Registration No. 33-30198
811-5867
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. 12 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940
AMENDMENT NO. 14 / X /
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center - Suite 3400
New York, New York 10048-0203
(Address of Principal Executive Offices)
(212) 323-0200
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Oppenheimer Management Corporation
Two World Trade Center - Suite 3400
New York, New York 10048-0203
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On April 25, 1995, 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 elected to register an indefinite number of its
shares under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended December 31, 1994 was filed on February 27, 1995.
<PAGE>
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
FORM N-1A
Cross Reference Sheet
Oppenheimer Pennsylvania Tax-Exempt Fund, a series of the Registrant
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History;
Dividends, Capital Gains and Taxes; The Transfer Agent
7 How to Buy Shares; Special Investor Services; How to Sell
Shares; How to Exchange Shares; Service Plan For Class A
Shares; Distribution and Service Plan for Class B Shares;
Shareholder Account Rules and Policies
8 Special Investor Services; How to Sell Shares; How to
Exchange Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Other Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the Trust
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund
17 How the Fund is Managed
18 Additional Information about the Fund
19 About Your 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; Additional Information About the
Fund - The Distributor; Distribution and Service Plans
22 Performance of the Fund
23 Financial Statements
________________________
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
FORM N-1A
Cross Reference Sheet
Oppenheimer Florida Tax-Exempt Fund, a series of the Registrant
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History;
Dividends, Capital Gains and Taxes; The Transfer Agent
7 How to Buy Shares; Special Investor Services; How to Sell
Shares; How to Exchange Shares; Service Plan For Class A
Shares; Distribution and Service Plan for Class B Shares;
Shareholder Account Rules and Policies
8 Special Investor Services; How to Sell Shares; How to
Exchange Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Other Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the Trust
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund
17 How the Fund is Managed
18 Additional Information about the Fund
19 About Your 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; Additional Information About the
Fund - The Distributor; Distribution and Service Plans
22 Performance of the Fund
23 Financial Statements
________________________
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
FORM N-1A
Cross Reference Sheet
Oppenheimer New Jersey Tax-Exempt Fund, a series of the Registrant
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History;
Dividends, Capital Gains and Taxes; The Transfer Agent
7 How to Buy Shares; Special Investor Services; How to Sell
Shares; How to Exchange Shares; Service Plan For Class A
Shares; Distribution and Service Plan for Class B Shares;
Shareholder Account Rules and Policies
8 Special Investor Services; How to Sell Shares; How to
Exchange Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Other Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the Trust
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund
17 How the Fund is Managed
18 Additional Information about the Fund
19 About Your 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; Additional Information About the
Fund - The Distributor; Distribution and Service Plans
22 Performance of the Fund
23 Financial Statements
________________________
* Not applicable or negative answer.
<PAGE>
Oppenheimer Pennsylvania Tax-Exempt Fund
Prospectus dated April 25, 1995.
Oppenheimer Pennsylvania Tax-Exempt Fund (the "Fund") is a mutual
fund that seeks as high a level of current interest income exempt from
Federal and Pennsylvania personal income taxes for individual investors
as is available from municipal securities and consistent with preservation
of capital. The Fund will invest primarily in securities issued by the
Commonwealth of Pennsylvania and local governments and governmental
agencies, the income from which is tax-exempt as discussed above.
However, in times of unstable economic or market conditions, the Fund's
investment manager may deem it advisable to temporarily invest a portion
of the Fund's assets in certain taxable instruments. The Fund may use
certain hedging instruments to try to reduce the risks of market
fluctuations that affect the value of the securities the Fund holds. The
Fund is not intended to be a complete investment program and there is no
assurance that it will achieve its objective. Please refer to "Investment
Policies and Strategies" for more information about the types of
securities the Fund invests in and the risks of investing in the Fund.
The Fund offers two classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class B shares, which are sold without a front-end sales charge,
although you may pay a sales charge when you redeem your shares, depending
on how long you hold them. Class B shares are also subject to an annual
"asset-based sales charge." Each class of shares bears different
expenses. In deciding which class of shares to buy, you should consider
how much you plan to purchase, how long you plan to keep your shares, and
other factors discussed in "How to Buy Shares" starting on page 22.
This Prospectus explains concisely what you should know before investing
in the Fund. Please read it carefully and keep it for future reference.
You can find more detailed information about the Fund in the April 25,
1995 Statement of Additional Information. For a free copy, call
Oppenheimer Shareholder Services, the Fund's Transfer Agent, at 1-800-525-
7048, or write to the Transfer Agent at the address on the back cover.
The Statement of Additional Information has been filed with the Securities
and Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
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
3 Expenses
5 Overview of the Fund
6 Financial Highlights
9 Investment Objective and Policies
17 How the Fund is Managed
19 Performance of the Fund
ABOUT YOUR ACCOUNT
22 How to Buy Shares
Class A Shares
Class B Shares
30 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
32 How to Sell Shares
By Mail
By Telephone
Checkwriting
34 How to Exchange Shares
35 Shareholder Account Rules and Policies
37 Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are 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. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will expect to bear indirectly. The
numbers below are based on the Fund's expenses during its last fiscal year
ended December 31, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," from pages
22 through 30 for an explanation of how and when these charges apply.
Class A Shares Class B Shares
-------------- --------------
Maximum Sales Charge on
Purchases
(as a % of offering price) 4.75% None
Sales Charge on Reinvested
Dividends None None
Deferred Sales Charge
(as a % of the lower of the
original purchase price or
redemption proceeds) None(1) 5% in the first
year, declining
to 1% in the
sixth year and
eliminated
thereafter
Exchange Fee None None
(1) If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares - Class A Shares" below.
- Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the
Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
The numbers in the table below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan Fees for
Class A shares are service fees. For Class B shares the 12b-1
Distribution Plan Fees are service fees and asset-based sales charges.
The service fee for Class A shares is 0.15% and for Class B shares is
0.25% (currently set at 0.15%) of average annual net assets of the class,
and the asset-based sales charge for Class B shares is 0.75%. These plans
are described in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be more
or less than the numbers in the table, depending on a number of factors,
including the actual value of the Fund's assets represented by each class
of shares.
Class A Shares Class B Shares
-------------- --------------
Management Fees .60% .60%
12b-1 Distribution Plan Fees .15% .90%
Other Expenses .23% .25%
Total Fund Operating Expenses .98% 1.75%
- 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 $162
Class B Shares $68 $85 $115 $131
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 $162
Class B Shares $18 $55 $95 $131
(*) The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long-term Class B
shareholders could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations, because of
the effect of the asset-based sales charge and contingent deferred sales
charge. The automatic conversion 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 - Class B Shares" on page 28 for more information.
These examples show the effect of the current level of expenses on the
return of a hypothetical investment, but are not meant to state or predict
actual or expected expenses or investment returns of the Fund, all of
which will vary.
<PAGE>
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 Pennsylvania personal income taxes for individual
investors as is consistent with preservation of capital.
- What Does the Fund Invest In? Under normal market conditions, the
Fund will invest at least 80% of its total assets in (1) municipal bonds,
municipal notes and other debt obligations issued by or on behalf of the
Commonwealth of Pennsylvania and its political subdivisions, the interest
on which is not subject to Pennsylvania personal income tax, and (2) in
municipal bonds, municipal notes and other debt obligations issued by or
on behalf of the Commonwealth of Pennsylvania, other states and the
District of Columbia, the interest from which is not subject to Federal
individual income tax. The Fund may invest up to 20% of its assets in
investments the income from which may be taxable. The Fund may also use
hedging instruments and some derivative investments in an effort to
protect against market risks. These investments are more fully explained
in "Investment Objective and Policies," starting on page 9.
- Who Manages the Fund? The Fund's investment adviser is Oppenheimer
Management Corporation, which (including a subsidiary) advises investment
company portfolios having over $29 billion in assets at December 31, 1994.
The Fund's portfolio manager, who is primarily responsible for the
selection of the Fund's securities, is Robert E. Patterson. The Manager
is paid an advisory fee by the Fund, based on its net assets. 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 17 for more information about the Manager and
its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund's bond investments 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 its investments in
Pennsylvania Municipal Securities or the Fund's ability to invest its
assets in a single issuer or limited number of issuers entails greater
risk than an investment in a diversified investment company. The Fund's
investment in certain derivative investments may add a degree of risk not
present in a fund that does not invest in such securities.
While the Manager tries to reduce risks by diversifying investments and
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 objective and your shares may
be worth more or less than their original cost when you redeem them.
Please refer to "Investment Objective and Policies" starting on page 9 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"
starting on page 22 for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has two classes of
shares. Class A shares are offered with a front-end sales charge,
starting at 4.75%, and reduced for larger purchases. Class B shares are
offered without a front-end sales charge, but may be subject to a
contingent deferred sales charge (starting at 5% and declining as shares
are held longer) if redeemed within 6 years of purchase. There is also
an annual asset-based sales charge on Class B shares. Please review "How
To Buy Shares" starting on page 22 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 using Checkwriting. Please refer to "How To Sell Shares" on
page 32.
- 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 21.
Please remember that past performance does not guarantee future results.
<PAGE>
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 report
on the Fund's financial statements for the fiscal year ended December 31,
1994 is included in the Statement of Additional Information.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.85 $12.05 $11.93 $11.43
Income (loss) from investment operations:
Net investment income .67 .69 .76 .74
Net realized and unrealized gain
(loss) on investments (1.64) .85 .17 .53
------ ------ ------ ------
Total income (loss) from
investment operations (.97) 1.54 .93 1.27
Dividends and distributions to shareholders:
Dividends from net investment income (.69) (.70) (.73) (.73)
Distributions from net realized gain
on investments -- (.04) (.08) (.04)
------ ------ ------ ------
Total dividends and distributions
to shareholders (.69) (.74) (.81) (.77)
Net asset value, end of period $11.19 $12.85 $12.05 $11.93
====== ====== ====== ======
TOTAL RETURN, AT NET ASSET VALUE(3) (7.68)% 13.12% 8.04% 11.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $60,857 $64,640 $33,290 $13,791
Average net assets (in thousands) $62,786 $50,974 $21,936 $10,717
Number of shares outstanding
at end of period (in thousands) 5,440 5,031 2,764 1,156
Ratios to average net assets:
Net investment income 5.65% 5.52% 6.36% 6.30%
Expenses, before voluntary
assumption by the Manager
or Distributor .98% 1.06% 1.39% 1.29%
Expenses, net of voluntary
assumption by the Manager
or Distributor N/A .99% 1.06% N/A
Portfolio turnover rate(5) 37.0% 14.6% 29.9% 15.5%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1990 1989(2) 1994 1993(1)
---- ------ ---- ------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.58 $11.43 $12.84 $12.44
Income (loss) from investment operations:
Net investment income .81 .18 .59 .36
Net realized and unrealized gain
(loss) on investments (.15) .15 (1.65) .45
------ ------ ------ ------
Total income (loss) from
investment operations .66 .33 (1.06) .81
Dividends and distributions to shareholders:
Dividends from net investment income (.81) (.18) (.59) (.37)
Distributions from net realized gain
on investments -- -- -- (.04)
------ ------ ------ ------
Total dividends and distributions
to shareholders (.81) (.18) (.59) (.41)
Net asset value, end of period $11.43 $11.58 $11.19 $12.84
====== ====== ====== ======
TOTAL RETURN, AT NET ASSET VALUE(3) 6.00% 3.25% (8.32)% 6.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $8,406 $2,353 $9,484 $5,576
Average net assets (in thousands) $5,170 $1,231 $7,329 $2,770
Number of shares outstanding
at end of period (in thousands) 735 203 848 434
Ratios to average net assets:
Net investment income 7.06% 6.12%(4) 4.88% 4.26%(4)
Expenses, before voluntary
assumption by the Manager
or Distributor 1.77% 2.49%(4) 1.85% 1.88%(4)
Expenses, net of voluntary
assumption by the Manager
or Distributor .59% .91%(4) 1.75% 1.78%(4)
Portfolio turnover rate(5) 5.3% 0.0% 37.0% 14.6%
</TABLE>
1. For the period from May 1, 1993 (inception of
offering) to December 31, 1993.
2. For the period from September 18, 1989 (commencement
of operations) to December 31, 1989.
3. Assumes a hypothetical initial investment on the
business day before the first day of the fiscal period,
with all dividends and distributions reinvested in
additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not
reflected in the total returns.
4. Annualized.
5. The lesser of purchases or sales of portfolio
securities for a period, divided by the monthly average
of the market value of portfolio securities owned during
the period. Securities with a maturity or expiration date
at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of
investment securities (excluding short-term securities)
for the year ended December 31, 1994 were $36,612,834 and
$25,522,759, respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks as high a level of current interest income
exempt from Federal and Pennsylvania personal income taxes for individual
investors as is available from Municipal Securities (which are described
below) and consistent with preservation of capital. Since market risks
are inherent in all securities to varying degrees, assurance cannot be
given that the Fund will achieve its investment objective.
Investment Policies and Strategies. The Fund seeks its objective by
following the fundamental policy of investing, under normal market
conditions, at least 80% (and attempting to invest, as a non-fundamental
policy, 100%) of its total assets in Municipal Securities and making no
investment that will reduce to less than 80% the portion of its total
assets that are invested in Pennsylvania Municipal Securities (which are
described below).
Dividends paid by the Fund derived from interest attributable to
Pennsylvania Municipal Securities and obligations of certain U.S.
territories and possessions, will be exempt from Federal individual income
taxes, Pennsylvania personal income taxes and, in the case of residents
of Philadelphia, the investment income tax of the School District of
Philadelphia. Dividends derived from interest on Municipal Securities of
other governmental issuers will be exempt from Federal individual income
tax, but will be subject to Pennsylvania personal income taxes. Any net
interest income on taxable investments and repurchase agreements will be
taxable as ordinary income when distributed to shareholders.
- - Municipal Securities and Pennsylvania Municipal Securities.
Municipal Securities consist of municipal bonds, municipal notes
(including tax anticipation notes, bond anticipation notes, revenue
anticipation notes, construction loan notes and other short-term loans),
tax-exempt commercial paper and other debt obligations issued by or on
behalf of the Commonwealth of Pennsylvania or its political subdivisions,
other states and the District of Columbia, their political subdivisions,
or any commonwealth or territory of the United States, or their respective
agencies, instrumentalities or authorities, the interest from which is not
subject to Federal income tax, in the opinion of bond counsel to the
respective issuer at the time of issue. Pennsylvania Municipal Securities
are Municipal Securities the interest from which is not subject to
Pennsylvania personal income tax in the opinion of bond counsel for the
respective issuer at the time of issue. No independent investigation has
been made by the Manager as to the users of proceeds of bond offerings or
the application of such proceeds.
"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. See "Investment
Objective and Policies" in the Statement of Additional Information for
further information about the Fund's investment policies and about
Municipal Securities.
- Special Considerations - Pennsylvania Municipal Securities. The Fund
concentrates its investments in Municipal Securities issued by
Pennsylvania and its agencies, authorities, instrumentalities and
subdivisions. The market value and marketability of Pennsylvania
Municipal Securities and the interest income and repayment of principal
to the Fund from them could be adversely affected by a default or a
financial crisis relating to any of such issuers. For example, the
Commonwealth of Pennsylvania and certain of its municipalities (most
notably the City of Philadelphia) have from time to time experienced
significant budget deficits and other financial difficulties. Investors
should consider these matters as well as economic trends in Pennsylvania,
which are discussed in the Statement of Additional Information.
- Can the Fund's Investment Objective and Policies Change? The Fund has
an investment objective, described above, as well as investment policies
it follows to try to achieve its objective. Additionally, the Fund uses
certain investment techniques and strategies in carrying out those
investment policies. The Fund's investment policies and 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.
The Board of Trustees of the Trust (as defined below) may change non-
fundamental policies without shareholder approval, although significant
changes will be described in amendments to this Prospectus. 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).
- Investments in Taxable Securities and Temporary Defensive Investment
Strategy. Under normal market conditions, the Fund may invest up to 20%
of its assets in taxable investments, including (i) certain "Temporary
Investments" (described in the next paragraph); (ii) hedging instruments
(described in "Hedging," below), (iii) repurchase agreements; and (iv)
Municipal Securities issued to benefit a private user ("Private Activity
Municipal Securities"), the interest from which may be subject to Federal
alternative minimum tax (see "Taxes," below, and "Private Activity
Municipal Securities" in the Statement of Additional Information).
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary
"defensive" position by investing some or all of its assets (there is no
limit on the amount) in short-term money market instruments. These
include the taxable obligations described above, U.S. government
securities, bank obligations, commercial paper, corporate obligations and
other instruments approved by the Fund's Board of Trustees. This strategy
would be implemented to attempt to reduce fluctuations in the value of the
Fund's assets. The Fund may hold temporary investments pending the
investment of proceeds from the sale of Fund shares or portfolio
securities, pending settlement of purchases of Municipal Securities, or
to meet anticipated redemptions. To the extent the Fund assumes a
temporary defensive position, a portion of the Fund's distributions may
be subject to Federal and state income taxes and the Fund may not achieve
its objective.
- Credit Risk and Interest Rate Risk. The values of Municipal
Securities will vary as a result of changing evaluations by rating
services and investors of the ability of the issuers of such securities
to meet interest and principal payments. Such values will also change in
response to changes in prevailing interest rates. Should interest rates
rise, the values of outstanding Municipal Securities will probably decline
and (if purchased at principal amount) would sell at a discount. If
interest rates fall, the values of outstanding Municipal Securities will
probably increase and (if purchased at principal amount) would sell at a
premium. Changes in the values of Municipal Securities owned by the Fund
from these or other factors will not affect interest income derived from
these securities but will affect the Fund's net asset value per share.
- Municipal Lease Obligations. Municipal leases may take the form of
a lease or an installment purchase contract issued by state and local
government authorities to obtain funds to acquire a wide variety of
equipment and facilities. The Fund may invest in certificates of
participation that represent a proportionate interest in or right to the
lease-purchase payments under municipal lease obligations. Certain of
these securities may be deemed to be "illiquid" securities and their
purchase would be limited as described below in "Illiquid and Restricted
Securities". Investment in certificates of participation that the Manager
has determined to be liquid (under guidelines set by the Board) will not
be subject to such limitations.
- Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
- Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments." The Fund may use
some derivative investments for hedging purposes, and may invest in others
because they offer the potential for increased income and principal value.
In general, a "derivative investment" is a specially-designed investment
whose performance is linked to the performance of another investment or
security, such as an option, future or index. In the broadest sense,
derivative investments include exchange-traded options and futures
contracts (please refer to "Hedging," below).
The Fund may invest in "inverse floater" variable rate bonds, a type of
derivative investment whose yields move in the opposite direction from
changes in 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. Some inverse floaters
have a "cap" whereby if interest rates rise above the "cap," the security
pays additional interest income. If rates do not rise above the "cap,"
the Fund will have paid an additional amount for a feature that proves
worthless. The Fund may also invest in municipal securities that pay
interest that depends on an external pricing mechanism, also a type of
derivative investment. Examples of external pricing mechanisms are
interest rate swaps or caps and municipal bond or swap indices. The Fund
anticipates that under normal circumstances it will invest no more than
10% of its net assets in inverse floaters.
The risks of investing in derivative investments include not only the
ability of the issuer of the derivative investment to pay the amount due
on the maturity of the investment, but also the risk that the underlying
security or investment might not perform the way the Manager expected it
to perform. That can mean that the Fund will realize less income than
expected. Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions and
maturities.
- Ratings of Municipal Securities. Municipal Securities
purchased by the Fund must be rated within the four highest rating
categories of Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or,
if unrated, judged by the Manager to be of comparable quality to Municipal
Securities rated within such grades. See Appendix A of the Statement of
Additional Information for a description of those rating categories. At
a meeting to be held on May 25, 1995, shareholders of the Fund will be
asked to approve a proposal to permit the Fund to invest up to 25% of the
Fund's assets in non-investment grade Municipal Securities, including
unrated Municipal Securities judged by the Manager to be below investment
grade quality. If that proposal is not approved, this Prospectus will be
supplemented accordingly.
Not more than 25% of the Fund's total assets will be invested in
Municipal Securities that are rated either "Baa" or "MIG2" by Moody's, or
"BBB" or "SP-2" by S&P, or "BBB" or "F-2" by Fitch. Such securities,
although investment grade, may be subject to greater market fluctuations
and risks of loss of income and principal than higher-rated Municipal
Securities and may be considered to have speculative characteristics.
Investments in unrated Municipal Securities will not, at the time of
purchase, not exceed 25% of the Fund's total assets.
A reduction in the rating of a security after its purchase by the Fund
will not require the Fund to dispose of such security. Securities that
have fallen below investment grade have a greater risk that the ability
of the issuers of such securities to meet their debt obligations will be
impaired.
- Non-diversification. The Fund is a "non-diversified" investment
company under the Investment Company Act. As a result, it may invest its
assets in a single issuer or limited number of issuers without limitation
by the Investment Company Act. However, the Fund intends to qualify as
a "regulated investment company" under the Internal Revenue Code of 1986,
as amended (the "Internal Revenue Code"), pursuant to which (i) 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 (ii) 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. An investment in the Fund 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.
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 are designed to reduce some of the risks.
- When-Issued and Delayed Delivery Transactions. The Fund may purchase
Municipal Securities on a "when-issued" basis and may purchase or sell
such securities on a "delayed delivery" basis. These terms refer to
securities that have been created and for which a market exists, but which
are not available for immediate delivery. There may be a risk of loss to
the Fund if the value of the security declines prior to the settlement
date.
- 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 fails to
pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any
delay in its ability to do so. The Fund will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days. 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 Trust's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be
illiquid because of the absence of an active trading market, making it
difficult to value them or dispose of them promptly at an acceptable
price. The Fund will not invest more than 10% of its net assets in
illiquid investments (that limit may increase to 15% if applicable state
law permits). The Fund may not invest any portion of its assets in
restricted securities. A restricted security is one that has a
contractual restriction on its resale or that cannot be sold publicly
until registered under the Securities Act of 1933, as amended.
- Loans of Portfolio Securities. To attempt to increase its income, the
Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. These loans are limited to not more than 25% of
the Fund's net assets and are subject to other conditions described in the
Statement of Additional Information. The Fund presently does not intend
to lend its portfolio securities, but if it does, the value of securities
loaned is not expected to exceed 5% of the value of its total assets.
- 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 all 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,
defensive reasons, or to raise cash to distribute to shareholders.
- Futures. The Fund may buy and sell futures contracts that relate to
(1) broadly-based municipal bond indices (these are referred to as
Municipal Bond Index Futures) and (2) interest rates (these are referred
to as Interest Rate Futures). These types of Futures are 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 securities, broadly-based municipal bond
indices, Municipal Bond Index Futures or 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 puts. 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) broadly-based municipal bond indices,
(3) Municipal Bond Index Futures or (4) Interest Rate Futures. The Fund
can buy a put on a Municipal Bond Index Future or Interest Rate Future
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 securities or commodities exchange, or quoted on the
Automated Quotation System of the National Association of Securities
Dealers, Inc. (NASDAQ), 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 or it must
own other securities that are acceptable for the escrow arrangements
required for calls; (4) the Fund may write calls on Futures contracts it
owns, but these calls must be covered by securities or other liquid assets
the Fund owns and segregates to enable it to satisfy its obligations if
the call is exercised; (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; and (6) the aggregate premiums paid on all such
options which the Fund holds at any time will be limited to 20% of the
Fund's total assets, and the aggregate margin deposits on all such futures
or options thereon at any time will be limited to 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.
- 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.
Other Investment Restrictions. The Fund has other investment restrictions
which are fundamental policies.
Under these fundamental policies, the Fund cannot do any of the
following: (i) invest in securities or any investment other than the
Municipal Securities, temporary investments, taxable investments and
hedging instruments described in "Investment Policies and Strategies,"
"Municipal Securities and Pennsylvania Municipal Securities" and "Other
Investment Techniques and Strategies" above; (ii) 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"; (iii) borrow money in excess of 10% of
the value of its total assets, or make any investment whenever borrowings
exceed 5% of the Fund's total assets; it may borrow only from banks as a
temporary measure for extraordinary or emergency purposes (not for the
purpose of leveraging its investments); (iv) 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; (v)
concentrate investments to the extent of more than 25% of its total assets
in any industry; however, there is no limitation as to investment in
Municipal Securities, U.S. Government obligations or in obligations issued
by Pennsylvania or its subdivisions, agencies, authorities or
instrumentalities; or (vi) buy or sell futures contracts other than
interest rate futures or municipal bond index futures.
Under prior Pennsylvania law, in order for the Fund to qualify to
provide the Pennsylvania state and local tax benefits described above and
in the Statement of Additional Information, the Fund was required to
invest in securities to earn income but not to trade for profits and limit
the circumstances under which the Fund could vary its portfolio
investments. In order to comply with this and other Pennsylvania law
requirements previously in effect, the investment policies of the Fund
include, as a fundamental policy, that the Fund will invest in securities
to earn income but not trade for profits. Further, the Fund will not vary
its portfolio investments except to: (i) eliminate unsafe investments and
investments not consistent with the preservation of the Fund's capital or
the tax status of the Fund's investments; (ii) honor redemption orders,
meet anticipated redemption requirements and negate gains from discount
purchases; (iii) reinvest the earnings from securities in like securities;
and (iv) defray normal administrative expenses. These limitations,
applicable to the investment policies of the Fund, including the special
investment methods described above, may cause the Fund to have less
flexibility than other mutual funds in responding to changes in market
conditions, interest rates or new investment opportunities. At a meeting
to be held on May 25, 1995, shareholders of the Fund will be asked to
approve a proposal to eliminate the fundamental investment policies
imposed under prior Pennsylvania law. If that proposal is not approved,
this Prospectus will be supplemented accordingly.
All of the percentage restrictions described above and elsewhere in this
Prospectus apply to the Fund only at the time the Fund purchases a
security, and the Fund need not dispose of a security merely because the
Fund's assets have changed or the security has increased in value relative
to the size of the Fund. A supplementary list of investment restrictions
is contained in "Investment Restrictions" in the Statement of Additional
Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1989 as a
Massachusetts business trust (the "Trust") with one series. In June 1993,
the Trust was reorganized to become a multi-series business trust called
Oppenheimer Multi-State Tax-Exempt Trust, and the Fund became a separate
series of it. The Trust is an open-end, non-diversified management
investment company, with an unlimited number of authorized shares of
beneficial interest. Each of the three series of the Trust is a fund that
issues its own shares, has its own investment portfolio, and its own
assets and liabilities.
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 Trust" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Trust. Although the Trust is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Trust's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has two classes of shares, Class A and
Class B. 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 together on matters that affect that
class alone. Shares are freely transferable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, 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 pays to
conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $29 billion as
of December 31, 1994, and with more than 2.4 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
- Portfolio Manager. The portfolio manager of the Fund (who is also a
Vice President of the Trust) is Robert E. Patterson, a Senior Vice
President of the Manager. He has been the person principally responsible
for the day-to-day management of the Fund's portfolio since September
1989. Mr. Patterson has also served as an officer and portfolio manager
for other OppenheimerFunds. For more information about the Fund's other
officers and Trustees, see "Trustees and Officers of the Trust" in the
Statement of Additional Information.
- 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 0.60% of average annual net assets for Class A shares and
0.60% for Class B shares, which may be higher than the rate paid by some
other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, and legal and
auditing costs. Those expenses are paid out of the Fund's assets and are
not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the Investment Advisory
Agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it 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 Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Fund's Distributor.
The Distributor also distributes the shares of other mutual funds managed
by the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free 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. This performance
information may be useful to help you see how your investment has done and
to compare it to other funds or to a market index, as we have done below.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions
of future returns or performance. This performance data is described
below, but more detailed information about how total returns and yields
are calculated is contained in the Statement of Additional Information,
which also contains information about 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, they reflect the
payment of the current maximum initial sales charge. When total returns
are shown for Class B shares, they reflect the effect of the contingent
deferred sales charge that applies to the period for which total return
is shown. Total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be
reduced if sales charges were deducted.
- Yield. Each class of shares calculates its yield by dividing the
annualized net investment income per share from the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
The yield of each class will differ because of the different expenses of
each class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge. 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.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1994,
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 December 31, 1994, the Fund's performance was affected by aggressive
increases in short-term interest rates by the Federal Reserve Board.
Because the Manager kept the Fund's duration, a technical measure of a
bond portfolio's sensitivity to interest rate changes, slightly longer
than those of many other funds, the Fund's net asset value declined more
than some other funds. To position the Fund's portfolio more defensively,
the Manager reduced the Fund's average maturity which made the Fund's
portfolio less sensitive to changing interest rates than longer-maturity
bonds. The Manager reduced the Fund's exposure to issues supported by
investor-owned utilities which are sensitive to an increasingly
competitive operating environment.
- Comparing the Fund's Performance to the Market. The charts below show
the performance of a hypothetical $10,000 investment in each class of
shares of the Fund held until December 31, 1994. In the case of Class A
shares, performance is measured from the Fund's inception on September 18,
1989, and in the case of Class B shares, from the inception of the Class
on May 1, 1993. In both cases, all dividends and capital gains
distributions were reinvested in additional shares. The graph for Class
A shares reflects the deduction of the 4.75% current maximum initial sales
charge on Class A shares and the graph for Class B shares reflects the 4%
contingent deferred sales charge that applies to redemptions of Class B
shares held from May 1, 1993 until December 31, 1994.
Because the Fund invests in a variety of Municipal Securities, its
performance is compared to that of the Lehman Brothers Municipal Bond
Index, an unmanaged index of a broad range of investment grade municipal
bonds that is widely regarded as a measure of the performance of the
general municipal bond market. Index performance reflects the
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 Pennsylvania Tax-Exempt Fund
and The Lehman Brothers Municipal Bond Index
(Graph)
Past Performance is not predictive of future performance.
Average Annual Total Returns of the Fund at 12/31/94
1 Year Life
------ ----
Class A: -12.06% 5.26%*
Class B: -12.68% -3.53%**
______________
* The inception date of the Fund (Class A shares) was 9/18/89.
** Class B shares of the Fund were first publicly offered on 5/1/93.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million). If you purchase Class A shares
as part of an investment of at least $1 million in shares of one or more
OppenheimerFunds, you will not pay an initial sales charge, but if you
sell any of those shares within 18 months after your purchase, you may pay
a contingent deferred sales charge, which will vary depending on the
amount you invested. Sales charges are described 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, you
will normally pay a contingent deferred sales charge, described below,
that varies depending on how long you own your shares.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial 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 are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B shares). 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 Class A and B shares, considering the
effect of the annual asset-based sales charge on Class B 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 you invest in. The factors discussed below are
not intended to be investment advice or recommendations, because each
investor's financial considerations are different.
- How Long Do You Expect to Hold Your Investment? The Fund is designed
for long-term 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.
The effect of the sales charge over time, using our assumptions, will
generally depend on the amount invested. Because of the effect of class-
based expenses, your choice will also depend on how much you invest.
- How Much Do You Plan to Invest? If you plan to invest a substantial
amount over the long term, the reduced sales charges available for larger
purchases of Class A shares may 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 expenses on Class B shares, for which no
initial sales charge is paid. Additionally, dividends payable to Class
B shareholders will be reduced by the additional expenses borne solely by
Class B, such as the asset-based sales charge described below.
In general, if you plan to invest less than $100,000, Class B shares may
be more advantageous than Class A shares, using the assumptions in our
hypothetical example. However, if you plan to invest more than $100,000
(not only in the Fund, but possibly in other OppenheimerFunds as well),
then Class A shares generally will be more advantageous than Class B,
because of the effect of the lower initial sales charges on larger
purchases of Class A shares (described in "Reduced Sales Charges for Class
A Share Purchases," below). That is also the case because the annual
asset-based sales charge on Class B shares will have a greater impact on
larger investments than the initial sales charge on Class A shares because
of the reductions of initial sales charge available for larger purchases.
And for investors who invest $500,000 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 from a single
investor.
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 assumptions stated above. Therefore, these examples should not
be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter to You? Because
some account features such as Checkwriting may not be available to Class
B shareholders, or other features (such as Automatic Withdrawal Plans)
might not be advisable (because of the effect of the contingent deferred
sales charge for Class B shareholders), you should carefully review how
you plan to use your investment account before deciding which class of
shares to buy. Also, because not all OppenheimerFunds currently offer
Class B shares, and because exchanges are permitted only to the same class
of shares in other OppenheimerFunds, you should consider how important the
exchange privilege is likely to be for you.
- 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 than for selling another class. It is important that investors
understand that the purpose of the contingent deferred sales charge and
asset-based sales charge for Class B shares is the same as the purpose of
the front-end sales charge on sales of Class A shares: 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 of as
little as $25; and subsequent purchases of at least $25 can be made by
telephone through AccountLink.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other OppenheimerFunds
(a list of them appears in the Statement of Additional Information, or you
can ask your dealer or call the Transfer Agent), or by reinvesting
distributions from unit investment trusts that have made arrangements with
the Distributor.
- How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A or
Class B shares. If you do not choose, your investment will be made in
Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "Oppenheimer
Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the Distributor will act
as your agent in buying the shares. However, we recommend 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 transmit dividends and distributions.
Shares are purchased for your account on AccountLink 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 OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that
applies) that is next determined after the Distributor receives the
purchase order in Denver, Colorado. In most cases, to enable you to
receive that day's offering price, the Distributor must receive your order
by the time of day the New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all references
to time in this Prospectus mean "New York time"). The net asset value of
each class of shares is determined as of that time on each day The New
York Stock Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your order
by the close of The New York Stock Exchange on a regular business day and
transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
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>
- -------------------------------------------------------------------
Amount of Purchase Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Percentage Percentage of Offering
of Offering of Amount Price
Price Invested
- -------------------------------------------------------------------
<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
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients.
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 shares you purchase for your individual accounts, or
jointly, or on behalf of your children who are minors, under trust or
custodial accounts. 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
shares of the Fund and other OppenheimerFunds. You can also include Class
A shares of OppenheimerFunds you previously purchased subject to a sales
charge, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase Class
A shares of the Fund and other OppenheimerFunds during a 13-month period
at the reduced sales charge rate that applies to the total amount of the
intended purchases. 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. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients; or (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares of defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administration services.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of dividends or other distributions reinvested from the Fund
or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or unit
investment trusts for which reinvestment arrangements have been made with
the Distributor. There is a further discussion of this policy in "Reduced
Sales Charges" in the Statement of Additional Information.
The contingent deferred sales charge does not apply to purchases of
Class A shares at net asset value described above and is also waived if
shares are redeemed in the following cases: (1) Automatic Withdrawal Plan
payments that are limited to no more than 12% of the original account
value annually, (2) involuntary redemptions of shares by operation of law
or under the procedures set forth in the Fund's Declaration of Trust or
adopted by the Board of Trustees, or (3) if, at the time an order is
placed for Class A shares that would otherwise be subject to the Class A
contingent deferred sales charge, the dealer agrees to accept the dealer's
portion of the commission payable on the sale in installments of 1/18th
of the commission per month (with no further commission 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
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- -----------------------------------------------------------------------
<S> <C>
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for redemptions
from accounts other than Retirement Plans following the death or
disability of the shareholder (the disability must have occurred after the
account was established and you must provide evidence of a determination
of disability by the Social Security Administration).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A and Class
B Shares" in the Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to reimburse
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of up to 0.25% per year. The Board has currently set the
service fee at 0.15% per year, which amount may be increased by the Board
from time to time up to the maximum of 0.25%. Both fees are computed on
the average annual net assets of Class B shares, determined as of the
close of each regular business day. The asset-based sales charge allows
investors to buy Class B shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class B shares.
At a meeting to be held on May 25, 1995, the shareholders of the Fund will
be asked to approve a proposal to recharacterize the Plan as a
compensation type plan. If that proposal is not approved, this Prospectus
will be supplemented accordingly.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the service fee to dealers in advance for the
first year after Class B shares have been sold by the dealer. After the
shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
The Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At December 31, 1994, the end of the Plan
year, the Distributor had incurred unreimbursed expenses under the Plan
of $388,274 (equal to 5.30% of the Fund's net assets represented by Class
B shares on that date), which have been carried over into the present Plan
year. If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for expenses it incurred before the Plan was terminated.
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 must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "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
OppenheimerFunds 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
automatically to exchange an amount you establish in advance for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each OppenheimerFunds account is $25. These exchanges are subject to
the terms and conditions, described in "How to Exchange Shares," below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying a
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge. It also applies to shares on which you paid
a contingent deferred sales charge when you redeemed them. You must be
sure to ask the Distributor for this privilege when you send your payment.
Please consult the Statement of Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account on any regular business
day by selling (redeeming) some or all of your shares. Your shares will
be sold at the net asset value next 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 Checkwriting or by
telephone. You can also set up an Automatic Withdrawal Plan 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
statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of the New York Stock Exchange that day, which is
normally 4:00 P.M., but which may be earlier on some days. You may not
redeem shares held under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account 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 wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Checkwriting. To be able to write checks against your Fund account,
you may request that privilege on your account Application or you can
contact the Transfer Agent for signature cards, which must be signed (with
a signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner. If you previously signed a signature card to establish a
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 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 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 OppenheimerFunds
at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. Certain
OppenheimerFunds offer Class A shares and Class B or Class C shares, and
a list can be obtained by calling the Distributor at 1-800-525-7048. 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 OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. Exchanges of shares
involve a redemption of the shares of the fund you own and a purchase of
shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request 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 if
it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of portfolio securities at a time or price disadvantageous to
the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of the New York Stock Exchange on each regular business
day by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The Fund's
Board of Trustees has established procedures to value the Fund's
securities to determine net asset value. In general, securities values
are based on market value. There are special procedures for valuing
illiquid and restricted securities, obligations for which market values
cannot be readily obtained, and call options and hedging instruments.
These procedures are described more completely in the Statement of
Additional Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither it 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 and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. Effective June 7, 1995,
for accounts registered in the name of a broker-dealer, payment will be
forwarded within 3 business days. The Transfer Agent may delay forwarding
a check or processing a payment via AccountLink for recently purchased
shares, but only until the purchase payment has cleared. That delay may
be as much as 10 days from the date the shares were purchased. That delay
may be avoided if you purchase shares by certified check or arrange with
your bank to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "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 dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charge when redeeming certain Class
A and Class B shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and Class
B 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 shares because expenses allocable to Class B shares will
generally be higher.
Capital Gains. Although the Fund does not seek capital gains, it may
realize capital gains on the sale of portfolio securities. If it does,
it may make distributions out of any net short-term or long-term capital
gains in December. The Fund may make supplemental distributions of
dividends and capital gains following the end of its fiscal year (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 OppenheimerFunds account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders for Federal income tax purposes. It does
not matter how long you hold your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary income.
To the extent that distributions are derived from interest on Pennsylvania
Municipal Securities, obligations of the U.S. Government and certain of
its territories, agencies, and instrumentalities, such distributions will
also be exempt from Pennsylvania personal income tax and, in the case of
residents of the City of Pennsylvania, the investment income tax of the
School District of Philadelphia. Dividends designated as capital gains
dividends for Federal income tax purposes will also be exempt from the
investment income tax of the School District of Philadelphia. Dividends
paid from net investment income earned by the Fund on Municipal Securities
will be excludable from your gross income for Federal income tax purposes.
A portion of the dividends paid by the Fund may be an item of tax
preference if you are subject to the alternative minimum tax. Certain
distributions are subject to Federal income tax and may be subject to
state and/or local taxes. Such distributions are taxable when paid,
whether you reinvest them in additional shares or take them in cash. 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.
- "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 capital
gain.
- Taxes on Transactions. Even though the Fund seeks tax-exempt
income for distribution to shareholders, you may have a capital gain or
loss when you sell or exchange your shares. A capital gain or loss is the
difference between the price you paid for the shares and the price you
receive when you sell them. Any capital gain is subject to capital gains
tax.
- Returns of Capital. In certain 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 TO PROSPECTUS OF
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
Graphic material included in Prospectus of Oppenheimer Pennsylvania
Tax-Exempt Fund: "Comparison of Change in Value of $10,000 Hypothetical
Investments in Oppenheimer Pennsylvania Tax-Exempt Fund and the Lehman
Brothers Municipal Bond Index
A linear graph will be included in the Prospectus of Oppenheimer
Pennsylvania Tax-Exempt Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in the Fund during each of the Fund's fiscal years since the commencement
of the Fund's operations as to Class A shares (September 18, 1989) and the
initial public offering of Class B shares (May 1, 1993) and comparing such
values with the same investments over the same time periods with 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
"Performance of the Fund - How Has the Fund Performed?"
<TABLE>
<CAPTION>
Fiscal Year Oppenheimer Pennsylvania Lehman Brothers
(Period) Ended Tax-Exempt Fund A Municipal Bond Index
- -------------- ------------------------ --------------------
<S> <C> <C>
9/18/89(1) $ 9,525 $10,000
12/31/89 $ 9,805 $10,384
12/31/90 $10,392 $11,141
12/31/91 $11,582 $12,494
12/31/92 $12,509 $13,595
12/31/93 $14,163 $15,265
12/31/94 $13,114 $14,476
Fiscal Year Oppenheimer Pennsylvania Lehman Brothers
(Period) Ended Tax-Exempt Fund B Municipal Bond Index
- -------------- ------------------------ --------------------
5/1/93(2) $10,000 $10,000
12/31/93 $10,641 $10,718
12/31/94 $ 9,420 $10,164
<FN>
_________________________
(1) The Fund commenced operations on September 18, 1989.
(2) Class B shares of the Fund were first publicly offered on May 1, 1993.
</TABLE>
<PAGE>
Oppenheimer Pennsylvania Tax-Exempt Fund
Two World Trade Center
New York, New York 10048-0203
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick 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, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc., or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in
any state to any person to whom it is unlawful to make such an offer in
such state.
PR0740.001.0495 * Printed on recycled paper
OPPENHEIMER
Pennsylvania Tax-Exempt Fund
Prospectus
Effective April 25, 1995
(OppenheimerFunds Logo)
<PAGE>
OPPENHEIMER
Pennsylvania Tax-Exempt Fund
Prospectus and
New Account Application
Effective April 25, 1995
(OppenheimerFunds Logo)
<PAGE>
Oppenheimer Pennsylvania Tax-Exempt Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated April 25, 1995
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated April 25, 1995. It should be read
together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder 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 2
Investment Policies and Strategies 2
Special Investment Considerations - Pennsylvania
Municipal Securities 6
Other Investment Techniques and Strategies 9
Other Investment Restrictions 18
How the Fund is Managed 19
Organization and History 19
Trustees and Officers of the Trust 19
The Manager and Its Affiliates 24
Brokerage Policies of the Fund 25
Performance of the Fund 27
Distribution and Service Plans 31
About Your Account 34
How To Buy Shares 34
How To Sell Shares 40
How To Exchange Shares 43
Dividends, Capital Gains and Taxes 45
Additional Information About the Fund 48
Financial Information About the Fund 49
Independent Auditors' Report 49
Financial Statements 50
Appendix A: Description of Ratings Categories A-1
Appendix B: Tax-Equivalent Yield Tables 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 described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information have the same meaning as those terms
used 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, its value would
normally rise. Thus, the Fund may realize a capital gain or loss upon
disposition of a portfolio security. There are, of course, variations in
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 market conditions,
general conditions of the Municipal Securities market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. The market value of Municipal Securities will vary as a result of
changing evaluations of the ability of their issuers to meet interest and
principal payments, as well as changes in the interest rates payable on
new issues of Municipal Securities.
Municipal Securities and Pennsylvania 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.
- 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.
- 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.
- Municipal Notes. Municipal Securities having a maturity when issued
of less than one year are generally known as municipal notes. Municipal
notes generally are used to provide for short-term working capital needs
and include:
- Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use
of business taxes, and are payable from these specific future taxes.
- Revenue Anticipation Notes. Revenue anticipation notes are issued
in expectation of receipt of other types of revenue, such as federal
revenues available under the Federal revenue sharing programs.
- Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the notes.
- Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and
acceptance, many projects receive permanent financing through the Federal
Housing Administration.
- Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-
term obligation with a stated maturity of 365 days or less. It is issued
by state and local governments or their agencies to finance seasonal
working capital needs or as short-term financing in anticipation of
longer-term financing.
- Municipal Lease Obligations. From time to time the Fund may invest
in municipal lease obligations, some of which may be illiquid and others
which the Manager has determined to be liquid under guidelines set by the
Board of Trustees. Those guidelines require the Manager to evaluate (1)
the frequency of trades and price quotations for such securities; (2) the
number of dealers or other potential buyers willing to purchase or sell
such securities; (3) the availability of market-makers; and (4) the nature
of the trades for such securities. The Manager will also evaluate the
likelihood of a continuing market for such securities throughout the time
they are held by the Fund, and the credit quality of the instrument.
Municipal leases may take the form of a lease or an installment purchase
contract issued by a state or local government authority to obtain funds
to acquire a wide variety of equipment and facilities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. In addition to the risk of such "non-
appropriation," municipal lease securities do not yet have a highly
developed market to provide the same degree of liquidity as conventional
municipal bonds. Municipal leases, like other municipal debt obligations,
are subject to the risk of non-payment. The ability of issuers of
municipal leases to make timely lease payments may be adversely affected
in general economic downturns and as relative governmental cost burdens
are reallocated among federal, state and local governmental units. Such
non-payment would result in a reduction of income to the Fund, and could
result in a reduction in the value of the municipal lease experiencing
non-payment and a potential decrease in the net asset value of the Fund.
- Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules
governing tax exemption for interest on Municipal Securities. The Tax
Reform Act generally does not change the tax treatment of bonds issued in
order to finance governmental operations. Thus, interest on obligations
issued by or on behalf of state or local government, the proceeds of which
are used to finance the operations of such governments (e.g., general
obligation bonds) continues to be tax-exempt. However, the Tax Reform Act
further limited the use of tax-exempt bonds for non-governmental (private)
purposes. More stringent restrictions were placed on the use of proceeds
of such bonds. Interest on certain private activity bonds (other than
those specified as "qualified" tax-exempt private activity bonds, e.g.,
exempt facility bonds including certain industrial development bonds,
qualified mortgage bonds, qualified Section 501(c)(3) bonds, qualified
student loan bonds, etc.) is taxable under the revised rules.
Interest on certain private activity bonds issued after August 7, 1986,
which continues to be tax-exempt, will be treated as a tax preference item
subject to the alternative minimum tax (discussed below) to which certain
taxpayers are subject. Further, a private activity bond which would
otherwise be a qualified tax-exempt private activity bond will not, under
Internal Revenue Code Section 147(a), be a qualified bond for any period
during which it is held by a person who is a "substantial user" of the
facilities or by a "related person" of such a substantial user. This
"substantial user" provision is applicable primarily to exempt facility
bonds, including industrial development bonds. The Fund may not be an
appropriate investment for entities which are "substantial users" (or
persons related thereto) of such exempt facilities, and such persons
should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-
exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be
a "related person" under the Internal Revenue Code unless such investor
or the investor's immediate family (spouse, brothers, sisters and
immediate descendants) own directly or indirectly in the aggregate more
than 50% in value of the equity of a corporation or partnership which is
a "substantial user" of a facility financed from the proceeds of exempt
facility bonds. In addition, the Tax Reform Act revised downward the
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
this 10% threshold. (The term "private business use" means any direct or
indirect use in a trade or business carried on by an individual or entity
other than a state 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 $5.0 million of the
proceeds. Thus, certain issues of Municipal Securities could lose their
tax-exempt status retroactively if the issuer fails to meet certain
requirements as to the expenditure of the proceeds of that issue or use
of the bond-financed facility. The Fund makes no independent
investigation of the users of such bonds or their use of proceeds. If the
Fund should hold a bond that loses its tax-exempt status retroactively,
there might be an adjustment to the tax-exempt income previously paid to
shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference
items in arriving at alternative minimum taxable income. The Tax Reform
Act made tax-exempt interest from certain private activity bonds a tax
preference item for purposes of the alternative minimum tax on individuals
and corporations. Any exempt-interest dividend paid by a regulated
investment company will be treated as interest on a specific private
activity bond to the extent of its proportionate share of the interest on
such bonds received by the regulated investment company. The U.S.
Treasury is authorized to issue regulations implementing this provision.
In addition, corporate taxpayers subject to the alternative minimum tax
may, under some circumstances, have to include exempt-interest dividends
in calculating their alternative minimum taxable income in situations
where the "adjusted current earnings" of the corporation exceeds its
alternative minimum taxable income. The Fund may hold Municipal
Securities the interest on which (and thus a proportionate share of the
exempt-interest dividends paid by the Fund) will be subject to the Federal
alternative minimum tax on individuals and corporations. The Fund
anticipates that under normal circumstances it will not purchase any such
securities in an amount greater than 20% of its total assets.
- Ratings of Municipal Securities. Moody's, S&P's and Fitch's
ratings (see Appendix A) represent their respective opinions of the
quality of the Municipal Securities they undertake to rate. However, such
ratings are general and are not absolute standards of quality.
Consequently, Municipal Securities with the same maturity, coupon and
rating may have different yields, while Municipal Securities of the same
maturity and coupon with different ratings may have the same yield.
Investment in lower quality securities may produce a higher yield than
securities rated in the higher rating categories described in the
Prospectus (or judged by the Manager to be of comparable quality).
However, the added risk of lower quality securities might not be
consistent with a policy of preservation of capital.
Special Investment Considerations - Pennsylvania Municipal Securities.
As explained in the Prospectus, the Fund is highly sensitive to the fiscal
stability of Pennsylvania and its subdivisions, agencies,
instrumentalities or authorities which issue the Pennsylvania Municipal
Securities in which the Fund concentrates its investments. Investors
should also consider the factors discussed below under "Other Investment
Techniques and Strategies."
The following information as to the fiscal condition of the
Commonwealth of Pennsylvania (the "Commonwealth") is provided in view of
the Fund's policy of investing primarily in securities of Pennsylvania
issuers. Such information is derived from sources that are generally
available to investors. Although the Fund has not independently verified
any of this information, it is not aware of any inaccuracies. Such
information constitutes only a brief summary, does not purport to be a
complete description and is based on information from official statements
relating to securities offerings of Pennsylvania issuers.
The Commonwealth and certain of its counties, cities and school
districts and public bodies have from time to time in the past encountered
financial difficulties which have adversely affected their respective
credit standings and borrowing abilities. For example, the financial
condition of the City of Philadelphia had impaired its ability to borrow
and resulted in its obligations being downgraded to below investment grade
by the major ratings services. Yet, in early 1995, Moody's restated the
investment grade rating of the City of Philadelphia obligations. Such
difficulties could, of course, affect outstanding obligations of such
entities, including obligations held by the Fund. The following are
highlights of certain factors bearing on the financial conditions of such
entities.
From fiscal 1984, when the Commonwealth first prepared its financial
statements on a generally accepted accounting principles basis, through
fiscal 1989, the Commonwealth reported a positive unreserved-undesignated
fund balance at the fiscal year-end. Slowing economic growth during
fiscal 1990, leading to a national economic recession beginning in fiscal
1991, reduced revenue growth and increased expenditures and contributed
to negative unreserved-undesignated balances at the end of the 1990 and
1991 fiscal years. The five year period from fiscal 1989 through fiscal
1993 was also marked by public health and welfare costs growing at a rate
double the growth rate for all state expenditures.
For the year ended June 30, 1992, the General Fund recorded a $1.1
billion operating surplus (determined on a GAAP basis). This operating
surplus was largely a result of legislated tax increases enacted in 1991,
and cost reduction measures implemented throughout the fiscal year. The
General Fund balance at June 30, 1992 (determined on a GAAP basis) was
$87.5 million and the unreserved/undesignated deficit fell to $138.6
million.
The 1993 fiscal year closed with revenues higher than anticipated and
expenditures about as projected, resulting in an ending unappropriated
balance surplus (on a budgetary basis) of $242.3 million. Cash revenues
were $41.5 million above the budget estimate and totalled $14.633 billion,
representing less than a 1% increase over revenues for the 1992 fiscal
year. A reduction in the personal income tax rate in July 1992 and
revenues from retroactive corporate tax increases received in fiscal 1992
were responsible for the low rate of revenue growth. On a generally
accepted accounting basis, the General Fund increased by $611.4 million,
resulting in a fund balance of $698.9 million.
The 1994 fiscal year closed with revenues of $15,210.7 million (on a
budgetary basis), $38.6 million above the fiscal year estimate.
Additional revenues were provided by higher than anticipated sales tax
revenues and a reduction in tax refund reserves resulting from a favorable
decision in a pending tax litigation. Personal income tax revenues,
however, were below estimate. Expenditures (net of certain pooled
financing expenditures and appropriation lapses) totalled $14,934.4
million, representing a 7.2% increase over fiscal 1993 expenditures.
The fiscal 1995 budget provides for $15,652.9 million of
appropriations, an increase of 3.9% over appropriations for fiscal 1994.
The budget also includes tax reductions totalling an estimated $166.4
million. The fiscal 1995 budget projects a $4 million fiscal year-end
unappropriated surplus. However, in a recent mid-year budget briefing,
outgoing Governor Casey told legislative leaders that projected revenues
will grow by $522 million over expectations for the current year,
resulting in a projected surplus of $401 million at June 30, 1995.
According to the Governor, this amount, when added to other cost savings
and existing reserves, result in a total projected surplus over $1
billion.
On March 7, 1995, newly elected Governor Tom Ridge proposed a $16.1
billion budget for fiscal 1996, which would increase spending by 2.3%.
The proposed budget also includes various business tax reductions
estimated to save businesses $185.9 million in taxes.
Recent economic indicators suggest that the Pennsylvania economy is
growing, but at a moderate pace. The expansion is generally broad-based
across geographic regions and industrial sectors, and inflation is not
accelerating.
Certain industries traditionally strong in Pennsylvania, such as coal,
steel and railways, have declined and account for a decreasing share of
total employment. Service industries (including trade, health care,
education and finance) have grown, however, contributing increasingly to
Pennsylvania's economy and since 1985 have exceeded the manufacturing
section as the largest single source of employment.
From 1986 through 1990, Pennsylvania's unemployment rate was slightly
less than the average unemployment rate for the U.S., but from 1991
through 1993 was slightly higher than the U.S. unemployment rate. In
February 1995, the most recent month for which data is available, the
seasonally adjusted unemployment rate for the Commonwealth was 5.6%
compared to 5.4% for the U.S.
Debt service on general obligation bonds of Pennsylvania, except those
issued for highway purposes or the benefit of other special revenue funds,
is payable from the General Fund, the recipient of all Commonwealth
revenues that are not required to be deposited in other funds. As of June
30, 1994, the Commonwealth had $5,075.8 million of general obligation debt
outstanding. Although Pennsylvania's Constitution permits the issuance
of an aggregate amount of capital projects debt equal to 1.75 times the
average annual tax revenues of the preceding five fiscal years, the
General Assembly may authorize and historically has authorized a smaller
amount. This constitutional limit does not apply to other types of
Pennsylvania debt such as debt approved by the electorate or debt issued
to rehabilitate areas affected by disaster. However, the former may be
incurred only after the enactment of legislation calling for a referendum
and usually specifying the purpose and amount of such debt, followed by
electoral approval. Similarly, debt issued to rehabilitate a disaster
area must be authorized by specific legislation.
Pennsylvania cannot use tax anticipation notes or any other form of
debt to fund budget deficits between fiscal years. All year-end deficits
must be funded within the succeeding fiscal year's budget. Moreover, the
principal amount of tax anticipation notes issued and outstanding for the
account of a fund during a fiscal year may not exceed 20% of the revenues
estimated to accrue to such fund in that fiscal year.
The debt of the Pennsylvania Housing Finance Agency ("PHFA"), a state
agency which provides financing for housing for lower and moderate income
families, and certain obligations of The Hospitals and Higher Education
Facilities Authority of Philadelphia (the "Hospitals Authority") are the
only debt bearing Pennsylvania's "moral obligation." PHFA's bonds, but
not its notes, are partially secured by a capital reserve fund required
to be maintained by PHFA in an amount equal to the maximum annual debt
service on its outstanding bonds in any succeeding calendar year. If
there is a potential deficiency in the capital reserve fund or if funds
are necessary to avoid default on interest, principal or sinking fund
payments on bonds or notes of PHFA, the Governor must place in
Pennsylvania's budget for the next succeeding year an amount sufficient
to make up any such deficiency or to avoid any such default. The budget
which the General Assembly adopts may or may not include such amount.
PHFA is not permitted to borrow additional funds as long as any deficiency
exists in the capital reserve fund.
Other obligations of Pennsylvania include (i) long-term agreements of
certain Commonwealth departments and agencies, as lessees of property and
equipment, to make lease payments that are pledged as security for debt
obligations of certain public authorities or other state-related entities
and (ii) pension plans covering state public school and other employees.
Certain Pennsylvania-created agencies have statutory authorization to
incur debt for which state appropriations to pay debt service thereon is
not required. The debt of these agencies is supported by assets of, or
revenues derived from, the various projects financed and is not an
obligation of Pennsylvania. Some of these agencies, however, are
indirectly dependent on Commonwealth appropriations. These entities are
as follows: the Delaware River Joint Toll Bridge Commission, the Delaware
River Port Authority, the Pennsylvania Energy Development Authority, the
Pennsylvania Higher Education Assistance Agency, the Pennsylvania Higher
Education Facilities Authority, the Pennsylvania Industrial Development
Authority, the Pennsylvania State Public School Building Authority, the
Pennsylvania Turnpike Commission, the Pennsylvania Economic Development
Financing Authority, the Pennsylvania Infrastructure Investment Authority
and the Philadelphia Regional Port Authority.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist Philadelphia
in remedying fiscal emergencies was enacted by the General Assembly and
approved by the Governor in June, 1991. PICA is designed to provide
assistance through the issuance of funding debt and to make factual
findings and recommendations to Philadelphia concerning its budgetary and
fiscal affairs. At this time, Philadelphia is operating under a five year
fiscal plan originally approved by PICA on April 6, 1992. As of November
1994, PICA had issued $1,296,660,000 of its Special Tax Revenue Bonds.
Many factors affect the financial condition of the Commonwealth and its
counties, cities and school districts and public bodies, certain of which
may not be within the control of such entities, such as social,
environmental and economic conditions. Various litigation is pending
against the Commonwealth, its officers and employees. An adverse decision
on one or more of these cases could materially affect the Commonwealth's
governmental operations. As is the case with many states, the
continuation of many of the Commonwealth's programs, particularly its
human services programs, is dependent to a significant degree upon
continuing federal reimbursements which have been steadily declining. The
loss of grants to the Commonwealth and its political subdivisions could
slow economic development. Also, changes to the Internal Revenue Code,
by limiting certain types of tax-exempt financing, may interfere with the
ability of the Commonwealth and its political subdivisions to carry out
their programs. To the extent that such factors exist, they could have
an adverse effect on economic conditions in Pennsylvania, although the
Fund is unable to predict what effect, if any, such factors would have on
the Fund's investments.
Other Investment Techniques and Strategies
- 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 Manager may determine that an
unrated floating rate or variable rate demand obligation meets the Fund's
quality standards by reason of being backed by a letter of credit or
guarantee issued by a bank that meets those quality standards. Floating
rate or variable rate obligations which do not provide for recovery of
principal and interest within seven days will be subject to the
limitations applicable to illiquid securities described in "Investment
Objective and Policies - Illiquid Securities" in the Prospectus. There
is otherwise no limit on the amount of the Fund's assets that may be
invested in floating rate and variable rate obligations.
- When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may purchase 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 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 will maintain
a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
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. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold 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 loss to the Fund.
When-issued transactions and forward commitments can be used by the
Fund as a defensive 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.
- 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 must, on each business day, be at least equal the market 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)
or other cash equivalents in which the Fund is permitted to invest. To
be acceptable as collateral, letters of credit must obligate a bank to pay
amounts demanded by the Fund if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Fund. When
it lends securities, the Fund receives an amount equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, or
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet certain tests under the Internal
Revenue Code and must permit the Fund to reacquire loaned securities on
five days' notice or in time to vote on any important matter. Income from
securities loans is not included in the exempt-interest dividends paid by
the Fund.
- Inverse Floaters and Other Derivative Securities. The Fund will
invest in inverse floaters in the expectation that they will provide
higher expected tax-exempt yields than are available for fixed-rate bonds
having comparable credit ratings and maturity. In certain instances, the
holder of an inverse floater may have an option to convert it into a
fixed-rate bond pursuant to a "rate lock option." Inverse floaters may
produce relatively high current income, reflecting the spread between
short-term and long-term tax-exempt interest rates. As long as the
municipal yield curve remains relatively steep and short-term rates remain
relatively low, owners of inverse floaters will continue to earn above-
market interest rates because they are receiving the higher long-term
rates and have paid for bonds with lower short-term rates. If the yield
curve flattens and shifts upward, an inverse floater will lose value more
quickly than conventional long-term municipal bonds.
Investing in inverse floaters that have interest rate caps might be a
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
may be used to hedge a portion of the Fund's exposure to rising interest
rates. When interest rates exceed the "strike" price 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 strike price, the cap
(which is purchased for additional cost) will not provide additional cash
flows and will expire worthless.
- Puts and Standby Commitments. When the Fund buys Municipal
Securities, it may obtain a standby commitment to repurchase the
securities that entitles it to achieve same-day settlement from the
repurchaser 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 transferable 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 standby commitments may not qualify as tax exempt in
its hands if the terms of the put or standby commitment cause the Fund not
to be treated as the tax owner of the underlying Municipal Securities.
- Hedging. As described in the Prospectus, the Fund may employ one or
more types of hedging instruments. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, to permit
the Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Interest Rate Futures or Municipal Bond
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 on the same security
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 a 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 until the call lapsed or
were exercised.
- 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 the related debt securities at a specified price on a specified
date. No amount is paid or received upon the purchase or sale of an
Interest Rate Future.
The Fund may concurrently buy and sell Futures contracts in the
expectation that the Future purchased will outperform the Future sold.
For example, the Fund might simultaneously buy Municipal Bond Futures and
sell U.S. Treasury Bond Futures. This type of transaction would be
profitable to the Fund if municipal bonds, in general, outperform U.S.
Treasury bonds. Risks of this type of Futures strategy include the
possibility that the Manager does not correctly assess the relative
durations of the investments underlying the Futures, with the result that
the strategy changes the overall duration of the Fund's portfolio in a
manner that increases the volatility of the Fund's price per share.
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%.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, equal to a specified percentage of the
contract amount, with the futures commission merchant (the "futures
broker"). The initial margin will be deposited with the Fund's Custodian
in an account registered in the futures broker's name; however, the
futures broker can gain access to that account only under specified
conditions. As the Future is marked to market to reflect changes in its
market value, subsequent margin payments, called variation margin, will
be made to and from the futures broker on a daily basis. At any time
prior to the expiration of the Future, the Fund may elect to close out its
position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required
to be paid by or released to the Fund. Any gain or loss is then realized.
Although Interest Rate Futures by their terms call for settlement by the
delivery 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 in the index, and is used 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 on a municipal bond index,
Municipal Bond Index Future or Interest Rate Future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying
investment to the Fund. 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).
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular
option. The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause it to sell underlying investments, thus increasing its turnover rate
in a manner beyond its control. The exercise by the Fund of puts may also
cause the sale of underlying investments, also causing turnover, since the
underlying investment might be sold for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a call or a put or sells a call. Premiums paid for options
are small in relation to the market value of the related investments and,
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could cause the Fund's net asset
value to be more sensitive to changes in the value of the underlying
investments.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
- 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 on the expiration of the calls or upon the
Fund's entering into a closing purchase transaction. An option position
may be closed out only on a market which provides secondary trading for
options of the same series and there is no assurance that a liquid
secondary market will exist for any particular option.
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.
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.
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of futures and options on futures as established by the Commodity
Futures Trading Commission ("CFTC"). In particular, the Fund is exempted
from registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. Under the
Rule the Fund will not, as to any positions, whether long, short or a
combination thereof, enter into Futures transactions and options thereon
for which the aggregate initial margins and premiums exceed 5% of the fair
market value of the Fund's assets, with certain exclusions as defined in
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 the Option Exchanges governing the maximum number of
options that may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or through
one or more brokers. Thus, the number of options which the Fund may write
or hold may be affected by options written or held by other entities,
including other investment companies having the same adviser as the Fund
(or an adviser that is an affiliate of the Fund's adviser). The exchanges
also impose position limits on futures transaction. An exchange may order
the liquidation of positions found to be in violation of those limits and
may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases an Interest Rate Future or Municipal Bond Index Future, the Fund
will maintain, in a segregated account or accounts with its Custodian,
cash or readily marketable short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the 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
(irrespective of losses) must be derived from gains realized on the sale
of securities held for less than three months. To comply with this 30%
cap, the Fund will limit the extent to which it engages in the following
activities, but will not be precluded from them: (i) selling investments,
including Interest Rate Futures and Municipal Bond Index Futures, held for
less than three months, whether or not they were purchased on the exercise
of a call held by the Fund; (ii) writing calls on investments held less
than three months; (iii) purchasing calls or puts which expire in less
than three months; (iv) effecting closing transactions with respect to
calls or puts purchased less than three months previously; and (v)
exercising puts or calls held by the Fund for less than three months.
- Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above,
there is a risk in using short hedging by selling Interest Rate Futures
and Municipal Bond Index Futures that the prices of such Futures or the
applicable index will correlate imperfectly with the behavior of the cash
(i.e., market value) prices of the Fund's securities. The ordinary
spreads between prices in the cash and futures markets are subject to
distortions due to differences in the natures of those markets. First,
all participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash
and futures markets. Second, the liquidity of the futures markets depends
on participants entering into offsetting transactions rather than making
or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
deposit requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of debt securities being hedged and movements in the price of the
Hedging Instruments, the Fund may use Hedging Instruments in a greater
dollar amount than the dollar amount of debt securities being hedged if
the historical volatility of the prices of such debt securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that if the Fund has used Hedging Instruments in a
short hedge, the market may advance and the value of debt securities held
in the Fund's portfolio may decline. If that occurred, the Fund would
lose money on the Hedging Instruments and also experience a decline in
value 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 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.
- Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank or the U.S. branch of a foreign bank with
assets of at least $1 billion or a broker-dealer with net capital of at
least $50 million which has been designated a primary dealer in government
securities) for delivery on an agreed-on future date. The resale price
exceeds the purchase price by an amount that reflects an agreed-upon
interest rate effective for the period during which the repurchase
agreement is in effect. The majority of these transactions run from day
to day, and delivery pursuant to 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 continuously monitor
the collateral's value and will impose creditworthiness requirements to
confirm that the vendor is financially sound.
Other Investment Restrictions
The most significant investment restrictions that apply to the Fund
are described in the Prospectus. The following investment restrictions
are also fundamental policies of the Fund, and, together with the Fund's
fundamental policies and investment objective, described in the
Prospectus, 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
shareholders' meeting, if the holders of more than 50% of the outstanding
shares are present or represented by a proxy, or (ii) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot: (1) invest in
real estate, but the Fund may invest in Municipal Securities or other
permitted securities secured by real estate or interests therein; (2)
purchase securities other than hedging instruments on margin; however, the
Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; (3) make short sales of
securities; (4) underwrite securities or invest in securities subject to
restrictions on resale; (5) invest in or hold securities of any "issuer"
if officers and Trustees or Directors of the Trust and the Manager
individually owning more than 0.5% of the securities of such issuer
together own more than 5% of the securities of such issuer; or (6) invest
in securities of any other investment company, except in connection with
a merger, consolidation, acquisition or reorganization.
- Diversification. For purposes of the investment restrictions set
forth in the Prospectus and above, the identification of the "issuer" of
a Municipal Security depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government
creating the subdivision, and the security is backed only by the assets
and revenues of the subdivision, such subdivision would be deemed to be
the sole issuer. Similarly, in the case of an industrial development
bond, if that bond is backed only by the assets and revenues of the
nongovernmental user, then such nongovernmental user would be deemed the
sole issuer. However, if in either case the creating government or some
other entity guarantees a security, such a guarantee would be considered
a separate security and would be treated as an issue of such government
or other agency. In applying these restrictions to the Fund's
investments, the Manager will consider a nongovernmental user of
facilities financed by industrial development bonds as being in a
particular industry, despite the fact that such bonds are Municipal
Securities as to which there is no industry concentration limitation.
Although this application of the restriction is not technically a
fundamental policy of the Fund, it will not be changed without shareholder
approval. The Manager has no present intention of investing more than 25%
of the total assets of the Fund in securities paying interest from
revenues of similar type projects, or in industrial development bonds.
Neither of these are fundamental policies, and therefore may be changed
without shareholder approval. Should any such change be made, the
Prospectus and/or this Statement of Additional Information will be
supplemented accordingly.
For purposes of the Fund's policy not to concentrate its assets,
described under investment restriction number (v) in the Prospectus, the
Fund has adopted the industry classifications set forth in Appendix C to
this Statement of Additional Information.
How the Fund Is Managed
Organization and History. As a series of 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 Trust, 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 Trust
valued at $25,000 or more or holding at least 1% of the Trust'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 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 Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and officers
and their principal occupations and business affiliations during the past
five years are listed below. The address of each Trustee and officer is
Two World Trade Center, New York, New York 10048-0203, unless another
address is listed below. All of the Trustees are also trustees or
directors of Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Time
Fund, Oppenheimer Growth Fund, Oppenheimer Discovery Fund, Oppenheimer
Global Growth & Income Fund, Oppenheimer Global Emerging Growth Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Tax-Free Bond Fund,
Oppenheimer New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt
Fund, Oppenheimer Target Fund, Oppenheimer Asset Allocation Fund,
Oppenheimer Mortgage Income Fund, Oppenheimer U.S. Government Trust,
Oppenheimer Multi-Sector Income Trust and Oppenheimer Multi-Government
Trust (the "New York-based OppenheimerFunds"). Messrs. Spiro, Donohue,
Bishop, Bowen, Farrar and Zack respectively hold the same offices with the
other New York-based OppenheimerFunds as with the Trust. As of March 15,
1995, the Trustees and officers of the Trust as a group owned less than
1% of the outstanding Class A and Class B shares of the Trust and 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 officers listed above, Mr. Donohue, is a trustee)
other than the shares beneficially owned under that plan by the officers
of the Fund listed above.
Leon Levy, Chairman of the Board of Trustees, Age: 69
General Partner of Odyssey Partners, L.P. (investment partnership) and
Chairman of Avatar Holdings, Inc. (real estate development).
Leo Cherne, Trustee, Age: 82
122 East 42nd Street, New York, New York 10168
Chairman Emeritus of the International Rescue Committee (philanthropic
organization); formerly Executive Director of the Research Institute
of America.
Robert G. Galli, Trustee*, Age: 61
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company;
formerly he held the following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder
Services, Inc. ("SSI"), transfer agent subsidiaries of the Manager, an
officer of other OppenheimerFunds and Executive Vice President and
General Counsel of the Manager and the Distributor.
Benjamin Lipstein, Trustee, Age: 71
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; Director of Sussex Publishers,
Inc. (publishers of Psychology Today and Mother Earth News) and a
Director of Spy Magazine, L.P.
Elizabeth B. Moynihan, Trustee, Age: 65
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of
Art, Smithsonian Institution; a member of the Indo-U.S. Sub-Commission
on Education and Culture; a trustee of the Institute of Fine Arts, New
York University and the National Building Museum; a member of the
Trustees Council, Preservation League of New York State.
__________________________
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Kenneth A. Randall, Trustee, Age: 67
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) and Fidelity
Life Association (mutual life insurance company); formerly Chairman of
the Board of ICL, Inc. (information systems) and President and Chief
Executive Officer of The Conference Board, Inc. (international
economics and business research).
Edward V. Regan, Trustee, Age: 64
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director or GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and
trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age: 63
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee, Age: 82
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; a director of The Korea Fund, Inc. and
The Malaysia Fund, Inc. (closed-end investment companies); a member of
the Board of Advisors, Olympus Private Placement Fund, L.P.; Professor
Emeritus of Finance, Adelphi University.
Donald W. Spiro, President and Trustee*, Age: 69
Chairman Emeritus and a director of the Manager; formerly Chairman of
the Manager and the Distributor.
Pauline Trigere, Trustee, Age: 82
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale
of women's fashions).
_____________________________________
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Clayton K. Yeutter, Trustee, Age: 64
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),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments,
Inc. (electronics) and The Vigoro Corporation (fertilizer
manufacturer); 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.
Andrew J. Donohue, Secretary, Age: 44
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, prior to which he was a 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.
Robert E. Patterson, Vice President and Portfolio Manager, Age: 51
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
George C. Bowen, Treasurer, Age: 58
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of
other OppenheimerFunds.
Robert G. Zack, Assistant Secretary, Age: 46
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Robert Bishop, Assistant Treasurer, Age: 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer, Age: 29
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman Co., a bank, and previously a
Senior Fund Accountant for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Galli and Spiro; Mr. Spiro is also an officer)
receive no salary or fee from the Fund. The Trustees of the Fund
(including Mr. Delaney, a former Trustee, but excluding Messrs. Galli and
Spiro) received the total amounts shown below from (i) the Fund, during
its fiscal year ended December 31, 1994 and (ii) from all 19 of the New
York-based OppenheimerFunds (including the Fund) listed in the first
paragraph of this section (and from Oppenheimer Global Environment Fund,
a former New York-based OppenheimerFund), for services in the positions
shown:
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
Compensation New York-based
Name and Position From Fund OppenheimerFunds1
<S> <C> <C>
Leon Levy, Chairman and Trustee $2,359 $141,000.00
Leo Cherne, Audit Committee $1,151 $ 68,800.00
Member and Trustee
Edmund T. Delaney, Study $1,442 $ 86,200.00
Committee Member
and Trustee2
Benjamin Lipstein, $1,442 $ 86,200.00
Study Committee
Member and Trustee
Elizabeth B. Moynihan, $1,014 $ 60,625.00
Study Committee
Member and3 Trustee
Kenneth A. Randall, $1,312 $ 78,400.00
Audit Committee Member
and Trustee
Edward V. Regan, $ 941 $ 56,275.00
Audit Committee
Member3 and Trustee
Russell S. Reynolds, Jr.,Trustee $ 872 $ 52,100.00
Sidney M. Robbins, Study $2,044 $122,100.00
Committee Chairman, Audit
Committee Vice-Chairman
and Trustee
Pauline Trigere, Trustee $ 872 $ 52,100.00
Clayton K. Yeutter, Trustee $ 872 $ 52,100.00
<FN>
______________________
1For the 1994 calendar year.
2Board and committee positions held during a portion of the period shown.
3Committee position held during a portion of the period shown.
</TABLE>
The Fund has adopted a retirement plan that provides for payment to
a retired Trustee of up to 80% of the average compensation paid during
that Trustee's five years of service in which the highest compensation was
received. A Trustee must serve in that capacity for any of the New York-
based OppenheimerFunds for at least 15 years to be eligible for the
maximum payment. No provision was made during the fiscal year ended
December 31, 1994 for the Fund's projected retirement obligations. No
payments have been made by the Fund under the plan as of December
31, 1994.
- Major Shareholders. As of March 15, 1995, the only person who
owned of record or was known by the Fund to own beneficially 5% or more
of the Fund's outstanding Class A or Class B shares was Evora K. Morgan,
234 Pembroke Avenue, Wayne, PA 19087-4837, who owned of record 48,228.663
Class B shares (5.06% of the Class B shares then outstanding).
The Manager and Its Affiliates. The Manager is 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 two of whom (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 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 investment
advisory agreement or by the Distributor under the Distribution Agreement
are paid by the Fund. The investment advisory agreement lists examples
of expenses paid by the Fund, the major categories of which relate to
interest, taxes, brokerage commissions, fees to certain trustees, legal
and audit expenses, custodian and transfer agent expenses, share issuance
costs, certain printing and registration costs and non-recurring expenses,
including litigation costs. For the fiscal years ended December 31, 1992,
1993 and 1994, the management fees paid by the Fund to the Manager were
$131,646, $316,801 and $420,696, respectively. These amounts do not
reflect the expense assumptions of $73,040 and $39,417 by the Manager for
the fiscal year ended December 31, 1992 and the fiscal period ended
December 31, 1993 (prior to May 26, 1993), respectively.
The investment advisory agreement contains no provision limiting the
Fund's expenses. However, independently of the investment advisory
agreement, the Manager has voluntarily undertaken that the total expenses
of the Fund in any fiscal year (including the management fee but excluding
taxes, interest, brokerage commissions, distribution plan payments and
extraordinary expenses such as litigation costs) shall not exceed the most
stringent expense limitation imposed under state law applicable to the
Fund. Currently, the most stringent state expense limitation is imposed
by California, and limits the Fund's expenses (with specific exclusions)
to 2.5% of the first $30 million of average annual net assets, 2% of the
next $70 million, and 1.5% of average annual net assets in excess of $100
million. The Manager reserves the right to modify or terminate a
voluntary expense assumption undertaking at any time. Any assumption of
the Fund's expenses under a voluntary undertaking would lower the Fund's
overall expense ratio and increase its total return during any period in
which expenses are limited.
The investment 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 investment advisory agreement permits the Manager
to act as investment adviser for any other person, firm or corporation and
to use the name "Oppenheimer" in connection with one or more additional
companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment adviser to
the Fund, the right of the Fund to use the name "Oppenheimer" as part of
its name may be withdrawn.
- The Distributor. Under its Distribution Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A and Class B shares but is not
obligated to sell a specific number of shares. Expenses normally
attributable to sales (other than those paid under the Class B
Distribution and Service Plan), including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders, are borne by the Distributor. During the Fund's fiscal
years ended December 31, 1992, 1993 and 1994, the aggregate amount of
sales charges on sales of the Fund's shares was $751,703, $939,991 and
$470,999, respectively, of which the Distributor and an affiliated broker-
dealer retained in the aggregate $151,644, $252,444 and $125,278 in those
respective years. During the Fund's fiscal year ended December 31, 1994,
the contingent deferred sales charge collected on redemption of the Fund's
Class B shares was $63,420, all of which the Distributor retained. For
additional information about distribution of the Fund's shares and the
expenses connected with such activities, please refer to "Distribution and
Service Plans," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon new 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 advisory agreement and the procedures and rules
described above. In each 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 incurs
little or no brokerage costs. The Fund usually deals directly with the
selling or purchasing principal or market maker without incurring charges
for the services of a broker on its behalf unless it is determined that
better price or execution may be obtained by utilizing the services of a
broker. Purchases of portfolio securities from underwriters include a
commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
The Fund seeks to obtain prompt execution of orders at the most favorable
net price. When the Fund engages in an option transaction, ordinarily the
same broker will be used for the purchase or sale of the option and any
transaction in the securities to which the option relates. When possible,
concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are averaged
as to price and allocated in accordance with the purchase or sale orders
actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Trust (those
Trustees of the Trust who are not "interested persons" as defined in the
Investment Company Act, and who have no direct or indirect financial
interest in the operation of the advisory agreement or the Distribution
Plans described below) annually reviews information furnished by the
Manager as to the commissions paid to brokers furnishing such services so
that the Board may ascertain whether the amount of such commissions was
reasonably related to the value or benefit of such services.
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 or 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
As described in the Prospectus, from time to time the "standardized
yield," "dividend yield," "tax-equivalent yield," "average annual total
return", "total return at net asset value," and "total return" of an
investment in each class of Fund shares may be advertised. An explanation
of how yields and total returns are calculated for each class and the
components of those calculations is set forth below.
Yield and total return information may be useful to investors in
reviewing the Fund's performance. The Fund's advertisement of its
performance must, under applicable SEC rules, include the average annual
total returns for each class of shares of the Fund for the 1, 5 and 10-
year period (or the life of the class, if less) as of the most recently
ended calendar quarter. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its yield and total return are not
guaranteed and normally will fluctuate on a daily basis. When redeemed,
an investor's shares may be worth more or less than their original cost.
Yield and total return for any given past period are not a prediction or
representation by the Fund of future yields or rates of return on its
shares. The yield and total returns of the Class A and Class B shares of
the Fund are affected by portfolio quality, portfolio maturity, the type
of investments the Fund holds and its operating expenses.
- Standardized Yields
- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
a-b 6
Yield = 2 ((---- + 1) -1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of the class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended December 31, 1994, the standardized yields for the
Fund's Class A and Class B shares were 5.58% and 5.10%, 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, state and city taxable income (the net amount
subject to Federal and state income taxes after deductions and
exemptions). The tax equivalent yield table assumes that the investor is
taxed at the highest bracket, regardless of whether a switch to non-
taxable investments would cause a lower bracket to apply 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. The Fund's tax-equivalent yields (after expense
assumptions by the Manager) for its Class A and Class B shares for the 30-
day period ended December 31, 1994, for an individual Pennsylvania
resident in the 41.29% combined tax bracket were 9.50% and 8.69%,
respectively.
- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A or Class B share dividends derived
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares, the maximum offering price
is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time similar yield or distribution return calculations
may also be made using the Class A net asset value (instead of its
respective maximum offering price) at the end of the period.
The dividend yields on Class A shares for the 30-day period ended
December 31, 1994, were 5.85% and 6.14% when calculated at maximum
offering price and at net asset value, respectively. The dividend yield
on Class B shares for the 30-day period ended December 31, 1994, was
5.38%. Distribution returns for the 30-day period ended December 31, 1994
are the same as the above-quoted dividend yields. No portions of the
Class A or Class B dividends for the three months ended December 31, 1994
were derived from realized capital gains.
- 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 discussed below). For Class B shares, the payment of the
applicable contingent deferred sales charge of (5.0% for the first year,
4.0% for the second year, 3.0% for the third and fourth years, 2.0% in the
fifth year, 1.0% in the sixth year and none thereafter) is applied to the
investment result for the time period shown (unless the total return is
shown at net asset value, as described below. Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that
the investment is redeemed at the end of the period.
The "average annual total return" on an investment in Class A shares
of the Fund for the one and five year periods ended December 31, 1994 and
for the period from September 18, 1989 (commencement of operations) to
December 31, 1994 were -12.06%, 4.90% and 5.26%, respectively. The
cumulative "total return" on Class A shares for the latter period was
31.14%. The average annual total returns on an investment in Class B
shares for the fiscal year ended December 31, 1994 and for the period May
1, 1993 (the date Class B shares were first publicly offered) through
December 31, 1994 were -12.68% and -3.52%, respectively. The cumulative
total return on Class B shares for the period May 1, 1993 through December
31, 1994 was -5.80%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A or Class B shares.
Each is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred
sales charges) and takes into consideration the reinvestment of dividends
and capital gains distributions.
The average annual total returns at net asset value for Class A
shares for the one and five year periods ended December 31, 1994, and for
the period from September 18, 1989 (commencement of operations) to
December 31, 1994 were -7.68%, 33.34% and 37.68%, respectively.
The average annual total returns at net asset value for Class B
shares for the one year period ended December 31, 1994 and for the period
May 1, 1993 (the date Class B shares were first publicly offered) through
December 31, 1994 were -8.32% and -2.20%, respectively.
- Other Performance Comparisons. From time to time the Fund may
publish the ranking of the performance of its Class A or Class B shares
by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund, and
ranks their performance for various periods based on categories relating
to investment objectives. The performance of the Fund is ranked against
(i) all other bond funds, excluding money market funds, and (ii) all other
New York municipal bond funds. The Lipper performance rankings are based
on total returns that include the reinvestment of capital gains
distributions and income dividends but do not take sales charges or taxes
into consideration. From time to time the Fund may include in its
advertisement and sales literature performance information about the Fund
cited in other newspapers and periodicals such as The New York Times,
which may include performance quotations from other sources, including
Lipper and Morningstar.
From time to time the Fund may publish the ranking of the performance
of its Class A or Class B shares by Morningstar, Inc., an independent
mutual fund monitoring service that ranks mutual funds, including the
Fund, monthly in broad investment categories (equity, taxable bond,
municipal bond and hybrid) based upon risk-adjusted investment returns.
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 returns. Risk and return
are combined to produce star rankings reflecting performance relative to
the average fund in a given 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.
Investors may also wish to compare the Fund's Class A or Class B
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 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. When redeemed, an investor's shares may be worth
more or less than their original cost. Returns for any given past period
are not a prediction or representation by the Fund of future returns. The
returns of Class A and Class B shares of the Fund are affected by
portfolio quality, the type of investments the Fund holds and its
operating expenses allocated to a particular class.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or the Transfer Agent), by independent third-parties, on
the investor services provided by them to shareholders of the
OppenheimerFunds, other than the performance rankings of the
OppenheimerFunds themselves. Those ratings or rankings of
shareholder/investor services may compare the OppenheimerFunds' 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, using its own 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 a
Distribution and Service Plan for Class B shares of the Fund under Rule
12b-1 of the Investment Company Act, pursuant to which the Fund will
reimburse the Distributor quarterly for all or a portion of its costs
incurred in connection with the distribution and/or servicing of the
shares of that class, as described in the Prospectus. Each Plan has been
approved by a vote of (i) the Board of Trustees of the Trust, including
a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the shares of
each class. For the Distribution and Service Plan for the Class B shares,
that vote was cast by the Manager as the then-sole initial holder of Class
B shares of the Fund].
In addition, under the Plans the Manager and the Distributor in their
sole discretion, from time to time, may use their own resources (which,
as to the Manager, may include profits derived from the advisory fee it
receives from the Fund) to make payments to brokers, dealers, or other
financial institutions (each is referred to as a "Recipient" under the
Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of distribution assistance payments they make to
Recipients from their own resources.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Trust's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on any such selection or nomination is approved by a
majority of such Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate allowed under the Plans and set no minimum amount.
For the fiscal year ended December 31, 1994, payments under the Class
A Plan totaled $92,871, all of which was paid by the Distributor to
Recipients, including $7,608 paid to an affiliate of the Distributor.
Unreimbursed expenses incurred with respect to Class A shares for any
fiscal quarter by the Distributor may not be recovered under the Class A
Plan in subsequent fiscal quarters. Payments received by the Distributor
under the Class A Plan will not be used to pay any interest expense,
carrying charges, or other financial costs, or allocation of overhead by
the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will
be made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at an annual rate of 0.25% of the average daily net
asset value of Class B shares held in accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance payment of the service fee. In the event Class B shares are
redeemed during the first year that the shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of the advance of
the service fee payment for those shares to the Distributor.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class B Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B
Plan are subject to the limitations imposed by the National Association
of Securities Dealers, Inc. Rules of Fair Practice on payments of asset
based sales charges and service fees. The Distributor anticipates that
it will take a number of years for it to recoup (from the Fund's payments
to the Distributor under the Class B Plan and recoveries of the contingent
deferred sales charge) the sales commissions paid to authorized brokers
or dealers. For the fiscal year ended December 31, 1994, payments under
the Class B plan totaled $65,901, including $385 to an affiliated
broker/dealer.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and from
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class B Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
availability of two 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 shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$1 million or more of Class B shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of 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 and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total 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 Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined as of the
close of business of The New York Stock Exchange (the "NYSE") on each day
that the NYSE is open by dividing the value of the Fund's net assets
attributable to that class by the total number of shares of that class
outstanding. The NYSE 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 NYSE's most recent
annual holiday schedule states that it will close on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than NYSE members may conduct trading in Municipal
Securities on certain days on which the NYSE is closed (including weekends
and holidays) or after 4:00 P.M. on a regular business day. Because the
Fund's net asset value will not be calculated on those days, the Fund's
net asset value per share of each class may be significantly affected on
days when shareholders may not purchase or redeem shares (e.g., Good
Friday), so that securities of the same type held by the Fund may be
traded, and the net asset values per share of Class A and Class B shares
of the Fund may be significantly affected, on such days when shareholders
cannot purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) long-term
debt securities, and short-term debt securities having a remaining
maturity in excess of 60 days, or less are valued at the mean between the
asked and bid prices determined by a portfolio pricing service approved
by the Board or obtained from active market makers in the security on the
basis of reasonable inquiry; (ii) short-term debt securities having a
remaining maturity of 60 days or less when purchased or which currently
have maturities of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (iii) securities
or assets for which market quotations are not readily available are valued
at their fair value as determined in good faith under the procedures
established by and under the general supervision and responsibility of the
Board of Trustees.
In the case of Municipal Securities, U.S. Government securities and
corporate bonds, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity and other
special factors involved (such as the tax-exempt status of the interest
paid by Municipal Securities). With the approval of the Trust's Board of
Trustees, the Manager may employ a pricing service, bank or broker-dealer
experienced in such matters to price any of the types of securities
described above. The Trustees will monitor the accuracy of pricing
services by comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
The Fund values puts, calls, Interest Rate Futures and Municipal Bond
Index Futures at the last sales price on the principal exchange or on the
NASDAQ on which they are traded. If there were no sales on the principal
exchange, the last sale or any exchange is used. In the absence of any
sales that day, value shall be the last reported sales price on the prior
trading day or closing bid or asked prices on the principal exchange
closets to the last reported sales price.
When the Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets and
Liabilities as an asset, and an equivalent deferred credit is included in
the liability section. The deferred credit is adjusted ("marked-to-
market") to reflect the current market value of the option. In determining
the Fund's gain on investments, if a call 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 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 the premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before the close of the NYSE that day, which is normally 3 days
after the ACH transfer is initiated. The Distributor and the Fund are not
responsible for any delays. If the Federal Funds are received after the
close of the NYSE that day, dividends will begin to accrue on the next
regular business day after such Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction 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 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, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer 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 Tax-Exempt Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase Class A shares of the Fund (and other
eligible OppenheimerFunds) sold with a front-end sales charge during the
13-month period from the investor's first purchase pursuant to the Letter
(the "Letter of Intent period"), which may, at the investor's request,
include purchases made up to 90 days prior to the date of the Letter. The
Letter states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestments of dividends or
distributions or purchases made at net asset value without sales charge),
which together with the investor's holdings of such funds (calculated at
their respective public offering prices calculated on the date of the
Letter) will equal or exceed the amount specified in the Letter. This
enables the investor to obtain the reduced sales charge rate (as set forth
in the Prospectus) applicable to purchases of shares in that amount (the
"intended purchase amount"). Each purchase under the Letter will be made
at the public offering price applicable to a single lump-sum purchase of
shares in the intended amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of one
of the OppenheimerFunds whose shares were acquired by payment of a sales
charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, 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.
- Involuntary Redemptions. The Trust's Board of Trustees has the
right to cause the involuntary redemption of the Fund's shares held in any
account if the aggregate net asset value of such shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of such shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or may set requirements
for granting permission to the shareholder to increase the investment, and
set other terms and conditions so that the shares would not be
involuntarily redeemed.
- 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 Trust 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 Trust has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Value Per Share" and such valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after 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 OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of either class at the time of transfer to the name
of another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives an order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customer 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.). Payment ordinarily will be made
within seven (effective June 7, 1995, within three) days after the
Distributor's receipt of the required redemption documents, with
signature(s) guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of
the Fund valued at $5,000 or more can authorize the Transfer Agent to
redeem shares (minimum $50) automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Withdrawal Plan. Shares will
be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are 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 the payment on the
date requested and reserves the right to amend, suspend or discontinue
offering such plans at any time without prior notice. Because of the
sales charge assessed on Class A share purchases, shareholders should not
make regular additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B shareholders should not establish
withdrawal plans that would require the redemption of shares purchased
subject to a contingent deferred sales charge and held less than 6 years
because of the imposition of the Class B contingent deferred sales charge
on such withdrawals (except where the Class B contingent deferred sales
charge is waived as described in the Prospectus under "Class B Contingent
Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "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 thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
the OppenheimerFunds that have a single class of shares without a class
designation are deemed "Class A" shares for this purpose. All
OppenheimerFunds offer Class A shares (except Oppenheimer Strategic
Diversified Income Fund), but only the following other OppenheimerFunds
offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Discovery Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Class A shares of OppenheimerFunds 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
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds 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 six years of the initial purchase
of the exchanged Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or 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 Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal 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 on
newly purchased shares will not be declared or paid until such time as
Federal Funds (funds credited to a member bank's account at the Federal
Reserve Bank) are available from the purchase payment for such shares.
Normally, purchase checks received from investors are converted to Federal
Funds on the next business day. Dividends will be declared on shares
repurchased by a dealer or broker for four business days following the
trade date (i.e., to and including the day prior to settlement of the
repurchase). If all shares in an account are redeemed, all dividends
accrued on shares of the same class in the account will be paid together
with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A and Class B
Shares," above. Dividends are calculated in the same manner, at the same
time and on the same day for shares of each class. However, dividends on
Class B shares are expected to be lower as a result of the asset-based
sales charge on Class B shares, and Class B dividends will also differ in
amount as a consequence of any difference in net asset value between Class
A and Class B shares.
Dividends will be declared from net investment income, if any. Net
investment income includes the allocation of amounts of income from the
Pennsylvania Municipal Securities in the Fund's portfolio which are free
from Federal and Pennsylvania personal 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.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Trust'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.
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. At December 31, 1994,
the Fund had available for federal income tax purposes an unused capital
loss carryover of approximately $842,000 which will expire in the year
2002.
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 the gross income of
shareholders for Federal income tax purposes. To the extent that
distributions are derived from interest on Pennsylvania Municipal
Securities, obligations of the U.S. Government and certain of its
territories, agencies and instrumentalities, such distributions will also
be exempt from Pennsylvania personal income tax and, in the case of
residents of the City of Philadelphia, the investment income tax of the
School District of Philadelphia. Dividends designated as capital gain
dividends for Federal income tax purposes will also be exempt from the
investment income tax of the School District of Philadelphia. Dividends
derived from interest on Municipal Securities other than Pennsylvania
Municipal Securities will be exempt from Federal income tax for
individuals, but will be subject to the Pennsylvania personal income tax
and, in the case of residents of Philadelphia, the investment income tax
of the City of Philadelphia. All of the Fund's dividends (excluding
distributions) paid during 1994 were exempt from such Federal and
Pennsylvania income taxes. 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. 5.9% of the Fund's dividends (excluding
distributions) paid during 1994 were a tax preference item for such
shareholders. Corporate shareholders and "substantial users" of
facilities financed by Private Activity Municipal Securities should read
"Investment Objective and Policies" above before purchasing shares.
Pennsylvania has recently enacted legislation which eliminated the
necessity for certain investment restrictions which the Fund has adopted
as fundamental policies and which are described in the Prospectus. These
investment restrictions had been required under prior law in order to
enable a fund (such as the Fund) to pass-through to investors the tax-
exempt nature of its income for purposes of the Pennsylvania personal
income tax. The tax-exempt nature of such income may now be passed-
through to investors generally without restriction for purposes of the
Pennsylvania personal income tax. The Fund continues to be governed by
these restrictions but, as a result of the recent Pennsylvania
legislation, may eliminate such restrictions. The Pennsylvania
legislation also repeals the Pennsylvania personal income tax exemption
for gains from the sale of tax-exempt obligations. Thus, capital gain
distributions from the Fund will be fully taxable for purposes of the
Pennsylvania personal income tax.
For Federal income tax purposes, a shareholder receiving a dividend
from income earned by the Fund from one or more of: (i) certain taxable
temporary investments, (ii) income from securities loans, (iii) income or
gains from hedging instruments, and (iv) an excess of net short-term
capital gain over net long-term capital loss from the Fund, treats the
dividend as either a receipt of 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.
Shares of the Fund will be exempt from Pennsylvania county personal
property taxes, the personal property tax of the City of Pittsburgh, and
the personal property tax of the School District of Pittsburgh to the
extent that the Fund's portfolio securities consist of Pennsylvania
Municipal Securities and obligations of the U.S. Government, and certain
of its territories, agencies and instrumentalities, and certain other
obligations that are not subject to such personal property taxes on the
annual assessment date.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges" above at net asset value without sales charge. Class B
shareholders should be aware that as of the date of this Statement of
Additional Information, not all of the OppenheimerFunds offer Class B
shares. The names of the Funds that offer Class B shares can be obtained
by calling the Distributor at 1-800-525-7048. To elect this option, the
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to
establish an account. The investment will be made at the net asset value
per share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or distributions from shares of
other OppenheimerFunds may be invested in shares of this Fund on the same
basis.
Additional Information About the Fund
The Custodian. The Custodian of the assets of the Fund is Citibank,
N.A. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
Appendix C
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Transmission
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
__________________
* For purposes of the Fund's investment policy not to concentrate in
securities of issuers in the same industry, gas utilities and gas
transmission utilities each will be considered a separate industry.
<PAGE>
APPENDIX A
Descriptions 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.
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>
<TABLE>
<CAPTION>
TAX-EQUIVALENT YIELDS
Appendix B
Combined
Federal Effective
Taxable Tax A Pennsylvania Tax-Exempt Bond Fund yield
of:
Income of: Bracket 3.50% 4.00% 4.50% 5.00% 5.50%
6.00% 6.50% 7.00%
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
Joint return:
But Not
Over Over Is Equivalent to a Taxable Yield of:
$0 $39,000 17.38% 4.24% 4.84% 5.45% 6.05% 6.66%
7.26% 7.87% 8.47%
$39,000 $94,250 30.02% 5.00% 5.72% 6.43% 7.14% 7.86%
8.57% 9.29% 10.00%
$94,250 $143,600 32.93% 5.22% 5.96% 6.71% 7.46% 8.20%
8.95% 9.69% 10.44%
$143,600 $256,500 37.79% 5.63% 6.43% 7.23% 8.04% 8.84%
9.65% 10.45% 11.25%
$256,500 and above 41.29% 5.96% 6.81% 7.66% 8.52% 9.37%
10.22% 11.07% 11.92%
Single return:
But Not
Over Over
$0 $23,350 17.38% 4.24% 4.84% 5.45% 6.05% 6.66%
7.26% 7.87% 8.47%
$23,350 $56,500 30.02% 5.00% 5.72% 6.43% 7.14% 7.86%
8.57% 9.29% 10.00%
$56,550 $117,950 32.93% 5.22% 5.96% 6.71% 7.46% 8.20%
8.95% 9.69% 10.44%
$117,950 $256,500 37.79% 5.63% 6.43% 7.23% 8.04% 8.84%
9.65% 10.45% 11.25%
$256,500 and above 41.29% 5.96% 6.81% 7.66% 8.52% 9.37% 10.22%
11.07% 11.92%
</TABLE>
The equivalent yield table above compares tax-free income with taxable
income under Federal tax rates effective January 1, 1995 and Commonwealth
of Pennsylvania income tax rates effective January 1, 1995. Combined
taxable income refers to the net amount subject to Federal and
Pennsylvania income tax after deductions and exemptions. The table
assumes that an investor's highest tax bracket applies to the change in
taxable income resulting from a switch between taxable and non-taxable
investments, that the investment is not subject to the Alternative Minimum
Tax and that Pennsylvania income tax payments are fully deductible for
Federal income tax purposes. They 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. The income tax
brackets are subject to indexing in future years to reflect changes in the
Consumer Price Index. The table does not include the effect of exemption
from Pennsylvania personal property taxes or school district taxes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer
Multi-State Tax-Exempt Trust:
We have audited the accompanying statements of
investments and assets and liabilities of Oppenheimer
Pennsylvania Tax-Exempt Fund (a series of Oppenheimer
Multi-State Tax-Exempt Trust) as of December 31, 1994,
and the related statement of operations for the year then
ended, the statements of changes in net assets for each
of the years in the two-year period then ended and the
financial highlights for each of the years in the
five-year period then ended and the period from September
18, 1989 (commencement of operations) to December 31,
1989. 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 December 31, 1994,
by correspondence with the custodian. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of
Oppenheimer Pennsylvania Tax-Exempt Fund as of December
31, 1994, the results of its operations for the year then
ended, the changes in its net assets for each of the
years in the two-year period then ended, and the
financial highlights for each of the years in the five-
year period then ended and the period from September 18,
1989 (commencement of operations) to December 31, 1989,
in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
January 23, 1995
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1994
<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--97.9%
PENNSYLVANIA--95.5% Allegheny County, Pennsylvania Hospital Development
Authority Revenue Bonds, Magee Women's Hospital,
FGIC Insured, 5.375%, 10/1/13 Aaa/AAA/AAA $2,000,000 $1,706,742
Allegheny County, Pennsylvania Hospital Development
Authority Revenue Bonds, Presbyterian University Hospital,
Prerefunded, Series A, MBIA Insured, 7.60%, 3/1/08 Aaa/AAA 600,000 646,047
Berks County, Pennsylvania General Obligation Bonds,
FGIC Insured, 8.425%, 11/15/20(1) Aaa/AAA/AAA 1,000,000 1,078,526
Berks County, Pennsylvania Municipal Authority Hospital
Revenue Bonds, Reading Hospital Medical Center Project,
MBIA Insured, 5.70%, 10/1/14 Aaa/AAA/AAA 1,250,000 1,110,293
Blair County, Pennsylvania Hospital Authority Revenue
Bonds, Altoona Hospital Project, AMBAC Insured,
5.523%, 7/1/14(1) Aaa/AAA/AAA 700,000 664,855
Dauphin County, Pennsylvania General Authority Hospital
Revenue Bonds, Hapsco-Western Pennsylvania Hospital
Project, Series A-1, MBIA Insured, 5.50%, 7/1/13 Aaa/AAA 1,000,000 863,353
Dauphin County, Pennsylvania Hospital Authority Revenue
Refunding Bonds, Polyclinic Medical Center Project,
MBIA Insured, 5.40%, 8/15/13 Aaa/AAA/NR 2,500,000 2,166,425
Delaware County, Pennsylvania Authority Revenue Bonds,
Villanova University, MBIA Insured, 6.90%, 8/1/16 Aaa/AAA 1,000,000 1,010,429
Delaware County, Pennsylvania Industrial Development
Authority Revenue Refunding Bonds, Resource Recovery
Project, Series A, 8.10%, 12/1/13 Aa3/A+ 2,630,000 2,789,157
Delaware River Joint Toll Bridge Commission Pennsylvania
Bridge Revenue Bonds, Interstate 78, Prerefunded,
FGIC Insured, 7.80%, 7/1/18 Aaa/AAA/AAA 1,450,000 1,578,444
Langhorne Manor Boro, Pennsylvania Higher Education
& Health Authority Revenue Bonds, Woods Schools
Project, Prerefunded, 8.75%, 11/15/14 NR/AAA 1,000,000 1,147,480
Lehigh County, Pennsylvania General Purpose Authority
Revenue Bonds, Lehigh Valley Hospital, Inc., Series A,
MBIA Insured, 7%, 7/1/16 Aaa/AAA 1,250,000 1,290,951
Northampton County, Pennsylvania Hospital Authority
Revenue Bonds, Easton Hospital, Series A, MBIA Insured,
6.25%, 1/1/19 Aaa/AAA 1,000,000 939,850
Northcumberland County, Pennsylvania Commonwealth
Lease Authority Revenue Bonds, MBIA Insured,
6.25%, 10/15/09 Aaa/AAA 2,000,000 2,048,592
Pennsylvania Convention Center Authority Revenue Bonds,
Escrowed to Maturity, Series A, FGIC Insured, 6.70%, 9/1/16 Aaa/AAA/AAA 1,850,000
1,835,159
Pennsylvania Economic Development Financing
Authority Wastewater Treatment Revenue Bonds,
Sun Co., Inc.--R & M Project, Series A, 7.60%, 12/1/24 Baa1/BBB+ 2,000,000 2,009,244
Pennsylvania Housing Finance Agency Revenue Bonds,
Single Family Mtg., Series 31C, 9.315%, 10/1/23(1) Aa/AA 1,000,000 956,234
Pennsylvania Housing Finance Agency Revenue Bonds,
Single Family Mtg., Series 36, 5.45%, 10/1/14 Aa/AA 1,000,000 848,580
</TABLE>
6 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
---------------- ------ ------------
<S> <C> <C> <C>
PENNSYLVANIA Pennsylvania Housing Finance Agency Revenue Bonds,
(CONTINUED) Single Family Mtg., Series 40, 6.80%, 10/1/15 Aa/AA $2,000,000
$1,973,482
Pennsylvania Housing Finance Agency Revenue
Refunding Bonds, Rental Housing, 5.80%, 7/1/18 Aaa/AAA 2,000,000 1,762,722
Pennsylvania Housing Finance Agency Revenue
Refunding Bonds, Rental Housing, 6.40%, 7/1/12 Aaa/AAA 1,500,000 1,455,525
Pennsylvania Intergovernmental Cooperative Authority
Special Tax Revenue Bonds, City of Philadelphia Funding
Program, MBIA Insured, 5.60%, 6/15/15 Aaa/AAA/BBB+ 1,500,000 1,319,146
Pennsylvania Intergovernmental Cooperative Authority
Special Tax Revenue Refunding Bonds, City of Philadelphia
Funding Program, MBIA Insured, 5.60%, 6/15/16 Aaa/AAA 1,000,000 876,731
Pennsylvania State General Obligation Refunding Bonds,
Fst. Series, 10%, 4/15/98 A1/AA--/AA-- 1,880,000 2,144,631
Pennsylvania State Higher Education Assistance Agency
Student Loan Revenue Bonds, Series B, AMBAC Insured,
7.316%, 3/1/22(1) Aaa/AAA/AAA 1,250,000 957,575
Pennsylvania State Higher Educational Facilities Authority
College & University Revenue Bonds, Hahnemann
University Project, MBIA Insured, 7.20%, 7/1/19 Aaa/AAA 1,500,000 1,542,981
Pennsylvania State Higher Educational Facilities Authority
College & University Revenue Bonds, RIDC Regional
Growth Fund--Carnegie, 9%, 11/1/09 NR/A+ 1,250,000 1,308,581
Pennsylvania State Higher Educational Facilities Authority
College & University Revenue Bonds, Thomas Jefferson
University, Series A, 6.625%, 8/15/09 Aa/A+ 750,000 756,824
Pennsylvania State Higher Educational Facilities
Authority Health Services Revenue Bonds, University of
Pennsylvania, Series A, 6%, 1/1/10 Aa/AA-- 2,000,000 1,897,742
Pennsylvania State Industrial Development Authority
Economic Development Revenue Bonds, Prerefunded,
Series A, 7%, 1/1/11 NR/A--/AAA 1,000,000 1,078,594
Pennsylvania State Turnpike Commission Revenue Bonds,
Series P, AMBAC Insured, 6%, 12/1/17 Aaa/AAA/AAA 2,000,000 1,848,026
Pennsylvania State Turnpike Commission Turnpike
Revenue Bonds, Prerefunded, Series E, MBIA Insured,
7.50%, 12/1/09 Aaa/AAA 1,000,000 1,095,442
Pennsylvania State University Revenue Refunding Bonds,
5.50%, 8/15/16 A1/AA-- 1,000,000 869,007
Pennsylvania State University Revenue Refunding Bonds,
Series B, 5.50%, 8/15/16 A1/AA-- 2,500,000 2,172,517
Philadelphia, Pennsylvania Gas Works Revenue Bonds,
14th Series, 6.375%, 7/1/26 Baa1/BBB/A-- 1,800,000 1,620,988
Philadelphia, Pennsylvania Gas Works Revenue Bonds,
15th Series, 5.25%, 8/1/15 Baa1/BBB/A-- 1,000,000 802,254
Philadelphia, Pennsylvania Hospitals & Higher
Educational Facilities Authority Revenue Bonds,
Albert Einstein Medical Center, 7.625%, 4/1/11 A/BBB+ 3,500,000 3,604,264
</TABLE>
7 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
---------------- ------ -------------
<S> <C> <C> <C>
PENNSYLVANIA Philadelphia, Pennsylvania Hospitals & Higher Educational
(CONTINUED) Facilities Authority Revenue Bonds, Temple University
Hospital, Series A, 6.625%, 11/15/23 Baa1/BBB+ $3,800,000 $ 3,464,908
Philadelphia, Pennsylvania Municipal Authority Justice
Lease Revenue Refunding Bonds, Series A, FGIC Insured,
5.625%, 11/15/14 Aaa/AAA/AAA 3,000,000 2,673,801
Philadelphia, Pennsylvania Regional Port Authority Lease
Revenue Bonds, MBIA Insured, 6.87%, 9/1/20(1) Aaa/AAA 2,100,000 1,785,550
Philadelphia, Pennsylvania Water & Sewer Revenue Bonds,
Escrowed to Maturity, Tenth Series, 7.35%, 9/1/04 NR/AAA/BBB 245,000 261,923
Philadelphia, Pennsylvania Water & Wastewater Revenue
Bonds, 5.75%, 6/15/13 Baa/BBB/BBB 1,000,000 853,149
Schuylkill County, Pennsylvania Industrial Development
Authority Resource Recovery Revenue Refunding Bonds,
Schuylkill Energy Resources, Inc., 6.50%, 1/1/10 NR/NR/BBB-- 2,895,000 2,617,607
Schuylkill County, Pennsylvania Industrial Development
Authority Resource Recovery Revenue Refunding Bonds,
Schuylkill Energy Resources, Inc., 6.50%, 1/1/10 NR/NR/BBB-- 105,000 105,000
St. Mary Hospital Authority Langhorne, Pennsylvania
Hospital Revenue Refunding Bonds, Franciscan Health
Project, Series B, BIG Insured, 7%, 7/1/14 Aaa/AAA 500,000 509,907
Washington County, Pennsylvania Municipal Facility
Lease Authority Revenue Bonds, Prerefunded, AMBAC
Insured, 7.45%, 12/15/12 Aaa/AAA/AAA 1,000,000 1,102,646
-----------
67,151,884
U.S. POSSESSIONS--2.4% Puerto Rico Commonwealth Public Improvement General
Obligation Bonds, YCNS, MBIA Insured, 7.384%, 7/1/08(1) Aaa/AAA 1,000,000 839,442
Puerto Rico Electric Power Authority Revenue Refunding
Bonds, Series N, 5%, 7/1/12 Baa1/A-- 1,000,000 838,115
-----------
1,677,557
-----------
Total Municipal Bonds and Notes (Cost $73,527,286) 68,829,441
SHORT-TERM TAX-EXEMPT OBLIGATIONS--0.5%
Philadelphia, Pennsylvania Authority for Industrial
Development Revenue Bonds, Franklin Institute Project,
5.50%(2) (Cost $400,000) 400,000 400.00
TOTAL INVESTMENTS, AT VALUE (COST $73,927,286) 98.4%
69,229,441
OTHER ASSETS NET OF LIABILITIES 1.6 1,111,672
-----------
NET ASSETS 100.0% $70,341,113
===========
</TABLE>
1. Represents the current interest rate for a variable
rate bond. These variable rate bonds known as "inverse
floaters" pay interest at a rate that varies inversely
with short-term interest rates. As interest rates rise,
inverse floaters produce less current income. Their price
may be more volatile than the price of a comparable
fixed-rate security. Inverse floaters amount to
$6,282,182 or 8.9% of the Fund's net assets, at December
31, 1994.
2. Floating or variable rate obligation maturing in more
than one year. The interest rate, which is based on
specific, or an index of, current market interest rates,
is subject to change periodically and is the effective
rate on December 31, 1994. A demand feature allows the
recovery of principal at any time, or at specified
intervals not exceeding one year, on up to 30 days'
notice.
See accompanying Notes to Financial Statements.
8 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1994
<TABLE>
<S> <C> <C>
ASSETS Investments, at value (cost $73,927,286)--see accompanying statement $69,229,441
Cash 156,742
Receivables:
Interest 1,393,024
Shares of beneficial interest sold 549,174
Other 9,876
-----------
Total assets 71,338,257
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 630,369
Dividends 246,005
Distribution and service plan fees--Note 4 26,193
Other 94,577
-----------
Total liabilities 997,144
NET ASSETS $70,341,113
===========
COMPOSITION OF Paid-in capital $76,139,920
NET ASSETS Undistributed (overdistributed) net investment income (62,280)
Accumulated net realized gain (loss) from investment transactions (1,038,682)
Net unrealized appreciation (depreciation) on investments--Note 3 (4,697,845)
-----------
Net assets $70,341,113
===========
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets of $60,857,134
and 5,440,395 shares of beneficial interest outstanding) $11.19
Maximum offering price per share (net asset value plus sales charge of 4.75%
of offering price) $11.75
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $9,483,979 and 847,844 shares of beneficial interest outstanding) $11.19
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
STATEMENT OF OPERATIONS For The Year Ended December 31,
1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME Interest $4,653,517
EXPENSES Management fees--Note 4 420,696
Distribution and service plan fees:
Class A--Note 4 92,871
Class B--Note 4 65,901
Transfer and shareholder servicing agent fees--Note 4 77,912
Legal and auditing fees 22,432
Shareholder reports 18,183
Trustees' fees and expenses 14,321
Custodian fees and expenses 1,442
Registration and filing fees:
Class A 1,132
Class B 1,585
Other 29,915
-----------
Total expenses 746,390
NET INVESTMENT INCOME (LOSS) 3,907,127
REALIZED AND Net realized gain (loss) on investments (1,065,903)
UNREALIZED Net change in unrealized appreciation or depreciation on investments (8,445,048)
GAIN (LOSS) -----------
ON INVESTMENTS Net realized and unrealized gain (loss) on investments (9,510,951)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
$(5,603,824)
===========
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993
--------------------------------
<S> <C> <C> <C>
OPERATIONS Net investment income (loss) $ 3,907,127 $ 2,891,932
Net realized gain (loss) on investments (1,065,903) 206,077
Net change in unrealized appreciation or depreciation on investments (8,445,048) 3,029,967
----------- -----------
Net increase (decrease) in net assets resulting from operations (5,603,824) 6,127,976
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.686 and $.702 per share, respectively) (3,639,305)
(2,800,212)
SHAREHOLDERS Class B ($.594 and $.368 per share, respectively) (367,811) (80,782)
Distributions from net realized gain on investments:
Class A ($.044 per share) -- (215,004)
Class B ($.044 per share) -- (17,419)
BENEFICIAL INTEREST Net increase (decrease) in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 4,897,535 28,394,854
Net increase (decrease) in net assets resulting from Class B
beneficial interest transactions--Note 2 4,838,266 5,516,888
NET ASSETS Total increase (decrease) 124,861 36,926,301
Beginning of period 70,216,252 33,289,951
----------- -----------
End of period [including undistributed (overdistributed)
net investment income of $(62,280) and $96,255, respectively] $70,341,113 $70,216,252
===========
===========
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.85 $12.05 $11.93 $11.43
Income (loss) from investment operations:
Net investment income .67 .69 .76 .74
Net realized and unrealized gain
(loss) on investments (1.64) .85 .17 .53
------ ------ ------ ------
Total income (loss) from
investment operations (.97) 1.54 .93 1.27
Dividends and distributions to shareholders:
Dividends from net investment income (.69) (.70) (.73) (.73)
Distributions from net realized gain
on investments -- (.04) (.08) (.04)
------ ------ ------ ------
Total dividends and distributions
to shareholders (.69) (.74) (.81) (.77)
Net asset value, end of period $11.19 $12.85 $12.05 $11.93
====== ====== ====== ======
TOTAL RETURN, AT NET ASSET VALUE(3) (7.68)% 13.12% 8.04% 11.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $60,857 $64,640 $33,290 $13,791
Average net assets (in thousands) $62,786 $50,974 $21,936 $10,717
Number of shares outstanding
at end of period (in thousands) 5,440 5,031 2,764 1,156
Ratios to average net assets:
Net investment income 5.65% 5.52% 6.36% 6.30%
Expenses, before voluntary
assumption by the Manager
or Distributor .98% 1.06% 1.39% 1.29%
Expenses, net of voluntary
assumption by the Manager
or Distributor N/A .99% 1.06% N/A
Portfolio turnover rate(5) 37.0% 14.6% 29.9% 15.5%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1990 1989(2) 1994 1993(1)
---- ------ ---- ------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.58 $11.43 $12.84 $12.44
Income (loss) from investment operations:
Net investment income .81 .18 .59 .36
Net realized and unrealized gain
(loss) on investments (.15) .15 (1.65) .45
------ ------ ------ ------
Total income (loss) from
investment operations .66 .33 (1.06) .81
Dividends and distributions to shareholders:
Dividends from net investment income (.81) (.18) (.59) (.37)
Distributions from net realized gain
on investments -- -- -- (.04)
------ ------ ------ ------
Total dividends and distributions
to shareholders (.81) (.18) (.59) (.41)
Net asset value, end of period $11.43 $11.58 $11.19 $12.84
====== ====== ====== ======
TOTAL RETURN, AT NET ASSET VALUE(3) 6.00% 3.25% (8.32)% 6.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $8,406 $2,353 $9,484 $5,576
Average net assets (in thousands) $5,170 $1,231 $7,329 $2,770
Number of shares outstanding
at end of period (in thousands) 735 203 848 434
Ratios to average net assets:
Net investment income 7.06% 6.12%(4) 4.88% 4.26%(4)
Expenses, before voluntary
assumption by the Manager
or Distributor 1.77% 2.49%(4) 1.85% 1.88%(4)
Expenses, net of voluntary
assumption by the Manager
or Distributor .59% .91%(4) 1.75% 1.78%(4)
Portfolio turnover rate(5) 5.3% 0.0% 37.0% 14.6%
</TABLE>
1. For the period from May 1, 1993 (inception of
offering) to December 31, 1993.
2. For the period from September 18, 1989 (commencement
of operations) to December 31, 1989.
3. Assumes a hypothetical initial investment on the
business day before the first day of the fiscal period,
with all dividends and distributions reinvested in
additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not
reflected in the total returns.
4. Annualized.
5. The lesser of purchases or sales of portfolio
securities for a period, divided by the monthly average
of the market value of portfolio securities owned during
the period. Securities with a maturity or expiration date
at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of
investment securities (excluding short-term securities)
for the year ended December 31, 1994 were $36,612,834 and
$25,522,759, respectively.
See accompanying Notes to Financial Statements.
12 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT Oppenheimer Pennsylvania Tax-Exempt Fund (the Fund) is a
ACCOUNTING separate series of Oppenheimer Multi-State Tax-Exempt
POLICIES Trust, a non-diversified, open-end management investment
company registered under the Investment Company Act of
1940, as amended. The Fund's investment advisor is
Oppenheimer Management Corporation (the Manager). The
Fund offers both Class A and Class B shares. Class A
shares are sold with a front-end sales charge. Class B
shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical rights to
earnings, assets and voting privileges, except that each
class has its own distribution 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
4:00 p.m. (New York time) 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 debt securities are
valued by a portfolio pricing service approved by the
Board of Trustees. Long-term debt securities which cannot
be valued by the approved portfolio pricing service are
valued 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 under consistently applied procedures
established by the Board of Trustees to determine fair
value in good faith. Short-term debt securities having a
remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for
amortization to maturity of any premium or discount.
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated daily
to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a specific
class are charged against the operations of that class.
FEDERAL INCOME TAXES. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any net
realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal income
tax provision is required. At December 31, 1994, the Fund
had available for federal income tax purposes an unused
capital loss carryover of approximately $842,000 which
will expire in 2002.
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a
nonfunded retirement plan for the Fund's independent
trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During
the year ended December 31, 1994, the Fund's projected
benefit obligations were reduced by $14,071, resulting in
an accumulated liability of $14,673 at December 31, 1994.
No payments have been made under the plan.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to
declare dividends separately for Class A and Class B
shares from net investment income each 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.
13 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
1. SIGNIFICANT CHANGE IN ACCOUNTING CLASSIFICATION OF DISTRIBUTIONS TO
ACCOUNTING SHAREHOLDERS. Net investment income (loss) and net
POLICIES realized gain (loss) may differ for financial statement
(CONTINUED) and tax purposes primarily because of premium
amortization. The character of the distributions made
during the year from net investment income or net
realized gains may differ from their ultimate
characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year
in which amounts are distributed may differ from the year
that the income or realized gain (loss) was recorded by
the Fund. Effective January 1, 1994, the Fund adopted
Statement of Position 93-2: Determination, Disclosure,
and Financial Statement Presentation of Income, Capital
Gain, and Return of Capital Distributions by Investment
Companies. As a result, 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, subsequent to
December 31, 1993, amounts have been reclassified to
reflect a decrease in paid-in capital of $22,700, a
decrease in undistributed net investment income of
$21,143 and a decrease in accumulated net realized loss
on investments of $43,843. During the year ended December
31, 1994, in accordance with Statement of Position 93-2,
undistributed net investment loss was increased by
$37,403 and accumulated net realized loss on investments
was decreased by the same amount.
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. 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. For bonds acquired after
April 30, 1993, accrued market discount is recognized at
maturity or disposition as taxable ordinary income.
Taxable ordinary income is realized to the extent of the
lesser of gain or accrued market discount.
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL value shares of beneficial interest of each class.
INTEREST Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER
31, 1993(1)
---------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A:
Sold 1,479,731 $17,605,222 2,598,125 $32,598,970
Dividends and distributions reinvested 200,372 2,359,317 156,253 1,972,297
Redeemed (1,270,347) (15,067,004) (487,470) (6,176,413)
---------- ----------- --------- -----------
Net increase 409,756 $ 4,897,535 2,266,908 $28,394,854
========== =========== =========
===========
Class B:
Sold 442,928 $ 5,204,609 441,757 $ 5,613,333
Dividends and distributions reinvested 19,685 230,132 4,737 60,779
Redeemed (48,897) (596,475) (12,366) (157,224)
---------- ----------- --------- -----------
Net increase 413,716 $ 4,838,266 434,128 $ 5,516,888
========== =========== =========
===========
</TABLE>
1. For the year ended December 31, 1993 for Class A
shares and for the period from May 1, 1993 (inception of
offering) to December 31, 1993 for Class B shares.
14 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
3. UNREALIZED At December 31, 1994, net unrealized depreciation on
GAINS AND investments of $4,697,845 was composed of gross
LOSSES ON appreciation of $243,742, and gross depreciation of
INVESTMENTS $4,941,587.
4. MANAGEMENT FEES Management fees paid to the Manager were in accordance
AND OTHER with the investment advisory agreement with the Fund
TRANSACTIONS which provides for an annual fee of .60% on the first
WITH AFFILIATES $200 million of net assets, .55% on the next $100
million, .50% on the next $200 million, .45% on the next
$250 million, .40% on the next $250 million and .35% on
net assets in excess of $1 billion. The Manager has
agreed to assume Fund expenses (with specified
exceptions) in excess of the most stringent applicable
regulatory limit on Fund expenses.
For the year ended December 31, 1994, commissions
(sales charges paid by investors) on sales of Class A
shares totaled $470,999, of which $125,278 was retained
by Oppenheimer Funds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor, and by
an affiliated broker/dealer. During the year ended
December 31, 1994, OFDI received contingent deferred
sales charges of $7,854 upon redemption of Class B
shares.
Oppenheimer Shareholder Services (OSS), a division
of the Manager, is the transfer and shareholder servicing
agent for the Fund, and for other registered investment
companies. OSS's total costs of providing such services
are allocated ratably to these companies.
Under separate approved plans, each class may
expend up to .15% of its Class A and .25% (voluntarily
reduced to .15% by the Fund's Board) of its Class B net
assets annually to reimburse OFDI for costs incurred in
connection with the personal service and maintenance of
accounts that hold shares of the Fund, including amounts
paid to brokers, dealers, banks and other institutions.
In addition, Class B shares are subject to an asset-based
sales charge of .75% of net assets annually, to reimburse
OFDI for sales commissions paid from its own resources at
the time of sale and associated financing costs. In the
event of termination or discontinuance of the Class B
plan, the Board of Trustees may allow the Fund to
continue payment of the asset-based charge to OFDI for
distribution expenses incurred on Class B shares sold
prior to termination or discontinuance of the plan.
During the year ended December 31, 1994, OFDI paid $7,608
and $385, respectively, to an affiliated broker/dealer as
reimbursement for Class A and Class B personal service
and maintenance expenses and retained $63,420 as
reimbursement for Class B sales commissions and service
fee advances, as well as financing costs.
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217-5270
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 NEW JERSEY
TAX-EXEMPT FUND
Prospectus dated April 25, 1995
Oppenheimer New Jersey Tax-Exempt Fund (the "Fund") is a mutual fund
with the investment objective of seeking as high a level of current income
exempt from Federal and New Jersey income taxes for individual investors
that is consistent with preservation of capital. The Fund seeks to
achieve this objective by investing in municipal obligations, the income
from which is tax-exempt as described above. However, in times of
unstable economic or market conditions, the Fund's investment manager may
deem it advisable to temporarily invest a portion of the Fund's assets in
certain taxable instruments. The Fund may also use certain hedging
instruments to try to reduce the risks of market fluctuations that affect
the value of the securities the Fund holds. The Fund is not intended to
be a complete investment program and there is no assurance that it will
achieve its objective. You should carefully review the risks associated
with an investment in the Fund. Please refer to "Investment Policies and
Strategies" for more information about the types of securities the Fund
invests in and the risks of investing in the Fund.
The Fund offers two classes of shares: (1) Class A
shares, which are sold at a public offering price that includes a front-
end sales charge, and (2) Class B shares, which are sold without a front-
end sales charge, although you may pay a sales charge when you redeem your
shares, depending on how long you hold them. Class B shares are also
subject to an annual "asset-based sales charge." Each class of shares
bears different expenses. In deciding which class of shares to buy, you
should consider how much you plan to purchase, how long you plan to keep
your shares, and other factors discussed in "How to Buy Shares" starting
on page 22.
This Prospectus explains concisely what you should know
before investing in the Fund. Please read it carefully and keep it for
future reference. You can find more detailed information about the Fund
in the April 25, 1995 Statement of Additional Information. For a free
copy, call Oppenheimer Shareholder Services, the Fund's Transfer Agent,
at 1-800-525-7048, or write to the Transfer Agent at the address on the
back cover. The Statement of Additional Information has been filed with
the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
Expenses
Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges and account transaction charges. The following tables are provided
to help you understand your direct expenses of investing in the Fund and
your share of the Fund's business operating expenses that you will expect
to bear indirectly. The numbers below are based on the Fund's expenses
during the period March 1, 1994 (commencement of operations) through
December 31, 1994.
- Shareholder Transaction Expenses are charges you pay
when you buy or sell shares of the Fund. Please refer to "About Your
Account," from pages 22 through 31, for an explanation of how and when
these charges apply.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C>
Maximum Sales Charge
on Purchases (as a %
of offering price) 4.75% None
- --------------------------------------------------------------
Sales Charge on
Reinvested Dividends None None
- --------------------------------------------------------------
Deferred Sales Charge
(as a % of the lower of
the original purchase
price or redemption
proceeds) None(1) 5% in the first
year, declining
to 1% in the
sixth year and
eliminated
thereafter
- --------------------------------------------------------------
Exchange Fee None None
- --------------------------------------------------------------
<FN>
(1) If you invest more than $1 million in Class A shares, you may have to pay a sales charge of up to 1% if you sell your shares
within 18 calendar months from the end of the calendar month during which you purchased those shares. See "How to Buy
Shares - Class A Shares," below.
</TABLE>
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
The numbers in the table below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan Fees for
Class A shares are service fees. For Class B shares the 12b-1
Distribution Plan fees are service fees and asset-based sales charges.
The service fee for each class is a maximum of 0.25% (currently set at
0.15%) of average annual net assets of the class and the asset-based sales
charge for Class B shares is 0.75%. These plans are described in greater
detail in "How to Buy Shares."
The Total Fund Operating Expenses shown are net of a voluntary
expense assumption by the Manager. The expense assumption lowered the
Fund's overall expense ratio. Without such expense assumption by the
Manager, the "Management Fees" for each class of the Fund's shares would
have been .60% of the Fund's average net assets, and the "Total Fund
Operating Expenses" for the Fund's Class A and Class B shares would have
been 1.46% and 2.29% respectively. The expense assumption is described
in the Statement of Additional Information and may be modified or
withdrawn by the Manager at any time.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the table, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C>
Management Fees (after 0.0% 0.0%
expense reimbursement)
- ---------------------------------------------------------------
12b-1 Distribution and/or 0.12% 0.90%
Service Plan Fees
- ---------------------------------------------------------------
Other Expenses 0.19% 0.24%
- ---------------------------------------------------------------
Total Fund Operating Expense
(after expense reimbursement) 0.31% 1.14%
- ---------------------------------------------------------------
</TABLE>
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating
Expenses 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:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $62 $91 $123 $214
- -----------------------------------------------------------------
Class B Shares $73 $102 $143 $223
If you did not redeem your investment, it would incur the following expenses:
Class A Shares $62 $91 $123 $214
- -----------------------------------------------------------------
Class B Shares $23 $72 $123 $223
- -----------------------------------------------------------------
<FN>
*The Class B expenses in years 7 through 10 are based on the Class A expenses shown above, because the Fund
automatically converts your Class B shares into Class A shares after 6 years. Long term Class B shareholders could pay the
economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations, because of the effect
of the asset-based sales charge and contingent deferred sales charge. The automatic conversion 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 - Class B Shares" on pages
29-31 for more information.
</TABLE>
These examples show the effect of the current level of expenses on
the return of a hypothetical investment, but are not meant to state or
predict actual or expected expenses or investment returns of the Fund, all
of which will vary.
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 New Jersey income taxes for individual investors that is
consistent with preservation of capital.
- What Does the Fund Invest In? Under normal market conditions, the
Fund will invest at least 80% of its total assets in (1) municipal bonds,
municipal notes and other debt obligations issued by or on behalf of the
State of New Jersey or any political subdivision thereof, and its agencies
or authorities, the interest on which is not subject to Federal and New
Jersey individual income tax, and (2) municipal bonds, municipal notes and
other debt obligations issued by or on behalf of the State of New Jersey,
or any political subdivision thereof, and its agencies or authorities,
other states and the District of Columbia, or any political subdivisions
thereof, the interest from which is not subject to Federal individual
income tax. The Fund may invest up to 20% of its assets in investments
the income from which may be taxable. The Fund may also use hedging
instruments and some derivative investments in an effort to protect
against market risks. These investments are more fully explained in
"Investment Objective and Policies," starting on page 9.
- Who Manages the Fund? The Fund's investment adviser is Oppenheimer
Management Corporation, which (including a subsidiary) advises investment
company portfolios having over $29 billion in assets at December 31, 1994.
The Fund's portfolio manager, who is primarily responsible for the
selection of the Fund's securities, is Robert E. Patterson. The Manager
is paid an advisory fee by the Fund, based on its net assets. 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 17 for more information about the Manager and
its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund's bond investments 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 its investments in New Jersey
Municipal securities and the Fund's ability to invest its assets in a
single issuer or limited number of issuers entails greater risk than an
investment in a diversified investment company. The Fund's investment in
certain derivative investments may add a degree of risk not present in a
Fund that does not invest in such securities.
While the Manager tries to reduce risks by diversifying investments
and 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 objective and your shares may
be worth more or less than their original cost when you redeem them.
Please refer to "Investment Objective and Policies" starting on page 9 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"
starting on page 22 for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has two classes
of shares. Class A shares are offered with a front-end sales charge,
starting at 4.75%, and reduced for larger purchases. Class B shares are
offered without a front-end sales charge, but may be subject to a
contingent deferred sales charge (starting at 5% and declining as shares
are held longer) if redeemed within 6 years of purchase. There is also
an annual asset-based sales charge on Class B shares. Please review "How
To Buy Shares" starting on page 22 for more details, including a
discussion about factors you and your financial adviser 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 using Checkwriting. Please refer to "How To Sell Shares" starting
on page 33.
- 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 21.
Please remember that past performance does not guarantee future results.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. This information has been audited by
KPMG Peat Marwick LLP, the Fund's independent auditors, whose report on
the Fund's financial statements for the fiscal year ended December 31,
1994 is included in the Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A CLASS B
-------- --------
PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1994(1) 1994(1)
------------ ------------
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.43 $11.43
Income (loss) from investment operations:
Net investment income .49 .41
Net realized and unrealized gain (loss)
on investments (1.02) (1.02)
------- -------
Total income (loss) from investment operations (.53) (.61)
------- -------
Dividends to shareholders:
Dividends from net investment income (.49) (.42)
------- -------
Total dividends to shareholders (.49) (.42)
Net asset value, end of period $10.41 $10.40
======= ======
TOTAL RETURN, AT NET ASSET VALUE(2) (4.63)% (5.39)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $3,877 $2,986
Average net assets (in thousands) $2,506 $1,841
Number of shares outstanding at end of period
(in thousands) 373 287
Ratios to average net assets:
Net investment income 5.57%(3) 4.76%(3)
Expenses, before voluntary assumption by the
Manager or Distributor 1.46%(3) 2.29%(3)
Expenses, net of voluntary assumption by the
Manager or Distributor .31%(3) 1.14%(3)
Portfolio turnover rate(4) 17.3% 17.3%
</TABLE>
1. For the period from March 1, 1994 (commencement of operations) to December
31, 1994.
2. Assumes a hypothetical initial investment on March 1, 1994, 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 year. Sales charges are not reflected in the
total returns.
3. Annualized.
4. 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 December 31, 1994 were $7,840,507 and
$765,543, respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks as high a level of current interest income
exempt from Federal and New Jersey income taxes for individual investors
as is consistent with preservation of capital.
Investment Policies and Strategies. Under normal market conditions, the
Fund attempts to invest 100% of its assets, and as a matter of fundamental
policy to invest at least 80% of its assets, in Municipal Securities (as
defined below). In addition, under normal market conditions, the Fund
will invest at least 80% of its assets in New Jersey Municipal Securities.
Dividends paid by the Fund derived from interest attributable to New
Jersey Municipal Securities will be exempt from Federal and New Jersey
individual income taxes. Dividends derived from interest on Municipal
Securities of other than New Jersey issuers will be exempt from Federal
income tax for individuals, but will be subject to New Jersey individual
income tax. Any net interest income on taxable investments will be
taxable as ordinary income when distributed to shareholders (see
"Dividends, Capital Gains, and Taxes" below).
- Municipal Securities. Municipal Securities consist of municipal
bonds, municipal notes (including tax anticipation notes, bond
anticipation notes, revenue anticipation notes, construction loan notes,
and other short-term notes), tax-exempt commercial paper, certificates of
participation, participation interests and other debt obligations issued
by or on behalf of the State of New Jersey, or any political subdivision
thereof, and its agencies and authorities, other states and the District
of Columbia, their political subdivisions or any commonwealths,
territories or possessions of the United States, or their respective
agencies, instrumentalities or authorities, the interest on which is, in
the opinion of bond counsel to the respective issuer at the time of issue,
not subject to Federal individual income tax. New Jersey Municipal
Securities are obligations of the State of New Jersey and its political
subdivisions, and their respective agencies, authorities or
instrumentalities, the interest from which is, in the opinion of bond
counsel to the respective issuer at the time of issue, not subject to New
Jersey 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. See "Investment
Objective and Policies" in the Statement of Additional Information for
further information about the Fund's investment policies and about
Municipal Securities.
- Special Considerations - New Jersey Municipal Securities. Because
the Fund concentrates its investments in New Jersey Municipal Securities,
a default, financial crisis or other material adverse event relating to
any of such issuers could adversely affect the market value and
marketability of such Municipal Securities and the interest income and
repayment of principal to the Fund from them. Investors should consider
these matters as well as economic trends in New Jersey, summarized in the
Statement of Additional Information under "Special Investment
Considerations - New Jersey Municipal Securities."
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and 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.
The Board of Trustees of the Trust (as defined below) may change non-
fundamental policies without shareholder approval, although significant
changes will be described in amendments to this Prospectus. 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).
- Investments in Taxable Securities and Temporary Defensive
Investment Strategy. Under normal market conditions, the Fund may invest
up to 20% of its assets in taxable investments, including (i) certain
"Temporary Investments" (described in the next paragraph); (ii) hedging
instruments (described in "Hedging," below), (iii) repurchase agreements;
and (iv) Municipal Securities issued to benefit a private user ("Private
Activity Municipal Securities"), the interest from which may be subject
to Federal alternative minimum tax (see "Taxes," below, and "Private
Activity Municipal Securities" in the Statement of Additional
Information).
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary
"defensive" position by investing some or all of its assets (there is no
limit on the amount) in short-term money market instruments. These
include the taxable obligations described above, U.S. Government
Securities, bank obligations, commercial paper, corporate obligations and
other instruments approved by the Trust's Board of Trustees. This
strategy would be implemented to attempt to reduce fluctuations in the
value of the Fund's assets. The Fund may hold temporary investments
pending the investment of proceeds from the sale of Fund shares or
portfolio securities, pending settlement of purchases of Municipal
Securities, or to meet anticipated redemptions. To the extent the Fund
assumes a temporary defensive position, a portion of the Fund's
distributions may be subject to Federal and state income taxes and the
Fund may not achieve its objective.
- Credit Risk and Interest Rate Risk. The values of Municipal
Securities will vary as a result of changing evaluations by rating
services and investors of the ability of the issuers of such securities
to meet the interest and principal payments. Such values will also change
in response to changes in prevailing interest rates. Should interest
rates rise, the values of outstanding Municipal Securities will probably
decline and (if purchased at principal amount) would sell at a discount.
If interest rates fall, the values of outstanding Municipal Securities
will probably increase and (if purchased at principal amount) would sell
at a premium. Changes in the values of Municipal Securities owned by the
Fund from these or other factors will not affect interest income derived
from these securities but will affect the Fund's net asset value per
share.
- Municipal Lease Obligations. Municipal leases may take the form
of a lease or an installment purchase contract issued by state and local
government authorities to obtain funds to acquire a wide variety of
equipment and facilities. The Fund may invest in certificates of
participation that represent a proportionate interest in or right to the
lease-purchase payments made under municipal lease obligations. While
some municipal lease securities may be deemed to be "illiquid" securities
(the purchase of which would be limited as described below in "Illiquid
and Restricted Securities"), from time to time the Fund may invest more
than 5% of its net assets in municipal lease obligations that the Manager
has determined to be liquid under guidelines set by the Board of Trustees.
- Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
- Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments." The Fund may use
some derivative investments for hedging purposes, and may invest in others
because they offer the potential for increased income and principal value.
In general, a "derivative investment" is a specially-designed investment
whose performance is linked to the performance of another investment or
security, such as an option, future or index. In the broadest sense,
derivative investments include exchange-traded options and futures
contracts (please refer to "Hedging," below).
The Fund may invest in "inverse floater" variable rate bonds, a type
of derivative investment whose yields move in the opposite direction from
changes in 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. Some inverse floaters
have a "cap" whereby if interest rates rise above the "cap," the security
pays additional interest income. If rates do not rise above the "cap,"
the Fund will have paid an additional amount for a feature that proves
worthless. The Fund may also invest in Municipal Securities that pay
interest that depends on an external pricing mechanism, also a type of
derivative investment. Examples of external pricing mechanisms are
interest rate swaps or caps and municipal bond or swap indices. The Fund
anticipates that under normal circumstances it will invest no more than
10% of its net assets in inverse floaters.
The risks of investing in derivative investments include not only the
ability of the issuer of the derivative investment to pay the amount due
on the maturity of the investment, but also the risk that the underlying
security or investment might not perform the way the Manager expected it
to perform. That can mean that the Fund will realize less income than
expected. Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions and
maturities.
- 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," that is, rated below the four highest rating
categories of Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or,
if unrated, are not judged by the Manager to be of comparable quality to
Municipal Securities rated within such grades. (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.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund generally will not engage in
the trading of securities for the purpose of realizing short-term gains,
but the Fund may sell securities as the Manager deems advisable to take
advantage of differentials in yield. The "Financial Highlights," above,
show the Fund's portfolio turnover rate during its first fiscal year.
While short-term trading increases portfolio turnover, the Fund incurs
little or no brokerage costs because most of the Fund's portfolio
transactions are principal trades without brokerage commissions.
- Non-diversification. The Fund is a "non-diversified" investment
company under the Investment Company Act. As a result, it may invest its
assets in a single issuer or limited number of issuers without limitation
by the Investment Company Act. An investment in the Fund therefore will
entail greater risk than an investment in a diversified investment company
because a higher percentage of investments among fewer issuers may result
in greater fluctuation in the total market value of the Fund's portfolio,
and economic, political or regulatory developments may have a greater
impact on the value of the Fund's portfolio than would be the case if the
portfolio were diversified among more issuers. However, the Fund intends
to conduct its operations so as to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), which will relieve the Fund from liability
for Federal income tax to the extent of its taxable earnings distributed
to shareholders. Among the requirements for such qualification are that:
(i) 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 (ii) 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.
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 are designed to reduce some of the risks.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. These terms refer
to securities that have been created and for which a market exists, but
which are not available for immediate delivery. There may be a risk of
loss to the Fund if the value of the security declines prior to the
settlement date.
- Repurchase Agreements. The Fund may enter into repurchase
agreements to generate income for liquidity purposes. 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 fails to pay the resale price on
the delivery date, the Fund may incur costs in disposing of the collateral
and may experience losses if there is any delay in its ability to do so.
The Fund will not enter into a repurchase agreement that causes more than
10% of its net assets to be subject to repurchase agreements having a
maturity beyond seven days. 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 Trust's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments. Investments
may be illiquid because of the absence of an active trading market, making
it difficult to value them or dispose of them promptly at an acceptable
price. The Fund will not invest more than 10% of its net assets in
illiquid securities (that limit may increase to 15% if certain state laws
are changed or the Fund's shares are no longer sold in those states). A
restricted security is one that has a contractual restriction on its
resale or that cannot be sold publicly until it is registered under the
Securities Act of 1933. The Fund may not invest in securities that have
a restriction on their resale.
- Loans of Portfolio Securities. To attempt to increase its income,
and for liquidity purposes, the Fund may lend its portfolio securities to
brokers, dealers and other financial institutions. These loans are
limited to not more than 25% of the Fund's net assets and are subject to
other conditions described in the Statement of Additional Information.
The Fund presently does not intend to lend its portfolio securities, but
if it does, the value of securities loaned is not expected to exceed 5%
of the value of its total assets.
- 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 all 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 or to raise cash to distribute to shareholders.
Futures. The Fund may buy and sell futures contracts that relate to
(1) broadly-based municipal bond indices (these are referred to as
Municipal Bond Index Futures) and (2) interest rates (these are referred
to as Interest Rate Futures). These types of Futures are 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 securities, broadly-based municipal
bond indices, Municipal Bond Index Futures or 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 puts. 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) broadly-based municipal bond indices,
(3) Municipal Bond Index Futures or (4) Interest Rate Futures. The Fund
can buy a put on a Municipal Bond Future or Interest Rate Future 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 securities or commodities exchange, or quoted on the
Automated Quotation System of the National Association of Securities
Dealers, Inc. (NASDAQ), 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 or it must
own other securities that are acceptable for the escrow arrangements
required for calls; (4) the Fund may write calls on Futures contracts it
owns, but these calls must be covered by securities or other liquid assets
the Fund owns and segregates to enable it to satisfy its obligations if
the call is exercised; (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; and (6) the aggregate premiums paid on all such
options which the Fund hold at any time will be limited to 20% of the
Fund's total assets, and the aggregate margin deposits on all such futures
or options thereon at any time will be limited to 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 nor will it use interest rate swaps for
leverage. 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.
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 Restrictions. The Fund has other investment restrictions which
are fundamental policies. Pursuant to one such restriction, the Fund
cannot concentrate investments to the extent of more than 25% of its total
assets in any industry; however, there is no limitation as to investment
in Municipal Securities, New Jersey Municipal Securiites or U.S.
Government obligations. As a matter of non-fundamental policy, changeable
without a shareholder vote, the Fund will not: (i) invest in securiites
or any other investment other than the Municipal Securities, temporary
investments, taxable investments and Hedging Instruments described above
in "Investment Objective and Policies"; (ii) make loans, except through
the purchase of portfolio securities subject to repurchase agreements or
through loans of portfolio securities as described under "Other Investment
Techniques and Strategies - Loans of Portfolio Securities"; (iii) 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 value
of its total assets; it may borrow only as a temporary measure for
extraordinary or emergency purposes; (iv) 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; or (v) buy
or sell futures contracts other than Interest Rate Futures or Municipal
Bond Index Futures. The percentage restrictions described above and in
the Statement of Additional Information apply only at the time of
investment and require no action by the Fund as a result of subsequent
changes in value of the investments or the size of the Fund. A
supplementary list of investment restrictions is contained in "Investment
Restrictions" in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1994 as a
separate series of Oppenheimer Multi-State Tax-Exempt Trust, an open-end
non-diversified management investment company organized in 1989 as a
Massachusetts business trust. The Fund may issue an unlimited number of
authorized shares of beneficial interest. Each of the three series of the
Trust is a fund that issues its own shares, has its own investment
portfolio, and its own assets and liabilities.
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 Trust" in the Statement of Additional
Information names the Trustees and officers of the Fund and provides more
information about them. Although the Fund is not required by law to hold
annual meetings, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a meeting to
remove a Trustee or to take other action described in the Trust's
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has two classes of shares, Class A and
Class B. 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 together on matters that affect that
class alone. Shares are freely transferable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, 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 establishes the fees paid by
the Fund to the Manager and describes the expenses that the Fund pays to
conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $29 billion as
of December 31, 1994, and with more than 2.4 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
- Portfolio Manager. The Fund's Portfolio Manager is Robert E.
Patterson, a Senior Vice President of the Manager and a Vice President of
the Trust. He has been the person principally responsible for the day-to-
day management of the Fund's portfolio since March 1, 1994, and is an
officer and portfolio manager of other OppenheimerFunds.
- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.60% of the first $200 million of
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 in excess of $1 billion. The Fund's
management fee for its first fiscal year ended December 31, 1994 was 0.60%
of average annual net assets for its Class A shares and 0.60% for its
Class B shares, which fees may be higher than the rate paid by some other
mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, and legal and
auditing costs. Those expenses are paid out of the Fund's assets and are
not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the Investment Advisory
Agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it 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 Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor for the
Fund. The Distributor also distributes the shares of other mutual funds
managed by the Manager (the "OppenheimerFunds") and is sub-distributor for
funds managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free 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," "yield", "standardized
yield", "dividend 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 will usually be different as a
result of the different kinds of expenses each class bears. This
performance information may be useful to help you see how your investment
has done and to compare it to other funds or to a market index, as we have
done below.
It is important to understand that the fund's yields and total
returns represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns and
yields are calculated is contained in the Statement of Additional
Information, which also contains information about 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, they reflect the
payment of the current maximum initial sales charge. When total returns
are shown for Class B shares, they reflect the effect of the contingent
deferred sales charge that applies to the period for which total return
is shown. Total returns may also be quoted at net asset value, without
considering the effect of the sales charge, and those returns would be
reduced if sales charges were deducted.
- Yield. Each class of shares calculates its yield by dividing the
annualized net investment income per share from the portfolio during a
30-day period by the maximum offering price on the last day of the period.
Tax-equivalent yield is the equivalent yield that would be earned in the
absence of taxes. It is calculated by dividing that portion of the yield
that is tax-exempt by a factor equal to one minus the applicable tax rate.
The yield of each class will differ because of the different expenses of
each class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the fiscal year
ended December 31, 1994, the Fund was affected by aggressive increases in
short-term interest rates by the Federal Reserve Board. The effects of
rising interest rates were offset to a large degree by the timing of the
Fund's introduction in March 1994. By pacing the Fund's purchases, the
Manager was able to capture rising bond yields without major declines in
the Fund's net asset value. In seeking to obtain the Fund's investment
objective of high current interest income, the Manager kept the Fund's
duration, a technical measure of a bond portfolio's sensitivity to
interest rate changes, slightly longer than those of many other funds.
This strategy should benefit the Fund as the New Jersey economy continues
to improve. In response to the rising interest rate environment, the
Manager concentrated on buying bonds with shorter maturities which make
the Fund's portfolio less sensitive to changing interest rates than
longer-maturity bonds. The Manager also concentrated the Fund's
investments in insured and pre-refunded issues which provided high credit
quality and above-market yields.
- Comparing the Fund's Performance to the Market. The charts below
show the performance of a hypothetical $10,000 investment in each class
of shares of the Fund held from the inception of the Fund on March 1, 1994
until December 31, 1994. In both cases, all dividends and capital gains
distributions were reinvested in additional shares. The graph for Class
A shares reflects the deduction of the 4.75% current maximum initial sales
charge on Class A shares and the graph for Class B shares reflects the
maximum 5% contingent deferred sales charge that applies to redemptions
of Class B shares held from March 1, 1994 until December 31, 1994.
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, an unmanaged index of a broad range of investment
grade municipal bonds that is widely regarded as a measure of the
performance of the general municipal bond market.
Index performance reflects the 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
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 the Lehman Brothers Municipal Bond 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 New Jersey Tax-Exempt Fund and The
Lehman Brothers Municipal Bond Index
(Graph)
Past performance is not predictive of future performance.
Cumulative Total
Returns of the Fund at 12/31/94
A Shares Life:*
-9.16%
B Shares Life:*
-9.94%
- ----------------------
* Class A and Class B shares of the Fund were first publicly offered on
3/1/94.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, you will not pay an initial sales charge, but
if you sell any of those shares within 18 months after your purchase, you
may pay a contingent deferred sales charge, which will vary depending on
the amount you invested. Sales charges are described 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, you
will normally pay a contingent deferred sales charge, described below,
that varies depending on how long you own your shares.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial 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 are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B shares). 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 Class A and B shares, considering the
effect of the annual asset-based sales charge on Class B 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 you invest in. The factors discussed below are
not intended to be investment advice or recommendations, because each
investor's financial considerations are different.
- How Long Do You Expect to Hold Your Investment? The Fund is
designed for long-term 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.
The effect of the sales charge over time, using our assumptions, will
generally depend on the amount invested. Because of the effect of class-
based expenses, your choice will also depend on how much you invest.
- How Much Do You Plan to Invest? If you plan to invest a substantial
amount over the long term, the reduced sales charges available for larger
purchases of Class A shares may 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 expenses on Class B shares, for which no
initial sales charge is paid. Additionally, dividends payable to Class
B shareholders will be reduced by the additional expenses borne solely by
Class B, such as the asset-based sales charge described below.
In general, if you plan to invest less than $100,000, Class B shares
may be more advantageous than Class A shares, using the assumptions in our
hypothetical example. However, if you plan to invest more than $100,000
(not only in the Fund, but possibly in other OppenheimerFunds as well),
then Class A shares generally will be more advantageous than Class B,
because of the effect of the lower initial sales charges on larger
purchases of Class A shares (described in "Reduced Sales Charges for Class
A Share Purchases," below). That is also the case because the annual
asset-based sales charge on Class B shares will have a greater impact on
larger investments than the initial sales charge on Class A shares because
of the reductions of initial sales charge available for larger purchases.
And for investors who invest $500,000 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 from
a single investor.
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 assumptions stated above. Therefore, these examples
should not be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter to You?
Because some account features such as Checkwriting may not be available
to Class B shareholders, or other features (such as Automatic Withdrawal
Plans) might not be advisable (because of the effect of the contingent
deferred sales charge for Class B shareholders), you should carefully
review how you plan to use your investment account before deciding which
class of shares to buy. Also, because not all OppenheimerFunds currently
offer Class B shares, and because exchanges are permitted only to the same
class of shares in other OppenheimerFunds, you should consider how
important the exchange privilege is likely to be for you.
- 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 than for selling another class. It is important that investors
understand that the purpose of the contingent deferred sales charge and
asset-based sales charge for Class B shares is the same as the purpose of
the front-end sales charge on sales of Class A shares: 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 of as
little as $25; and subsequent purchases of at least $25 can be made by
telephone through AccountLink.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A or
Class B shares. If you do not choose, your investment will be made in
Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "Oppenheimer
Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the Distributor will act
as your agent in buying the shares. However, we recommend 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 transmit dividends and distributions.
Shares are purchased for your account on AccountLink 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 OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver, Colorado. In most cases, to enable you to
receive that day's offering price, the Distributor must receive your order
by the time of day the New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all references
to time in this Prospectus mean "New York time"). The net asset value of
each class of shares is determined as of that time on each day The New
York Stock Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
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>
- -------------------------------------------------------------------
Amount of Purchase Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Percentage Percentage of Offering
of Offering of Amount Price
Price Invested
- -------------------------------------------------------------------
<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
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients.
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 shares you purchase for your individual accounts, or
jointly, or on behalf of your children who are minors, under trust or
custodial accounts. 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
shares of the Fund and other OppenheimerFunds. You can also include Class
A shares of OppenheimerFunds you previously purchased subject to a sales
charge, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase Class
A shares of the Fund and other OppenheimerFunds during a 13-month period
at the reduced sales charge rate that applies to the total amount of
intended purchases. 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. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients; or (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares of defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administration services.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of dividends or other distributions reinvested from the Fund
or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or unit
investment trusts for which reinvestment arrangements have been made with
the Distributor. There is a further discussion of this policy in "Reduced
Sales Charges" in the Statement of Additional Information.
The contingent deferred sales charge does not apply to purchases of
Class A shares at net asset value described above and is also waived if
shares are redeemed in the following cases: (1) Automatic Withdrawal Plan
payments that are limited to no more than 12% of the original account
value annually, (2) involuntary redemptions of shares by operation of law
or under the procedures set forth in the Fund's Declaration of Trust or
adopted by the Board of Trustees, or (3) if, at the time an order is
placed for Class A shares that would otherwise be subject to the Class A
contingent deferred sales charge, the dealer agrees to accept the dealer's
portion of the commission payable on the sale in installments of 1/18th
of the commission per month (with no further commission 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
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- -----------------------------------------------------------------------
<S> <C>
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for redemptions
from accounts other than Retirement Plans following the death or
disability of the shareholder (the disability must have occurred after the
account was established and you must provide evidence of a determination
of disability by the Social Security Administration).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A and Class
B Shares" in the Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to reimburse
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of up to 0.25% per year. The Board has currently set the
service at 0.15% per year, which amount may be increased by the Board from
time to time up to a maximum of 0.25%. Both fees are computed on the
average annual net assets of Class B shares, determined as of the close
of each regular business day. The asset-based sales charge allows
investors to buy Class B shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the service fee to dealers in advance for the
first year after Class B shares have been sold by the dealer. After the
shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.85% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
The Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At December 31, 1994, the Distributor had
incurred unreimbursed expenses under the Plan of $128,858 (equal to 7.0%
of the Fund's net assets represented by Class B shares on that date),
which have been carried over into the present Plan year. If the Plan is
terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to the Distributor for
expenses it incurred before the Plan was terminated.
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 must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "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
OppenheimerFunds 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
automatically to exchange an amount you establish in advance for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each OppenheimerFunds account is $25. These exchanges are subject to
the terms and conditions, described in "How to Exchange Shares", below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying a
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge. It also applies to shares on which you paid
a contingent deferred sales charge when you redeemed them. You must be
sure to ask the Distributor for this privilege when you send your payment.
Please consult the Statement of Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the net asset value next 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 Checkwriting
or by telephone. You can also set up an Automatic Withdrawal Plan 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
statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of the New York Stock Exchange that day, which is
normally 4:00 P.M., but which may be earlier on some days. You may not
redeem shares held under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account 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 wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Checkwriting. To be able to write checks against your Fund account,
you may request that privilege on your account Application or you can
contact the Transfer Agent for signature cards, which must be signed (with
a signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner. 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 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 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
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. Certain
OppenheimerFunds offer Class A shares and Class B or Class C shares, and
a list can be obtained by calling the Distributor at 1-800-525-7048. 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 OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. Exchanges of shares
involve a redemption of the shares of the fund you own and a purchase of
shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request by 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
if it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of portfolio securities at a time or price disadvantageous to
the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of the New York Stock Exchange on each regular business
day by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The Fund's
Board of Trustees has established procedures to value the Fund's
securities to determine net asset value. In general, securities values
are based on market value. There are special procedures for valuing
illiquid and restricted securities, obligations for which market values
cannot be readily obtained, and call options and hedging instruments.
These procedures are described more completely in the Statement of
Additional Information.
- The Offering of Shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither it 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 and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
- Payment for Redeemed Shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. Effective June 7, 1995,
for accounts registered in the name of a broker-dealer, payment will be
forwarded within 3 business days. The Transfer Agent may delay forwarding
a check or processing a payment via AccountLink for recently purchased
shares, but only until the purchase payment has cleared. That delay may
be as much as 10 days from the date the shares were purchased. That delay
may be avoided if you purchase shares by certified check or arrange with
your bank to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "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 dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charge when redeeming certain Class
A and Class B shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and
Class B 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 shares because expenses allocable to Class B shares will
generally be higher.
For the fiscal year ended December 31, 1994, the Fund maintained 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 was 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 net 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 OppenheimerFunds account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. It does not matter how long you hold
your shares. Dividends paid from short-term capital gains and net
investment income are taxable as ordinary income. Dividends paid from net
investment income earned by the Fund on Municipal Securities will be
excludable from your gross income for Federal income tax purposes. A
portion of the dividends paid by the Fund may be an item of tax preference
if you are subject to the alternative minimum tax. Certain distributions
are subject to Federal income tax and may be subject to state and/or local
taxes. Such distributions are taxable when paid, whether you reinvest in
additional shares or take them in cash. 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.
- "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 capital
gain.
- Taxes on Transactions. Even though the Fund seeks tax-exempt
income for distribution to shareholders, you may have a capital gain or
loss when you sell or exchange your shares. A capital gain or loss is the
difference between the price you paid for the shares and the price you
receive when you sell them. Any capital gain is subject to capital gains
tax.
- Returns of Capital. In certain 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 TO PROSPECTUS OF
OPPENHEIMER NEW JERSEY TAX-EXEMPT FUND
Graphic material included in Prospectus of Oppenheimer New Jersey
Tax-Exempt Fund: "Comparison of Change in Value of $10,000 Hypothetical
Investments in Oppenheimer New Jersey Tax-Exempt Fund and the Lehman
Bros. Municipal Bond Index.
A linear graph will be included in the Prospectus of Oppenheimer New
Jersey Tax-Exempt Fund (the "Fund") depicting the initial account value
and subsequent account value of a hypothetical $10,000 investment in and
Class B shares of the Fund from March 1, 1994 to December 31, 1994, and
comparing such values with the same 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
"Fund Information - Management's Discussion of Performance."
<TABLE>
<CAPTION>
Oppenheimer
New Jersey
Tax-Exempt Lehman
Fund Brothers
Fiscal Year Class A Municipal
(Period) Ended Shares Bond Index
<S> <C> <C>
3/1/94 $9,525 $10,000
12/31/94 $9,084 $10,034
Oppenheimer
New Jersey
Tax-Exempt Lehman
Fund Brothers
Fiscal Year Class B Municipal
(Period) Ended Shares Bond Index
03/01/94 $10,000 $10,000
12/31/94 $ 9,006 $10,034
</TABLE>
<PAGE>
Oppenheimer New Jersey Tax-Exempt Fund
Two World Trade Center
New York, New York 10048-0203
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc. O P P E N H E I M E R
Two World Trade Center New Jersey
New York, New York 10048-0203 Tax-Exempt Fund
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217 Prospectus
1-800-525-7048 Effective April 25, 1995
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
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, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc., or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in
any state to any person to whom it is unlawful to make such an offer in
such state.
(OppenheimerFunds Logo)
PR396.0495.N * Printed on recycled paper
<PAGE>
Oppenheimer New Jersey Tax-Exempt Fund
Two World Trade Center
New York, New York 10048-0203
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc. O P P E N H E I M E R
Two World Trade Center New Jersey
New York, New York 10048-0203 Tax-Exempt Fund
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217 Prospectus and
1-800-525-7048 New Account Application
Effective April 25, 1995
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
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, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc., or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in
any state to any person to whom it is unlawful to make such an offer in
such state.
(OppenheimerFunds Logo)
PR395.0495.N * Printed on recycled paper
<PAGE>
Oppenheimer New Jersey Tax-Exempt Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated April 25, 1995
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated April 25, 1995. It should be read
together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder 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 2
Investment Policies and Strategies 2
Special Investment Considerations - New Jersey
Municipal Securities 5
Other Investment Techniques and Strategies 8
Other Investment Restrictions 15
How the Fund is Managed 16
Organization and History 16
Trustees and Officers of the Trust 17
The Manager and Its Affiliates 21
Brokerage Policies of the Fund 22
Performance of the Fund 24
Distribution and Service Plans 28
About Your Account 30
How To Buy Shares 30
How To Sell Shares 35
How To Exchange Shares 38
Dividends, Capital Gains and Taxes 40
Additional Information About the Fund 42
Financial Information About the Fund
Independent Auditors' Report 43
Financial Statements 44
Appendix A: Description of Ratings Categories A-1
Appendix B: Tax-Equivalent Yield Tables 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 described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information have the same meaning as those terms
used in the Prospectus.
Municipal Securities
- 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.
- General Obligation Bonds. Issuers of general obligation bonds
include states, counties, cities, towns, and regional districts. The
proceeds of these obligations are used to fund a wide range of public
projects, including construction or improvement of schools, highways and
roads, and water and sewer systems. The basic security behind general
obligation bonds is the issuer's pledge of its full faith and credit and
taxing power for the payment of principal and interest. The taxes that
can be levied for the payment of debt service may be limited or unlimited
as to the rate or amount of special assessments.
- Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, and/or
the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
- Industrial Development Bonds. Industrial development bonds,
which are considered municipal bonds if the interest paid is exempt from
federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, solid waste, housing, sports, and pollution control.
These bonds are also used to finance public facilities such as airports,
mass transit systems, ports, and parking. The payment of the principal
and interest on such bonds is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any,
of real and personal property so financed as security for such payment.
- Municipal Notes. Municipal Securities having a maturity when
issued of less than one year are generally known as municipal notes.
Municipal notes generally are used to provide for short-term working
capital needs and include:
- Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use of business taxes, and are payable from these specific future
taxes.
- Revenue Anticipation Notes. Revenue anticipation notes are
issued in expectation of receipt of other types of revenue, such as
federal revenues available under the Federal revenue sharing programs.
- Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the notes.
- Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and
acceptance, many projects receive permanent financing through the Federal
Housing Administration.
- Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is
issued by state and local governments or their agencies to finance
seasonal working capital needs or as short-term financing in anticipation
of longer-term financing.
- Municipal Lease Obligations. From time to time the Fund may invest
more than 5% of its net assets in municipal lease obligations that the
Manager has determined to be liquid under guidelines set by the Board of
Trustees. Those guidelines require the Manager to evaluate: (1) the
frequency of trades and price quotations for such securities; (2) the
number of dealers or other potential buyers willing to purchase or sell
such securities; (3) the availability of market-makers; and (4) the nature
of the trades for such securities. The Manager will also evaluate the
likelihood of a continuing market for such securities throughout the time
they are held by the Fund and the credit quality of the instrument. These
may take the form of a lease or an installment purchase contract issued
by a state or local government authority to obtain funds to acquire a wide
variety of equipment and facilities. Although lease obligations do not
constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to budget for, appropriate and make
the payments due under the lease obligation. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on
a yearly basis. In addition to the risk of such "non-appropriation,"
municipal lease securities do not yet have a highly developed market to
provide the same degree of liquidity as conventional municipal bonds.
Municipal leases, like other municipal debt obligations, are subject to
the risk of non-payment. The ability of issuers of municipal leases to
make timely lease payments may be adversely affected in general economic
downturns and as relative governmental cost burdens are reallocated among
federal, state and local governmental units. Such non-payment would
result in a reduction of income to the Fund, and could result in a
reduction in the value of the municipal lease experiencing non-payment and
a potential decrease in the net asset value of the Fund.
- Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules
governing tax exemption for interest on Municipal Securities. The Tax
Reform Act generally does not change the tax treatment of bonds issued in
order to finance governmental operations. Thus, interest on obligations
issued by or on behalf of state or local government, the proceeds of which
are used to finance the operations of such governments (e.g., general
obligation bonds) continues to be tax-exempt. However, the Tax Reform Act
further limited the use of tax-exempt bonds for non-governmental (private)
purposes. More stringent restrictions were placed on the use of proceeds
of such bonds. Interest on certain private activity bonds (other than
those specified as "qualified" tax-exempt private activity bonds, e.g.,
exempt facility bonds including certain industrial development bonds,
qualified mortgage bonds, qualified Section 501(c)(3) bonds, qualified
student loan bonds, etc.) is taxable for Federal Tax purposes 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. Further, 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 financed or by a "related person" of such a substantial
user. This "substantial user" provision is applicable primarily to exempt
facility bonds, including industrial development bonds. The Fund may not
be an appropriate investment for entities which are "substantial users"
(or persons related thereto) of such exempt facilities, and such persons
should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-
exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be
a "related person" under the Internal Revenue Code unless such investor
or the investor's immediate family (spouse, brothers, sisters and
immediate descendants) own directly or indirectly in the aggregate more
than 50% in value of the equity of a corporation or partnership which is
a "substantial user" of a facility financed from the proceeds of exempt
facility bonds. In addition, the Tax Reform Act revised downward the
limitations as to the amount of exempt facility 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
this 10% threshold. (The term "private business use" means any direct or
indirect use in a trade or business carried on by an individual or entity
other than a state or municipal governmental unit.) Under the private
loan restriction, the amount of bond proceeds which may be used to make
private loans is limited to the lesser of 5% or $5.0 million of the
proceeds. Thus, certain issues of Municipal Securities could lose their
tax-exempt status retroactively if the issuer fails to meet certain
requirements as to the expenditure of the proceeds of that issue or use
of the bond-financed facility. The Fund makes no independent investigation
of the user of such bonds or their use of proceeds. If the Fund should
hold a bond that loses its tax-exempt status retroactively, there might
be an adjustment to the tax-exempt income previously paid to shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference
items in arriving at alternative minimum taxable income. The Tax Reform
Act 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 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 alternative minimum tax on
individuals and corporations. The Fund anticipates that under normal
circumstances it will not purchase any such securities in an amount
greater than 20% of the Fund's total assets.
- Ratings of Municipal Securities. Moody's, S&P's and Fitch's
ratings (see Appendix A) represent their respective opinions of the
quality of the Municipal Securities they undertake to rate. However, such
ratings are general and are not absolute standards of quality.
Consequently, Municipal Securities with the same maturity, coupon and
rating may have different yields, while Municipal Securities of the same
maturity and coupon with different ratings may have the same yield.
Investment in lower quality securities may produce a higher yield than
securities rated in the higher rating categories described in the
Prospectus (or judged by the Manager to be of comparable quality).
However, the added risk of lower quality securities might not be
consistent with a policy of preservation of capital.
Special Investment Considerations - New Jersey Municipal Securities. As
explained in the Prospectus, the Fund is highly sensitive to the fiscal
stability of New Jersey and its subdivisions, agencies, instrumentalities
or authorities and the other issuers which issue the New Jersey Municipal
Securities in which the Fund concentrates its investments. Investors
should also consider the factors discussed below under "Other Investment
Techniques and Strategies".
The following information on risk factors in concentrating in New
Jersey Municipal Securities is only a summary, based on publicly available
information and official statements relating to information compiled
annually by the State of New Jersey (the "State") and other private
sources, and no representation is made as to the accuracy of such
information. The information is provided as general information intended
to give a recent historical description regarding the State and its
economy and is not intended to indicate future or continuing trends in the
financial or other positions of the State or of local governmental units
located in the State or to provide financial, economic or general
information regarding the State or any other issuer of New Jersey
municipal securities or the risk factors related to an investment in the
same. The Fund has not independently verified this information.
After enjoying an extraordinary boom during the mid-1980's, the
State, as well as the rest of the northeast United States, slipped into
a slowdown well before the onset of the national recession which
officially began in July 1990 (according to the National Bureau of
Economic Research). From fiscal 1984 to 1988 revenues of the State grew
almost 40%, increasing accumulated surpluses in government funds from
$1.02 billion to $1.93 billion during that period. This growth has
slowed, however, since 1988. The State had an operating deficit for the
1989 and 1990 fiscal years and operations reduced the General Fund balance
to $391.5 million for the fiscal year 1989, to $1 million for the fiscal
year 1990, to $1.4 million for the fiscal year 1991, to $760.8 million for
the fiscal year 1992, to $925.9 million for the fiscal year 1993, and for
the fiscal year 1994, the balance in the General Fund is projected to be
$399.3 million. The General Fund is the fund into which all State
revenues not otherwise restricted by statute are deposited and from which
appropriations are made. The largest part of the total financial
operations of the State is accounted for in the General Fund. Revenues
received from most taxes, federal revenues and certain miscellaneous
revenue items are recorded in the General Fund. The appropriation acts
provide the basic framework for the operation of the General Fund.
The State finances capital projects primarily through the sale of the
general obligation bonds of the State. These bonds are backed by the full
faith and credit of the State. State tax revenues and certain other fees
are pledged to meet the principal and interest payments required to pay
the debt fully. No general obligation debt can be issued by the State
without prior voter approval, except that no voter approval is required
for any law authorizing the creation of a debt for the purpose of
refinancing all or a portion of outstanding debt of the State, so long as
such law requires that the refinancing provide a debt service savings.
All appropriations for capital projects and all proposals for State bond
authorizations are subject to the review and recommendation of the New
Jersey Commission on Capital Budgeting and Planning.
The State may also enter into lease finance arrangements, through
which rental payments made by the State are sufficient to cover debt
service on the obligations issued to finance the project. Such rental
payments are subject to annual appropriation by the State Legislature.
Also, various State entities have issued obligations to which the State
has a "moral obligation" to appropriate funds to cover a deficiency in a
debt service reserve fund maintained to meet payments of principal of and
interest on the obligations. The State Legislature, however, is not
legally bound to make such an appropriation.
The State has extensive control over school districts, cities,
counties and local financing authorities. Such local finance system is
regulated by various statutes designed to assure that these entities
remain on a sound financial basis. State laws impose specific limitations
on local appropriations, with exemptions subject to state approval. The
State shares the proceeds of a number of taxes, with funds going primarily
for local education programs, homestead rebates, medicaid and welfare
programs. Certain bonds are issued by localities but supported by direct
state payments. In addition, the State participates in local wastewater
treatment programs.
Although counties, municipalities and school districts finance
capital projects through the sale of general obligation bonds, backed by
their respective taxing power, other entities, including local financing
authorities, typically finance their capital needs through the sale of
bonds backed by a particular pledge of revenues, which may or may not
include revenues derived from taxing powers.
While New Jersey's economy continued to expand during the late 1980s,
the level of growth slowed considerably after its performance during the
1983-1987 period. By the beginning of the national recession,
construction activity had already been declining in New Jersey for nearly
two years. As the rapid acceleration of real estate prices forced many
would-be homeowners out of the market and high non-residential vacancy
rates reduced new commitments for offices and commercial facilities,
construction employment began to decline; also growth had tapered off
markedly in the service sectors and the long-term trend of factory
employment had accelerated, partly because of a leveling off of industrial
demand nationally. The onset of recession caused an acceleration of New
Jersey's job losses in construction and manufacturing, as well as an
employment downturn in previously growing sectors such as wholesale trade,
retail trade, finance, utilities and trucking and warehousing.
After enjoying an extraordinary boom during the mid-1980s, New Jersey
as well as the rest of the Northeast slipped into a slowdown well before
the onset of the national recession which officially began in July 1990
(according to the National Bureau of Economic Research). By the beginning
of the national recession, construction activity had already been
declining in New Jersey for nearly two years. As the rapid acceleration
of real estate prices forced many would-be homeowners out of the market
and non-residential vacancy rates reduced new commitments for offices and
commercial facilities, construction employment began to decline; also
growth had tapered off markedly in the service sectors and the long-term
downward trend of factory employment had accelerated, partly because of
a leveling off of industrial demand nationally. The onset of recession
caused an acceleration of New Jersey's job losses in construction and
manufacturing, as well as an employment downturn in such previously
growing sectors as wholesale trade, retail trade, finance, utilities and
trucking and warehousing. The net effect was a decline in the State's
total nonfarm wage and salary employment from a peak of 3,706,400 in March
1989 to a low of 3,445,000 in March 1992. This loss has been followed by
an employment gain of 118,700 from March 1992 to September 1994.
Reflecting the downturn, the rate of unemployment in the State rose
from a low of 3.6 percent during the first quarter of 1989 to a
recessionary peak of 9.3% during 1992. Since the, the unemployment rate
fell to 6.7% during the fourth quarter of 1993. The jobless rate averaged
7.1% during the first nine months of 1994, but this estimate is not
comparable to those prior to January because of major changes in the
federal survey from which these statistics are obtained.
In the first nine month of 1994, relative to the same period a year
ago, job growth took place in service (3.5%) and construction (5.7%), more
moderate growth took place in trade (1.9%), transportation and utilities
(1.2%) and finance/insurance/real estate (1.4%), while manufacturing and
government declined (by 1.5% and 0.1% respectively). The net result was
a 1.6% increase in average employment during the first nine months of 1994
compared to the first nine months of 1993.
The insured unemployment rate, i.e. the number of individuals
claiming benefits as a percentage of the number of workers covered by
Unemployment insurance, stopped rising in the winter of 1991 and has been
stable at about 4.1 percent through April of before beginning a gradual
decline to its May, 1994 level of 3.2 percent. It has since stabilized
at about that level. After paying out approximately $125 million, the
State's Emergency Unemployment benefits Program ended on November 17, 1991
with the enactment of the Federal Emergency Unemployment Compensation
(EUC) Program. Through the expiration of the EUC program on April 30,
1994, over $2.1 billion has been disbursed to claimants who exhausted
their entitlement under the regular state program. Benefits under EUC are
financed 100 percent by the Federal government and thus do not impact the
State's trust fund.
Just as New Jersey was hurt by the national recession, evidence of
the State's improving economy can be found in increased homebuilding, and
other areas of construction activity, rising consumer spending for new
cars and light trucks, substantial new job creation and the decline in the
unemployment rate.
One of the basic building blocks of the fiscal 1996 budget is
Governor Whitman's continued reengineering of State government operations.
Last year's budget, which represented the first real decrease in State
appropriations in years, began the process. A year later, the process is
much further along, and a number of significant initiatives have been
started. State government has to be streamlined, and this budget moves
in that direction by providing the full range of essential services within
its means. As a result, spending on Executive Branch operations will once
again be below the previous year's levels, a reduction of $129 million or
almost 4 percent.
As with last year's budget, tax reductions for individuals and
businesses are major parts of the budget plan. Tax reductions transfer
economic decision making from the government to the consumer and the
competitive marketplace. Tax reductions for individuals allow them to
keep more of the money they earn and spend it in ways that have a direct
benefit to themselves and to New Jersey's economy. Business tax
reductions make New Jersey more competitive and will help in the retention
of existing jobs and the creation of new business opportunities.
The fiscal 1996 budget represents the realization of Governor
Whitman's commitment on tax reductions, and while taxpayers at all income
levels will benefit, those at the lowest levels will enjoy the greatest
percentage savings. In addition this budget incorporates the elimination
of the Sales Tax on Yellow Pages advertising and provides addition tax
reductions for small business owners and New Jersey corporations.
The fiscal 1996 budget recognizes that essential services must be
maintained. None have been cut. Instead, the budget reflects the kind
of changes that have been going on in the private section for years. Old,
inefficient service delivery systems have been eliminated. Where
appropriate, the service delivery responsibility for certain activities
will be transferred to the private sector, on the basis of competitive
contracting. In some cases, where programs have outlived their original
purposes or mandates, they have been eliminated.
This budget is built on prudent revenue estimates and genuine
spending reductions based on improvements in operational efficiency and
smarter, leaner State government.
On March 12, 1990, the Fair Automobile Insurance Reform Act of 1990
(the "Reform Act") was enacted into law. The Reform Act substantially
altered New Jersey's statutory scheme governing private passenger
automobile insurance. The New Jersey Automobile Full Insurance
Underwriting Association (the "JUA"), an unincorporated non-profit
association created in 1983 to provide automobile insurance to those
unable to secure such coverage in the voluntary market, was precluded from
issuing or renewing automobile insurance policies since October 1, 1990.
The Reform Act includes provisions governing the transition of drivers
insured by the JUA to the voluntary market and, to the extent such
coverage is not available, to an assigned risk plan. The Reform Act also
provides for the imposition of taxes and assessments to meet the financial
obligations of the JUA, which are not debts, liabilities or obligations
of the State. The proposed fiscal year 1994 State budget does not reflect
the anticipated revenues from the premiums tax surcharge because the
revenues are to be applied by the statute to the JUA obligation. The
Reform Act also provides for the making of assessments by the New Jersey
Property Liability Insurance Guaranty Association upon property and
casualty liability insurers in order to raise $160 million per year for
the period 1990 to 1997. Litigation challenging various portions of the
Reform Act still remains pending. "As applied" challenges to the Reform
Act surtax and assessment provisions have been brought. Litigation was
filed in the Mercer County Superior Court--Chancery Division, by Allstate
and State Farm alleging that their constitutional rights have been
violated and that they are entitled to refunds of their Reform Act
surtaxes and assessments. The State Farm matter is pending on appeal.
In July, 1991, S&P downgraded New Jersey general obligation bonds
from AAA to AA+. Fitch rates New Jersey general obligation bonds AAA.
On June 4, , S&P placed New Jersey general obligation bonds on CreditWatch
with negative implications. On July 6, , S&P removed New Jersey's general
obligation bonds from CreditWatch and reaffirmed its AA+ rating of such
bonds but with negative long-term implications. On August 24, , Moody's
lowered its rating on New Jersey's general obligation bonds from Aa1 to
Aaa.
Other Investment Techniques and Strategies
- When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, 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 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 will
maintain a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
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. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold 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 loss to the Fund.
When-issued transactions and forward commitments can be used by the
Fund as a defensive 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. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank or U.S. branch of a foreign bank with total
domestic assets of a least $1 billion or broker-dealer with net capital
of at least $50 million which has been designated a primary dealer in
government securities) for delivery on an agreed-on future date. The
resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these transactions run
from day to day, and delivery pursuant to 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
continuously monitor the collateral's value and will impose
creditworthiness requirements to confirm that the vendor is financially
sound.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the market
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, or other cash equivalents in which the Fund is
permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. When it lends securities, the Fund receives an
amount equal to the dividends or interest on loaned securities and also
receives one or more of: (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt
securities purchased with such loan collateral; either type of interest
may be shared with the borrower. The Fund may also pay reasonable
finder's, custodian and administrative fees. The terms of the Fund's
loans must meet certain tests under the Internal Revenue Code and permit
the Fund to reacquire loaned securities on five days' notice or in time
to vote on any important matter. Income from securities loans is not
included in the exempt-interest dividends paid by the Fund. The Fund will
not enter into any securities loans having a duration of more than one
year.
-Inverse Floaters and Other Derivative Securities. The Fund will
invest in inverse floaters in the expectation that they will provide
higher expected tax-exempt yields than are available for fixed-rate bonds
having comparable credit ratings and maturity. In certain instances, the
holder of an inverse floater may have an option to convert it into a
fixed-rate bond pursuant to a "rate lock option." Inverse floaters may
produce relatively high current income, reflecting the spread between
short-term and long-term tax-exempt interest rates. As long as the
municipal yield curve remains relatively steep and short-term rates remain
relatively low, owners of inverse floaters will continue to earn above-
market interest rates because they are receiving the higher long-term
rates and have paid for bonds with lower short-term rates. If the yield
curve flattens and shifts upward, an inverse floater will lose value more
quickly than conventional long-term municipal bonds.
Investing in inverse floaters that have interest rate caps might be
a 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
may be used to hedge a portion of the Fund's exposure to rising interest
rates. When interest rates exceed the "strike" price 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 strike price, the cap
(which is purchased for additional cost) will not provide additional cash
flows and will expire worthless.
-Puts and Standby Commitments. When the Fund buys Municipal
Securities, it may obtain a standby commitment to repurchase the
securities that entitles it to achieve same-day settlement from the
repurchaser 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 transferable 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 standby commitments may not qualify as tax exempt in
its hands if the terms of the put or standby commitment cause the Fund not
to be treated as the tax owner of the underlying Municipal Securities.
- Hedging. As described in the Prospectus, the Fund may employ one
or more types of hedging instruments. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, to permit
the Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Interest Rate Futures or Municipal Bond
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 on the same security
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 a 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 until the call lapsed or
were exercised.
- 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 the related debt securities at a specified price on a specified
date. No amount is paid or received upon the purchase or sale of an
Interest Rate Future.
The Fund may concurrently buy and sell Futures contracts in the
expectation that the Future purchased will outperform the Future sold.
For example, the Fund might simultaneously buy Municipal Bond Futures and
sell U.S. Treasury Bond Futures. This type of transaction would be
profitable to the Fund if municipal bonds, in general, outperform U.S.
Treasury bonds. Risks of this type of Futures strategy include the
possibility that the Manager does not correctly assess the relative
durations of the investments underlying the Futures, with the result that
the strategy changes the overall duration of the Fund's portfolio in a
manner that increases the volatility of the Fund's price per share.
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%.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment, equal to a specified percentage of
the contract amount, with the futures commission merchant (the "futures
broker"). The initial margin will be deposited with the Fund's Custodian
in an account registered in the futures broker's name; however, the
futures broker can gain access to that account only under specified
conditions. As the Future is marked to market to reflect changes in its
market value, subsequent margin payments, called variation margin, will
be made to and from the futures broker on a daily basis. At any time
prior to the expiration of the Future, the Fund may elect to close out its
position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required
to be paid by or released to the Fund. Any gain or loss is then realized.
Although Interest Rate Futures by their terms call for settlement by the
delivery 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 in the index, and is used 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 on a municipal bond index,
Municipal Bond Index Future or Interest Rate Future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in
question (and thus on price movements in the debt securities market
generally) rather than on price movements in individual futures contracts.
When the Fund buys a put, it pays a premium and, except as to puts
on municipal bond indices, has the right to sell the underlying investment
to a seller of a corresponding put on the same investment during the put
period at a fixed exercise price. Buying a put on a debt security,
Interest Rate Future or Municipal Bond Index Future the Fund owns enables
the Fund to protect itself during the put period against a decline in the
value of the underlying investment below the exercise price by selling
such underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is
equal to or above the exercise price and as a result the put is not
exercised or resold, the put will become worthless at its expiration date
and the Fund will lose its premium payment and the right to sell the
underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit).
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular
option. The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause it to sell underlying investments, thus increasing its turnover rate
in a manner beyond its control. The exercise by the Fund of puts may also
cause the sale of underlying investments, also causing turnover, since the
underlying investment might be sold for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a call or a put or sells a call. Premiums paid for options
are small in relation to the market value of the related investments and,
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could cause the Fund's net asset
value to be more sensitive to changes in the value of the underlying
investments.
-Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
- 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 on the expiration of the calls or upon the
Fund's entering into a closing purchase transaction. An option position
may be closed out only on a market which provides secondary trading for
options of the same series and there is no assurance that a liquid
secondary market will exist for any particular option. 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.
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.
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of futures and options on futures as established by the Commodity
Futures Trading Commission ("CFTC"). In particular, the Fund is exempted
from registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. Under the
Rule, the Fund will not, as to any position whether long, short or a
combination thereof, enter into futures transactions and options thereon
for which the aggregate initial margins and premiums exceed 5% of the fair
market value of the Fund's assets, with certain exclusions as defined in
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 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 affiliated investment adviser. Position limits also apply to
Futures. An exchange may order the liquidation of positions found to be
in violation of those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases an Interest Rate Future or Municipal Bond Index Future, the Fund
will maintain, in a segregated account or accounts with its Custodian,
cash or readily marketable short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the 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
(irrespective of losses) must be derived from gains realized on the sale
of securities held for less than three months. Due to this limitation,
the Fund will limit the extent to which it engages in the following
activities, but will not be precluded from them: (i) selling investments,
including Interest Rate Futures and Municipal Bond Index Futures, held for
less than three months, whether or not they were purchased on the exercise
of a call held by the Fund; (ii) writing calls on investments held less
than three months; (iii) purchasing calls or puts which expire in less
than three months; (iv) effecting closing transactions with respect to
calls or puts purchased less than three months previously; and (v)
exercising puts or calls held by the Fund for less than three months.
- Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above,
there is a risk in using short hedging by selling Interest Rate Futures
and Municipal Bond Index Futures that the prices of such Futures or the
applicable index will correlate imperfectly with the behavior of the cash
(i.e., market value) prices of the Fund's securities. The ordinary
spreads between prices in the cash and futures markets are subject to
distortions due to differences in the natures of those markets. First,
all participants in the futures 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 debt securities being hedged and movements in the price of the
Hedging Instruments, the Fund may use Hedging Instruments in a greater
dollar amount than the dollar amount of debt securities being hedged if
the historical volatility of the prices of such debt securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that where the Fund has used Hedging Instruments in
a short hedge, the market may advance and the value of debt securities
held in the Fund's portfolio may decline. If that occurred, the Fund
would lose money on the Hedging Instruments and also experience a decline
in value 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 debt
securities, it is possible that the market may decline; if the Fund then
concludes not to invest in such securities at that time because of
concerns as to possible further market decline or for other reasons, the
Fund will realize a loss on the Hedging Instruments that is not offset by
a reduction in the price of the debt securities purchased.
Other Investment Restrictions
The Fund's significant investment restrictions are described in the
Prospectus. The following investment restrictions are also fundamental
policies of the Fund, and, together with the fundamental policies and
investment objective described in the Prospectus, 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 such meeting, if the holders of more
than 50% of the outstanding shares are present or represented by proxy,
or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) Invest in
real estate, but the Fund may invest in Municipal Securities or other
permitted securities secured by real estate or interests therein; (2)
Purchase securities other than Hedging Instruments on margin; however, the
Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; (3) Make short sales of
securities; (4) Invest in or hold securities of any issuer if those
officers and Trustees or Directors of the Fund or its adviser beneficially
owning individually more than .5% of the securities of such issuer
together own more than 5% of the securities of such issuer; or (5) Invest
in securities of any other investment company, except in connection with
a merger with another investment company.
- Diversification. For purposes of the investment restrictions set
forth in the Prospectus and above, the identification of the "issuer" of
a Municipal Security depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government
creating the subdivision, and the security is backed only by the assets
and revenues of the subdivision, such subdivision would be deemed to be
the sole issuer. Similarly, in the case of an industrial development
bond, if that bond is backed only by the assets and revenues of the
nongovernmental user, then such nongovernmental user would be deemed the
sole issuer. However, if in either case the creating government or some
other entity guarantees a security, such a guarantee would be considered
a separate security and would be treated as an issue of such government
or other agency. In applying these restrictions to the Fund's
investments, the Manager will consider a nongovernmental user of
facilities financed by industrial development bonds as being in a
particular industry, despite the fact that such bonds are Municipal
Securities as to which there is no industry concentration limitation.
Although this application of the restriction is not technically a
fundamental policy of the Fund, it will not be changed without shareholder
approval. The Manager has no present intention of investing more than 25%
of the total assets of the Fund in securities paying interest from
revenues of similar type projects, or in industrial development bonds.
Neither of these are fundamental policies, and therefore may be changed
without shareholder approval. Should any such change be made, the
Prospectus and/or this Statement of Additional Information will be
supplemented accordingly.
For purposes of the Fund's policy not to concentrate its assets,
described under investment restriction number (3) in the Prospectus, the
Fund has adopted the industry classifications set forth in Appendix C to
this Statement of Additional Information.
How the Fund Is Managed
Organization and History. As a series of 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 Trust, 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 Trust
valued at $25,000 or more or holding at least 1% of the Trust'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 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 Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and officers
and their principal occupations and business affiliations during the past
five years are listed below. The address of each Trustee and officer is
Two World Trade Center, New York, New York 10048-0203, unless another
address is listed below. All of the Trustees are also trustees or
directors of Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Time
Fund, Oppenheimer Growth Fund, Oppenheimer Discovery Fund, Oppenheimer
Global Growth & Income Fund, Oppenheimer Global Emerging Growth Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Tax-Free Bond Fund,
Oppenheimer New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt
Fund, Oppenheimer Target Fund, Oppenheimer Asset Allocation Fund,
Oppenheimer Mortgage Income Fund, Oppenheimer U.S. Government Trust,
Oppenheimer Multi-Sector Income Trust and Oppenheimer Multi-Government
Trust (the "New York-based OppenheimerFunds"). Messrs. Spiro, Donohue,
Bishop, Bowen, Farrar and Zack respectively hold the same offices with the
other New York-based OppenheimerFunds as with the Trust. As of March 15,
1995, the Trustees and officers of the Trust as a group owned less than
1% of the outstanding Class A and Class B shares of the Trust and 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 officers listed above, Mr. Donohue, is a trustee)
other than the shares beneficially owned under that plan by the officers
of the Fund listed above.
Leon Levy, Chairman of the Board of Trustees, Age: 69
General Partner of Odyssey Partners, L.P. (investment partnership)
and Chairman of Avatar Holdings, Inc. (real estate development).
Leo Cherne, Trustee, Age: 82
122 East 42nd Street, New York, New York 10168
Chairman Emeritus of the International Rescue Committee
(philanthropic organization); formerly Executive Director of the
Research Institute of America.
Robert G. Galli, Trustee*, Age: 61
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company;
formerly he held the following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager, an officer of other OppenheimerFunds and Executive Vice
President and General Counsel of the Manager and the Distributor.
Benjamin Lipstein, Trustee, Age: 71
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; Director of Sussex Publishers,
Inc. (publishers of Psychology Today and Mother Earth News) and a
Director of Spy Magazine, L.P.
Elizabeth B. Moynihan, Trustee, Age: 65
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art, Smithsonian Institution; a member of the Indo-U.S. Sub-
Commission on Education and Culture; a trustee of the Institute of
Fine Arts, New York University and the National Building Museum; a
member of the Trustees Council, Preservation League of New York
State.
Kenneth A. Randall, Trustee, Age: 67
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) and Fidelity
Life Association (mutual life insurance company); formerly Chairman
of the Board of ICL, Inc. (information systems) and President and
Chief Executive Officer of The Conference Board, Inc. (international
economics and business research).
Edward V. Regan, Trustee, Age: 64
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director or GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and
trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age: 63
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
_____________________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Sidney M. Robbins, Trustee, Age: 82
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; a director of The Korea Fund, Inc.
and The Malaysia Fund, Inc. (closed-end investment companies); a
member of the Board of Advisors, Olympus Private Placement Fund,
L.P.; Professor Emeritus of Finance, Adelphi University.
Donald W. Spiro, President and Trustee*, Age: 69
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and the Distributor.
Pauline Trigere, Trustee, Age: 82
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: 64
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),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments,
Inc. (electronics) and The Vigoro Corporation (fertilizer
manufacturer); 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.
Andrew J. Donohue, Secretary, Age: 44
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, prior to which he was a 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.
Robert E. Patterson, Vice President and Portfolio Manager, Age: 51
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
George C. Bowen, Treasurer, Age: 58
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other OppenheimerFunds.
Robert G. Zack, Assistant Secretary, Age: 46
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
_____________________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Robert Bishop, Assistant Treasurer, Age: 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer, Age: 29
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Galli and Spiro; Mr. Spiro is also an officer)
receive no salary or fee from the Fund. The Trustees of the Fund
(including Mr. Delaney, a former Trustee, but excluding Messrs. Galli and
Spiro) received the total amounts shown below from (i) the Fund, during
its fiscal year ended December 31, 1994, and (ii) from all 19 of the New
York-based Oppenheimer Funds (including the Fund) listed in the first
paragraph of this section (and from Oppenheimer Global Environment Fund,
a former New York-based OppenheimerFund), for services in the positions
shown:
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
Compensation New York-based
Name and Position From Fund OppenheimerFunds1
<S> <C> <C>
Leon Levy, Chairman and Trustee $302 $141,000.00
Leo Cherne, Audit Committee $147 $ 68,800.00
Member and Trustee
Edmund T. Delaney, Study $185 $ 86,200.00
Committee Member
and Trustee2
Benjamin Lipstein, $185 $ 86,200.00
Study Committee
Member and Trustee
Elizabeth B. Moynihan, $130 $ 60,625.00
Study Committee
Member and3 Trustee
Kenneth A. Randall, $168 $ 78,400.00
Audit Committee Member
and Trustee
Edward V. Regan, $121 $ 56,275.00
Audit Committee
Member3 and Trustee
Russell S. Reynolds, Jr.,Trustee $112 $ 52,100.00
Sidney M. Robbins, Study $262 $122,100.00
Committee Chairman, Audit
Committee Vice-Chairman
and Trustee
Pauline Trigere, Trustee $112 $ 52,100.00
Clayton K. Yeutter, Trustee $112 $ 52,100.00
<FN>
______________________
1For the 1994 calendar year.
2Board and committee positions held during a portion of the period shown.
3Committee position held during a portion of the period shown.
</TABLE>
The Fund has adopted a retirement plan that provides for payment to
a retired Trustee of up to 80% of the average compensation paid during
that Trustee's five years of service in which the highest compensation was
received. A Trustee must serve in that capacity for any of the New York-
based OppenheimerFunds for at least 15 years to be eligible for the
maximum payment. No provision was made during the fiscal year ended
December 31, 1994 for the Fund's projected retirement obligations. No
payments have been made by the Fund under the plan as of December 31,
1994.
-Major Shareholders. As of March 15, 1995, no person owned of record
or is known to the Fund to own beneficially 5% or more of the Fund's
outstanding Class A or Class B shares.
The Manager and Its Affiliates. The Manager is 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 two of whom (Messrs. Galli and Spiro) serve as
Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. Its 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 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 investment
advisory agreement or by the Distributor under the Distribution Agreement
are paid by the Fund. The investment advisory agreement lists examples
of expenses paid by the Fund, the major categories of which relate to
interest, taxes, brokerage commissions, fees to certain trustees, legal
and audit expenses, custodian and transfer agent expenses, share issuance
costs, certain printing and registration costs and non-recurring expenses,
including litigation costs. For the Fund's first fiscal year ended
December 31, 1994 the management fee payable by the Fund to the Manager
was $21,740. This amount does not reflect the expense assumption of
$38,370 by the Manager for the same period.
The investment advisory agreement contains no provision limiting the
Fund's expenses. However, independently of the investment advisory
agreement, the Manager has voluntarily undertaken that the total expenses
of the Fund in any fiscal year (including the management fee but excluding
taxes, interest, brokerage commissions, distribution plan payments and
extraordinary expenses such as litigation costs) shall not exceed the most
stringent expense limitation imposed under state law applicable to the
Fund. Currently, the most stringent state expense limitation is imposed
by California, and limits the Fund's expenses (with specific exclusions)
to 2.5% of the first $30 million of average annual net assets, 2% of the
next $70 million, and 1.5% of average annual net assets in excess of $100
million. In addition, the Manager has voluntarily agreed to assume the
expenses of the Fund to the extent required to enable the Fund to pay
dividends per Class A share at the rate of $.612 per year. The payment
of the management fee will be reduced monthly to the extent necessary so
that there will not be any accrued but unpaid liability under this
voluntary expense assumption undertaking. The Manager reserves the right
to modify or terminate a voluntary expense assumption undertaking at any
time. Any assumption of the Fund's expenses under a voluntary undertaking
would lower the Fund's overall expense ratio and increase its total return
during any period in which expenses are limited.
The investment 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 investment advisory agreement permits the Manager
to act as investment adviser for any other person, firm or corporation and
to use the name "Oppenheimer" in connection with one or more additional
companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment adviser to
the Fund, the right of the Fund to use the name "Oppenheimer" as part of
its name may be withdrawn.
-The Distributor. Under its Distribution Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A and Class B shares but is not
obligated to sell a specific number of shares. Expenses normally
attributable to sales (other than those paid under the Class B
Distribution and Service Plan), including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders, are borne by the Distributor. During the period March 1,
1994 (inception of the Fund) through December 31, 1994, sales charges paid
by investors on purchases of Class A shares were $102,836, of which
$19,169 was retained by the Distributor. During the same period, no
contingent deferred sales charge were collected on redemption of Class B
shares. For additional information about distribution of the Fund's
shares and the expenses connected with such activities, please refer to
"Distribution and Service Plans," below.
-The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon new 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 advisory agreement and the procedures and rules
described above. In each 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 incurs
little or no brokerage costs. The Fund usually deals directly with the
selling or purchasing principal or market maker without incurring charges
for the services of a broker on its behalf unless it is determined that
better price or execution may be obtained by utilizing the services of a
broker. Purchases of portfolio securities from underwriters include a
commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
The Fund seeks to obtain prompt execution of orders at the most favorable
net price. When the Fund engages in an option transaction, ordinarily the
same broker will be used for the purchase or sale of the option and any
transaction in the securities to which the option relates. When possible,
concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are averaged
as to price and allocated in accordance with the purchase or sale orders
actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Trust (those
Trustees of the Trust who are not "interested persons" as defined in the
Investment Company Act, and who have no direct or indirect financial
interest in the operation of the advisory agreement or the Distribution
Plans described below) annually reviews information furnished by the
Manager as to the commissions paid to brokers furnishing such services so
that the Board may ascertain whether the amount of such commissions was
reasonably related to the value or benefit of such services.
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 or price of such securities. If two or more of such funds
purchase the same security on the same day from the same dealer, the
Manger may average the price of the transactions and allocate the average
among such funds.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "dividend yield," "tax-equivalent yield" "average annual total
return", "total return at net asset value," and "total return" of an
investment in each class of Fund shares may be advertised. An explanation
of how yields and total returns are calculated for each class and the
components of those calculations is set forth below.
Yield and total return information may be useful to investors in
reviewing the Fund's performance. The Fund's advertisement of its
performance must, under applicable SEC rules, include the average annual
total returns for each class of shares of the Fund for the 1, 5 and 10-
year period (or the life of the class, if less) as of the most recently
ended calendar quarter. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its yield and total return are not
guaranteed and normally will fluctuate on a daily basis. When redeemed,
an investor's shares may be worth more or less than their original cost.
Yield and total return for any given past period are not a prediction or
representation by the Fund of future yields or rates of return on its
shares. The yields and total returns of the Class A and Class B shares
of the Fund are affected by portfolio quality, portfolio maturity, the
type of investments the Fund holds and its operating expenses.
- Standardized Yields
- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
a-b 6
Yield = 2 ((---- + 1) -1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of the class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended December 31, 1994, the standardized yields for the
Fund's Class A and Class B shares were 5.68% and 5.04%, 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, state and city taxable income (the net amount
subject to Federal and state income taxes after deductions and
exemptions). The tax equivalent yield table assumes that the investor is
taxed at the highest bracket, regardless of whether a switch to non-
taxable investments would cause a lower bracket to apply, 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. The Fund's tax-equivalent yields (after expense
assumptions by the Manager) for its Class A and Class B shares for the 30-
day period ended December 31, 1994, for an individual taxpayer in the
43.62% combined tax bracket were 10.07% and 8.94%, respectively.
- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A or Class B share dividends derived
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares, the maximum offering price
is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time similar yield or distribution return calculations
may also be made using the Class A net asset value (instead of its
respective maximum offering price) at the end of the period.
The dividend yields on Class A shares for the 30-day period ended
December 31, 1994, were 5.62% and 5.90% when calculated at maximum
offering price and at net asset value, respectively. The dividend yield
on Class B shares for the 30-day period ended December 31, 1994, was
5.23%. Distribution returns for the 30-day period ended December 31, 1994
are the same as the above-quoted dividend yields. No portions of the
Class A or Class B dividends for the three months ended December 31, 1994
were derived from realized capital gains.
- 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 discussed below). For Class B shares, the payment of the
applicable contingent deferred sales charge of (5.0% for the first year,
4.0% for the second year, 3.0% for the third and fourth years, 2.0% in the
fifth year, 1.0% in the sixth year and none thereafter) is applied to the
investment result for the time period shown (unless the total return is
shown at net asset value, as described below. Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that
the investment is redeemed at the end of the period.
The "average annual total return" on an investment in Class A shares
and Class B shares of the Fund for the fiscal period from March 1, 1994
through December 31, 1994 was -10.88% and -11.81%, respectively; the
"annual total return at net asset value" for the same period for Class A
shares and Class B shares was -4.63% and -5.39%, respectively.
- Other Performance Comparisons. From time to time the Fund may
publish the ranking of the performance of its Class A or Class B shares
by bond Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund, and
ranks their performance for various periods based on categories relating
to investment objectives. The performance of the Fund is ranked against
(1) all other bond funds, excluding money market funds, and (ii) all other
New Jersey municipal bond funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gains
distributions and income dividends but do not take sales charges or taxes
into consideration. From time to time the Fund may include in its
advertisement and sales literature performance information about the Fund
cited in other newspapers and periodicals such as The New York Times,
which may include performance quotations from other sources, including
Lipper and Morningstar.
From time to time the Fund may publish the ranking of the performance
of its Class A or Class B shares by Morningstar, Inc., an independent
mutual fund monitoring service that ranks mutual funds, including the
Fund, monthly in broad investment categories (equity, taxable bond,
municipal bond and hybrid) based upon risk-adjusted investment returns.
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 returns. Risk and return
are combined to produce star rankings reflecting performance relative to
the average fund in a given 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.
Investors may also wish to compare the Fund's Class A or Class B
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 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. When redeemed, an investor's shares may be worth
more or less than their original cost. Returns for any given past period
are not a prediction or representation by the Fund of future returns. The
returns of Class A and Class B shares of the Fund are affected by
portfolio quality, the type of investments the Fund holds and its
operating expenses allocated to a particular class.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or the Transfer Agent), by independent third-parties, on
the investor services provided by them to shareholders of the
OppenheimerFunds, other than the performance rankings of the
OppenheimerFunds themselves. Those ratings or rankings of
shareholder/investor services may compare the OppenheimerFunds' 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, using its own research or judgment, or based upon surveys
of investors, brokers, shareholders or others.
<PAGE>
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class B shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will reimburse the
Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Trust, including a majority of
the Independent Trustees, cast in person at a meeting called for the
purpose of voting on that Plan, and (ii) the holders of a "majority" (as
defined in the Investment Company Act) of the shares of each class. For
the Distribution and Service Plan for the Class B shares, that vote was
cast by the Manager as the then sole initial holder of Class B shares of
the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make to Recipients from their own
resources.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Trust's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on any such selection or nomination is approved by a
majority of such Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate allowed under the Plans and set no minimum amount.
For the period from March 1, 1994 through December 31, 1994, payments
under the Class A Plan totaled $2,285, all of which was paid by the
Distributor to Recipients. Any unreimbursed expenses incurred with
respect to Class A shares for any fiscal year by the Distributor may not
be recovered in subsequent years. Payments received by the Distributor
under the Plan for Class A shares will not be used to pay any interest
expense, carrying charge, or other financial costs, or allocation of
overhead by the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will
be made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at an annual rate of 0.25% of the average daily net
asset value of Class B shares held in accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance service fee payment. In the event Class B shares are redeemed
during the first year such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class B Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B
plan are subject to the limitations imposed by the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service fees. The Distributor anticipates
that it will take a number of years for it to recoup (from the Fund's
payments to the Distributor under the Class B Plan and recoveries of the
contingent deferred sales charge) the sales commissions paid to authorized
brokers or dealers. For the period from March 1, 1994 through December
31, 1994, payments under the Class B plan totaled $13,846.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and from
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class B Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
<PAGE>
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
availability of two 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 shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$1 million or more of Class B shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of 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 and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total 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 Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined as of the
close of business of The New York Stock Exchange (the "NYSE") on each day
that the NYSE is open by dividing the value of the Fund's net assets
attributable to that class by the total number of shares of that class
outstanding. The NYSE 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 NYSE's most recent
annual holiday schedule states that it will close on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than NYSE members may conduct trading in Municipal
Securities on certain days on which the NYSE is closed (including weekends
and holidays) or after 4:00 P.M. on a regular business day. Because the
Fund's net asset value will not be calculated on those days, the Fund's
net asset value per share of each class may be significantly affected on
days when shareholders may not purchase or redeem shares (e.g., Good
Friday), so that securities of the same type held by the Fund may be
traded, and the net asset values per share of Class A and Class B shares
of the Fund may be significantly affected, on such days when shareholders
cannot purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) long-term
debt securities, and short-term debt securities having a remaining
maturity in excess of 60 days, or less are valued at the mean between the
asked and bid prices determined by a portfolio pricing service approved
by the Board or obtained from active market makers in the security on the
basis of reasonable inquiry; (ii) short-term debt securities having a
remaining maturity of 60 days or less when purchased or which currently
have maturities of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (iii) securities
or assets for which market quotations are not readily available are valued
at their fair value as determined in good faith under the procedures
established by and under the general supervision and responsibility of the
Board of Trustees.
In the case of Municipal Securities, U.S. Government securities and
corporate bonds, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity and other
special factors involved (such as the tax-exempt status of the interest
paid by Municipal Securities). With the approval of the Trust's Board of
Trustees, the Manager may employ a pricing service, bank or broker-dealer
experienced in such matters to price any of the types of securities
described above. The Trustees will monitor the accuracy of pricing
services by comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
The Fund values puts, calls, Interest Rate Futures and Municipal Bond
Index Futures at the last sales price on the principal exchange or on the
NASDAQ on which they are traded. If there were no sales on the principal
exchange, the last sale or any exchange is used. In the absence of any
sales that day, value shall be the last reported sales price on the prior
trading day or closing bid or asked prices on the principal exchange
closets to the last reported sales price.
When the Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets and
Liabilities as an asset, and an equivalent deferred credit is included in
the liability section. The deferred credit is adjusted ("marked-to-
market") to reflect the current market value of the option. In determining
the Fund's gain on investments, if a call 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 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 the premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before the close of the NYSE that day, which is normally 3 days
after the ACH transfer is initiated. The Distributor and the Fund are not
responsible for any delays. If the Federal Funds are received after the
close of the NYSE that day, dividends will begin to accrue on the next
regular business day after such Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction 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 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, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer 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 Tax-Exempt Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
-Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase Class A shares of the Fund (and other
eligible OppenheimerFunds) sold with a front-end sales charge during the
13-month period from the investor's first purchase pursuant to the Letter
(the "Letter of Intent period"), which may, at the investor's request,
include purchases made up to 90 days prior to the date of the Letter. The
Letter states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestments of dividends or
distributions or purchases made at net asset value without sales charge),
which together with the investor's holdings of such funds (calculated at
their respective public offering prices calculated on the date of the
Letter) will equal or exceed the amount specified in the Letter. This
enables the investor to obtain the reduced sales charge rate (as set forth
in the Prospectus) applicable to purchases of shares in that amount (the
"intended purchase amount"). Each purchase under the Letter will be made
at the public offering price applicable to a single lump-sum purchase of
shares in the intended amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
-Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value to 5% of the
intended purchase amount specified in the Letter shall be held in escrow
by the Transfer Agent. For example, if the intended purchase amount is
$50,000, the escrow shall be shares valued in the amount of $2,500
(computed at the public offering price adjusted for a $50,000 purchase).
Any dividends and capital gains distributions on the escrowed shares will
be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of the Letter) do not include
any shares sold without a front-end sales charge or without being subject
to a Class A contingent deferred sales charge unless (for the purpose of
determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of one of the
OppenheimerFunds whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, 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.
- Involuntary Redemptions. The Trust's Board of Trustees has the
right to cause the involuntary redemption of the Fund's shares held in any
account if the aggregate net asset value of such shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of such shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or may set requirements
for granting permission to the shareholder to increase the investment, and
set other terms and conditions so that the shares would not be
involuntarily redeemed.
- 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 Trust 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 Trust has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Value Per Share" and such valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after 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 OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of either class at the time of transfer to the name
of another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives an order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customer 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.). Payment ordinarily will be made
within seven (effective June 7, 1995, within three) days after the
Distributor's receipt of the required redemption documents, with
signature(s) guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of
the Fund valued at $5,000 or more can authorize the Transfer Agent to
redeem shares (minimum $50) automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Withdrawal Plan. Shares will
be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are 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 the payment on the
date requested and reserves the right to amend, suspend or discontinue
offering such plans at any time without prior notice. Because of the
sales charge assessed on Class A share purchases, shareholders should not
make regular additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B shareholders should not establish
withdrawal plans that would require the redemption of shares purchased
subject to a contingent deferred sales charge and held less than 6 years
because of the imposition of the Class B contingent deferred sales charge
on such withdrawals (except where the Class B contingent deferred sales
charge is waived as described in the Prospectus under "Class B Contingent
Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "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 thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
the OppenheimerFunds that have a single class of shares without a class
designation are deemed "Class A" shares for this purpose. All
OppenheimerFunds offer Class A shares (except Oppenheimer Strategic
Diversified Income Fund), but only the following other OppenheimerFunds
offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Discovery Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Class A shares of OppenheimerFunds 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
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds 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 six years of the initial purchase
of the exchanged Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or 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 Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal 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 on
newly purchased shares will not be declared or paid until such time as
Federal Funds (funds credited to a member bank's account at the Federal
Reserve Bank) are available from the purchase payment for such shares.
Normally, purchase checks received from investors are converted to Federal
Funds on the next business day. Dividends will be declared on shares
repurchased by a dealer or broker for four business days following the
trade date (i.e., to and including the day prior to settlement of the
repurchase). If all shares in an account are redeemed, all dividends
accrued on shares of the same class in the account will be paid together
with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A and Class B
Shares," above. Dividends are calculated in the same manner, at the same
time and on the same day for shares of each class. However, dividends on
Class B shares are expected to be lower as a result of the asset-based
sales charge on Class B shares, and Class B dividends will also differ in
amount as a consequence of any difference in net asset value between Class
A and Class B shares.
Distributions may be made annually in December out of any net short-
term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from
hedging instruments and closing purchase transactions realized in the
twelve months ending on October 31 of the current year. Any difference
between the net asset value of Class A and Class B shares will be
reflected in such distributions. Distributions from net short-term
capital gains are taxable to shareholders as ordinary income and when paid
by the Fund are considered "dividends." The Fund may make a supplemental
distribution of capital gains and ordinary income following the end of its
fiscal year. Long-term capital gains distributions, if any are taxable
as long-term capital gains whether received in cash or reinvested and
regardless of how long Fund shares have been held. There is no fixed
dividend rate (although the Fund has a targeted dividend rate for Class
A shares) and there can be no assurance as to the payment of any dividends
or the realization of any capital gains.
Tax Status of the Fund's Dividends and Distributions. The Fund intends
to qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest
dividends which are derived from net investment income earned by the Fund
on Municipal Securities will be excludable from gross income of
shareholders for Federal income tax purposes. Net investment income
includes the allocation of amounts of income from the Municipal Securities
in the Fund's portfolio which are free from Federal income taxes. This
allocation will be made by the use of one designated percentage applied
uniformly to all income dividends made during the Fund's tax year. Such
designation will normally be made following the end of each fiscal year
as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of
the Fund's income that was tax-exempt for a given period. All of the
Fund's dividends (excluding capital gains distributions) paid during 1994
were exempt from Federal and New Jersey income taxes. 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. 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. 9.6% of the Fund's dividends (excluding
distributions) paid during 1994 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.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. The Manager might determine in a particular year that it
might be in the best interest of shareholders for the Fund not to make
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital
gains available for distribution to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue as income each year a portion of the
discount at which the security was purchased even though the Fund receives
no interest payment in cash on the security during the year. As an
investment company, the Fund must pay out substantially all of its net
investment income each year or be subject to excise taxes, as described
above. Accordingly, when the Fund holds zero coupon securities, it may
be required to pay out as an income distribution each year an amount which
is greater than the total amount of cash interest the Fund actually
received during that year. Such distributions will be made from the cash
assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they
would have had in the absence of such transactions.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Class B
shareholders should be aware that as of the date of this Statement of
Additional Information, not all of the OppenheimerFunds offer Class B
shares. The names of the Funds that offer Class B shares can be obtained
by calling the Distributor at 1-800-525-7048. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to
establish an account. The investment will be made at the net asset value
per share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or distributions from certain of
the OppenheimerFunds may be invested in shares of this Fund on the same
basis.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets.
The Custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities, collecting income on the portfolio securities
and handling the delivery of such securities to and from the Fund. The
Manager has represented to the Fund that the banking relationships between
the Manager and the Custodian have been and will continue to be unrelated
to and unaffected by the relationship between the Fund and the Custodian.
It will be the practice of the Fund to deal with the Custodian in a manner
uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer
Multi-State Tax-Exempt Trust:
We have audited the accompanying statements of
investments and assets and liabilities of Oppenheimer
New Jersey Tax-Exempt Fund (a series of Oppenheimer
Multi-State Tax-Exempt Trust) as of December 31, 1994,
and the related statements of operations and changes in
net assets and the financial highlights for the period
from March 1, 1994 (commencement of operations) to
December 31, 1994. 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 audit.
We conducted our audit 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 December 31, 1994, by
correspondence with the custodian and brokers; where
replies were not received from brokers, we performed
other auditing procedures. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe
that our audit provides 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
New Jersey Tax-Exempt Fund as of December 31, 1994, the
results of its operations, changes in its net assets and
its financial highlights for the period from March 1,
1994 (commencement of operations) to December 31, 1994,
in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
January 23, 1995
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS December 31, 1994
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
------------------ ------ ------------
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - 98.8%
NEW JERSEY - 79.8%
Bayonne, New Jersey General Obligation Bonds, FGIC Insured, 6%,
5/1/13 Aaa/AAA/AAA $ 100,000 $ 94,678
Camden County, New Jersey Municipal Authority Sewer Revenue
Bonds, Series A, FGIC Insured, 0%, 9/1/15 Aaa/AAA/AAA 250,000 63,390
Cape May County, New Jersey Municipal Utility Authority Revenue
Refunding Bonds, Prerefunded, MBIA Insured, 6.80%, 8/1/09 Aaa/AAA 200,000 211,571
Cape May County, New Jersey Municipal Utility Authority Revenue
Refunding Bonds, Series A, MBIA Insured, 5.75%, 1/1/16 Aaa/AAA 250,000 226,035
Edgewater, New Jersey Board of Education General Obligation
Bonds, 5.40%, 3/1/08 NR/AA 70,000 63,885
Essex County, New Jersey Improvement Authority Revenue Bonds,
Prerefunded, AMBAC Insured, 7%, 12/1/20 Aaa/AAA/AAA 150,000 161,744
Essex County, New Jersey Improvement, General Obligation Bonds,
Irvington Township School District, Prerefunded, FSA Insured,
6.55%, 10/1/09 Aaa/AAA 60,000 63,118
Hoboken Union City & Weehawken, New Jersey Sewer Authority
Revenue Refunding Bonds, MBIA Insured, 6.20%, 8/1/19 Aaa/AAA 85,000 80,886
Hudson County, New Jersey Utility Authority System Revenue
Bonds, Prerefunded, 11.875%, 7/1/06 Aaa/AAA 215,000 281,055
Mercer County, New Jersey Improvement Authority Revenue Bonds,
Custodial Receipts-Justice Complex, 6.05%, 1/1/11 Aa/AA- 250,000 235,595
Monmouth County, New Jersey Improvement Authority Revenue
Bonds, Millston Township Board of Education Project, 5.55%,
2/15/18 NR/AA 85,000 73,671
New Brunswick, New Jersey Parking Authority Revenue Refunding
Bonds, Series A, FGIC Insured, 6.50%, 9/1/19 Aaa/AAA 150,000 148,167
New Jersey Economic Development Authority Revenue Bonds, Sr.
Lien, Series A, MBIA Insured, 5.875%, 7/1/11 Aaa/AAA 200,000 187,360
New Jersey Economic Development Authority, Public Service
Electric and Gas Co. Project, MBIA Insured , 6.40%, 5/1/32 Aaa/AAA 500,000 466,586
New Jersey Health Care Facilities Finance Authority Revenue
Bonds, Prerefunded, Series C, 8.60%, 7/1/17 Aaa/AAA 620,000 676,567
New Jersey Health Care Facilities Finance Authority Revenue
Bonds, Riverview Medical Center, AMBAC Insured, 5.50%,
7/1/13 Aaa/AAA/AAA 130,000 112,850
New Jersey Health Care Facilities Finance Authority Revenue
Refunding Bonds, Wayne General Hospital, Series B, FHA Insured,
5.75% 8/1/11 NR/AAA 70,000 62,944
New Jersey Health Care Facilities Finance Revenue Bonds,
Centrastate Medical Center, Series A, AMBAC Insured, 6%,
7/1/21 Aaa/AAA/AAA 100,000 91,952
New Jersey Sports & Exposition Authority Revenue Bonds,
Convention Center Luxury Tax, Series A, MBIA Insured, 6.25%,
7/1/20 Aaa/AAA 80,000 76,095
New Jersey State Housing & Mortgage Finance Agency Revenue
Bonds, Home Buyer, Series J, MBIA Insured, 6.20%, 10/1/25 Aaa/AAA 200,000
179,641
New Jersey State Housing & Mortgage Finance Agency Revenue
Refunding Bonds, Series 1, 6.70%, 11/1/28 NR/A+ 150,000 142,879
New Jersey State Turnpike Authority Revenue Bonds, Series C,
6.50%, 1/1/16 A/A/A 600,000 597,956
Ocean County, New Jersey Utilities Authority Wastewater Revenue
Refunding Bonds, Series A, 5.75%, 1/1/18 Aa/AA- 490,000 436,303
Passaic County, New Jersey General Obligation Bonds, FGIC
Insured, 5.70%, 3/1/15 Aaa/AAA/AAA 100,000 88,612
Passaic Valley, New Jersey Community Water Supply Revenue
Bonds, Prerefunded, FGIC Insured, 6.40%, 12/15/22 Aaa/AAA/AAA 200,000
208,660
</TABLE>
5 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS December 31, 1994
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
----------------- ------ ------------
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
NEW JERSEY (CONTINUED)
Port Authority of New York and New Jersey Consolidated Revenue
Bonds, Ninety-Fourth Series, 6%, 12/1/14 A1/AA-/AA- 200,000 187,845
Sussex County, New Jersey General Obligation Bonds, General
Improvement, AMBAC Insured, 6%, 4/1/07 Aaa/AAA/AAA 135,000
132,691
University of New Jersey Medicine & Dentistry Revenue Bonds,
Series E, 5.75%, 12/1/21 A/AA 50,000 43,387
Woodbridge Township, New Jersey Revenue Refunding Bonds,
Sewer Utilities, Series B, 5%, 9/15/09 A1/NR 95,000 80,742
-----------
5,476,865
U.S. POSSESSIONS - 19.0%
Puerto Rico Commonwealth General Obligation Refunding Bonds,
Series A, 6%, 7/1/14 Baa1/A 100,000 92,954
Puerto Rico Commonwealth Highway & Transportation Authority
Highway Revenue Refunding Bonds, Series V, 6.625%, 7/1/12 Baa1/A 300,000 296,939
Puerto Rico Commonwealth Highway & Transportation Authority
Highway Revenue Refunding Bonds, Series W, 5.25%, 7/1/20 Baa1/A 50,000 40,777
Puerto Rico Commonwealth Revenue Refunding Bonds, 5.50%,
7/1/13 Baa1/A 100,000 87,380
Puerto Rico Electric Power Authority Revenue Bonds, Unrefunded
Balance, Series 0, 7.125%, 7/1/14 Baa1/A- 540,000 555,764
Puerto Rico Electric Power Authority Revenue Refunding Bonds,
Series U, 6%, 7/1/14 Baa1/A- 200,000 186,115
Puerto Rico Public Buildings Authority Guaranteed Public Education
& Health Facilities Revenue Refunding Bonds, Series M, 5.75%,
7/1/15 Baa1/A 50,000 44,644
-----------
1,304,573
TOTAL INVESTMENTS, AT VALUE (COST $7,073,929) 98.8%
6,781,438
OTHER ASSETS NET OF LIABILITIES 1.2 81,139
-------- -----------
NET ASSETS 100.0% $6,862,577
========
===========
</TABLE>
See accompanying Notes to Financial Statements.
6 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1994
<TABLE>
<S> <C> <C>
ASSETS Investments, at value (cost $7,073,929) - see accompanying statement $6,781,438
Cash 35,430
Receivables:
Interest 181,612
Shares of beneficial interest sold 152,788
Investment sold 99,885
Deferred organization costs 7,079
Other 7,249
------------
Total assets 7,265,481
-----------
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 239,239
Investments purchased 124,377
Dividends 20,714
Distribution and service plan fees - Note 4 1,897
Other 16,677
-----------
Total liabilities 402,904
----------
NET ASSETS $6,862,577
COMPOSITION OF Paid-in capital $7,160,244
NET ASSETS Undistributed (overdistributed) net investment income 403
Accumulated net realized gain (loss) form investment transactions (5,579)
Net unrealized appreciation (depreciation) on investments - Note 3 (292,491)
-----------
Net assets $6,862,577
==========
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share
(based on net assets of $3,877,068 and 372,610 shares
of beneficial interest
outstanding) $10.41
Maximum offering price per share (net asset value plus sales
charge of 4.75% of offering price) $10.93
Class B Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $2,985,509 and
287,179 shares of beneficial
interest outstanding) $10.40
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
STATEMENT OF OPERATIONS For the Period from March 1, 1994 (commencement of
operations) to December 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME Interest $ 214,555
---------
EXPENSES Management fees - Note 4 21,740
Distribution and service plan fees:
Class A - Note 4 2,285
Class B - Note 4 13,846
Legal and auditing fees 8,684
Shareholder reports 6,082
Transfer and shareholder servicing agent fees - Note 4 2,564
Trustee's fee and expenses 1,836
Custodian fees and expenses 1,548
Registration and filing fees:
Class A 1,397
Class B 1,109
Other 1,375
---------
Total expenses 62,466
Less assumption of expenses by Oppenheimer Management
Corporation - Note 4 (38,370)
----------
Net expenses 24,096
---------
NET INVESTMENT INCOME (LOSS) 190,459
REALIZED AND Net realized gain (loss) from investments (5,176)
UNREALIZED GAIN (LOSS) Net change in unrealized appreciation or depreciation
ON INVESTMENTS on investments (292,491)
----------
Net realized and unrealized gain (loss) on investments (297,667)
----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
$(107,208)
==========
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1994(1)
------------
<S> <C> <C>
OPERATIONS Net investment income (loss) $ 190,459
Net realized gain (loss) on investments (5,176)
Net change in unrealized appreciation or
depreciation on investments (292,491)
-----------
Net increase (decrease) in net assets resulting
from operations (107,208)
-----------
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.493 per share) (116,609)
SHAREHOLDERS Class B ($.416 per share) (73,850)
BENEFICIAL INTEREST Net increase (decrease) in net assets resulting from
TRANSACTIONS Class A beneficial interest transactions - Note 2 4,048,476
Net increase (decrease) in net assets resulting from
Class B beneficial interest transactions - Note 2 3,111,768
-----------
NET ASSETS Total increase (decrease) 6,862,577
Beginning of period --
-----------
End of period (including undistributed net investment
income of $403) $ 6,862,577
===========
1. For the period from March 1, 1994 (commencement of
operations) to December 31, 1994.
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
-------- --------
PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1994(1) 1994(1)
------------ ------------
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.43 $11.43
Income (loss) from investment operations:
Net investment income .49 .41
Net realized and unrealized gain (loss)
on investments (1.02) (1.02)
------- -------
Total income (loss) from investment operations (.53) (.61)
------- -------
Dividends to shareholders:
Dividends from net investment income (.49) (.42)
------- -------
Total dividends to shareholders (.49) (.42)
Net asset value, end of period $10.41 $10.40
======= ======
TOTAL RETURN, AT NET ASSET VALUE(2) (4.63)% (5.39)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $3,877 $2,986
Average net assets (in thousands) $2,506 $1,841
Number of shares outstanding at end of period
(in thousands) 373 287
Ratios to average net assets:
Net investment income 5.57%(3) 4.76%(3)
Expenses, before voluntary assumption by the
Manager or Distributor 1.46%(3) 2.29%(3)
Expenses, net of voluntary assumption by the
Manager or Distributor .31%(3) 1.14%(3)
Portfolio turnover rate(4) 17.3% 17.3%
</TABLE>
1. For the period from March 1, 1994 (commencement of operations) to December
31, 1994.
2. Assumes a hypothetical initial investment on March 1, 1994, 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 year. Sales charges are not reflected in the
total returns.
3. Annualized.
4. 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 December 31, 1994 were $7,840,507 and
$765,543, respectively.
See accompanying Notes to Financial Statements.
10 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT Oppenheimer New Jersey Tax-Exempt Fund (the Fund) is a
ACCOUNTING separate series of Oppenheimer Multi- State Tax-Exempt
POLICIES Trust, a non-diversified, open-end management investment
company registered under the Investment Company Act of
1940, as amended. The Fund's investment advisor is
Oppenheimer Management Corporation (the Manager). The
Fund offers both Class A and Class B shares. Class A
shares are sold with a front-end sales charge. Class B
shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical rights to
earnings, assets and voting privileges, except that each
class has its own distribution plan, expenses directly
attributable to a particular class and exclusive voting
rights with respect to matters affecting a single class.
Class B shares will automatically convert to Class A
shares six years after the date of purchase. The
following is a summary of significant accounting
policies consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued at
4:00 p.m. (New York time) on each trading day. 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 debt securities are
valued by a portfolio pricing service approved by the
Board of Directors. Long-term debt 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 under consistently
applied procedures established by the Board of Directors
to determine fair value in good faith. Short-term debt
securities having a remaining maturity of 60 days or
less are valued at cost (or last determined market
value) adjusted for amortization to maturity of any
premium or discount.
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated daily
to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a specific
class are charged against the operations of that class.
FEDERAL INCOME TAXES. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any net
realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal
income tax provision is required.
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a
nonfunded retirement plan for the Fund's independent
trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service.
No payments have been made under the plan.
ORGANIZATION COSTS. The Manager advanced $8,500 for
organization and start-up costs of the Fund. Such
expenses are being amortized over a five-year period
from the effective date of the initial prospectus. In
the event that all or part of the Manager's initial
investment in shares of the Fund is withdrawn during the
amortization period, the redemption proceeds will be
reduced to reimburse the Fund for any unamortized
expenses, in the same ratio as the number of shares
redeemed bears to the number of initial shares
outstanding at the time of such redemption.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to
declare dividends separately for Class A and Class B
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.
11 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net
investment income (loss) and net realized gain (loss)
may differ for financial statement and tax purposes
primarily because of premium amortization. The character
of the distributions made during the year from net
investment income or net realized gains may differ from
their ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions,
the fiscal year in which amounts are distributed may
differ from the year that the income or realized gain
(loss) was recorded by the Fund. The Fund follows
Statement of Position 93-2: Determination, Disclosure,
and Financial Statement Presentation of Income, Capital
Gain, and Return of Capital Distributions by Investment
Companies. As a result, 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. During the
period ended December 31, 1994, in accordance with
Statement of Position 93-2, undistributed net investment
income was increased by $403 and accumulated net
realized loss on investments was increased by the same
amount.
OTHER. Investment transactions are accounted for on the
date the investments are purchased or sold (trade date).
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. Original issue discount on
securities purchased is amortized over the life of the
respective securities, in accordance with federal income
tax requirements. For bonds acquired after April 30,
1993, accrued market discount is recognized at maturity
or disposition as taxable ordinary income. Taxable
ordinary income is realized to the extent of the lesser
of gain or accrued market discount.
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL value shares of beneficial interest of each class.
INTEREST Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1994(1)
SHARES AMOUNT
---------------------------------
<S> <C> <C>
Class A:
Sold 447,660 $4,853,160
Dividends reinvested 6,784 72,067
Redeemed (81,834) (876,751)
--------- -----------
Net increase 372,610 $4,048,476
========= ===========
Class B:
Sold 294,677 $3,191,135
Dividends reinvested 4,335 45,898
Redeemed (11,833) (125,265)
--------- -----------
Net increase 287,179 $3,111,768
========= ===========
</TABLE>
1. For the period from March 1, 1994 (commencement of
operations) to December 31, 1994 for both Class A and
Class B Shares.
3. UNREALIZED GAINS At December 31, 1994, net unrealized depreciation on
AND LOSSES ON investments of $292,491 was composed of gross
INVESTMENTS appreciation of $18,409, and gross depreciation of
$310,900.
12 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
4. MANAGEMENT FEES Management fees paid to the Manager were in accordance
AND OTHER with the investment advisory agreement with the Fund
TRANSACTIONS WITH which provides for an annual fee of .60% on the first
AFFILIATES $200 million of net assets, .55% on the next $100
million, .50% on the next $200 million, .45% on the next
$250 million, .40% on the next $250 million and .35% on
net assets in excess of $1 billion. The Manager has
agreed to assume Fund expenses (with specified
exceptions) in excess of the most stringent applicable
regulatory limit on Fund expenses. In addition, the
Manager has voluntarily undertaken to assume Fund
expenses to the level needed to maintain a stable
dividend.
For the period ended December 31, 1994, commissions
(sales charges paid by investors) on sales of Class A
shares totaled $102,836, of which $19,169 was retained
by Oppenheimer Funds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor, and
by an affiliated broker/dealer.
Oppenheimer Shareholder Services (OSS), a division of
the Manager, is the transfer and shareholder servicing
agent for the Fund, and for other registered investment
companies. OSS's total costs of providing such services
are allocated ratably to these companies.
Under separate approved plans, each class may expend up
to .25% (voluntarily reduced to .15% by the Fund's
Board) of its net assets annually to reimburse OFDI for
costs incurred in connection with the personal service
and maintenance of accounts that hold shares of the
Fund, including amounts paid to brokers, dealers, banks
and other institutions. In addition, Class B shares are
subject to an asset-based sales charge of .75% of net
assets annually, to reimburse OFDI for sales commissions
paid from its own resources at the time of sale and
associated financing costs. In the event of termination
or discontinuance of the Class B plan, the Board of
Trustees may allow the Fund to continue payment of the
asset-based sales charge to OFDI for distribution
expenses incurred on Class B shares sold prior to
termination or discontinuance of the plan. During the
period ended December 31, 1994, OFDI retained $13,748 as
reimbursement for Class B sales commissions and service
fee advances, as well as financing costs.
APPENDIX A
Descriptions 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.
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 YIELD TABLES
APPENDIX B
TAX EQUIVALENT YIELD TABLES
The equivalent yield tables below compare tax-free income with taxable
income under Federal individual income tax rates effective January 1, 1995
and New Jersey state income tax rates effective January 1, 1995. Combined
taxable income refers to the net amount subject to Federal and New Jersey
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, that
the investor is not subject to the Alternative Minimum Tax and that state
income tax payments are fully deductible for Federal income tax purposes.
They do not reflect the phaseout of itemized deductions and personal
exemptions at higher income levels, resulting in higher effective tax
rates and tax equivalent yields.
<TABLE>
<CAPTION>
Combined
Federal Effective
Taxable Tax A New Jersey Tax-Exempt Bond Fund yield of:
Income Bracket 3.50% 4.00% 4.50% 5.00% 5.50%
6.00% 6.50% 7.00%
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Joint return:
But Not
Over Over Is Equivalent to a Taxable Yield of:
$20,000 $39,000 17.02% 4.22% 4.82% 5.42% 6.03% 6.63%
7.23% 7.83% 8.44%
$39,000 $50,000 29.71% 4.98% 5.69% 6.40% 7.11% 7.83%
8.54% 9.25% 9.96%
$50,000 $70,000 30.40% 5.03% 5.75% 6.47% 7.18% 7.90%
8.62% 9.34% 10.06%
$70,000 $80,000 31.42% 5.10% 5.83% 6.56% 7.29% 8.02%
8.75% 9.48% 10.21%
$80,000 $94,250 32.45% 5.18% 5.92% 6.66% 7.40% 8.14%
8.88% 9.62% 10.36%
$94,250 $143,600 35.26% 5.41% 6.18% 6.95% 7.72% 8.50%
9.27% 10.04% 10.81%
$143,600 $150,000 39.96% 5.83% 6.66% 7.49% 8.33% 9.16%
9.99% 10.83% 11.66%
$150,000 $256,500 40.26% 5.86% 6.70% 7.53% 8.37% 9.21%
10.04% 10.88% 11.72%
$256,500 and above 43.62% 6.21% 7.09% 7.98% 8.87% 9.75%
10.64% 11.53% 12.42%
Combined
Federal Effective
Taxable Tax A New Jersey Tax-Exempt Bond Fund yield of:
Income Bracket 3.50% 4.00% 4.50% 5.00% 5.50%
6.00% 6.50% 7.00%
Single return:
But Not
Over Over
$20,000 $23,350 17.02% 4.22% 4.82% 5.42% 6.03% 6.63%
7.23% 7.83% 8.44%
$23,350 $35,000 29.71% 4.98% 5.69% 6.40% 7.11% 7.83%
8.54% 9.25% 9.96%
$35,000 $40,000 31.42% 5.10% 5.83% 6.56% 7.29% 8.02%
8.75% 9.48% 10.21%
$40,000 $56,550 32.45% 5.18% 5.92% 6.66% 7.40% 8.14%
8.88% 9.62% 10.36%
$56,550 $75,000 35.26% 5.41% 6.18% 6.95% 7.72% 8.50%
9.27% 10.04% 10.81%
$75,000 $117,950 35.59% 5.43% 6.21% 6.99% 7.76% 8.54%
9.32% 10.09% 10.87%
$117,950 $256,500 40.26% 5.86% 6.70% 7.53% 8.37% 9.21%
10.04% 10.88% 11.72%
$256,500 and above 43.62% 6.21% 7.09% 7.98% 8.87% 9.75%
10.64% 11.53% 12.42%
</TABLE>
<PAGE>
Appendix C
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
_______________________
* For purposes of the Fund's investment policy not to concentrate in
securities of issuers in the same industry, gas utilities and gas
transmission utilities each will be considered as separate industry.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick 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 Florida Tax-Exempt Fund
Prospectus dated April 25, 1995
Oppenheimer Florida Tax-Exempt Fund (the "Fund") is a mutual fund
that seeks as high a level of current interest income exempt from Federal
income tax for individual investors as is available from municipal
securities and consistent with preservation of capital. The Fund also
seeks to offer investors the opportunity to own securities exempt from
Florida intangible personal property taxes. The Fund will invest
primarily in securities issued by the State of Florida and local
governments and governmental agencies, but may also invest in securities
of other issuers. The Fund may use certain hedging instruments to try to
reduce the risks of market fluctuations that affect the value of the
securities the Fund holds. The Fund is not intended to be a complete
investment program and there is no assurance that it will achieve its
objective. Please refer to "Investment Policies and Strategies" for more
information about the types of securities the Fund invests in and the
risks of investing in the Fund.
The Fund offers two classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class B shares, which are sold without a front-end sales charge,
although you may pay a sales charge when you redeem your shares, depending
on how long you hold them. Class B shares are also subject to an annual
"asset-based sales charge." Each class of shares bears different
expenses. In deciding which class of shares to buy, you should consider
how much you plan to purchase, how long you plan to keep your shares, and
other factors discussed in "How to Buy Shares" starting on page 22.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read it carefully and keep it for future
reference. You can find more detailed information about the Fund in the
April 25, 1995 Statement of Additional Information. For a free copy, call
Oppenheimer Shareholder Services, the Fund's Transfer Agent, at 1-800-525-
7048, or write to the Transfer Agent at the address on the back cover.
The Statement of Additional Information has been filed with the Securities
and Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
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
Page
ABOUT THE FUND
3 Expenses
5 Overview of the Fund
7 Financial Highlights
9 Investment Objective and Policies
16 How the Fund is Managed
18 Performance of the Fund
ABOUT YOUR ACCOUNT
22 How to Buy Shares
Class A Shares
Class B Shares
30 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
32 How to Sell Shares
By Mail
By Telephone
Checkwriting
34 How to Exchange Shares
35 Shareholder Account Rules and Policies
37 Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services and
those expenses are 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. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will expect to bear indirectly. The
numbers below are based on the Fund's expenses during its last fiscal year
ended December 31, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account" from
pages 22 through 30 for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C>
Maximum Sales Charge on
Purchases
(as a % of offering price) 4.75% None
Sales Charge on Reinvested
Dividends None None
Deferred Sales Charge
(as a % of the lower of the
original purchase price or
redemption proceeds) None(1) 5% in the first
year, declining to 1%
in the sixth year and
eliminated thereafter
Exchange Fee None None
</TABLE>
(1) If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares - Class A Shares", below.
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
The numbers in the table below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan Fees for
Class A shares are service fees. For Class B shares the 12b-1
Distribution Plan Fees are service fees and asset-based sales charges.
The service fee for each class is a maximum of 0.25% (currently set at
0.15%) of average annual net assets of the class and the asset-based sales
charge for Class B shares is 0.75%. These plans are described in detail
in "How to Buy Shares", below.
The Total Fund Operating Expenses shown are net of a voluntary
expense assumption by the Manager. The expense assumption lowered the
Fund's overall expense ratio. Without such expense assumption by the
Manager, the "Management Fees" for each class of the Fund's shares would
have been .60% of the Fund's average net assets, and the "Total Fund
Operating Expenses" for the Fund's Class A and Class B shares would have
been 1.25% and 1.99% respectively. The expense assumption is described
in the Statement of Additional Information and may be modified or
withdrawn by the Manager at any time.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the table, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C>
Management Fees
(after expense reimbursement) .00% .00%
12b-1 Distribution
Plan Fees .15% .90%
Other Expenses .14% .13%
Total Fund Operating Expenses
(after expense reimbursement) .29% 1.03%
__________________________
</TABLE>
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, 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:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
Class A Shares $50 $56 $63 $83
Class B Shares $61 $63 $77 $86
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years*
Class A Shares $50 $56 $63 $83
Class B Shares $11 $33 $57 $86
</TABLE>
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long-term Class B
shareholders could pay the economic equivalent of an amount greater than
the maximum front-end sales charge allowed under applicable regulations,
because of the effect of the asset-based sales charge and contingent
deferred sales charge. The automatic conversion of Class B shares to
Class A shares is designed to minimize the likelihood that this will
occur. Please refer to "How to Buy Shares - Class B Shares" on pages 28-30
for more information.
These examples show the effect of the current level of expenses on the
return of a hypothetical investment, but are not meant to state or predict
actual or expected expenses or investment returns of the Fund, all of
which will vary.
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 income taxes for individual investors that is consistent with
preservation of capital. Investment in securities exempt from Florida's
intangible personal property taxes is also sought.
- What Does the Fund Invest In? Under normal market conditions, the
Fund will invest at least 80% (and will attempt to invest 100%) of its
total assets in Municipal Securities, and invest at least 65% of its total
assets in Florida Municipal Securities, the interest on which is exempt
from Federal income tax. The Fund may invest up to 20% of its assets in
investments the income from which may be taxable. The Fund may also use
hedging instruments and some derivative investments in an effort to
protect against market risks. These investments are more fully explained
in "Investment Objective and Policies," starting on page 9.
- Who Manages the Fund? The Fund's investment adviser is Oppenheimer
Management Corporation, which (including a subsidiary) advises investment
company portfolios having over $29 billion in assets at December 31, 1994.
The Fund's portfolio manager, who is primarily responsible for the
selection of the Fund's securities, is Robert E. Patterson. The Manager
is paid an advisory fee by the Fund, based on its net assets. 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 16 for more information about the Manager and
its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund's bond investments 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 its investments in Florida
Municipal Securities or the Fund's ability to invest its assets in a
single issuer or limited number of issuers entails greater risk than an
investment in a diversified investment company. The Fund's investment in
certain derivative investments may add a degree of risk not present in a
fund that does not invest in such securities.
While the Manager tries to reduce risks by diversifying investments
and 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 objective and your shares may
be worth more or less than their original cost when you redeem them.
Please refer to "Investment Objective and Policies" starting on page 9 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"
starting on page 22 for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has two classes
of shares. Class A shares are offered with a front-end sales charge,
starting at 4.75%, and reduced for larger purchases. Class B shares are
offered without a front-end sales charge, but may be subject to a
contingent deferred sales charge (starting at 5% and declining as shares
are held longer) if redeemed within 6 years of purchase. There is also
an annual asset-based sales charge on Class B shares. Please review "How
To Buy Shares" starting on page 22 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 using Checkwriting. Please refer to "How To Sell Shares" on
page 32.
- 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 21.
Please remember that past performance does not guarantee future results.
<PAGE>
Financial Highlights
The table on the following page presents selected financial
information about the Fund, including per share data and expense ratios
and other data based on the Fund's average net assets. This information
has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors, whose report on the Fund's financial statements for the fiscal
year ended December 31, 1994 is included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Class A Class B
---------------------------------- --------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1994 1993(1) 1994 1993(1)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 11.79 $ 11.43 $ 11.81 $ 11.43
Income (loss) from investment operations:
Net investment income .64 .14 .56 .12
Net realized and unrealized gain (loss)
on investments (1.53) .36 (1.54) .38
-------- -------- -------- --------
Total income (loss) from investment operations (.89) .50 (.98) .50
-------- -------- -------- --------
Dividends to shareholders from net investment
income (.64) (.14) (.56) (.12)
-------- -------- -------- --------
Net asset value, end of period $10.26 $11.79 $10.27 $11.81
======== ======== ========
========
Total Return, at Net Asset Value(2) (7.66)% 4.39% (8.42)% 4.35%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $11,992 $7,062 $7,992 $4,874
Average net assets (in thousands) $ 9,741 $2,471 $6,987 $2,304
Number of shares outstanding at end of period
(in thousands) 1,169 599 778 413
Ratios to average net assets:
Net investment income 5.90% 5.08%(3) 5.13% 4.29%(3)
Expenses, before voluntary assumption by the
Manager or Distributor 1.25% 1.89%(3) 1.99% 2.20%(3)
Expenses, net of voluntary assumption by the
Manager or Distributor .29% --%(3) 1.03% .38%(3)
Portfolio turnover rate(4) 30.4% --% 30.4% --%
</TABLE>
1. For the period from October 1, 1993 (commencement of operations) to December
31, 1993.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term
securities) for the year ended December 31, 1994 were $15,467,826 and
$4,895,277, respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks as high a level of current interest income
exempt from Federal income tax for individual investors as is available
from Municipal Securities (which are described below) and consistent with
preservation of capital. The Fund also seeks to offer investors the
opportunity to own securities exempt from Florida intangible personal
property taxes.
Investment Policies and Strategies. The Fund seeks its objective by
following the fundamental policy of investing, under normal market
conditions, at least 80% (and attempting to invest, as a non-fundamental
policy, 100%) of its total assets in Municipal Securities and investing
at least 65% of its total assets in Florida Municipal Securities (which
are described below).
Dividends paid by the Fund derived from interest attributable to
Municipal Securities, including Florida Municipal Securities, will be
exempt from Federal individual income taxes. Dividends and distributions
paid by the Fund to individuals who are residents of Florida are not
taxable by Florida, because Florida does not impose a personal income tax.
Florida does, however, impose an intangible personal property tax. Shares
of the Fund will be exempt from the Florida intangible personal property
tax to the extent that the Fund's assets consist of Florida Municipal
Securities and obligations of the U.S. Government, its agencies,
instrumentalities and territories on the last business day of each
calendar year. The Fund will attempt not to hold any investments on the
last business day of each calendar year to the extent such investments may
result in shares of the Fund being subject to the Florida intangible
personal property tax. Any net interest income on taxable investments and
repurchase agreements will be taxable as ordinary income when distributed
to shareholders.
- Investments in Taxable Securities and Temporary Defensive
Investment Strategy. Under normal market conditions, the Fund may invest
up to 20% of its assets in taxable investments, including (i) certain
"Temporary Investments" (described in the next paragraph); (ii) hedging
instruments (described in "Hedging," below), (iii) repurchase agreements;
and (iv) Municipal Securities issued to benefit a private user ("Private
Activity Municipal Securities"), the interest from which may be subject
to Federal alternative minimum tax (see "Taxes," below, and "Private
Activity Municipal Securities" in the Statement of Additional
Information).
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary
"defensive" position by investing some or all of its assets (there is no
limit on the amount) in short-term money market instruments. These
include the taxable obligations described above, U.S. Government
Securities, bank obligations, commercial paper, corporate obligations and
other instruments approved by the Fund's Board of Trustees. This strategy
would be implemented to attempt to reduce fluctuations in the value of the
Fund's assets. The Fund may hold temporary investments pending the
investment of proceeds from the sale of Fund shares or portfolio
securities, pending settlement of purchases of Municipal Securities, or
to meet anticipated redemptions. To the extent the Fund assumes a
temporary defensive position, a portion of the Fund's distributions may
be subject to Federal and state income taxes and the Fund may not achieve
its objective.
- Municipal Securities and Florida Municipal Securities. Municipal
Securities consist of municipal bonds, municipal notes (including tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other short-term loans), tax-exempt commercial
paper and other debt obligations issued by or on behalf of the State of
Florida or its political subdivisions, other states and the District of
Columbia, their political subdivisions, or any commonwealth or territory
of the United States, or their respective agencies, instrumentalities or
authorities, the interest from which is not subject to Federal income tax,
in the opinion of bond counsel to the respective issuer, at the time of
issue. Florida Municipal Securities are Municipal Securities that would
enable shares of the Fund to be exempt from Florida intangible personal
property taxes. 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.
- Municipal Lease Obligations. Municipal leases may take the form of
a lease or an installment purchase contract issued by state and local
government authorities to obtain funds to acquire a wide variety of
equipment and facilities. The Fund may invest in certificates of
participation that represent a proportionate interest in, or right to, the
lease-purchase payments made under municipal lease obligations. Certain
of these securities may be deemed to be "illiquid" securities and their
purchase would be limited as described below in "Illiquid and Restricted
Securities". Investment in certificates of participation that the Manager
has determined to be liquid (under guidelines set by the Board) will not
be subject to such limitations.
- Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
- Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments." The Fund may use
some derivative investments for hedging purposes, and may invest in others
because they offer the potential for increased income and principal value.
In general, a "derivative investment" is a specially-designed investment
whose performance is linked to the performance of another investment or
security, such as an option, future or index. In the broadest sense,
derivative investments include exchange-traded options and futures
contracts (please refer to "Hedging," below).
The Fund may invest in "inverse floater" variable rate bonds, a
type of derivative investment whose yields move in the opposite direction
from changes in 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. Some inverse
floaters have a "cap" whereby if interest rates rise above the "cap," the
security pays additional interest income. If rates do not rise above the
"cap," the Fund will have paid an additional amount for a feature that
proves worthless. The Fund may also invest in municipal securities that
pay interest that depends on an external pricing mechanism, also a type
of derivative investment. Examples of external pricing mechanisms are
interest rate swaps or caps and municipal bond or swap indices. The Fund
anticipates that under normal circumstances it will invest no more than
10% of its net assets in inverse floaters.
The risks of investing in derivative investments include not only the
ability of the issuer of the derivative investment to pay the amount due
on the maturity of the investment, but also the risk that the underlying
security or investment might not perform the way the Manager expected it
to perform. That can mean that the Fund will realize less income than
expected. Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions and
maturities.
- 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," that is, rated below the four highest rating
categories of Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or,
if unrated, are not judged by the Manager to be of comparable quality to
Municipal Securities rated within such grades. (See Appendix A to the
Statement of Additional Information for a description of those ratings.
A reduction in 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.
- Credit Risk and Interest Rate Risks. The values of Municipal
Securities will vary as a result of changing evaluations by rating
services and investors of the ability of the issuers of such securities
to meet interest and principal payments. Such values will also change in
response to changes in prevailing interest rates. Should interest rates
rise, the values of outstanding Municipal Securities will probably decline
and (if purchased at principal amount) would sell at a discount. If
interest rates fall, the values of outstanding Municipal Securities will
probably increase and (if purchased at principal amount) would sell at a
premium. Changes in the values of Municipal Securities owned by the Fund
from these or other factors will not affect interest income derived from
these securities but will affect the Fund's net asset value per share.
- Special Considerations - Florida Municipal Securities. The Fund
concentrates its investments in Municipal Securities issued by the State
of Florida and its agencies, authorities, instrumentalities and
subdivisions. The market value and marketability of Florida Municipal
Securities and the interest income and repayment of principal 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 Florida, which are discussed in the
Statement of Additional Information.
- Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund's portfolio turnover rate is not
expected to exceed 100%, although the Fund's management is unable to
predict what the Fund's rate of portfolio turnover will be in any
particular period. The Fund generally will not engage in the trading of
securities to realize short-term gains, but the Fund may purchase and sell
Municipal Securities as the Manager deems advisable to take advantage of
differentials in yield. While short-term trading increases portfolio
turnover, the Fund incurs little or no brokerage costs.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and 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.
The Board of Trustees of the Trust (as defined below) may change non-
fundamental policies without shareholder approval, although significant
changes will be described in amendments to this Prospectus. 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).
- Non-diversification. The Fund is a "non-diversified" investment
company under the Investment Company Act. As a result, it may invest its
assets in a single issuer or limited number of issuers without limitation
by the Investment Company Act. However, the Fund intends to qualify as
a "regulated investment company" under the Internal Revenue Code of 1986,
as amended (the "Internal Revenue Code"), pursuant to which (i) 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 (ii) 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. An investment in the Fund 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.
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 are designed to reduce some of the risks.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis and may purchase
or sell such securities on a "delayed delivery" basis. These terms refer
to securities that have been created and for which a market exists, but
which are not available for immediate delivery. There may be a risk of
loss to the Fund if the value of the security declines prior to the
settlement date.
- 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
fails to pay the resale price on the delivery date, the Fund may incur
costs in disposing of the collateral and may experience losses if there
is any delay in its ability to do so. The Fund will not enter into a
repurchase agreement that causes more than 10% of its net assets to be
subject to repurchase agreements having a maturity beyond seven days.
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 Trust's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active trading
market, making it difficult to value them or dispose of them promptly at
an acceptable price. The Fund will not invest more than 10% of its net
assets in illiquid investments (that limit may increase to 15% if
applicable state law permits). The Fund may not invest any portion of its
assets in restricted securities. A restricted security is one that has a
contractual restriction on its resale or that cannot be sold publicly
until registered under the Securities Act of 1933, as amended.
- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. These loans are limited to not more than 25% of
the Fund's net assets, and are subject to other conditions described in
the Statement of Additional Information. The Fund presently does not
intend to lend its portfolio securities, but if it does, the value of
securities loaned is not expected to exceed 5% of the value of its total
assets.
- 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 all 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, defensive reasons, or to raise cash to distribute to
shareholders.
Futures. The Fund may buy and sell futures contracts that relate to
(1) broadly-based municipal bond indices (these are referred to as
Municipal Bond Index Futures) and (2) interest rates (these are referred
to as Interest Rate Futures). These types of Futures are 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 securities, broadly-based municipal
bond indices, Municipal Bond Index Futures or 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 puts. 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) broadly-based municipal bond indices,
(3) Municipal Bond Index Futures or (4) Interest Rate Futures. The Fund
can buy a put on a Municipal Bond Index Future or Interest Rate Future
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 securities or commodities exchange, or quoted on the
Automated Quotation System of the National Association of Securities
Dealers, Inc. (NASDAQ), 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 or it must
own other securities that are acceptable for the escrow arrangements
required for calls; (4) the Fund may write calls on Futures contracts it
owns, but these calls must be covered by securities or other liquid assets
the Fund owns and segregates to enable it to satisfy its obligations if
the call is exercised; (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; and (6) the aggregate premiums paid on all such
options which the Fund holds at any time will be limited to 20% of the
Fund's total assets, and the aggregate margin deposits on all such futures
or options thereon at any time will be limited to 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.
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.
Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies.
Under these fundamental policies, the Fund may not concentrate
investments to the extent of more than 25% of its total assets in any
industry; however, there is no limitation as to investment in Municipal
Securities, Florida Municipal Securities or U.S. Government obligations.
As a matter of non-fundamental policy, changeable without a shareholder
vote, the Fund will not: (i) invest in securities or any other investment
other than the Municipal Securities, temporary investments, taxable
investments and hedging instruments described in "Investment Policies and
Strategies," "Municipal Securities and Florida Municipal Securities" and
"Other Investment Techniques and Strategies" above; (ii) 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"; (iii) borrow money in excess of 10% of
the value of its total assets, or make any investments whenever borrowings
exceed 5% of the Fund's total assets; it may borrow only from banks as a
temporary measure for extraordinary or emergency purposes (not for the
purpose of leveraging its investments); (iv) 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; or (v) buy
or sell futures contracts other than interest rate futures or municipal
bond index futures.
All of the percentage restrictions described above and elsewhere in
this Prospectus apply to the Fund only at the time the Fund purchases a
security, and the Fund need not dispose of a security merely because the
Fund's assets have changed or the security has increased in value relative
to the size of the Fund. A supplementary list of investment restrictions
is contained in "Investment Restrictions" in the Statement of Additional
Information.
How the Fund is Managed
Organization and History. The Fund was organized on June 10, 1993 and
is one of three investment portfolios or "series" of Oppenheimer Multi-
State Tax-Exempt Trust (the "Trust"). The Trust is an open-end, non-
diversified management investment company organized in 1989 as a
Massachusetts business trust, with an unlimited number of authorized
shares of beneficial interest. Each of the three series of the Trust is
a fund that issues its own shares, has its own investment portfolio, and
its own assets and liabilities.
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 Trust" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Trust. Although the Trust is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Declaration of Trust of the Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has two classes of shares, Class A and
Class B. 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 together on matters that affect that
class alone. Shares are freely transferable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, 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 pays to
conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $29 billion as
of December 31, 1994, and with more than 2.4 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
- Portfolio Manager. The portfolio manager of the Fund (who is also
a Vice President of the Trust) is Robert E. Patterson, a Senior Vice
President of the Manager. He has been the person principally responsible
for the day-to-day management of the Fund's portfolio since October 7,
1993, the commencement of the Fund's operations. Mr. Patterson has also
served as an officer and portfolio manager for other OppenheimerFunds.
For more information about the other officers and Trustees, see "Trustees
and Officers of the Trust" in the Statement of Additional Information.
- 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 .60% of average annual net assets for
Class A shares and .60% for Class B shares, which may be higher than the
rate paid by some other mutual funds. After taking the voluntary expense
assumption (described above) into effect, no management fees were due and
payable by the Fund for its last fiscal year.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, and legal and
auditing costs. Those expenses are paid out of the Fund's assets and are
not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the Investment Advisory
Agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it 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 Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Fund's Distributor.
The Distributor also distributes the shares of other mutual funds managed
by the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free 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. This
performance information may be useful to help you see how your investment
has done and to compare it to other funds or to a market index, as we have
done below.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions
of future returns or performance. This performance data is described
below, but more detailed information about how total returns and yields
are calculated is contained in the Statement of Additional Information,
which also contains information about 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, they reflect the
payment of the current maximum initial sales charge. When total returns
are shown for Class B shares, they reflect the effect of the contingent
deferred sales charge that applies to the period for which total return
is shown. Total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be
reduced if sales charges were deducted.
- Yield. Each class of shares calculates its yield by dividing the
annualized net investment income per share from the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
The yield of each class will differ because of the different expenses of
each class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge. The tax-
equivalent yield is the equivalent yield that would be earned in the
absence of Federal income tax and Florida intangible tax. 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.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index. The Fund commenced operations on
October 7, 1993.
- Management's Discussion of Performance. During the Fund's fiscal
year ended December 31, 1994, the Fund's performance was affected by
aggressive increases in short-term interest rates by the Federal Reserve
Board. The effects of rising interest rates were offset to a large degree
by the timing of the Fund's introduction in late 1993. By pacing the
Fund's purchases, the Manager was able to capture rising bond yields
without major declines in the Fund's net asset value. In seeking to
attain the Fund's investment objective of high current interest income,
the Manager kept the Fund's duration, a technical measure of a bond
portfolio's sensitivity to interest rate changes, slightly longer than
those of many other funds. This strategy should benefit the Fund as the
Florida economy continues to improve. In response to the rising interest
rate environment, the Manager concentrated on buying bonds with shorter
maturities which make the Fund's portfolio less sensitive to changing
interest rates than longer-maturity bonds. The Manager also concentrated
the Fund's investments in insured and pre-refunded issues which provided
high credit quality and above-market yields.
- Comparing the Fund's Performance to the Market. The charts below
show the performance of a hypothetical $10,000 investment in each class
of shares of the Fund from the commencement of operations of the Fund
through December 31, 1994, with all dividends and capital gains
distributions reinvested in additional shares. The graph for Class A
shares reflects the deduction of the 4.75% current maximum initial sales
charge on Class A shares and the graph for Class B shares reflects the 4%
contingent deferred sales charge that applies to redemptions of Class B
shares held from October 1, 1993 until December 31, 1994.
Because the Fund invests in a variety of Municipal Securities, its
performance is compared to that of the Lehman Brothers Municipal Bond
Index, an unmanaged index of a broad range of investment grade municipal
bonds that is widely regarded as a measure of the performance of the
general municipal bond market. Index performance reflects the
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 Florida Tax-Exempt Fund and the
Lehman Brothers Municipal Bond Index
(Graph)
Past Performance is not predictive of future performance.
Oppenheimer Florida Tax-Exempt Fund
Average Annual Total Returns of the Fund at 12/31/94
1 Year Life of Fund
(from 10/1/93)
Class A: -12.04% -6.60%
Class B: -12.77% -6.48%
A B O U T Y O U R A C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million). If you purchase Class A shares
as part of an investment of at least $1 million in shares of one or more
OppenheimerFunds, you will not pay an initial sales charge, but if you
sell any of those shares within 18 months after your purchase, you may pay
a contingent deferred sales charge, which will vary depending on the
amount you invested. Sales charges are described 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, you
will normally pay a contingent deferred sales charge, described below,
that varies depending on how long you own your shares.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial 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 are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B shares). 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 Class A and B shares, considering the
effect of the annual asset-based sales charge on Class B 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 you invest in. The factors discussed below are
not intended to be investment advice or recommendations, because each
investor's financial considerations are different.
- How Long Do You Expect to Hold Your Investment? The Fund is
designed for long-term 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.
The effect of the sales charge over time, using our assumptions, will
generally depend on the amount invested. Because of the effect of class-
based expenses, your choice will also depend on how much you invest.
- How Much Do You Plan to Invest? If you plan to invest a substantial
amount over the long term, the reduced sales charges available for larger
purchases of Class A shares may 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 expenses on Class B shares, for which no
initial sales charge is paid. Additionally, dividends payable to Class
B shareholders will be reduced by the additional expenses borne solely by
Class B, such as the asset-based sales charge described below.
In general, if you plan to invest less than $100,000, Class B shares
may be more advantageous than Class A shares, using the assumptions in our
hypothetical example. However, if you plan to invest more than $100,000
(not only in the Fund, but possibly in other OppenheimerFunds as well),
then Class A shares generally will be more advantageous than Class B,
because of the effect of the lower initial sales charges on larger
purchases of Class A shares (described in "Reduced Sales Charges for Class
A Share Purchases," below). That is also the case because the annual
asset-based sales charge on Class B shares will have a greater impact on
larger investments than the initial sales charge on Class A shares because
of the reductions of initial sales charge available for larger purchases.
And for investors who invest $500,000 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 from a single
investor.
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 assumptions stated above. Therefore, these examples should not
be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter to You?
Because some account features such as Checkwriting may not be available
to Class B shareholders, or other features (such as Automatic Withdrawal
Plans) might not be advisable (because of the effect of the contingent
deferred sales charge for Class B shareholders), you should carefully
review how you plan to use your investment account before deciding which
class of shares to buy. Also, because not all OppenheimerFunds currently
offer Class B shares, and because exchanges are permitted only to the same
class of shares in other OppenheimerFunds, you should consider how
important the exchange privilege is likely to be for you.
- 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 than for selling another class. It is important that investors
understand that the purpose of the contingent deferred sales charge and
asset-based sales charge for Class B shares is the same as the purpose of
the front-end sales charge on sales of Class A shares: 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 of as
little as $25; and subsequent purchases of at least $25 can be made by
telephone through AccountLink.
There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other OppenheimerFunds (a list of
them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A or
Class B shares. If you do not choose, your investment will be made in
Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "Oppenheimer
Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the Distributor will act
as your agent in buying the shares. However, we recommend 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 transmit dividends and distributions.
Shares are purchased for your account on AccountLink 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 OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver, Colorado. In most cases, to enable you to
receive that day's offering price, the Distributor must receive your order
by the time of day the New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all references
to time in this Prospectus mean "New York time"). The net asset value of
each class of shares is determined as of that time on each day The New
York Stock Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
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>
- -------------------------------------------------------------------
Amount of Purchase Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Percentage Percentage of Offering
of Offering of Amount Price
Price Invested
- -------------------------------------------------------------------
<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
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients.
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 shares you purchase for your individual accounts, or
jointly, or on behalf of your children who are minors, under trust or
custodial accounts. 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
shares of the Fund and other OppenheimerFunds. You can also include Class
A shares of OppenheimerFunds you previously purchased subject to a sales
charge, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase Class
A shares of the Fund and other OppenheimerFunds during a 13-month period
at the reduced sales charge rate that applies to the total amount of the
intended purchases. 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. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients; or (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares of defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administration services.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of dividends or other distributions reinvested from the Fund
or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or unit
investment trusts for which reinvestment arrangements have been made with
the Distributor. There is a further discussion of this policy in "Reduced
Sales Charges" in the Statement of Additional Information.
The contingent deferred sales charge does not apply to purchases of
Class A shares at net asset value described above and is also waived if
shares are redeemed in the following cases: (1) Automatic Withdrawal Plan
payments that are limited to no more than 12% of the original account
value annually, (2) involuntary redemptions of shares by operation of law
or under the procedures set forth in the Fund's Declaration of Trust or
adopted by the Board of Trustees, (3) if, at the time an order is placed
for Class A shares that would otherwise be subject to the Class A
contingent deferred sales charge, the dealer agrees to accept the dealer's
portion of the commission payable on the sale in installments of 1/18th
of the commission per month (with no further commission payable if the
shares are redeemed within 18 months of purchase), or (4) purchased and
paid for with the proceeds of shares redeemed in the prior 12 months from
a mutual fund on which an initial sales charge or contingent deferred
sales charge was paid (other than a fund managed by the Manager or any of
its affiliates); 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 the waiver.
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
<S> <C>
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for redemptions
from accounts other than Retirement Plans following the death or
disability of the shareholder (the disability must have occurred after the
account was established and you must provide evidence of a determination
of disability by the Social Security Administration).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A and Class
B Shares" in the Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of up to 0.25% per year. The Board has currently set the
service fee at 0.15% per year, which amount may be increased by the Board
from time to time up to the maximum of 0.25%. Both fees are computed on
the average annual net assets of Class B shares, determined as of the
close of each regular business day. The asset-based sales charge allows
investors to buy Class B shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the service fee to dealers in advance for the
first year after Class B shares have been sold by the dealer. After the
shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.85% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
The Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At December 31, 1994, the end of the Plan
year, the Distributor had incurred unreimbursed expenses under the Plan
of $324,330 (equal to 4.64% of the Fund's net assets represented by Class
B shares on that date), which have been carried over into the present Plan
year. If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for expenses it incurred before the Plan was terminated.
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 must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "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
OppenheimerFunds 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
automatically to exchange an amount you establish in advance for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each OppenheimerFunds account is $25. These exchanges are subject to
the terms and conditions described in "How to Exchange Shares," below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying a
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge. It also applies to shares on which you paid
a contingent deferred sales charge when you redeemed them. You must be
sure to ask the Distributor for this privilege when you send your payment.
Please consult the Statement of Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the net asset value next 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 Checkwriting
or by telephone. You can also set up an Automatic Withdrawal Plan 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
statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but which may be earlier on some days. You may not
redeem shares held under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account 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 wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Checkwriting. To be able to write checks against your Fund account,
you may request that privilege on your account Application or you can
contact the Transfer Agent for signature cards, which must be signed (with
a signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner. 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 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 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
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. Certain
OppenheimerFunds offer Class A shares and Class B or Class C shares, and
a list can be obtained by calling the Distributor at 1-800-525-7048. 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 OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. Exchanges of shares
involve a redemption of the shares of the fund you own and a purchase of
shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request 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 if
it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of portfolio securities at a time or price disadvantageous to
the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of the New York Stock Exchange on each regular business
day by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The Fund's
Board of Trustees has established procedures to value the Fund's
securities to determine net asset value. In general, securities values
are based on market value. There are special procedures for valuing
illiquid and restricted securities, obligations for which market values
cannot be readily obtained, and call options and hedging instruments.
These procedures are described more completely in the Statement of
Additional Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither it 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 and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. Effective June 7, 1995,
for accounts registered in the name of a broker dealer, payment will be
forward within 3 business days. The Transfer Agent may delay forwarding
a check or processing a payment via AccountLink for recently purchased
shares, but only until the purchase payment has cleared. That delay may
be as much as 10 days from the date the shares were purchased. That delay
may be avoided if you purchase shares by certified check or arrange with
your bank to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "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 dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charge when redeeming certain Class
A and Class B shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and
Class B 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 shares because expenses allocable to Class B shares will
generally be higher.
For the fiscal year ended December 31, 1994, the Fund maintained 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 was 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 OppenheimerFunds account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. It does not matter how long you hold
your shares. Dividends paid from short-term capital gains and net
investment income are taxable as ordinary income. Dividends paid from net
investment income earned by the Fund on Municipal Securities will be
excludable from your gross income for Federal income tax purposes. A
portion of the dividends paid by the Fund may be an item of tax preference
if you are subject to the alternative minimum tax. Certain distributions
are subject to Federal income tax and may be subject to state and/or local
taxes. Such distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. 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.
- "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 capital
gain.
- Taxes on Transactions. Even though the Fund seeks tax-exempt
income for distribution to shareholders, you may have a capital gain or
loss when you sell or exchange your shares. A capital gain or loss is the
difference between the price you paid for the shares and the price you
receive when you sell them. Any capital gain is subject to capital gains
tax.
- Florida Intangible Taxes. Florida currently imposes an "intangible
tax" on certain securities and other tangible assets owned by Florida
residents on the first day of each calendar year. The Fund anticipates
that on the close of the last business day of each calendar year, the
Fund's assets will consist solely of assets exempt from Florida's
intangible personal property tax, but there is not guarantee that in a
given year no taxable assets of the Fund shall be held. Please see the
Statement of Additional Information for further information regarding
these issues.
- 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 TO PROSPECTUS OF
OPPENHEIMER FLORIDA TAX-EXEMPT FUND
Graphic material included in Prospectus of Oppenheimer Florida Tax-
Exempt Fund: "Comparison of Change in Value of $10,000 Hypothetical
Investments in Oppenheimer Florida Tax-Exempt Fund and the Lehman Brothers
Municipal Bond Index."
A linear graph will be included in the Prospectus of Oppenheimer Florida
Tax-Exempt Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in the Fund
since the commencement of the Fund's operations (October 7, 1993) and
comparing such values with the same investments over the same time periods
with 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
"Performance of the Fund - How Has the Fund Performed?"
<TABLE>
<CAPTION>
Oppenheimer
Fiscal Florida Tax- Lehman Brothers
Period Ended Exempt Fund A Municipal Bond Index
<S> <C> <C>
10/7/93(1) $9,525 $10,000
12/31/93 $9,914 $10,121
12/31/94 $9,182 $ 9,598
Oppenheimer
Fiscal Florida Tax- Lehman Brothers
Period Ended Exempt Fund B Municipal Bond Index
10/7/93(1) $10,000 $10,000
12/31/93 $10,408 $10,121
12/31/94 $ 9,196 $ 9,598
<FN>
(1) The Fund commenced operations on October 7, 1993.
</TABLE>
<PAGE>
Oppenheimer Florida Tax-Exempt Fund
Two World Trade Center
New York, New York 10048-0203
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick 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, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc., or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in
any state to any person to whom it is unlawful to make such an offer in
such state.
PR0795.001.0495 * Printed on recycled paper
OPPENHEIMER
Florida Tax-Exempt Fund
Prospectus
Effective April 25, 1995
(OppenheimerFunds Logo)
<PAGE>
OPPENHEIMER
Florida Tax-Exempt Fund
Prospectus and
New Account Application
Effective April 25, 1995
(OppenheimerFunds Logo)
<PAGE>
Oppenheimer Florida Tax-Exempt Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated April 25, 1995
This Statement of Additional Information of Oppenheimer Florida Tax-
Exempt Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus
dated April 25, 1995. It should be read together with the Prospectus,
which may be obtained by writing to the Fund's Transfer Agent, Oppenheimer
Shareholder 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 2
Investment Policies and Strategies 2
Special Investment Considerations -
Florida Municipal Securities 6
Other Investment Techniques and Strategies 9
Other Investment Restrictions 17
How the Fund is Managed 18
Organization and History 18
Trustees and Officers of the Trust 18
The Manager and Its Affiliate 23
Brokerage Policies of the Fund 25
Performance of the Fund 27
Distribution and Service Plans 31
About Your Account
How To Buy Shares 33
How To Sell Shares 39
How To Exchange Shares 42
Dividends, Capital Gains and Taxes 44
Additional Information About the Fund 47
Financial Information About the Fund
Independent Auditors' Report 48
Financial Statements 49
Appendix A: Descriptions of Ratings Categories A-1
Appendix B: Tax-Equivalent Yield Tables B-1
Appendix C: Industry Classifications C-1
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information have the same meaning as those terms
used 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, its value would
normally rise. Thus, the Fund may realize a capital gain or loss upon
disposition of a portfolio security. There are, of course, variations in
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 market conditions,
general conditions of the Municipal Securities market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. The market value of Municipal Securities will vary as a result of
changing evaluations of the ability of their issuers to meet interest and
principal payments, as well as changes in the interest rates payable on
new issues of Municipal Securities.
Municipal Securities and Florida 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.
-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.
-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.
- Municipal Notes. Municipal Securities having a maturity when issued
of less than one year are generally known as municipal notes. Municipal
notes generally are used to provide for short-term working capital needs
and include:
- Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use
of business taxes, and are payable from these specific future taxes.
-Revenue Anticipation Notes. Revenue anticipation notes are issued
in expectation of receipt of other types of revenue, such as federal
revenues available under the Federal revenue sharing programs.
-Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the notes.
-Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and
acceptance, many projects receive permanent financing through the Federal
Housing Administration.
-Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is
issued by state and local governments or their agencies to finance
seasonal working capital needs or as short-term financing in anticipation
of longer-term financing.
-Floating Rate/Variable Rate Obligations. Floating rate and variable
rate demand notes are tax-exempt obligations which may have a stated
maturity in excess of one year, but may include features that permit the
holder to recover the principal amount of the underlying security at
specified intervals not exceeding one year and upon no more than 30 days'
notice. The issuer of such notes normally has a corresponding right,
after a given period, to prepay in its discretion the outstanding
principal amount of the note plus accrued interest upon a specified number
of days notice to the holder. The interest rate on a floating rate demand
note is based on a stated prevailing market rate, such as a bank's prime
rate, the 90-day U.S. Treasury Bill rate, or some other standard, and is
adjusted automatically each time such rate is adjusted. The interest rate
on a variable rate demand note is also based on a stated prevailing market
rate but is adjusted automatically at specified intervals of no less than
one year. Generally, the changes in the interest rate on such securities
reduce the fluctuation in their market value. As interest rates decrease
or increase, the potential for capital appreciation or depreciation is
less than that for fixed-rate obligations of the same maturity. The
Manager may determine that an unrated floating rate or variable rate
demand obligation meets the Fund's quality standards by reason of being
backed by a letter of credit or guarantee issued by a bank that meets
those quality standards. Floating rate or variable rate obligations which
do not provide for recovery of principal and interest within seven days
will be subject to the limitations applicable to illiquid securities
described in "Investment Objective and Policies - Illiquid Securities"
in the Prospectus. Otherwise there is on the amount of the Fund's assets
that may be invested in floating rate and variable rate obligations.
-Municipal Lease Obligations. From time to time the Fund may invest
in municipal lease obligations, some of which may be illiquid and others
which the Manager has determined to be liquid under guidelines set by the
Board of Trustees. Those guidelines require the Manager to evaluate (1)
the frequency of trades and price quotations for such securities; (2) the
number of dealers or other potential buyers willing to purchase or sell
such securities; (3) the availability of market-makers; and (4) the nature
of the trades for such securities. The Manager will also evaluate the
likelihood of a continuing market for such securities throughout the time
they are held by the Fund, and the credit quality of the instrument.
Municipal leases may take the form of a lease or an installment purchase
contract issued by a state or local government authority to obtain funds
to acquire a wide variety of equipment and facilities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. In addition to the risk of such "non-
appropriation," municipal lease securities do not yet have a highly
developed market to provide the same degree of liquidity as conventional
municipal bonds. Municipal leases, like other municipal debt obligations,
are subject to the risk of non-payment. The ability of issuers of
municipal leases to make timely lease payments may be adversely affected
in general economic downturns and as relative governmental cost burdens
are reallocated among federal, state and local governmental units. Such
non-payment would result in a reduction of income to the Fund, and could
result in a reduction in the value of the municipal lease experiencing
non-payment and a potential decrease in the net asset value of the Fund.
-Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules
governing tax exemption for interest on Municipal Securities. The Tax
Reform Act generally does not change the tax treatment of bonds issued in
order to finance governmental operations. Thus, interest on obligations
issued by or on behalf of state or local government, the proceeds of which
are used to finance the operations of such governments (e.g., general
obligation bonds), continues to be tax-exempt. However, the Tax Reform
Act further limited the use of tax-exempt bonds for non-governmental
(i.e., 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. Further, a private activity bond which would
otherwise be a qualified tax-exempt private activity bond will not, under
Internal Revenue Code Section 147(a), be a qualified bond for any period
during which it is held by a person who is a "substantial user" of the
facilities or by a "related person" of such a substantial user. This
"substantial user" provision is applicable primarily to exempt facility
bonds, including industrial development bonds. The Fund may not be an
appropriate investment for entities which are "substantial users" (or
persons related thereto) of such exempt facilities, and such persons
should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-
exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be
a "related person" under the Internal Revenue Code unless such investor
or the investor's immediate family (spouse, brothers, sisters and
immediate descendants) own directly or indirectly in the aggregate more
than 50% in value of the equity of a corporation or partnership which is
a "substantial user" of a facility financed from the proceeds of exempt
facility bonds. In addition, the Tax Reform Act revised downward the
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
this 10% threshold. (The term "private business use" means any direct or
indirect use in a trade or business carried on by an individual or entity
other than a state or municipal governmental unit.) Under the private
loan restriction, the amount of bond proceeds which may be used to make
private loans is limited to the lesser of 5% or $5.0 million of the
proceeds. Thus, certain issues of Municipal Securities could lose their
tax-exempt status retroactively if the issuer fails to meet certain
requirements as to the expenditure of the proceeds of that issue or use
of the bond-financed facility. The Fund makes no independent
investigation of the users of such bonds or their use of proceeds. If the
Fund should hold a bond that loses its tax-exempt status retroactively,
there might be an adjustment to the tax-exempt income previously paid to
shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference
items in arriving at alternative minimum taxable income. The Tax Reform
Act 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, be required to include exempt-interest
dividends in calculating their alternative minimum taxable income in
situations where the amount of "adjusted current earnings" of the
corporation exceeds its alternative minimum taxable income. The Fund may
hold Municipal Securities the interest on which (and thus a proportionate
share of the exempt-interest dividends paid by the Fund) will be subject
to the Federal alternative minimum tax on individuals and corporations.
The Fund anticipates that under normal circumstances it will not purchase
any such securities in an amount greater than 20% of its total assets.
- Ratings of Municipal Securities. Moody's and S&P's ratings (see
Appendix A) represent their respective opinions of the quality of the
Municipal Securities they undertake to rate. However, such ratings are
general and are not absolute standards of quality. Consequently, Municipal
Securities with the same maturity, coupon and rating may have different
yields, while Municipal Securities of the same maturity and coupon with
different ratings may have the same yield. Investment in lower quality
securities may produce a higher yield than securities rated in the higher
rating categories described in the Prospectus (or judged by the Manager
to be of comparable quality). However, the added risk of lower quality
securities might not be consistent with a policy of preservation of
capital.
Special Investment Considerations - Florida Municipal Securities. As
explained in the Prospectus, the Fund is highly sensitive to the fiscal
stability of the State of Florida (the "State") and its subdivisions,
agencies, instrumentalities or authorities which issue the Florida
Municipal Securities in which the Fund concentrates its investments.
Investors should also consider the factors discussed below under "Other
Investment Techniques and Strategies."
The following information as to the fiscal condition of the State of
Florida (the "State") is provided in view of the Fund's policy to invest
primarily in securities of Florida issuers. Such information is derived
from sources that are generally available to investors. Although the Fund
has not independently verified any of this information, it is not aware
of any inaccuracies. Such information constitutes only a brief summary,
does not purport to be a complete description and is based on information
from official statements relating to securities offerings of Florida
issuers.
Since 1980, the State's unemployment rate has, generally, tracked below
that of the nation. Only since 1989 has the State's jobless rate moved
ahead of the national average. The State's unemployment rate was 7.0% for
1993, 6.6% for 1994 and 4.9%, seasonally adjusted, for the first 3 months
of 1995. The national unemployment rate was 6.8% for 1993, 6.1% for 1994
and 5.5%, seasonally adjusted, for the first 3 months of 1995.
Nevertheless, the average rate of unemployment for the State from 1980
through 1992 was 6.5%, while the national average was 7.8%.
Personal income in the State has been growing strongly the last several
years and has generally outperformed both the nation as a whole and the
Southeast in particular. Per capita personal income in the State was
$20.9 million in 1993, a 7.4% increase over 1992. The national per capita
personal income was $20.8 million, only a 4.7% increase over 1992.
The State's strong population growth is one reason why its economy is
performing better than the nation as a whole. In 1980, the State was
ranked seventh among the 50 states with a population of 9.7 million
people. The State has continued to grow since then and, as of 1993,
ranked fourth with an estimated population of 13.6 million. Population
increased in all of the Florida Metropolitan areas in 1993 between 13.9
million and 14.4 million in 1995 and between 14.7 million and 16.3 million
by the year 2000.
Tourism is one of the State's most important industries. An estimated
39.9 million domestic and international auto and air tourists visited the
State in 1994. 40.2 million are expected to visit the State in 1995.
The construction industry accounted for 5.2% of the State's non-
agricultural employment industry in 1993, down from 5.6% in 1992.
However, single-family construction starts increased from 91,275 units in
1993 to 96,293 units in 1994. Multi-family construction starts also
increased from 23,842 units in 1993 to 32,139 units in 1994. Single-
family construction starts are predicted to drop to 89,317 units in 1995
and 88,039 units in 1996, but then to increase to 92,273 units in 1997.
Multi-family construction starts are also predicted to drop to 31,488
units in 1995, but then to increase to 32,509 units in 1996 and 38,983
units in 1997.
Church construction has been the strongest sector of nonresidential
building recently (construction awards for places of worship reached a
twenty-six year record high in 1992). As of 1992, manufacturing plants
and warehouses, hospitals, and hotels/motels have all turned up from
recessionary lows, as has annual contracting for non-building construction
such as sewers and roads.
Financial operations of the State covering all receipts and
expenditures are maintained through the use of three funds--the General
Revenue Fund, Trust Funds, and the Working Capital Trust Fund. General
Revenue plus Working Capital funds available to the State for fiscal year
1991-92 totalled $11,231.1 million. Compared to effective appropriations
from General Revenues for fiscal year 1991-92 of $11,046.5 million, this
results in unencumbered reserves of $184.6 million at the end of fiscal
year 1991-92.
Estimated General Revenue plus Working Capital funds available to the
State for fiscal year 1992-93 total $12,100.0 million. Compared to
estimated effective appropriations from General Revenues for fiscal year
1992-93 of $11,913.7 million, this results in estimated unencumbered
reserves of $186.3 million at the end of fiscal year 1992-93.
Estimated fiscal year 1993-94 General Revenue plus Working Capital
funds available are expected to total $13,108.4 million, an 8.3% increase
over fiscal year 1991-92.
The Sales and Use Tax is the greatest single source of tax receipts in
the State. For the State fiscal year ended June 30, 1993, receipts from
this source were $9,295 million, up from $8,368 million for the state
fiscal year ended June 30, 1992. The second largest source of State-tax
receipts is the Motor Fuel Tax. The estimated collections from this
source during the fiscal year ending June 30, 1992, were $1,117.0 million,
up 20.21% over the previous fiscal year. Alcoholic beverage tax revenues
totalled $527.2 million for the State fiscal year ending June 30, 1992,
down by .26% over the previous year. The receipts of corporate income tax
for the fiscal year ended June 30, 1992 were $801.3 million, an increase
of 14.21% from the preceding year. Gross Receipt tax collections for
fiscal year 1991-92 totalled $391.5 million, an increase of 17.23% over
the previous fiscal year. Effective July 1, 1992, the tax rate was
increased from 2.25% to 2.5% of the gross receipts of electric, natural
gas, and telecommunications services. Documentary stamp tax collections
totalled $589.3 million during fiscal year 1992-93, up from $504.0 million
during fiscal year 1991-92. Severance taxes totalled $7.03 million during
fiscal year 1991-92, down 24.66% from the previous fiscal year. In
November, 1986, the voters of the State approved a constitutional
amendment to allow the State to operate a lottery. Fiscal year 1991-92
produced ticket sales of $2.17 billion and fiscal year 1992-93 produced
ticket sales of $2.21 billion.
The State Constitution does not permit a state or local personal
income tax. An amendment to the State Constitution by the electors of the
State is required to impose a personal income tax in the State.
An amendment to the Florida Constitution was approved by statewide
ballot in the November 3, 1992 general election, limiting changes in the
assessed value of homestead properties for ad valorem tax purposes to the
lesser of (a) 3% of the assessed value for the preceding calendar year or
(b) the percentage change in the Consumer Price Index for all urban
consumers for the preceding calendar year and providing for reassessment
of market values upon changes in ownership. Although the impact of such
constitutional amendment cannot be determined, it may have the effect of
causing local governmental units in the State to rely more on non-ad
valorem revenues to meet operating and other requirements normally funded
with ad valorem tax revenues. However, total ad valorem taxes levied in
the State were $10.6 billion in 1993, a 5.76% increase over 1992.
According to the Division of Bond Finance of the Department of General
Services of the State, the State maintains a high bond rating from both
Moody's Investors Service, Inc. (Aa) and Standard & Poor's Corporation
(AA) on the majority of its general bonds.
Other Investment Techniques and Strategies
-When-Issued and Delayed Delivery Securities. As stated in the
Prospectus, the Fund may purchase 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 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 will maintain
a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
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. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold 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 loss to the Fund.
When-issued transactions and forward commitments can be used by the
Fund as a defensive 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.
-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 must, on each business day, be at least equal the market value
of the loaned securities and must consist of cash, bank letters of credit
or securities of the U.S. Government (or its agencies or
instrumentalities) or other cash equivalents in which the Fund is
permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. When it lends securities, the Fund receives an
amount equal to the dividends or interest on loaned securities and also
receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt
securities purchased with such loan collateral. Either type of interest
may be shared with the borrower. The Fund may also pay reasonable
finder's, custodian and administrative fees. The terms of the Fund's
loans must meet certain tests under the Internal Revenue Code and must
permit the Fund to reacquire loaned securities on five days' notice or in
time to vote on any important matter. Income from securities loans is not
included in the exempt-interest dividends paid by the Fund.
-Inverse Floaters and Other Derivative Securities. The Fund will
invest in inverse floaters in the expectation that they will provide
higher expected tax-exempt yields than are available for fixed-rate bonds
having comparable credit ratings and maturity. In certain instances, the
holder of an inverse floater may have an option to convert it into a
fixed-rate bond pursuant to a "rate lock option." Inverse floaters may
produce relatively high current income, reflecting the spread between
short-term and long-term tax-exempt interest rates. As long as the
municipal yield curve remains relatively steep and short-term rates remain
relatively low, owners of inverse floaters will continue to earn above-
market interest rates because they are receiving the higher long-term
rates and have paid for bonds with lower short-term rates. If the yield
curve flattens and shifts upward, an inverse floater will lose value more
quickly than conventional long-term municipal bonds.
Investing in inverse floaters that have interest rate caps might be
a 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
may be used to hedge a portion of the Fund's exposure to rising interest
rates. When interest rates exceed the "strike" price 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 strike price, the cap
(which is purchased for additional cost) will not provide additional cash
flows and will expire worthless.
-Puts and Standby Commitments. When the Fund buys Municipal
Securities, it may obtain a standby commitment to repurchase the
securities that entitles it to achieve same-day settlement from the
repurchaser 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 transferable 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 standby commitments may not qualify as tax exempt in
its hands if the terms of the put or standby commitment cause the Fund not
to be treated as the tax owner of the underlying Municipal Securities.
- Hedging. As described in the Prospectus, the Fund may employ one or
more types of hedging instruments. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, to permit
the Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Interest Rate Futures or Municipal Bond
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 on the same security
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 a 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 until the call lapsed or
were exercised.
- 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 the related debt securities at a specified price on a specified
date. No amount is paid or received upon the purchase or sale of an
Interest Rate Future.
The Fund may concurrently buy and sell Futures contracts in the
expectation that the Future purchased will outperform the Future sold.
For example, the Fund might simultaneously buy Municipal Bond Futures and
sell U.S. Treasury Bond Futures. This type of transaction would be
profitable to the Fund if municipal bonds, in general, outperform U.S.
Treasury bonds. Risks of this type of Futures strategy include the
possibility that the Manager does not correctly assess the relative
durations of the investments underlying the Futures, with the result that
the strategy changes the overall duration of the Fund's portfolio in a
manner that increases the volatility of the Fund's price per share.
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%.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, equal to a specified percentage of the
contract amount, with the futures commission merchant (the "futures
broker"). The initial margin will be deposited with the Fund's Custodian
in an account registered in the futures broker's name; however, the
futures broker can gain access to that account only under specified
conditions. As the Future is marked to market to reflect changes in its
market value, subsequent margin payments, called variation margin, will
be made to and from the futures broker on a daily basis. At any time
prior to the expiration of the Future, the Fund may elect to close out its
position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required
to be paid by or released to the Fund. Any gain or loss is then realized.
Although Interest Rate Futures by their terms call for settlement by the
delivery 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 in the index, and is used 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 on a municipal bond index,
Municipal Bond Index Future or Interest Rate Future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying
investment to the Fund. 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).
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular
option. The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause it to sell underlying investments, thus increasing its turnover rate
in a manner beyond its control. The exercise by the Fund of puts may also
cause the sale of underlying investments, also causing turnover, since the
underlying investment might be sold for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a call or a put or sells a call. Premiums paid for options
are small in relation to the market value of the related investments and,
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could cause the Fund's net asset
value to be more sensitive to changes in the value of the underlying
investments.
-Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
- 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 on the expiration of the calls or upon the
Fund's entering into a closing purchase transaction. An option position
may be closed out only on a market which provides secondary trading for
options of the same series and there is no assurance that a liquid
secondary market will exist for any particular option.
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.
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.
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of futures and options on futures as established by the Commodity
Futures Trading Commission ("CFTC"). In particular, the Fund is exempted
from registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. Under the
Rule the Fund will not, as to any positions, whether long, short or a
combination thereof, enter into Futures transactions and options thereon
for which the aggregate initial margins and premiums exceed 5% of the fair
market value of the Fund's assets, with certain exclusions as defined in
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 the Option Exchanges governing the maximum number of
options that may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or through
one or more brokers. Thus, the number of options which the Fund may write
or hold may be affected by options written or held by other entities,
including other investment companies having the same adviser as the Fund
(or an adviser that is an affiliate of the Fund's adviser). The exchanges
also impose position limits on futures transaction. An exchange may order
the liquidation of positions found to be in violation of those limits and
may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases an Interest Rate Future or Municipal Bond Index Future, the Fund
will maintain, in a segregated account or accounts with its Custodian,
cash or readily marketable short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the 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
(irrespective of losses) must be derived from gains realized on the sale
of securities held for less than three months. To comply with this 30%
cap, the Fund will limit the extent to which it engages in the following
activities, but will not be precluded from them: (i) selling investments,
including Interest Rate Futures and Municipal Bond Index Futures, held for
less than three months, whether or not they were purchased on the exercise
of a call held by the Fund; (ii) writing calls on investments held less
than three months; (iii) purchasing calls or puts which expire in less
than three months; (iv) effecting closing transactions with respect to
calls or puts purchased less than three months previously; and (v)
exercising puts or calls held by the Fund for less than three months.
- Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above,
there is a risk in using short hedging by selling Interest Rate Futures
and Municipal Bond Index Futures that the prices of such Futures or the
applicable index will correlate imperfectly with the behavior of the cash
(i.e., market value) prices of the Fund's securities. The ordinary
spreads between prices in the cash and futures markets are subject to
distortions due to differences in the natures of those markets. First,
all participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash
and futures markets. Second, the liquidity of the futures markets depends
on participants entering into offsetting transactions rather than making
or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
deposit requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of debt securities being hedged and movements in the price of the
Hedging Instruments, the Fund may use Hedging Instruments in a greater
dollar amount than the dollar amount of debt securities being hedged if
the historical volatility of the prices of such debt securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that if the Fund has used Hedging Instruments in a
short hedge, the market may advance and the value of debt securities held
in the Fund's portfolio may decline. If that occurred, the Fund would
lose money on the Hedging Instruments and also experience a decline in
value 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 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.
-Repurchase Agreements. In a repurchase transaction, the Fund acquires
a security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank or the U.S. branch of a foreign bank with assets of
at least $1 billion or a broker-dealer with net capital of at least $50
million which has been designated a primary dealer in government
securities) for delivery on an agreed-on future date. The resale price
exceeds the purchase price by an amount that reflects an agreed-upon
interest rate effective for the period during which the repurchase
agreement is in effect. The majority of these transactions run from day
to day, and delivery pursuant to 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 continuously monitor
the collateral's value and will impose creditworthiness requirements to
confirm that the vendor is financially sound.
Other Investment Restrictions
The most significant investment restrictions that apply to the Fund
are described in the Prospectus. The following investment restrictions
are also fundamental policies of the Fund, and, together with the Fund's
fundamental policies and investment objective, described in the
Prospectus, 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
shareholders' meeting, if the holders of more than 50% of the outstanding
shares are present or represented by a proxy, or (ii) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot: (1) invest in
real estate, but this shall not prevent the Fund from investing in
Municipal Securities or other permitted securities secured by real estate
or interests therein; (2) purchase securities other than hedging
instruments on margin; however, the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities; (3) make short sales of securities; (4) underwrite securities
or invest in securities subject to restrictions on resale; (5) invest in
or hold securities of any "issuer" if officers and Trustees or Directors
of the Trust and the Manager individually owning more than 0.5% of the
securities of such issuer together own more than 5% of the securities of
such issuer; or (6) invest in securities of any other investment company,
except in connection with a merger, consolidation, acquisition or
reorganization.
- Diversification For purposes of diversification under the
Investment Company Act and the investment restrictions set forth in the
Prospectus and above, the identification of the issuer of a Municipal
Security depends on the terms and conditions of the security. When the
assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating
the subdivision and the security is backed only by the assets and revenues
of the subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case of an industrial development bond, if that
bond is backed only by the assets and revenues of the nongovernmental
user, then such nongovernmental user would be deemed the sole issuer.
However, if in either case the creating government or some other entity
guarantees a security, such a guarantee would be considered a separate
security and would be treated as an issue of such government or other
agency. In applying these restrictions to the Fund's investments, the
Manager will consider a nongovernmental user of facilities financed by
industrial development bonds as being in a particular industry, despite
the fact that such bonds are Municipal Securities as to which there is no
industry concentration limitation. Although this application of the
restriction is not technically a fundamental policy of the Fund, it will
not be changed without shareholder approval. The Manager has no present
intention of investing more than 25% of the total assets of the Fund in
securities paying interest from revenues of similar type projects, or in
industrial development bonds. Neither of these are fundamental policies,
and therefore may be changed without shareholder approval. Should any
such change be made, the Prospectus and/or this Statement of Additional
Information will be supplemented accordingly.
For purposes of the Fund's policy not to concentrate its assets in any one
industry, described under investment restriction number (v) in the
Prospectus, the Fund has adopted the industry classifications set forth
in Appendix C to the Statement of Additional Information.
How the Fund Is Managed
Organization and History. As a series of 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 Trust, 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 Trust
valued at $25,000 or more or holding at least 1% of the Trust'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 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 Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. The address of each Trustee and officer is Two
World Trade Center, New York, New York 10048-0203, unless another address
is listed below. All of the Trustees are also trustees or directors of
Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Time Fund,
Oppenheimer Growth Fund, Oppenheimer Discovery Fund, Oppenheimer Global
Growth & Income Fund, Oppenheimer Global Emerging Growth Fund, Oppenheimer
Gold & Special Minerals Fund, Oppenheimer Tax-Free Bond Fund, Oppenheimer
New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt Fund,
Oppenheimer Target Fund, Oppenheimer Asset Allocation Fund, Oppenheimer
Mortgage Income Fund, Oppenheimer U.S. Government Trust, Oppenheimer
Multi-Sector Income Trust and Oppenheimer Multi-Government Trust (the "New
York-based OppenheimerFunds"). Messrs. Spiro, Donohue, Bishop, Bowen,
Farrar and Zack respectively hold the same offices with the other New
York-based OppenheimerFunds as with the Trust. As of March 15, 1995, the
Trustees and officers of the Trust as a group owned less than 1% of the
outstanding Class A and Class B shares of the Trust and 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 officers listed above, Mr. Donohue, is a trustee) other than
the shares beneficially owned under that plan by the officers of the Fund
listed above.
Leon Levy, Chairman of the Board of Trustees, Age: 69
General Partner of Odyssey Partners, L.P. (investment partnership) and
Chairman of Avatar Holdings, Inc. (real estate development).
Leo Cherne, Trustee, Age: 82
122 East 42nd Street, New York, New York 10168
Chairman Emeritus of the International Rescue Committee (philanthropic
organization); formerly Executive Director of the Research Institute
of America.
Robert G. Galli, Trustee*, Age: 61
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company;
formerly he held the following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of the
Manager, an officer of other OppenheimerFunds and Executive Vice
President and General Counsel of the Manager and the Distributor.
Benjamin Lipstein, Trustee, Age: 71
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; Director of Sussex Publishers,
Inc. (publishers of Psychology Today and Mother Earth News) and a
Director of Spy Magazine, L.P.
_____________________________________
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Elizabeth B. Moynihan, Trustee, Age: 65
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of
Art, Smithsonian Institution; a member of the Indo-U.S. Sub-Commission
on Education and Culture; a trustee of the Institute of Fine Arts, New
York University and the National Building Museum; a member of the
Trustees Council, Preservation League of New York State.
Kenneth A. Randall, Trustee, Age: 67
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) and Fidelity
Life Association (mutual life insurance company); formerly Chairman of
the Board of ICL, Inc. (information systems) and President and Chief
Executive Officer of The Conference Board, Inc. (international
economics and business research).
Edward V. Regan, Trustee, Age: 64
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director or GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and
trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age: 63
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee, Age: 82
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; a director of The Korea Fund, Inc. and
The Malaysia Fund, Inc. (closed-end investment companies); a member of
the Board of Advisors, Olympus Private Placement Fund, L.P.; Professor
Emeritus of Finance, Adelphi University.
Donald W. Spiro, President and Trustee*, Age: 69
Chairman Emeritus and a director of the Manager; formerly Chairman of
the Manager and the Distributor.
Pauline Trigere, Trustee, Age: 82
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale
of women's fashions).
_____________________________________
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Clayton K. Yeutter, Trustee, Age: 64
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),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments,
Inc. (electronics) and The Vigoro Corporation (fertilizer
manufacturer); 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.
Andrew J. Donohue, Secretary, Age: 44
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, prior to which he was a 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.
Robert E. Patterson, Vice President and Portfolio Manager, Age: 51
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
George C. Bowen, Treasurer, Age: 58
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of
other OppenheimerFunds.
Robert G. Zack, Assistant Secretary, Age: 46
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Robert Bishop, Assistant Treasurer, Age: 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer, Age: 29
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman Co., a bank, and previously a
Senior Fund Accountant for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Galli and Spiro; Mr. Spiro is also an officer)
receive no salary or fee from the Fund. The Trustees of the Fund
(including Mr. Delaney, a former Trustee, but excluding Messrs. Galli and
Spiro) received the total amounts shown below (i) from the Fund, during
its fiscal year ended December 31, 1994 and (ii) from all 19 of the New
York-based OppenheimerFunds (including the Fund) listed in the first
paragraph of this section (and from Oppenheimer Global Environment Fund,
a former New York-based OppenheimerFund), for services in the positions
shown:
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
Compensation New York-based
Name and Position From Fund OppenheimerFunds1
<S> <C> <C>
Leon Levy, Chairman and Trustee $1,629 $141,000.00
Leo Cherne, Audit Committee $ 796 $ 68,800.00
Member and Trustee
Edmund T. Delaney, Study $ 996 $ 86,200.00
Committee Member
and Trustee2
Benjamin Lipstein, $ 996 $ 86,200.00
Study Committee
Member and Trustee
Elizabeth B. Moynihan, $ 700 $ 60,625.00
Study Committee
Member and3 Trustee
Kenneth A. Randall, $ 906 $ 78,400.00
Audit Committee Member
and Trustee
Edward V. Regan, $ 650 $ 56,275.00
Audit Committee
Member3 and Trustee
Russell S. Reynolds, Jr.,Trustee $ 602 $ 52,100.00
Sidney M. Robbins, Study $1,412 $122,100.00
Committee Chairman, Audit
Committee Vice-Chairman
and Trustee
Pauline Trigere, Trustee $ 602 $ 52,100.00
Clayton K. Yeutter, Trustee $ 602 $ 52,100.00
<FN>
______________________
1For the 1994 calendar year.
2Board and committee positions held during a portion of the period shown.
3Committee position held during a portion of the period shown.
</TABLE>
The Fund has adopted a retirement plan that provides for payment to
a retired Trustee of up to 80% of the average compensation paid during
that Trustee's five years of service in which the highest compensation was
received. A Trustee must serve in that capacity for any of the New York-
based OppenheimerFunds for at least 15 years to be eligible for the
maximum payment. No payments have been made by the Fund under the plan as
of December 31, 1994. The total accrued liability for the New York-based
OppenheimerFunds referred to in the preceding paragraph for their
collective projected benefit obligations under the plan as of December 31,
1994 was $1,714,000.
-Major Shareholders. As of March 15, 1995, no person owned of record
or was known by the Trust or the Fund to own beneficially 5% or more of
the outstanding Class A shares or Class B shares of the Trust or the Fund,
respectively.
The Manager and Its Affiliates. The Manager is 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 two of whom (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 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 investment
advisory agreement or by the Distributor under the Distribution Agreement
are paid by the Fund. The investment advisory agreement lists examples
of expenses paid by the Fund, the major categories of which relate to
interest, taxes, brokerage commissions, fees to certain trustees, legal
and audit expenses, custodian and transfer agent expenses, share issuance
costs, certain printing and registration costs and non-recurring expenses,
including litigation costs. For the fiscal year ended December 31, 1994,
the management fees paid by the Fund to the Manager were $100,261. This
amount does not reflect the expense assumption of $144,023 by the Manager
for such period.
The investment advisory agreement contains no provision limiting the
Fund's expenses. However, independently of the investment advisory
agreement, the Manager has voluntarily undertaken that the total expenses
of the Fund in any fiscal year (including the management fee but excluding
taxes, interest, brokerage commissions, distribution plan payments and
extraordinary expenses such as litigation costs) shall not exceed the most
stringent expense limitation imposed under state law applicable to the
Fund. In addition, the Manager has voluntarily agreed to assume the
expenses of the Fund to the extent required to enable the Fund to pay
dividends per Class A share at the rate of $.636 per fiscal year. The
payment of the management fee will be reduced monthly to the extent
necessary so that there will not be any accrued but unpaid liability under
this expense assumption undertaking. The Manager reserves the right to
modify or terminate a voluntary expense assumption undertaking at any
time. Any assumption of the Fund's expenses under these undertakings
would lower the Fund's overall expense ratio and increase its total return
during any period in which expenses are assumed.
The investment 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 investment advisory agreement permits the Manager
to act as investment adviser for any other person, firm or corporation and
to use the name "Oppenheimer" in connection with one or more additional
companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment adviser to
the Fund, the right of the Fund to use the name "Oppenheimer" as part of
its name may be withdrawn.
-The Distributor. Under its Distribution Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A and Class B shares but is not
obligated to sell a specific number of shares. Expenses normally
attributable to sales (other than those paid under the Class B
Distribution and Service Plan), including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders, are borne by the Distributor. During the fiscal year ended
December 31, 1994, the aggregate amount of sales charges on sales of the
Fund's shares was $145,115, of which the Distributor and an affiliated
broker-dealer retained in the aggregate $24,662. During that same period,
the contingent deferred sales charges on the redemption of the Fund's
Class B shares totaled $39,328, all of which the Distributor retained.
For additional information about distribution of the Fund's shares and the
expenses connected with such activities, please refer to "Distribution and
Service Plans," below.
-The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the 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
brokers, 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.
Under the investment advisory agreement, the Manager is authorized
to select brokers that provide brokerage and/or research services for the
Fund and/or the other accounts over which the Manager or its affiliates
have investment discretion. The commissions paid to such brokers may be
higher than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is reasonable and
fair in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon new 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 advisory agreement and the procedures and rules
described above. In each 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 incurs
little or no brokerage costs. The Fund usually deals directly with the
selling or purchasing principal or market maker without incurring charges
for the services of a broker on its behalf unless it is determined that
better price or execution may be obtained by utilizing the services of a
broker. Purchases of portfolio securities from underwriters include a
commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
The Fund seeks to obtain prompt execution of orders at the most favorable
net price. When the Fund engages in an option transaction, ordinarily the
same broker will be used for the purchase or sale of the option and any
transaction in the securities to which the option relates. When possible,
concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are averaged
as to price and allocated in accordance with the purchase or sale orders
actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed price offers to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Trust (those
Trustees of the Trust who are not "interested persons" as defined in the
Investment Company Act, and who have no direct or indirect financial
interest in the operation of the advisory agreement or the Distribution
Plans described below) annually reviews information furnished by the
Manager as to the commissions paid to brokers furnishing such services so
that the Board may ascertain whether the amount of such commissions was
reasonably related to the value or benefit of such services.
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 or 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", "total return," and
"total return at net asset value" of an investment in each class of Fund
shares may be advertised. An explanation of how yields and total returns
are calculated for each class and the components of those calculations is
set forth below.
Yield and total return information may be useful to investors in
reviewing the Fund's performance. The Fund's advertisement of its
performance must, under applicable SEC rules, include the average annual
total returns for each class of shares of the Fund for the 1, 5 and 10-
year period (or the life of the class, if less) as of the most recently
ended calendar quarter. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its yield and total return are not
guaranteed and normally will fluctuate on a daily basis. When redeemed,
an investor's shares may be worth more or less than their original cost.
Yield and total return for any given past period are not a prediction or
representation by the Fund of future yields or rates of return on its
shares. The yield and total returns of the Class A and Class B shares of
the Fund are affected by portfolio quality, portfolio maturity, the type
of investments the Fund holds and its operating expenses.
-Standardized Yields. The Fund's "yield" (referred to as
"standardized yield") for a given 30-day period for a class of shares is
calculated using the following formula set forth in rules adopted by the
Securities and Exchange Commission that apply to all funds that quote
yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class
outstanding during the 30-day period that were entitled to
receive dividends.
d = the maximum offering price per share of the class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended December 31, 1994, the standardized yields for the
Fund's Class A and Class B shares were 5.72% and 5.28%, respectively.
-Tax-Equivalent Yields. The "tax-equivalent yield" of a class of
shares adjusts the Fund's current yield, as calculated above, by a stated
combined Federal and State tax rate. The tax-equivalent yield is based
on a 30-day period, and is computed by dividing the tax-exempt portion of
the Fund's current yield (as calculated above) by one minus a stated
income tax rate and adding the result to the portion (if any) of the
Fund's current yield that is not tax exempt. The tax equivalent yield may
be used to compare the tax effects of income derived from shares of a
class with income from taxable investments at the tax rates stated. For
the 30-day period ended December 31, 1994, the tax-equivalent yield for
the Fund's Class A shares and Class B shares was 9.47% and 8.74%,
respectively, for a taxpayer in the 39.6% combined effective tax bracket.
Appendix B includes a tax-equivalent yield table, based on various
effective tax brackets for individual taxpayers. Such tax brackets are
determined by a taxpayer's Federal and state taxable income (the net
amount subject to Federal and state income tax after deductions and
exemptions). The tax-equivalent yield 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.
-Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A or Class B share dividends derived
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class)
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares, the maximum offering price
is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time similar yield or distribution return calculations
may also be made using the Class A net asset value (instead of its
respective maximum offering price) at the end of the period. The dividend
yields on Class A shares for the 30-day period ended December 31, 1994,
were 5.92% and 6.22% when calculated at maximum offering price and at net
asset value, respectively. The dividend yield on Class B shares for the
30-day period ended December 31, 1994 was 5.48% when calculated at net
asset value.
-Total Returns. The "average annual total return" of each class is
an average annual compounded rate of return for each year in a specified
number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below)
held for a number of years ("n") to achieve an Ending Redeemable Value
("ERV") 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 discussed below). For Class B shares, the payment of the
applicable contingent deferred sales charge (5.0% for the first year, 4.0%
for the second year, 3.0% for the third and fourth years, 2.0% in the
fifth year, 1.0% in the sixth year and none thereafter) is applied to the
investment result for the time period shown (unless the total return is
shown at net asset value, as described below). Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that
the investment is redeemed at the end of the period.
For the one year period ended December 31, 1994 and for the period
from October 7, 1993 (commencement of offering) through December 31, 1994,
the average annual total returns on an investment in Class A shares of the
Fund were -12.04% and -6.60%, respectively, and in Class B shares of the
Fund over those periods were -12.77% and -6.48% respectively. The
cumulative total returns for Class A and Class B shares were -8.18% and -
8.04%, respectively.
-Total Returns at Net Asset Value. From time to time the Fund may
also quote an "average annual total return at net asset value" or a
cumulative "total return at net asset value" for Class A or Class B
shares. It is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred
sales charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The total returns at net asset value on
the Fund's Class A shares for the period from October 7, 1993
(commencement of offering) through December 31, 1994, and for the one-year
period ended December 31, 1994, was -7.66% and -3.60% respectively. The
total returns at net asset value on the Fund's Class B shares for the
fiscal period from October 7, 1993 (commencement of offering) through
December 31, 1994, and for the one-year period ended December 31, 1994,
was -8.42% and -4.44%, respectively.
Other Performance Comparisons. From time to time the Fund may publish
the ranking of the performance of its Class A or Class B shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent
mutual fund monitoring service. Lipper monitors the performance of
regulated investment companies, including the Fund, and ranks their
performance for various periods based on categories relating to investment
objectives. The performance of the Fund's classes is ranked against (i)
all other bond funds other than money market funds and (ii) Florida
municipal bond funds. The Lipper performance rankings are based on total
return that includes the reinvestment of capital gains distributions and
income dividends but does not take sales charges or taxes into
consideration.
From time to time the Fund may publish the ranking of the performance
of its Class A or Class B shares by Morningstar, Inc., an independent
mutual fund monitoring service that ranks mutual funds, including the
Fund, monthly in broad investment categories (equity, taxable bond,
municipal bond and hybrid) based upon risk-adjusted investment returns.
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 returns. Risk and return
are combined to produce star rankings reflecting performance relative to
the average fund in a given 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.
The total return on an investment made in Class A or Class B shares
of the Fund may be compared with the performance for the same period of
the Lehman Brothers Municipal Bond Index, as described in the Prospectus.
From time to time the Fund may also include in its advertisements and
sales literature performance information about the Fund or rankings of the
Fund's performance cited in newspapers or periodicals, such as The New
York Times, Money, The Wall Street Journal, Fortune, or other
publications. These articles may include quotations of performance from
other sources, such as Lipper or Morningstar.
When comparing yield, total return and investment risk of an
investment in Class A or Class B shares of the Fund with other
investments, investors should understand that certain other investments
have different risk characteristics than an investment in shares of the
Fund. For example, certificates of deposit may have fixed rates of return
and may be insured as to principal and interest by the FDIC, while the
Fund's returns will fluctuate and its share values and returns are not
guaranteed. Money market accounts offered by banks also may be insured
by the FDIC and may offer stability of principal. U.S. Treasury
securities are guaranteed as to principal and interest by the full faith
and credit of the U.S. government. Money market mutual funds may seek to
offer a fixed price per share.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A Shares and a
Distribution and Service Plan for Class B shares of the Fund under Rule
12b-1 of the Investment Company Act, pursuant to which the Fund will
reimburse the Distributor quarterly for all or a portion of its costs
incurred in connection with the distribution and/or servicing of the
shares of that class, as described in the Prospectus. Each Plan has been
approved by a vote of (i) the Board of Trustees of the Trust, 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. That vote for each class was cast by the Manager as the then-
sole initial holder of Class A and Class B shares of the Fund.
In addition, under the Plan the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, as
to the Manager, may include profits derived from the advisory fee it
receives from the Fund) to make payments to Recipients for distribution
and administrative services they perform. The Distributor and the Manager
may, in their sole discretion, increase or decrease the amount of
distribution assistance payments they make to Recipients from their own
assets. For further details, see the discussions relating to the Plans
in "How to Buy Shares" in the Prospectus.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Trust's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on any such selection or nomination is approved by a
majority of the Independent Trustees.
Under the Plans, no payment will be made to any broker, dealer or
other financial institution under the Plan (each is referred to as a
"Recipient") in any quarter if the aggregate net asset value of all Fund
shares held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time by a
majority of the Fund's Independent Trustees. Initially, the Board of
Trustees has set the fee at the maximum rate allowed under the Plans and
set no minimum amount.
For the one year period ended December 31, 1994, payments under the
Class A Plan totaled $14,448, all of which was paid by the Distributor to
Recipients. Unreimbursed expenses incurred with respect to Class A shares
for any fiscal quarter by the Distributor may not be recovered under the
Class A Plan in subsequent fiscal quarters. Payments received by the
Distributor under the Class A Plan will not be used to pay any interest
expense, carrying charges, or other financial costs, or allocation of
overhead by the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will be
made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers, and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at the annual rate of 0.25% of the average daily net
asset value of Class B shares held in the accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance payment of the service fee. In the event Class B shares are
redeemed during the first year that the shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of the advance of
the service fee payment for those shares to the Distributor.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class B Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B
Plan are subject to the limitations imposed by the National Association
of Securities Dealers, Inc. Rules of Fair Practice on payments of asset
based sales charges and service fees. The Distributor anticipates that
it will take a number of years for it to recoup (from the Fund's payments
to the Distributor under the Class B Plan and the recoveries of the
contingent deferred sales charge) the sales commissions paid to authorized
brokers or dealers. For the one year period ended December 31, 1994,
payments under the Class B plan totaled $62,865, all paid by the
Distributor to Recipients.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and from
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class B Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
availability of two 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 shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$1 million or more of Class B shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of 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 and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total 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 Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined as of the
close of business of The New York Stock Exchange (the "NYSE") on each day
that the NYSE is open by dividing the value of the Fund's net assets
attributable to that class by the total number of shares of that class
outstanding. The NYSE 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 NYSE's most recent
annual holiday schedule states that it will close on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than NYSE members may conduct trading in Municipal
Securities on certain days on which the NYSE is closed (including weekends
and holidays) or after 4:00 P.M. on a regular business day. Because the
Fund's net asset value will not be calculated on those days, the Fund's
net asset value per share of each class may be significantly affected on
days when shareholders may not purchase or redeem shares (e.g., Good
Friday), so that securities of the same type held by the Fund may be
traded, and the net asset values per share of Class A and Class B shares
of the Fund may be significantly affected, on such days when shareholders
cannot purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) long-term
debt securities, and short-term debt securities having a remaining
maturity in excess of 60 days, or less are valued at the mean between the
asked and bid prices determined by a portfolio pricing service approved
by the Board or obtained from active market makers in the security on the
basis of reasonable inquiry; (ii) short-term debt securities having a
remaining maturity of 60 days or less when purchased or which currently
have maturities of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (iii) securities
or assets for which market quotations are not readily available are valued
at their fair value as determined in good faith under the procedures
established by and under the general supervision and responsibility of the
Board of Trustees.
In the case of Municipal Securities, U.S. Government securities and
corporate bonds, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity and other
special factors involved (such as the tax-exempt status of the interest
paid by Municipal Securities). With the approval of the Trust's Board of
Trustees, the Manager may employ a pricing service, bank or broker-dealer
experienced in such matters to price any of the types of securities
described above. The Trustees will monitor the accuracy of pricing
services by comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
The Fund values puts, calls, Interest Rate Futures and Municipal Bond
Index Futures at the last sales price on the principal exchange or on the
NASDAQ on which they are traded. If there were no sales on the principal
exchange, the last sale or any exchange is used. In the absence of any
sales that day, value shall be the last reported sales price on the prior
trading day or closing bid or asked prices on the principal exchange
closets to the last reported sales price.
When the Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets and
Liabilities as an asset, and an equivalent deferred credit is included in
the liability section. The deferred credit is adjusted ("marked-to-
market") to reflect the current market value of the option. In determining
the Fund's gain on investments, if a call 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 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 the premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before the close of the NYSE that day, which is normally 3 days
after the ACH transfer is initiated. The Distributor and the Fund are not
responsible for any delays. If the Federal Funds are received after the
close of the NYSE that day, dividends will begin to accrue on the next
regular business day after such Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction 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 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, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer 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 Tax-Exempt Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
-Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase Class A shares of the Fund (and other
eligible OppenheimerFunds) sold with a front-end sales charge during the
13-month period from the investor's first purchase pursuant to the Letter
(the "Letter of Intent period"), which may, at the investor's request,
include purchases made up to 90 days prior to the date of the Letter. The
Letter states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestments of dividends or
distributions or purchases made at net asset value without sales charge),
which together with the investor's holdings of such funds (calculated at
their respective public offering prices calculated on the date of the
Letter) will equal or exceed the amount specified in the Letter. This
enables the investor to obtain the reduced sales charge rate (as set forth
in the Prospectus) applicable to purchases of shares in that amount (the
"intended purchase amount"). Each purchase under the Letter will be made
at the public offering price applicable to a single lump-sum purchase of
shares in the intended amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
-Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of one
of the OppenheimerFunds whose shares were acquired by payment of a sales
charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, 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.
- Involuntary Redemptions. The Trust's Board of Trustees has the
right to cause the involuntary redemption of the Fund's shares held in any
account if the aggregate net asset value of such shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of such shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or may set requirements
for granting permission to the shareholder to increase the investment, and
set other terms and conditions so that the shares would not be
involuntarily redeemed.
-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 Trust 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 Trust has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Value Per Share" and such valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after 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 OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of either class at the time of transfer to the name
of another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its shares
from authorized dealers or brokers. The repurchase price per share will
be the net asset value next computed after the Distributor receives an
order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from a dealer or broker after the close of The
New York Stock Exchange on a regular business day, it will be processed
at that day's net asset value if the order was received by the dealer or
broker from its customer prior to the time the Exchange closes (normally,
that is 4:00 P.M. but may be earlier 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.). Payment ordinarily will be made
within seven (effective June 7, 1995, within three) days after the
Distributor's receipt of the required redemption documents, with
signature(s) guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are 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 the payment on the
date requested and reserves the right to amend, suspend or discontinue
offering such plans at any time without prior notice. Because of the
sales charge assessed on Class A share purchases, shareholders should not
make regular additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B shareholders should not establish
withdrawal plans that would require the redemption of shares purchased
subject to a contingent deferred sales charge and held less than 6 years
because of the imposition of the Class B contingent deferred sales charge
on such withdrawals (except where the Class B contingent deferred sales
charge is waived as described in the Prospectus under "Class B Contingent
Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "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 thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
the OppenheimerFunds that have a single class of shares without a class
designation are deemed "Class A" shares for this purpose. All
OppenheimerFunds offer Class A shares (except Oppenheimer Strategic
Diversified Income Fund), but only the following other OppenheimerFunds
offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Discovery Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Class A shares of OppenheimerFunds 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
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds 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 six years of the initial purchase
of the exchanged Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or 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 Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal 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 on
newly purchased shares will not be declared or paid until such time as
Federal Funds (funds credited to a member bank's account at the Federal
Reserve Bank) are available from the purchase payment for such shares.
Normally, purchase checks received from investors are converted to Federal
Funds on the next business day. Dividends will be declared on shares
repurchased by a dealer or broker for four business days following the
trade date (i.e., to and including the day prior to settlement of the
repurchase). If all shares in an account are redeemed, all dividends
accrued on shares of the same class in the account will be paid together
with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A and Class B
Shares," above. Dividends are calculated in the same manner, at the same
time and on the same day for shares of each class. However, dividends on
Class B shares are expected to be lower as a result of the asset-based
sales charge on Class B shares, and Class B dividends will also differ in
amount as a consequence of any difference in net asset value between Class
A and Class B shares.
Dividends will be declared from net investment income, if any. 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.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Trust'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.
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. At December 31, 1994
the Fund had available for federal income tax purposes an unused capital
loss carryover of approximately $434,000, which will expire in the year
2002.
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 the gross income of
shareholders for Federal income tax purposes. All of the Fund's dividends
(excluding distributions) paid during 1994 were exempt from such Federal
income taxes. 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. 3.8% of the Fund's dividends (excluding
distributions) paid during 1994 were a tax preference item for such
shareholders. 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. Corporate shareholders and "substantial users"
of facilities financed by Private Activity Municipal Securities should
read "Investment Objective and Policies", above before purchasing shares.
For Federal income tax purposes, a shareholder receiving a dividend
from income earned by the Fund from one or more of (i) certain taxable
temporary investments, (ii) income from securities loans, (iii) income or
gains from hedging instruments, and (iv) an excess of net short-term
capital gain over net long-term capital loss from the Fund, treats the
dividend as either a receipt of ordinary income or long-term capital gains
in the computation of gross income, regardless of whether the dividend is
reinvested. The Fund's dividends will not be eligible for the dividends-
received deduction for corporations.
Florida does not currently impose a personal income tax on
individuals. Accordingly, dividends or distributions paid by the Fund to
individuals who are Florida residents are not subject to any Florida state
income tax. Investment company taxable income and capital gains of the
Fund will be subject to Florida corporate income taxes. Florida currently
imposes an "intangible tax" at the annual rate of 0.2% on certain
securities and other intangible assets owned by Florida residents on the
first day of each calendar year. The Fund has received a ruling from the
Florida Department of Revenue that, if on the close of business on the
last business day of the calendar year the Fund's portfolio assets consist
entirely of securities that are exempt from the Florida intangible
personal property tax, including obligations of the U.S. government, its
agencies, instrumentalities and territories (including Puerto Rico, Guam
and the U.S. Virgin Islands) and Florida Municipal Securities, shares of
the Fund will be exempt from Florida's intangible tax in the following
year. On the last business day of the 1994 calendar year the Fund's
assets consisted solely of assets exempt from Florida's intangible
personal property tax. The Fund anticipates that on the last business day
of each calendar year the Fund's assets will consist solely of assets
exempt from Florida's intangible personal property tax. Transaction costs
involved in restructuring the Fund's portfolio to take advantage of the
exemption from the intangibles tax in any year could reduce the Fund's
investment return and might exceed any increased investment return the
Fund achieved by investing in non-exempt assets during the year.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges" above at net asset value without sales charge. Class B
shareholders should be aware that as of the date of this Statement of
Additional Information, not all of the OppenheimerFunds offer Class B
shares. The names of Funds that offer Class B shares can be obtained by
calling the Distributor at 1-800-525-7048. To elect this option, the
shareholder must notify the Transfer Agent in writing and either must have
an existing account in the fund selected for reinvestment or must obtain
a prospectus for that fund and an application from the Distributor to
establish an account. The investment will be made at the net asset value
per share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or distributions from shares of
other OppenheimerFunds may be invested in shares of this Fund on the same
basis.
Additional Information About the Fund
The Custodian. The Custodian of the assets of the Fund is Citibank,
N.A. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
APPENDIX A
Descriptions 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.
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>
<TABLE>
<CAPTION>
TAX-EQUIVALENT YIELDS
Appendix B
Taxable Federal A Florida Tax-Exempt Bond Fund yield of:
Income Tax Bracket 4.00% 4.50% 5.00% 5.50%
<S> <C> <C> <C> <C> <C>
<C>
6.00% 6.50% 7.00%
Joint return:
But Not
Over Over Is Equivalent to a Taxable Yield of:
$0 $39,000 15.00% 4.71% 5.29% 5.88% 6.47%
7.06% 7.65% 8.24%
$39,000 $94,250 28.00% 5.56% 6.25% 6.94% 7.64%
8.33% 9.03% 9.72%
$94,250 $143,600 31.00% 5.80% 6.52% 7.25% 7.97%
8.70% 9.42% 10.14%
$143,600 $256,500 36.00% 6.25% 7.03% 7.81% 8.59%
9.38% 10.16% 10.94%
$256,500 and above 39.60% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59%
Single return:
But Not
Over Over
$0 $23,350 15.00% 4.71% 5.29% 5.88% 6.47%
7.06% 7.65% 8.24%
$23,350 $56,550 28.00% 5.56% 6.25% 6.94% 7.64%
8.33% 9.03% 9.72%
$56,550 $117,950 31.00% 5.80% 6.52% 7.25% 7.97%
8.70% 9.42% 10.14%
$117,950 $256,500 36.00% 6.25% 7.03% 7.81% 8.59%
9.38% 10.16% 10.94%
$256,500 and above 39.60% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59%
</TABLE>
Florida does not impose a state income tax. The table assumes 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 the investment is not subject to the Alternative Minimum Tax. The
income tax brackets are subject to indexing in future years to reflect
changes in the Consumer Price Index.
<PAGE>
Appendix C
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Transmission
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
______________
* For purposes of the Fund's investment policy not to concentrate in
securities of issuers in the same industry, gas utilities and gas
transmission utilities each will be considered a separate industry.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer
Multi-State Tax-Exempt Trust:
We have audited the accompanying statements of
investments and assets and liabilities of Oppenheimer
Florida Tax-Exempt Fund (a series of Oppenheimer
Multi-State Tax-Exempt Trust) as of December 31,
1994, and the related statement of operations for the
year then ended, the statements of changes in net
assets and the financial highlights for the year then
ended and the period from October 1, 1993 (inception
of offering) to December 31, 1993. 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 December 31, 1994, by correspondence with the
custodian. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and
financial highlights referred to above present
fairly, in all material respects, the financial
position of Oppenheimer Florida Tax-Exempt Fund as of
December 31, 1994, the results of its operations for
the year then ended, the changes in its net assets
and the financial highlights for the year then ended
and the period from October 1, 1993 (inception of
offering) to December 31, 1993, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
January 23, 1995
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS December 31, 1994
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
----------------- ------ ------------
<S> <C> <C> <C>
Municipal Bonds and Notes - 96.0%
Florida - 80.5%
Brevard County, Florida Housing Finance Authority Single Family
Mtg. Revenue Bonds, 6.70%, 9/1/27 Aaa/NR $ 1,000,000 $ 945,675
Broward County, Florida Resource Recovery Revenue Bonds,
Broward Waste Energy-LP North Project, 7.95%, 12/1/08 A/A 210,000 225,202
Collier County, Florida Health Facilities Authority Health Facility
Revenue Refunding Bonds, The Moorings, Inc. Project, 7%,
12/1/19 NR/BBB+/A- 1,000,000 975,776
Dade County, Florida Aviation Revenue Refunding Bonds,
Series Y, 5.50%, 10/1/11 Aa/A 600,000 533,071
Dade County, Florida General Obligation Refunding Bonds, FGIC
Insured, 12%, 10/1/04 Aaa/AAA/AAA 100,000 144,074
Florida State Board of Education Capital Outlay Public Education
General Obligation Bonds, Prerefunded, Series A, 7.25%,
6/1/23 Aaa/AAA 1,210,000 1,313,568
Florida State Board of Education Capital Outlay Public Education
General Obligation Bonds, Series A, 6.75%, 6/1/21 Aa/AA 300,000 302,759
Florida State Board of Education Capital Outlay Public Education
General Obligation Refunding Bonds, Series D, 5.125%,
6/1/22 Aa/AA/AA 700,000 566,445
Florida State Division of Finance Department Revenue Bonds,
Department of Natural Resource Preservation, Series 2000-A,
FSA Insured, 5.80%, 7/1/13 Aaa/AAA/A 750,000 686,430
Florida State Division of Finance Department Revenue Bonds,
Sunshine Skyway Project, Prerefunded, 10.25%, 6/1/08 Aaa/AAA 1,000,000 1,125,879
Florida State Turnpike Authority Revenue Bonds, Prerefunded,
Series A, FGIC Insured, 6.35%, 7/1/22 Aaa/AAA/AAA 600,000 619,688
Gainesville, Florida Utilities System Revenue Bonds, Series B,
5.50%, 10/1/13 Aa/AA 350,000 309,919
Gainesville, Florida Utilities System Revenue Bonds, Series B,
6%, 10/1/17 Aa/AA 550,000 510,127
Greater Orlando Aviation Authority Revenue Refunding Bonds,
Orlando, Florida Airport Facilities, Series A, AMBAC Insured,
5.50%, 10/1/18 Aaa/AAA/AAA 280,000 236,793
Hillsborough County, Florida Aviation Authority Revenue
Refunding Bonds, Tampa International Airport, Series B, FGIC
Insured, 5.50%, 10/1/13 Aaa/AAA/AAA 900,000 788,153
Hillsborough County, Florida Utility Revenue Refunding Bonds,
MBIA Insured, 5.50%, 8/1/16 Aaa/AAA 200,000 173,416
Jacksonville, Florida Electric Authority Revenue Bonds, Electric
Systems Project, Series Three-B, 5.25%, 10/1/19 Aa1/AA/AA+ 650,000 539,505
Kissimmee, Florida Utility Authority Electric System Improvement
Revenue Refunding Bonds, FGIC Insured, 5.50%, 10/1/15 Aaa/AAA/AAA 200,000 174,289
Orange County, Florida Housing Finance Authority Single Family
Mtg. Revenue Bonds, GNMA & FNMA Mtg.-Backed Securities
Program, 6.85%, 10/1/27 Aaa/AAA 1,000,000 974,416
Orlando and Orange County, Florida Expressway Authority
Revenue Refunding Bonds, Sr. Lien, AMBAC Insured, 5.25%,
7/1/14 Aaa/AAA/AAA 100,000 83,866
Orlando and Orange County, Florida Expressway Authority
Revenue Refunding Bonds, Sr. Lien, FGIC Insured, 5.50%,
7/1/18 Aaa/AAA/AAA 720,000 620,721
Palm Beach County, Florida Health Facilities Authority
Hospital Revenue Bonds, Good Samaritan Health System,
6.20%, 10/1/11 NR/A- 1,000,000 945,185
Palm Beach County, Florida Revenue Refunding Bonds, Criminal
Justice Facilities, FGIC Insured, 5.375%, 6/1/11 Aaa/AAA/AAA 250,000 218,982
</TABLE>
5 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS December 31, 1994
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
------------------ ------ ------------
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
FLORIDA (CONTINUED)
Pinellas County, Florida Health Facilities Authority Hospital
Revenue Bonds, Bayfront Obligation Group, Series A, MBIA
Insured, 5.60%, 7/1/23 Aaa/AAA $ 500,000 $ 426,542
South Florida Water Management District Revenue Refunding
Bonds, Special Obligation Land Acquisition, AMBAC Insured,
5.25%, 10/1/15 Aaa/AAA 720,000 603,789
St. Petersburg, Florida Public Improvement Revenue Refunding
Bonds, MBIA Insured, 6.375%, 2/1/12 Aaa/AAA 750,000 737,698
St. Petersburg, Florida Public Utility Revenue Bonds, 5.60%,
10/1/18 Aa/AA- 200,000 173,791
Vero Beach, Florida Electric Revenue Refunding Bonds,
Series A, MBIA Insured, 5.375%, 12/1/21 Aaa/AAA 500,000 415,401
West Palm Beach, Florida Utility System Revenue Bonds,
Series B, FGIC Insured, 5.40%, 10/1/23 Aaa/AAA/AAA 850,000 707,903
-----------
16,079,063
U.S. POSSESSIONS - 15.5%
Puerto Rico Commonwealth Aqueduct & Sewer Authority
Revenue Bonds, Escrowed to Maturity, 10.25%, 7/1/09 Aaa/AAA 200,000 261,015
Puerto Rico Commonwealth Highway & Transportation Authority
Revenue Refunding Bonds, Series X, 5.25%, 7/1/21 Baa1/A 700,000 569,751
Puerto Rico Electric Power Authority Revenue Refunding Bonds,
Series U, 6%, 7/1/14 Baa1/A- 900,000 837,516
Puerto Rico Public Buildings Authority Guaranteed Public
Education & Health Facilities Revenue Bonds, Prerefunded,
Series L, 6.875%, 7/1/21 Aaa/AAA 600,000 645,989
Puerto Rico Public Buildings Authority Guaranteed Public
Education & Health Facilities Revenue Refunding Bonds,
Series M, 5.50%, 7/1/21 Baa1/A 300,000 251,752
Puerto Rico Public Buildings Authority Guaranteed Revenue
Bonds, Prerefunded, Series K, 6.875%, 7/1/21 Aaa/AAA 500,000 538,324
-----------
3,104,347
-----------
Total Municipal Bonds and Notes (Cost $20,848,992) 19,183,410
SHORT-TERM TAX-EXEMPT OBLIGATIONS - 1.0%
Broward County, Florida Multifamily Housing Finance Authority
Revenue Bonds, Landings Inverrary Apartments, 5.35% (Cost
$200,000) (1) 200,000 200,000
TOTAL INVESTMENTS, AT VALUE (COST $21,048,992) 97.0%
19,383,410
OTHER ASSETS NET OF LIABILITIES 3.0 600,787
----------- -----------
Net Assets 100.0% $19,984,197
===========
===========
</TABLE>
1. Floating or variable rate obligations maturing in more
than one year. The interest rate, which is based on
specific or an index of, current market interest rates,
is subject to change periodically and is the effective
rate on December 31, 1994. 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.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1994
<TABLE>
<S> <C> <C>
ASSETS Investments, at value (cost $21,048,992) - see accompanying statement $19,383,410
Cash 48,253
Receivables:
Shares of beneficial interest sold 553,471
Interest 395,266
Deferred organization costs 3,433
Other 7,429
------------
Total assets 20,391,262
------------
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 312,145
Dividends 68,333
Distribution and service plan fees - Note 4 7,271
Other 19,316
------------
Total liabilities 407,065
------------
NET ASSETS $19,984,197
============
COMPOSITION OF Paid-in capital $22,105,565
NET ASSETS Undistributed (overdistributed) net investment income (5,485)
Accumulated net realized gain (loss) from investment transactions (450,301)
Net unrealized appreciation (depreciation) on investments - Note 3 (1,665,582)
------------
Net assets $19,984,197
============
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net
assets of $11,992,217 and 1,169,259 shares of beneficial
interest outstanding) $10.26
Maximum offering price per share (net asset value plus sales
charge of 4.75% of offering price) $10.77
Class B Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $7,991,980 and
778,073 shares
of beneficial interest outstanding) $10.27
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended
December 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME Interest $ 1,032,784
------------
EXPENSES Management fees - Note 4 100,261
Distribution and service plan fees:
Class A - Note 4 14,448
Class B - Note 4 62,865
Legal and auditing fees 19,688
Trustees' fees and expenses 9,891
Shareholder reports 9,572
Transfer and shareholder servicing agent fees - Note 4 9,356
Deferred organization expenses 4,067
Registration and filing fees:
Class A 2,786
Class B 1,540
Other 9,588
------------
Total expenses 244,062
Less assumption of expenses by Oppenheimer Management
Corporation - Note 4 (144,023)
------------
Net expenses 100,039
------------
NET INVESTMENT INCOME (LOSS) 932,745
------------
REALIZED AND Net realized gain (loss) on investments (455,786)
UNREALIZED GAIN (LOSS) Net change in unrealized appreciation or depreciation on
ON INVESTMENTS investments (1,795,681)
Net realized and unrealized gain (loss) on investments (2,251,467)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
($1,318,722)
============
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993(1)
------------------------------
<S> <C> <C> <C>
OPERATIONS Net investment income (loss) $ 932,745 $ 51,670
Net realized gain (loss) on investments (455,786)
Net change in unrealized appreciation or
depreciation on investments (1,795,681) 130,099
------------ ------------
Net increase (decrease) in net assets resulting
from operations (1,318,722) 181,769
------------ ------------
DIVIDENDS TO Dividends from net investment income:
SHAREHOLDERS Class A ($.637 and $.141 per share, respectively) (574,828) (28,959)
Class B ($.556 and $.115 per share, respectively) (357,917) (22,711)
BENEFICIAL INTEREST Net increase (decrease) in net assets resulting from
TRANSACTIONS Class A beneficial interest transactions - Note 2 6,272,842 6,995,516
Net increase (decrease) in net assets resulting from
Class B beneficial interest transactions - Note 2 4,026,577 4,810,630
------------ ------------
NET ASSETS Total increase (decrease) 8,047,952 11,936,245
Beginning of period 11,936,245 --
------------ ------------
End of period (including overdistributed net investment
income of $5,485 for 1994) $19,984,197 $11,936,245
============
============
</TABLE>
1. For the period from October 1, 1993 (commencement
of operations) to December 31, 1993.
See accompanying Notes to Financial Statements.
9 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A Class B
---------------------------------- --------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1994 1993(1) 1994 1993(1)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 11.79 $ 11.43 $ 11.81 $ 11.43
Income (loss) from investment operations:
Net investment income .64 .14 .56 .12
Net realized and unrealized gain (loss)
on investments (1.53) .36 (1.54) .38
-------- -------- -------- --------
Total income (loss) from investment operations (.89) .50 (.98) .50
-------- -------- -------- --------
Dividends to shareholders from net investment
income (.64) (.14) (.56) (.12)
-------- -------- -------- --------
Net asset value, end of period $10.26 $11.79 $10.27 $11.81
======== ======== ========
========
Total Return, at Net Asset Value(2) (7.66)% 4.39% (8.42)% 4.35%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $11,992 $7,062 $7,992 $4,874
Average net assets (in thousands) $ 9,741 $2,471 $6,987 $2,304
Number of shares outstanding at end of period
(in thousands) 1,169 599 778 413
Ratios to average net assets:
Net investment income 5.90% 5.08%(3) 5.13% 4.29%(3)
Expenses, before voluntary assumption by the
Manager or Distributor 1.25% 1.89%(3) 1.99% 2.20%(3)
Expenses, net of voluntary assumption by the
Manager or Distributor .29% --%(3) 1.03% .38%(3)
Portfolio turnover rate(4) 30.4% --% 30.4% --%
</TABLE>
1. For the period from October 1, 1993 (commencement of operations) to December
31, 1993.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term
securities) for the year ended December 31, 1994 were $15,467,826 and
$4,895,277, respectively.
See accompanying Notes to Financial Statements.
10 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT Oppenheimer Florida Tax-Exempt Fund (the Fund) is a
ACCOUNTING separate series of Oppenheimer Multi-State Tax-Exempt
POLICIES Trust, a non-diversified, open-end management
investment company registered under the Investment
Company Act of 1940, as amended. The Fund's
investment advisor is Oppenheimer Management
Corporation (the Manager). The Fund offers both Class
A and Class B shares. Class A shares are sold with a
front-end sales charge. Class B shares may be subject
to a contingent deferred sales charge. Both classes
of shares have identical rights to earnings, assets
and voting privileges, except that each class has its
own distribution 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 4:00 p.m. (New York time) each day on which the
New York Stock Exchange is open. 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 debt securities are
valued by a portfolio pricing service approved by the
Board of Trustees. Long- term debt securities which
cannot be valued by the approved portfolio pricing
service are valued 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 under consistently
applied procedures established by the Board of
Trustees to determine fair value in good faith.
Short-term debt securities having a remaining
maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for
amortization to maturity of any premium or discount.
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a
specific class are charged against the operations of
that class.
FEDERAL INCOME TAXES. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any
net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal
income tax provision is required. At December 31,
1994, the Fund had available for federal income tax
purposes an unused capital loss carryover of
approximately $434,000 which will expire in 2002.
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. No payments have been made under the plan.
ORGANIZATION COSTS. The Manager advanced $7,500 for
organization and start-up costs of the Fund. Such
expenses are being amortized over a five-year period
from the effective date operations commenced. In the
event that all or part of the Manager's initial
investment in shares of the Fund is withdrawn during
the amortization period, the redemption proceeds will
be reduced to reimburse the Fund for any unamortized
expenses, in the same ratio as the number of shares
redeemed bears to the number of initial shares
outstanding at the time of such redemption.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to
declare dividends separately for Class A and Class B
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.
11 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
CHANGE IN ACCOUNTING CLASSIFICATION OF DISTRIBUTIONS
TO SHAREHOLDERS. Net investment income (loss) and net
realized gain (loss) may differ for financial
statement and tax purposes primarily because of
premium amortization. The character of the
distributions made during the year from net
investment income or net realized gains may differ
from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividend
distributions, the fiscal year in which amounts are
distributed may differ from the year that the income
or realized gain (loss) was recorded by the Fund.
Effective January 1, 1994, the Fund adopted Statement
of Position 93-2: Determination, Disclosure, and
Financial Statement Presentation of Income, Capital
Gain, and Return of Capital Distributions by
Investment Companies. As a result, 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. During the
year ended December 31, 1994, in accordance with
Statement of Position 93-2, undistributed net
investment income was decreased by $5,485 and
accumulated net realized loss on investments was
decreased by the same amount.
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. 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. For bonds acquired after April
30, 1993, accrued market discount is recognized at
maturity or disposition as taxable ordinary income.
Taxable ordinary income is realized to the extent of
the lesser of gain or accrued market discount.
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL value shares of beneficial interest of each class.
INTEREST Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1994 Period Ended December 31, 1993(1)
------------------------------- ---------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Class A:
Sold 1,094,994 $11,835,206 661,945 $7,730,754
Dividends reinvested 23,730 253,862 456 5,352
Redeemed (548,471) (5,816,226) (63,395) (740,590)
---------- ------------ -------- -----------
Net increase 570,253 $ 6,272,842 599,006 $6,995,516
========== ============ ========
===========
Class B:
Sold 481,494 $5,234,804 420,202 $4,895,857
Dividends reinvested 10,745 114,966 376 4,414
Redeemed (126,967) (1,323,193) (7,777) (89,641)
---------- ------------ -------- -----------
Net increase 365,272 $4,026,577 412,801 $4,810,630
========== ============ ========
===========
</TABLE>
1. For the period from October 1, 1993 (commencement
of operations) to December 31, 1993.
3. UNREALIZED GAINS At December 31, 1994, net unrealized depreciation on
AND LOSSES ON investments of $1,665,582 was composed of gross
INVESTMENTS appreciation of $395, and gross depreciation of
$1,665,977.
12 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
4. MANAGEMENT FEES Management fees paid to the Manager were in
AND OTHER accordance with the investment advisory agreement
TRANSACTIONS WITH with the Fund which provides for an annual fee of
AFFILIATES .60% on the first $200 million of net assets, .55% on
the next $100 million, .50% on the next $200 million,
.45% on the next $250 million, .40% on the next $250
million and .35% on net assets in excess of $1
billion. The Manager has agreed to assume Fund
expenses (with specified exceptions) in excess of the
most stringent applicable regulatory limit for Fund
expenses. In addition, the Manager has voluntarily
undertaken to assume Fund expenses to the level
needed to maintain a stable dividend.
For the year ended December 31, 1994, commissions
(sales charges paid by investors) on sales of Class A
shares totaled $145,115, of which $24,662 was
retained by Oppenheimer Funds Distributor, Inc.
(OFDI), a subsidiary of the Manager, as general
distributor, and by an affiliated broker/dealer.
During the year ended December 31, 1994, OFDI
received contingent deferred sales charges of $39,328
upon redemption of Class B shares, as reimbursement
for sales commissions advanced by OFDI at the time of
sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of
the Manager, is the transfer and shareholder
servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of
providing such services are allocated ratably to
these companies.
Under separate approved plans, each class may expend
up to .25% (voluntarily reduced to .15% by the Fund's
Board) of its net assets annually to reimburse OFDI
for costs incurred in connection with the personal
service and maintenance of accounts that hold shares
of the Fund, including amounts paid to brokers,
dealers, banks and other institutions. In addition,
Class B shares are subject to an asset-based sales
charge of .75% of net assets annually, to reimburse
OFDI for sales commissions paid from its own
resources at the time of sale and associated
financing costs. In the event of termination or
discontinuance of the Class B plan, the Board of
Trustees may allow the Fund to continue payment of
the asset-based charge to OFDI for distribution
expenses incurred on Class B shares sold prior to
termination or discontinuance of the plan. During the
year ended December 31, 1994, OFDI retained $61,793
as reimbursement for Class B sales commissions and
service fee advances, as well as financing costs.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217-5270
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 MULTI-STATE TAX-EXEMPT TRUST
FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
--------------------
(1) Condensed Financial Information
(i) for Oppenheimer Pennsylvania Tax-Exempt Fund
("OPTEF") - Filed herewith.
(ii) for Oppenheimer Florida Tax-Exempt Fund ("OFTEF") -
Filed herewith.
(iii) for Oppenheimer New Jersey Tax-Exempt Fund
("ONJTEF") - Filed herewith.
(2) Independent Auditors' Report
(i) for OPTEF - Filed herewith.
(ii) for OFTEF - Filed herewith.
(iii) for ONJTEF - Filed herewith.
(3) Statement of Investments
(i) for OPTEF - Filed herewith.
(ii) for OFTEF - Filed herewith.
(iii) for ONJTEF - Filed herewith.
(4) Statement of Assets and Liabilities
(i) for OPTEF - Filed herewith.
(ii) for OFTEF - Filed herewith.
(iii) for ONJTEF - Filed herewith.
(5) Statement of Operations
(i) for OPTEF - Filed herewith.
(ii) for OFTEF - Filed herewith.
(iii) for ONJTEF - Filed herewith.
(6) Statement of Changes in Net Assets
(i) for OPTEF - Filed herewith.
(ii) for OFTEF - Filed herewith.
(iii) for ONJTEF - Filed herewtih.
(7) Notes to Financial Statements
(i) for OPTEF - Filed herewith.
(ii) for OFTEF - Filed herewith.
(iii) for ONJTEF - Filed herewith.
(8) Independent Auditors' Consent
(i) for OPTEF - Filed herewith.
(ii) for OFTEF - Filed herewith.
(iii) for ONJTEF - Filed herewith
(b) Exhibits
--------
(1) Registrant's Amended and Restated Declaration of Trust
dated 12/9/93 - Filed with Post-Effective Amendment No.
10, 2/28/94, and incorporated herein by reference.
(2) By-Laws dated 10/10/89 - Filed with Post-Effective
Amendment No.4, 5/1/92, and refiled herewith pursuant
to Item 102 of Regulation S-T.
(3) Not applicable.
(4) (i) OPTEF Specimen Class A Share Certificate - Filed
with Pre-Effective Amendment No. 1, 9/15/89, and
refiled herewith pursuant to Item 102 of Regulation
S-T.
(ii) OPTEF Specimen Class B Share Certificate - Filed
with Post-Effective Amendment No. 6, 7/16/93, and
refiled herewith pursuant to Item 102 of Regulation
S-T.
(iii) OFTEF Specimen Class A Share Certificate - Filed
with Post-Effective Amendment No. 7, 10/1/93, and
incorporated herein by reference.
(iv) OFTEF Specimen Class B Share Certificate - Filed
with Post-Effective Amendment No. 7, 10/1/93, and
incorporated herein by reference.
(v) ONJTEF Specimen Class A Share Certificate - Filed
with Post-Effective Amendment No. 10, 2/28/94, and
incorporated herein by reference.
(vi) ONJTEF Specimen Class B Share Certificate - Filed
with Post-Effective Amendment No. 10, 2/28/94, and
incorporated herein by reference.
(5) (i) Investment Advisory Agreement for OPTEF dated
10/22/90 - Filed with Post-Effective Amendment
No. 2, 3/1/91, and refiled herewith pursuant to
Item 102 of Regulation S-T.
(ii) Investment Advisory Agreement for OFTEF dated
10/1/93 - Filed with Post-Effective Amendment No.
8, 12/29/93, and incorporated herein by reference.
(iii) Investment Advisory Agreement for ONJTEF dated
12/9/93 - Filed with Post-Effective Amendment No.
9 to Registrant's Registration Statement, 2/25/94,
and incorporated herein by reference.
(6) (a) General Distributor's Agreement between the
Registrant and Oppenheimer Funds Distributor, Inc.
("Distributor") dated 8/19/93 - Filed herewith.
(b) Form of Distributor 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.
(c) Form of Distributor 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.
(d) Form of Distributor 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.
(e) Broker Agreement between Distributor and Newbridge
Securities dated 11/1/86 - Filed with Post-Effective
Amendment No. 25 of Oppenheimer Growth Fund (Reg. No.
2-45272), 10/30/86, 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.
(7) Retirement Plan for Non-Interested Trustees or
Directors dated 6/7/90 - Filed with Post-Effective
Amendment No.97 to the Registration Statement of
Oppenheimer Fund (File 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 9/18/89 - Filed with
Registrant's Post-Effective Amendment No. 3, 4/30/91,
and refiled herewith pursuant to Item 102 of
Regulation S-T.
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 9/15/89 - Filed with
Pre-Effective Amendment No. 2, 9/18/89, and refiled
herewith pursuant to Item 102 of Regulation S-T.
(11) Not applicable.
(12) Not applicable.
(13) Investment Letter dated 8/29/89 from Oppenheimer
Management Corporation to Registrant - Filed with Post-
Effective Amendment No. 3 to the Registrant's
Registration Statement, 4/30/91, and refiled herewith
pursuant to Item 102 of Regulation S-T.
(14) Not applicable.
(15) (i) Service Plan and Agreement for Class A shares of
OPTEF under Rule 12b-1 of the Investment Company
Act, dated 7/1/93 - Filed with Post-Effective
Amendment No. 6, 7/16/93, and refiled herewith
pursuant to Item 102 of Regulation S-T.
(ii) Distribution and Service Plan and Agreement for
Class B shares of OPTEF under Rule 12b-1 of the
Investment Company Act, dated 2/10/94 - Filed
herewith.
(iii) Service Plan and Agreement for Class A shares of
OFTEF under Rule 12b-1 of the Investment Company Act
- Filed with Post-Effective Amendment No. 7,
10/1/93, and incorporated herein by reference.
(iv) Distribution and Service Plan and Agreement for
Class B shares of OFTEF under Rule 12b-1 of the
Investment Company Act - Filed with Post-Effective
Amendment No. 7, 10/1/93, and incorporated herein
by reference.
(v) Service Plan and Agreement for Class A shares of
ONJTEF under Rule 12b-1 of the Investment Company
Act dated 12/9/93 - Filed with Post-Effective
Amendment No. 9 to Registrant's Registration
Statement, 2/25/94, and incorporated herein by
reference.
(vi) Distribution and Service Plan and Agreement for
Class B shares of ONJTEF under Rule 12b-1 of the
Investment Company Act dated 12/9/93 - Filed with
Post-Effective Amendment No. 9 to Registrant's
Registration Statement, 2/25/94, and incorporated
herein by reference.
(16) (i) Performance Computation Schedule for OPTEF - Filed
herewith.
(ii) Performance Computation Schedule for OFTEF - Filed
herewith.
(iii) Performance Computation Schedule for ONJTEF -
Filed herewith.
(17) (i) Financial Data Schedules for OPTEF - Filed
herewith.
(ii) Financial Data Schedules for OFTEF - Filed
herewith.
(iii) Financial Data Schedules for ONJTEF - Filed
herewith.
-- Powers of Attorney - Filed with Post-Effective Amendments
No. 6 and No. 7, 7/16/93 and 10/1/93, respectively, 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
Title of Class as of March 15, 1995
-------------- ------------------------
OPTEF Shares of Beneficial
Interest, Class A 2,600
OPTEF Shares of Beneficial
Interest, Class B 455
OFTEF Shares of Beneficial
Interest, Class A 323
OFTEF Shares of Beneficial
Interest, Class B 260
ONJTEF Shares of Beneficial
Interest, Class A 168
ONJTEF Shares of Beneficial
Interest, Class B 110
ITEM 27. Indemnification
---------------
Reference is made to paragraphs (c) through (f) of Section 12 of Article
SEVENTH of Registrant's Declaration of Trust filed as Exhibit 24(b)(1)(i)
to this Registration Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons
of Registrant pursuant to the foregoing provisions or otherwise,
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee,
officer or controlling person, Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
(a) Oppenheimer Management Corporation is the investment adviser of
the Registrant; it and certain 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 Oppenheimer Management Corporation 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
with Oppenheimer Other Business and Connections
Management Corporation During the Past Two Years
- ----------------------- ------------------------------
<S> <C>
Lawrence Apolito, None.
Vice President
James C. Ayer, Jr., Vice President and Portfolio Manager of
Assistant Vice President Oppenheimer Gold & Special Minerals Fund and
Oppenheimer Global Emerging Growth Fund.
Victor Babin, None.
Senior Vice President
Robert J. Bishop Assistant Treasurer of the OppenheimerFunds
Assistant Vice President (listed below); previously a Fund Controller
for Oppenheimer Management Corporation (the
"Manager").
George Bowen Treasurer of the New York-based
Senior Vice President OppenheimerFunds; Vice President, Secretary
and Treasurer and Treasurer of the Denver-based
OppenheimerFunds. Vice President and
Treasurer of Oppenheimer Funds Distributor,
Inc. (the "Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment adviser
subsidiary of OMC; 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
OMC; President, Treasurer and Director of
Centennial Capital Corporation; Vice
President and Treasurer of Main Street
Advisers; formerly Senior Vice President/
Comptroller and Secretary of Oppenheimer
Asset Management Corporation ("OAMC"), an
investment adviser which was a subsidiary of
the OMC.
Michael A. Carbuto, Vice President and Portfolio Manager of
Vice President Oppenheimer Tax-Exempt Cash Reserves,
Centennial California Tax Exempt Trust,
Centennial New York Tax Exempt Trust and
Centennial Tax Exempt Trust; Vice President
of Centennial.
William Colbourne, Formerly, Director of Alternative Staffing
Assistant Vice President Resources, and Vice President of Human
Resources, American Cancer Society.
Lynn Coluccy, Vice President Formerly Vice President\Director of Internal
Audit of the Manager.
O. Leonard Darling, Formerly Co-Director of Fixed Income for
Executive Vice President State Street Research & Management Co.
Robert A. Densen, None.
Vice President
Robert Doll, Jr., Vice President and Portfolio Manager of
Executive Vice President Oppenheimer Growth Fund and Oppenheimer
Target Fund; Senior Vice President and
Portfolio Manager of Strategic Income &
Growth Fund.
John Doney, Vice President Vice President and Portfolio Manager of
Oppenheimer Equity Income Fund.
Andrew J. Donohue, Secretary of the New York-based
Executive Vice President OppenheimerFunds; Vice President of the
& General Counsel Denver-based OppenheimerFunds; Executive
Vice President, Director and General Counsel
of the Distributor; formerly Senior Vice
President and Associate General Counsel of
the Manager and the Distributor.
Kenneth C. Eich, Treasurer of Oppenheimer Acquisition
Executive Vice President/ Corporation
Chief Financial Officer
George Evans, Vice President Vice President and Portfolio Manager of
Oppenheimer Global Securities Fund.
Scott Farrar, Assistant Treasurer of the OppenheimerFunds;
Assistant Vice President previously a Fund Controller for the
Manager.
Katherine P.Feld Vice President and Secretary of Oppenheimer
Vice President and Funds Distributor, Inc.; Secretary of
Secretary HarbourView, Main Street Advisers, Inc. and
Centennial; Secretary, Vice President and
Director of Centennial Capital Corp.
Jon S. Fossel, President and director of Oppenheimer
Chairman of the Board, Acquisition Corp. ("OAC"), the Manager's
Chief Executive Officer parent holding company; President, CEO and
and Director a director of HarbourView; a director of SSI
and SFSI; President, Director, Trustee, and
Managing General Partner of the Denver-based
OppenheimerFunds; formerly President of the
Manager. President and Chairman of the Board
of Main Street Advisers, Inc.
Robert G. Galli, Trustee of the New York-based
Vice Chairman OppenheimerFunds; Vice President and Counsel
of OAC; formerly he held the following
positions: a director of the Distributor,
Vice President and a director of HarbourView
and Centennial, a director of SFSI and SSI,
an officer of other OppenheimerFunds and
Executive Vice President & General Counsel
of the Manager and the Distributor.
Linda Gardner, None.
Assistant Vice President
Ginger Gonzalez, Formerly 1st Vice President/Director of
Vice President Creative Services for Shearson Lehman
Brothers.
Dorothy Grunwager, None.
Assistant Vice President
Caryn Halbrecht, Vice President and Portfolio Manager of
Vice President Oppenheimer Insured Tax-Exempt Bond Fund and
Oppenheimer Intermediate Tax Exempt Bond
Fund; an officer of other OppenheimerFunds;
formerly Vice President of Fixed Income
Portfolio Management at Bankers Trust.
Barbara Hennigar, President and Director of Shareholder
President and Chief Financial Service, Inc.
Executive Officer of
Oppenheimer Shareholder
Services, a division of OMC.
Alan Hoden, Vice President None.
Merryl Hoffman, None.
Vice President
Scott T. Huebl, None.
Assistant Vice President
Jane Ingalls, Formerly a Senior Associate with Robinson,
Assistant Vice President Lake/Sawyer Miller.
Stephen Jobe, None.
Vice President
Avram Kornberg, Formerly a Vice President with Bankers
Vice President Trust.
Paul LaRocco, Portfolio Manager of Oppenheimer Capital
Assistant Vice President Appreciation Fund; Associate Portfolio
Manager of Oppenheimer Discovery Fund and
Oppenheimer Time Fund. Formerly a
Securities Analyst for Columbus Circle
Investors.
Mitchell J. Lindauer, None.
Vice President
Loretta McCarthy, None.
Senior Vice President
Bridget Macaskill, Director of HarbourView; Director of Main
President and Director Street Advisers, Inc.; and Chairman of
Shareholder Services, Inc.
Sally Marzouk, None.
Vice President
Denis R. Molleur, None.
Vice President
Kenneth Nadler, None.
Vice President
David Negri, Vice President and Portfolio Manager of
Vice President Oppenheimer Strategic Bond Fund, Oppenheimer
Multiple Strategies Fund, Oppenheimer
Strategic Investment Grade Bond Fund,
Oppenheimer Asset Allocation Fund,
Oppenheimer Strategic Diversified Income
Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Short-Term Income
Fund, Oppenheimer High Income Fund and
Oppenheimer Bond Fund; an officer of other
OppenheimerFunds.
Barbara Niederbrach, None.
Assistant Vice President
Stuart Novek, Formerly a Director Account Supervisor for
Vice President J. Walter Thompson.
Robert A. Nowaczyk, None.
Vice President
Robert E. Patterson, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Main Street California Tax-
Exempt Fund, Oppenheimer Insured Tax-Exempt
Bond Fund, Oppenheimer Intermediate Tax-
Exempt Bond Fund, Oppenheimer Florida Tax-
Exempt Fund, Oppenheimer New Jersey Tax-
Exempt Fund, Oppenheimer Pennsylvania Tax-
Exempt Fund, Oppenheimer California Tax-
Exempt Fund, Oppenheimer New York Tax-Exempt
Fund and Oppenheimer Tax-Free Bond Fund;
Vice President of the New York Tax-Exempt
Income Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income Trust.
Tilghman G. Pitts III, Chairman and Director of the Distributor.
Executive Vice President
and Director
Jane Putnam, Associate Portfolio Manager of Oppenheimer
Assistant Vice President Growth Fund and Oppenheimer Target Fund and
Portfolio Manager for Oppenheimer Variable
Account Funds-Growth Fund; Senior Investment
Officer and Portfolio Manager with Chemical
Bank.
Russell Read, Formerly an International Finance Consultant
Assistant Vice President for Dow Chemical.
Thomas Reedy, Vice President of Oppenheimer Multi-Sector
Vice President Income Trust and Oppenheimer Multi-
Government Trust; an officer of other
OppenheimerFunds; formerly a Securities
Analyst for the Manager.
David Rosenberg, Vice President and Portfolio Manager of
Vice President Oppenheimer Limited-Term Government Fund and
Oppenheimer U.S. Government Trust. Formerly
Vice President and Senior Portfolio Manager
for Delaware Investment Advisors.
Richard H. Rubinstein, Vice President and Portfolio Manager of
Vice President Oppenheimer Asset Allocation Fund,
Oppenheimer Fund and Oppenheimer Multiple
Strategies Fund; an officer of other
OppenheimerFunds; formerly Vice President
and Portfolio Manager/Security Analyst for
Oppenheimer Capital Corp., an investment
adviser.
Lawrence Rudnick, Formerly Vice President of Dollar Dry Dock
Assistant Vice President Bank.
Ellen Schoenfeld, None.
Assistant Vice President
Nancy Sperte, None.
Senior Vice President
Donald W. Spiro, President and Trustee of the New York-based
Chairman Emeritus OppenheimerFunds; formerly Chairman of the
and Director Manager and the Distributor.
Arthur Steinmetz, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Strategic Diversified Income
Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Investment Grade Bond
Fund, Oppenheimer Strategic Short-Term
Income Fund; an officer of other
OppenheimerFunds.
Ralph Stellmacher, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Champion High Yield Fund and
Oppenheimer High Yield Fund; an officer of
other OppenheimerFunds.
John Stoma, Vice President Formerly Vice President of Pension Marketing
with Manulife Financial.
James C. Swain, Chairman, CEO and Trustee, Director or
Vice Chairman of the Managing Partner of the Denver-based
Board of Directors OppenheimerFunds; President and a Director
and 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 Time Fund and Oppenheimer
Discovery Fund. Formerly Managing Director
of Buckingham Capital Management.
Gary Tyc, Vice President, Assistant Treasurer of the Distributor and
Assistant Secretary SFSI.
and Assistant Treasurer
Ashwin Vasan, Vice President of Oppenheimer Multi-Sector
Vice President Income Trust and Oppenheimer Multi-
Government Trust: an officer of other
OppenheimerFunds.
Valerie Victorson, None.
Vice President
John Wallace, Vice President and Portfolio Manager of
Vice President Oppenheimer Total Return Fund, and
Oppenheimer Main Street Income and Growth
Fund; an officer of other OppenheimerFunds;
formerly a Securities Analyst and Assistant
Portfolio Manager for the Manager.
Dorothy Warmack, Vice President and Portfolio Manager of
Vice President Daily Cash Accumulation Fund, Inc.,
Oppenheimer Cash Reserves, Centennial
America Fund, L.P., Centennial Government
Trust and Centennial Money Market Trust;
Vice President of Centennial.
Christine Wells, None.
Vice President
Susan Wilson-Perez Senior Vice President, Strategic Planning
Vice President Smith Barney
William L. Wilby, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Global Fund and Oppenheimer
Global Growth & Income Fund; Vice President
of HarbourView; an officer of other
OppenheimerFunds.
Carol Wolf, Vice President and Portfolio Manager of
Vice President Oppenheimer Money Market Fund, Inc.,
Centennial America Fund, L.P., Centennial
Government Trust, Centennial Money Market
Trust and Daily Cash Accumulation Fund,
Inc.; Vice President of Oppenheimer Multi-
Sector Income Trust; Vice President of
Centennial.
Robert G. Zack, Associate General Counsel of the Manager;
Senior Vice President Assistant Secretary of the OppenheimerFunds;
and Assistant Secretary Assistant Secretary of SSI, SFSI; an officer
of other OppenheimerFunds.
Eva A. Zeff, Vice President and Portfolio Manager of
Assistant Vice President Oppenheimer Mortgage Income Fund; an officer
of other OppenheimerFunds; formerly a
Securities Analyst for the Manager.
Arthur J. Zimmer, Vice President and Portfolio Manager of
Vice President Centennial America Fund, L.P., Oppenheimer
Money Fund, Centennial Government Trust,
Centennial Money Market Trust and Daily Cash
Accumulation Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income Trust; Vice
President of Centennial; an officer of other
OppenheimerFunds.
</TABLE>
The OppenheimerFunds include the New York-based OppenheimerFunds
and the Denver-based OppenheimerFunds set forth below:
New York-based OppenheimerFunds
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Mortgage Income Fund
Oppenheimer Multi-Government Trust
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Tax-Exempt Trust
Oppenheimer New York Tax-Exempt Trust
Oppenheimer Fund
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer Time Fund
Oppenheimer U.S. Government Trust
Denver-based OppenheimerFunds
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Champion High Yield Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Funds Trust
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Tax-Exempt Bond Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
The address of Oppenheimer Management Corporation, the New York-
based OppenheimerFunds, Oppenheimer Funds 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 OppenheimerFunds, Shareholder
Financial Services, Inc., Shareholder Services, Inc., Oppenheimer
Shareholder Services, Centennial Asset Management Corporation, Centennial
Capital Corp., and Main Street Advisers, Inc. is 3410 South Galena Street,
Denver, Colorado 80231.
Item 29. Principal Underwriter
(a) Oppenheimer Funds 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 Oppenheimer Management
Corporation 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>
George Clarence Bowen+ Vice President & Treasurer Treasurer
Christopher Blunt Vice President None
6 Baker Avenue
Westport, CT 06880
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Mary Ann Bruce* Senior Vice President - None
Financial Institution Div.
Robert Coli Vice President None
12 Whitetail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Ronald Corlew Vice President None
1020 Montecito Drive
Los Angeles, CA 90031
Mary Crooks+ Vice President None
Paul Della Bovi Vice President None
750 West Broadway
Apt. 5M
Long Beach, NY 11561
Andrew John Donohue* Executive Vice Secretary
President & Director
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
Gregory Farley Vice President - None
1116 Westbury Circle Financial Institution Div.
Eagan, MN 55123
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Wendy Fishler* Vice President - None
Financial Institution Div.
Wayne Flanagan Vice President - None
36 West Hill Road Financial Institution Div.
Brookline, NH 03033
Ronald R. Foster Vice President - None
11339 Avant Lane Eastern Division Manager
Cincinnati, OH 45249
Patricia Gadecki Vice President None
6026 First Ave. South,
Apt. 10
St. Petersburg, FL 33707
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Carla Jiminez Vice President None
609 Chimney Bluff Drive
Mt. Pleasant, SC 29464
Terry Lee Kelley Vice President - None
1431 Woodview Lane Financial Institution Div.
Commerce Township, MI 48382
Michael Keogh* Vice President None
Richard Klein Vice President None
4011 Queen Avenue South
Minneapolis, MN 55410
Hans Klehmet II Vice President None
26542 Love Lane
Ramona, CA 92065
Ilene Kutno* Assistant Vice President None
Wayne A. LeBlang Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Laura Mulhall* Vice President - None
Director of Key Accounts
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
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
1900 Eight Avenue
San Francisco, CA 94116
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.
Minnie Ra Vice President - None
109 Peach Street Financial Institution Div.
Avenel, NJ 07001
David Robertson Vice President None
9 Hawks View
Hoeoye Falls, NY 14472
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Robert Romano Vice President None
1512 Fallingbrook Drive
Fishers, IN 46038
James Ruff* President None
Timothy Schoeffler Vice President None
3118 N. Military Road
Arlington, VA 22207
Mark Schon Vice President None
10483 E. Corrine Dr.
Scottsdale, AZ 85259
Michael Sciortino Vice President None
785 Beau Chene Dr.
Mandeville, LA 70448
James A. Shaw Vice President - None
5155 West Fair Place Financial Institution Div.
Littleton, CO 80123
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker Vice President - None
2017 N. Cleveland, #2 Financial Institution Div.
Chicago, IL 60614
Michael Stenger Vice President None
C/O America Building
30 East Central Pkwy
Suite 1008
Cincinnati, OH 45202
Paul Stickney Vice President None
1314 Log Cabin Lane
St. Louis, MO 63124
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
Gregory K. Wilson Vice President None
2 Side Hill Road
Westport, CT 06880
Bernard J. Wolocko Vice President None
33915 Grand River
Farmington, MI 48335
William Harvey Young+ Vice President None
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
</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
-------------------
Not applicable.
ITEM 32. Undertakings
------------
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a Trustee or
Trustees when requested to do so by the holders of at least 10% of
Registrant's outstanding shares and in connection with such meeting to
comply with provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York
on the 24th day of April, 1995.
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
By: /s/ Donald W. Spiro*
----------------------------------------
Donald W. Spiro, 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:
Signatures Title Date
- --------------- ----
/s/ Leon Levy* Chairman of the
- -------------- Board of Trustees April 24, 1995
Leon Levy
/s/ Donald W. Spiro* President, Principal
- -------------------- Executive Officer
Donald W. Spiro and Trustee April 24, 1995
/s/ George Bowen* Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting April 24, 1995
Officer
/s/ Leo Cherne* Trustee April 24, 1995
- ---------------
Leo Cherne
/s/ Robert G. Galli* Trustee April 24, 1995
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee April 24, 1995
- ----------------------
Benjamin Lipstein
/s/ Kenneth A. Randall* Trustee April 24, 1995
- -----------------------
Kenneth A. Randall
/s/ Sidney M. Robbins* Trustee April 24, 1995
- ----------------------
Sidney M. Robbins
/s/ Russell S. Reynolds, Jr.* Trustee April 24, 1995
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee April 24, 1995
- --------------------
Pauline Trigere
/s/ Elizabeth B. Moynihan* Trustee April 24, 1995
- --------------------------
Elizabeth B. Moynihan
/s/ Clayton K. Yeutter* Trustee April 24, 1995
- -----------------------
Clayton K. Yeutter
/s/ Edward V. Regan* Trustee April 24, 1995
- --------------------
Edward V. Regan
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
EXHIBIT INDEX
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Form N-1A
Item No. Description
- --------- -----------
24(a)(8) Independent Auditors' Report
24(b)(2) By-Laws dated 10/10/89
24(b)(4)(i) Specimen OPTEF Class A Share Certificate
24(b)(4)(ii) Specimen OPTEF Class B Share Certificate
24(b)(5)(i) OPTEF Investment Advisory Agreement dated 10/22/90
24(b)(6)(a) General Distributor's Agreement dated 8/19/93
24(b)(8) Custodian Agreement dated 9/18/89
24(b)(10) Opinion and Consent of Counsel dated 9/15/89
24(b)(13) Investment Letter dated 8/29/89
24(b)(15)(i) Service Plan and Agreement for OPTEF Class A Shares, dated
7/1/93
24(b)(15)(ii) Distribution and Service Plan and Agreement for OPTEF Class
B Shares, dated 2/10/94
24(b)(16) Performance Computation Schedule for (i) OPTEF, (ii) OFTEF,
and (iii) ONJTEF.
24(b)(17) Financial Data Schedule for Class A and Class B shares of
OPTEF, OFTEF and ONJTEF.
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer Multi-State Tax-Exempt Trust:
We consent to the use of our reports dated January 23, 1995 included
herein and the reference to our Firm under the heading "Financial
Highlights" in Part A of the registration statement.
/s/ KPMG Peat Marwick LLP
- --------------------
KPMG Peat Marwick LLP
Denver, Colorado
April 19, 1995
Exhibit 24(b)(2)
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
(the "Trust")
BY-LAWS
October 10, 1989
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the Shareholders
(which terms as used herein shall, together with all other terms defined
in the Declaration of Trust, have the same meaning as in the Declaration
of Trust) shall be held at the principal office of the Trust or at such
other place as may from time to time be designated by the Board of
Trustees and stated in the notice of meting.
Section 2. Shareholder Meetings. Meetings of the Shareholders
for any purpose or purposes may be called by the Chairman of the Board of
Trustees, if any, or by the President or by the Board of Trustees and
shall be called by the Secretary upon receipt of the request in writing
signed by Shareholders holding not less than one third in amount of the
entire number of Shares issued and outstanding and entitled to vote
thereat. Such request shall state the purpose or purposes of the proposed
meeting. In addition, meetings of the Shareholders shall be called by the
Board of Trustees upon receipt of the request in writing signed by
Shareholders that have, for at least six months prior to making such
requests, held not less than ten percent in amount of the entire number
of Shares issued and outstanding and entitled to vote thereat, stating
that the purpose of the proposed meeting is the removal of a Trustee.
Section 3. Notice of Meetings of Stockholders. Not less than
ten days' and not more than 120 days' written or printed notice of every
meeting of Shareholders, stating the time and place thereof (and the
general nature of the business proposed to be transacted at any special
or extraordinary meeting), shall be given to each Shareholder entitled to
vote thereat by leaving the same with him or at his residence or usual
place of business or by mailing it, postage prepaid and addressed to him
at his address as it appears upon the books of the Trust.
No notice of the time, place or purpose of any meeting of
Shareholders need be given to any Shareholder who attends in person or by
proxy or to any Shareholder who, in writing executed and filed with the
records of the meeting, either before or after the holding thereof, waives
such notice.
Section 4. Record Dates. The Board of Trustees may fix, in
advance, a date, not exceeding 120 days and not less than ten days
preceding the date of any meeting of Shareholders, and not exceeding 120
days preceding any dividend payment date or any date for the allotment of
rights, as a record date for the determination of the Shareholders
entitled to receive such dividend or rights, as the case may be; and only
Shareholders of record on such date and entitled to receive such dividends
or rights shall be entitled to notice of and to vote at such meeting or
to receive such dividends or rights, as the case may be.
Section 5. Access to Shareholder List. The Board of Trustees
shall make available a list of the 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 prior to submitting such request)
holding Shares of the Trust valued at $25,000 or more at current offering
price (as defined in the Trust's Prospectus) or holding not less than one
percent in amount of the entire number of shares of the Trust issued and
outstanding, whichever is less; such request must state that such
Shareholders wish to communicate with other Shareholders with a view to
obtaining signatures to request a meeting pursuant to Section 2 of Article
II of these By-Laws and must be accompanied by the form of communication
requested to be sent to the Shareholders. The Board of Trustees may, in
its discretion, satisfy its obligation under this Section 5 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
Shareholders' proposed communication and form of request, at such
Shareholders' expense, to all other Shareholders.
Section 6. Quorum, Adjournment of Meetings. The presence in
person or by proxy of the holders of record of more than 50% of the Shares
of the Trust issued and outstanding and entitled to vote thereat shall
constitute a quorum at all meetings of Shareholders. If at any meeting
of Shareholders there shall be less than a quorum present, the
Shareholders 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.
Section 7. Voting and Inspectors. At all meetings of
Shareholders, every Shareholder of record entitled to vote thereat shall
be entitled to vote at such meeting either in person or by proxy appointed
by instrument in writing subscribed by such Shareholder or such
Shareholder's duly authorized attorney-in-fact.
All elections of Trustees shall be had by a plurality of the
votes cast and all questions shall be decided by a majority of the votes
cast, in each case at a duly constituted meeting, except as otherwise
provided in the Declaration of Trust or in these By-Laws or by specific
statutory provision superseding the restrictions and limitations contained
in the Declaration of Trust or in these By-Laws.
At any election of Trustees, the Board of Trustees prior thereto
may, or, if they have not so acted, the Chairman of the meeting may, and
upon the request of the holders of ten percent (10%) of the Shares
entitled to vote at such election shall, appoint two inspectors of
election who shall first subscribe an oath or affirmation to execute
faithfully the duties of inspectors at such election with strict
impartiality and according to the best of their ability, and shall after
the election make a certificate of the result of the vote taken. No
candidate for the office of Trustee shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be
taken upon any election or matter, and such vote shall be taken upon the
request of the holders of ten percent (10%) of the Shares entitled to vote
on such election or matter.
Section 8. Conduct of Shareholders' Meetings. The meetings of
the Shareholders shall be presided over by the Chairman of the Board of
Trustees, if any, or if he shall not be present, by the President, or if
he shall not be present, by a Vice-President, or if none of the Chairman
of the Board of Trustees, the President or any Vice-President is present,
by a chairman to be elected at the meeting. The Secretary of the Trust,
if present, shall act as Secretary of such meetings, or if the Secretary
is not present, an Assistant Secretary shall so act; if neither the
Secretary nor an Assistant Secretary is present, than the meeting shall
elect its secretary.
Section 9. Concerning Validity of Proxies, Ballots, Etc. At
every meeting of the Shareholders, all proxies shall be received and taken
in charge of and all ballots shall be received and canvassed by the
secretary of the meeting, who shall decide all questions touching the
qualification of voters, the validity of the proxies, and the acceptance
or rejection of votes, unless inspectors of election shall have been
appointed as provided in Section 7, in which event such inspectors of
election shall decide all such questions.
ARTICLE II
BOARD OF TRUSTEES
Section 1. Number and Tenure of Office. The business and
property of the Trust shall be conducted and managed by a Board of
Trustees consisting of the number of initial Trustees, which number may
be increased or decreased as provided in Section 2 of this Article. Each
Trustee shall, except as otherwise provided herein, hold office until the
next meeting of Shareholders of the Trust following his election called
for the purpose of electing Trustees or until his successor is duly
elected and qualifies. Trustees need not be Shareholders.
Section 2. Increase or Decrease in Number of Trustees; Removal.
The Board of Trustees, by the vote of a majority of the entire Board, may
increase the number of Trustees to a number not exceeding fifteen, and may
elect Trustees to fill the vacancies created by any such increase in the
number of Trustees until the next meeting called for the purpose of
electing Trustees or until their successors are duly elected and qualify;
the Board of Trustees, by the vote of a majority of the entire Board, may
likewise decrease the number of Trustees to a number not less than three
but the tenure of office of any Trustee shall not be affected by any such
decrease. Vacancies occurring other than by reason of any such increase
shall be filled as provided for a Massachusetts business trust. In the
event that after the proxy material has been printed for a meeting of
Shareholders at which Trustees are to be elected and any one or more of
the nominees named in such proxy material dies or becomes incapacitated,
the authorized number of Trustees shall be automatically reduced by the
number of such nominees, unless the Board of Trustees prior to the meeting
shall otherwise determine. A Trustee at any time may be removed either
with or without cause by resolution duly adopted by the affirmative votes
of the holders of not less than two-thirds of the Shares of the Trust,
present in person or by proxy at any meeting of Shareholders at which
such vote may be taken, provided that a quorum is present. Any Trustee
at any time may be removed for cause by resolution duly adopted at any
meeting of the Board of Trustees provided that notice thereof is contained
in the notice of such meeting and that such resolution is adopted by the
vote of at least two thirds of the Trustees whose removal is not proposed.
As used herein, "for cause" shall mean any cause which under Massachusetts
law would permit the removal of a Trustee of a business trust.
Section 3. Place of Meeting. The Trustees may hold their
meetings, have one or more offices, and keep the books of the Trust
outside Massachusetts, at any office or offices of the Trust or at any
other place as they may from time to time by resolution determine, or, in
the case of meetings, as they may from time to time by resolution
determine or as shall be specified or fixed in the respective notices or
waivers of notice thereof.
Section 4. Regular Meetings. Regular meetings of the Board of
Trustees shall be held at such time and on such notice, if any, as the
Trustees may from time to time determine.
Section 5. Special Meetings. Special meetings of the Board of
Trustees may be held from time to time upon call of the Chairman of the
Board of Trustees, if any, the President, or two or more of the Trustees,
by oral, telegraphic or written notice duly served on or sent or mailed
to each Trustee not less than one day before such meeting. No notice need
be given to any Trustee who attends in person or to any Trustee who in
writing executed and filed with the records of the meeting either before
or after the holding thereof, waives such notice. Such notice or waiver
of notice need not state the purpose or purposes of such meeting.
Section 6. Quorum. One-third of the Trustees then in office
shall constitute a quorum for the transaction of business, provided that
a quorum shall in no case be less than two Trustees. If at any meeeting
of the Board there shall be less than a quorum present (in person or by
open telephone line, to the extent permitted by the Investment Company Act
of 1940 (the "1940 Act")), a majority of those present may adjourn the
meeting from time to time until a quorum shall have been obtained. The
act of the majority of the Trustees present at any meeting at which there
is a quorum shall be the act of the Board, except as may be otherwise
specifically provided by statute, by the Declaration of Trust or by these
By-Laws.
Section 7. Executive Committee. The Board of Trustees may, by
the affirmative vote of a majority of the entire Board, elect from the
Trustees an Executive Committee to consist of such number of Trustees as
the Board may from time to time determine. The Board of Trustees by such
affirmative vote shall have power at any time to change the members of
such Committee and may fill vacancies in the Committee by election from
the Trustees. When the Board of Trustees is not in session, the Executive
Committee shall have and may exercise any or all of the powers of the
Board of Trustees in the management of the business and affairs of the
Trust (including the power to authorize the seal of the Trust to be
affixed to all papers which may require it) except as provided by law and
except the power to increase or decrease the size of, or fill vacancies
on, the Board. The Executive Committee may fix its own rules of
procedure, and may meet, when and as provided by such rules or by
resolution of the Board of Trustees, but in every case the presence of a
majority shall be necessary to constitute a quorum. In the absence of any
member of the Executive Committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a member of
the Board of Trustees to act in the place of such absent member.
Section 8. Other Committees. The Board of Trustees, by the
affirmative vote of a majority of the entire Board, may appoint other
committees which shall in each case consist of such number of members (not
less than two) and shall have and may exercise such powers as the Board
may determine in the resolution appointing them. A majority of all
members of any such committee may determine its action, and fix the time
and place of its meetings, unless the Board of Trustees shall otherwise
provide. The Board of Trustees shall have power at any time to change the
members and powers of any such committee, to fill vacancies, and to
discharge any such committee.
Section 9. Informal Action by, and Telephone Meetings of,
Trustees and Committees. Any action required or permitted to be taken at
any meeting of the Board of Trustees or any committee thereof may be taken
without a meeting, if a written consent to such action is signed by all
members of the Board, or of such committee, as the case may be. Trustees
or members of a committee of the Board of Trustees may participate in a
meeting by means of a conference telephone or similar communications
equipment; such participation shall, except as otherwise required by the
1940 Act, have the same effect as presence in person.
Section 10. Compensation of Trustees. Trustees shall be
entitled to receive such compensation from the Trust for their services
as may from time to time be voted by the Board of Trustees.
Section 11. Dividends. Dividends or distributions payable on
the Shares of any Series may, but need not be, declared by specific
resolution of the Board as to each dividend or distribution; in lieu of
such specific resolutions, the Board may, by general resolution, determine
the method of computation thereof, the method of determining the
Shareholders of the Series to which they are payable and the methods of
determining whether and to which Shareholders they are to be paid in cash
or in additional Shares.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the
Trust may include a Chairman of the Board of Trustees, and shall include
a President, one or more Vice-Presidents (the number thereof to be
determined by the Board of Trustees), a Secretary and a Treasurer. The
Chairman of the Board of Trustees, if any, and the President shall be
selected from among the Trustees. The Board of Trustees may also in its
discretion appoint Assistant Secretaries, Assistant Treasurers, and other
officers, agents and employees, who shall have authority and perform such
duties as the Board or the Executive Committee may determine. The Board
of Trustees may fill any vacancy which may occur in any office. Any two
offices, except those of President and Vice-President, may be held by the
same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is required by
law or these By-Laws to be executed, acknowledged or verified by two or
more officers.
Section 2. Term of Office. The term of office of all officers
shall be one year and until their respective successors are chosen and
qualify; however, any officer may be removed from office at any time with
or without cause by the vote of a majority of the entire Board of
Trustees.
Section 3. Powers and Duties. The officers of the Trust shall
have such powers and duties as generally pertain to their respective
offices, as well as such powers and duties as may from time to time be
conferred by the Board of Trustees or the Executive Committee.
ARTICLE IV
SHARES
Section 1. Certificates of Shares. Each Shareholder of any
Series of the Trust may be issued a certificate or certificates for his
Shares of that Series, in such form as the Board of Trustees may from time
to time prescribe, but only if and to the extent and on the conditions
described by the Board.
Section 2. Transfer of Shares. Shares of any Series shall be
transferable on the books of the Trust by the holder thereof in person or
by his duly authorized attorney or legal representative, upon surrender
and cancellation of certificates, if any, for the same number of Shares
of that Series, duly endorsed or accompanied by proper instruments of
assignment and transfer, with such proof of the authenticity of the
signature as the Trust or its agent may reasonably require; in the case
of shares not represented by certificates, the same or similar
requirements may be imposed by the Board of Trustees.
Section 3. Share Ledgers. The share ledgers of the Trust,
containing the name and address of the Shareholders of each Series and the
number of shares of that Series, held by them respectively, shall be kept
at the principal offices of the Trust or, if the Trust employs a transfer
agent, at the offices of the transfer agent of the Trust.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Trustees may determine the conditions upon which a new certificate may be
issued in place of a certificate which is alleged to have been lost,
stolen or destroyed; and may, in their discretion, require the owner of
such certificate or his legal representative to give bond, with sufficient
surety to the Trust and the transfer agent, if any, to indemnify it and
such transfer agent against any and all loss or claims which may arise by
reason of the issue of a new certificate in the place of the one so lost,
stolen or destroyed.
ARTICLE V
SEAL
The Board of Trustees shall provide a suitable seal of the Trust,
in such form and bearing such inscriptions as it may determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Trust shall be fixed by the Board of
Trustees.
ARTICLE VII
AMENDMENT OF BY-LAWS
The By-Laws of the Trust may be altered, amended, added to or
repealed by the Shareholders or by majority vote of the entire Board of
Trustees, but any such alteration, amendment, addition or repeal of the
By-Laws by action of the Board of Trustees may be altered or repealed by
the Shareholders.
ORGZN\740#2
Exhibit 24(b)(4)(i)
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
Class A Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: CLASS A SHARES
(centered
below boxes) Oppenheimer Multi-State Tax-Exempt Trust
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
(at left) THIS IS TO CERTIFY THAT (at right)
SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 100
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer Pennsylvania Tax-Exempt Fund
a series of Oppenheimer Multi-State Tax-Exempt Trust
(hereinafter called the "Trust"), transferable only on the
books of the Trust 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 Trust's
Declaration of Trust 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 Trust and the signatures
of its duly authorized officers.
Dated:
(at left (at right
of seal) of seal)
/s/ Andrew J. Donohue /s/ Donald W. Spiro
--------------------- ------------------
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right,
printed vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
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 joint 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 on above list.
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________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
Trust 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 NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Trust.
PLEASE NOTE: This document contains a OppenheimerFunds "four
watermark when viewed at an angle. hands" logotype
It is invalid without this watermark.
_______________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EDGAR\740CERTA
Exhibit 24(b)(4)(ii)
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
Class B Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: CLASS A SHARES
(centered
below boxes) Oppenheimer Multi-State Tax-Exempt Trust
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
(at left) THIS IS TO CERTIFY THAT (at right)
SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 209
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer Pennsylvania Tax-Exempt Fund
a series of Oppenheimer Multi-State Tax-Exempt Trust
(hereinafter called the "Trust"), transferable only on the
books of the Trust 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 Trust's
Declaration of Trust 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 Trust and the signatures
of its duly authorized officers.
Dated:
(at left (at right
of seal) of seal)
/s/ Andrew J. Donohue /s/ Donald W. Spiro
--------------------- ------------------
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right,
printed vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
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 joint 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 on above list.
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________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
Trust 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 NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Trust.
PLEASE NOTE: This document contains a OppenheimerFunds "four
watermark when viewed at an angle. hands" logotype
It is invalid without this watermark.
_______________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EDGAR\740CERTB
Exhibit 24(b)(5)(i)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the 22nd day of October, 1990, by and between
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND (hereinafter referred to as the
"Fund"), and OPPENHEIMER MANAGEMENT CORPORATION (hereinafter referred to
as "OMC").
WHEREAS, the Fund is an open-end, non-diversified series
investment company registered as such with the Securities and Exchange
Commission (the "Commission") pursuant to the Investment Company Act of
1940 (the "Investment Company Act"), and OMC is a registered investment
adviser;
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, it is agreed by and between the parties,
as follows:
1. General Provision.
The Fund hereby employs OMC and OMC hereby undertakes to act as
the investment adviser of the Fund and to perform for the Fund such other
duties and functions as are hereinafter set forth. OMC shall, in all
matters, give to the Fund and its Board of Trustees the benefit of its
best judgment, effort, advice and recommendations and shall, at all times
conform to, and use its best efforts to enable the Fund to conform to (i)
the provisions of the Investment Company Act and any rules or regulations
thereunder; (ii) any other applicable provisions of state or Federal law;
(iii) the provisions of the Declaration of Trust and By-Laws of the Fund
as amended from time to time; (iv) policies and determinations of the
Board of Trustees of the Fund; (v) the fundamental policies and investment
restrictions of the Fund as reflected in its registration statement under
the Investment Company Act or as such policies may, from time to time, be
amended by the Fund's shareholders; and (vi) the Prospectus and Statement
of Additional Information of the Fund in effect from time to time. The
appropriate officers and employees of OMC shall be available upon
reasonable notice for consultation with any of the Trustees and officers
of the Fund with respect to any matters dealing with the business and
affairs of the Fund including the valuation of portfolio securities of the
Fund which are either not registered for public sale or not traded on any
securities market.
2. Investment Management.
(a) OMC shall, subject to the direction and control by the
Fund's Board of Trustees, (i) regularly provide investment advice and
recommendations to the Fund with respect to its investments, investment
policies and the purchase and sale of securities; (ii) supervise
continuously the investment program of the Fund and the composition of its
portfolio and determine what securities shall be purchased or sold by the
Fund; and (iii) arrange, subject to the provisions of paragraph 7 hereof,
for the purchase of securities and other investments for the Fund and the
sale of securities and other investments held in the Fund's portfolio.
(b) Provided that the Fund shall not be required to pay any
compensation other than as provided by the terms of this Agreement and
subject to the provisions of paragraph 7 hereof, OMC may obtain investment
information, research or assistance from any other person, firm or
corporation to supplement, update or otherwise improve its investment
management services.
(c) Provided that nothing herein shall be deemed to protect OMC
from willful misfeasance, bad faith or gross negligence in the performance
of its duties, or reckless disregard of its obligations and duties under
this Agreement, OMC shall not be liable for any loss sustained by reason
of good faith errors or omissions in connection with any matters to which
this Agreement relates.
(d) Nothing in this Agreement shall prevent OMC or any officer
thereof from acting as investment adviser for any other person, firm or
corporation or in any way limit or restrict OMC or any of its directors,
officers, stockholders or employees from buying, selling or trading any
securities for its or their own account or for the account of others for
whom it or they may be acting, provided that such activities will not
adversely affect or otherwise impair the performance by OMC of its duties
and obligations under this Agreement.
3. Other Duties of OMC.
OMC shall, at its own expense, provide and supervise the
activities of all administrative and clerical personnel as shall be
required to provide effective administration for the Fund, including the
compilation and maintenance of such records with respect to its operations
as may reasonably be required; the preparation and filing of such reports
with respect thereto as shall be required by the Commission; composition
of periodic reports with respect to operations of the Fund for its
shareholders; composition of proxy materials for meetings of the Fund's
shareholders; and the composition of such registration statements as may
be required by Federal and state securities laws for continuous public
sale of shares of the Fund. OMC shall, at its own cost and expense, also
provide the Fund with adequate office space, facilities and equipment.
OMC shall, at its own expense, provide officers for the Fund as the Fund's
Board may request.
4. Allocation of Expenses.
All other costs and expenses of the Fund not expressly assumed
by OMC under this Agreement, or to be paid by the Distributor of the
shares of the Fund, shall be paid by the Fund, including, but not limited
to: (i) interest and taxes; (ii) brokerage commissions; (iii) insurance
premiums for fidelity and other coverage requisite to its operations; (iv)
compensation and expenses of its trustees other than those associated or
affiliated with OMC; (v) legal and audit expenses; (vi) custodian and
transfer agent fees and expenses; (vii) expenses incident to the
redemption of its shares; (viii) expenses incident to the issuance of its
shares against payment therefor by or on behalf of the subscribers
thereto; (ix) fees and expenses, other than as hereinabove provided,
incident to the registration under Federal and state securities laws of
shares of the Fund for public sale; (x) expenses of printing and mailing
reports, notices and proxy materials to shareholders of the Fund; (xi)
except as noted above, all other expenses incidental to holding meetings
of the Fund's shareholders; and (xii) such extraordinary non-recurring
expenses as may arise, including litigation, affecting the Fund and any
legal obligation which the Fund may have to indemnify its officers and
trustees with respect thereto. Any officers or employees of OMC or any
entity controlling, controlled by or under common control with OMC who
also serve as officers, trustees or employees of the Fund shall not
receive any compensation from the Fund for their services.
5. Compensation of OMC.
The Fund agrees to pay OMC and OMC agrees to accept as full
compensation for the performance of all functions and duties on its part
to be performed pursuant to the provisions hereof, a fee computed on the
aggregate net asset value of the Fund as of the close of each business day
and payable monthly at the following annual rates:
.60% of the first $200 million of net assets;
.55% of the next $100 million;
.50% of the next $200 million;
.45% of the next $250 million;
.40% of the next $250 million;
.35% of the net assets in excess of $1 billion
6. Use of Name "Oppenheimer."
OMC hereby grants to the Fund a royalty-free, non-exclusive
license to use the name "Oppenheimer" in the name of the Fund for the
duration of this Agreement and any extensions or renewals thereof. To the
extent necessary to protect OMC's rights to the name "Oppenheimer" under
applicable law, such license shall allow the Manager to inspect and,
subject to control by the Fund's Board, control the nature and quality of
services offered by the Fund under such name and may, upon termination of
this Agreement, be terminated by OMC, in which event the Fund shall
promptly take whatever action may be necessary to change its name and
discontinue any further use of the name "Oppenheimer" in the name of the
Fund or otherwise. The name "Oppenheimer" may be used by OMC in
connection with any of its activities, or licensed by OMC to any other
party.
7. Portfolio Transactions and Brokerage.
(a) OMC is authorized, in arranging the purchase and sale of the
Fund's portfolio securities, to employ or deal with such members of
securities or commodities exchanges, brokers or dealers (hereinafter
"broker-dealers"), as may, in its best judgment, implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" (prompt
and reliable execution at the most favorable security price obtainable)
of the Fund's portfolio transactions as well as to obtain, consistent with
the provisions of subparagraph (c) of this paragraph 7, the benefit of
such investment information or research as will be of significant
assistance to the performance by OMC of its investment management
functions.
(b) OMC shall select broker-dealers to effect the Fund's
portfolio transactions on the basis of its estimate of their ability to
obtain best execution of particular and related portfolio transactions.
The abilities of a broker-dealer to obtain best execution of particular
portfolio transaction(s) will be judged by OMC on the basis of all
relevant factors and considerations including, insofar as feasible, the
execution capabilities required by the transaction or transactions; the
ability and willingness of the broker-dealer to facilitate the Fund's
portfolio transactions by participating therein for its own account; the
importance to the Fund of speed, efficiency or confidentiality; the
broker-dealer's apparent familiarity with sources from or to whom
particular securities might be purchased or sold; as well as any other
matters relevant to the selection of a broker-dealer for particular and
related transactions of the Fund.
(c) OMC shall have discretion, in the interest of the Fund, to
allocate brokerage on the Fund's portfolio transactions to broker-dealers,
other than affiliated broker-dealers, qualified to obtain best execution
of such transactions who provide brokerage and/or research services (as
such services are defined in Section 28(e)(3) of the Securities Exchange
Act of 1934) and to cause the Fund to pay such broker-dealers a commission
for effecting a portfolio transaction for the Fund that is in excess of
the amount of commission another broker-dealer adequately qualified to
effect such transaction would have charged for effecting that transaction,
if OMC determines, in good faith, that such commission is reasonable in
relation to the value of the brokerage and/or research services provided
by such broker-dealer, viewed in terms of either that particular
transaction or the overall responsibilities of OMC or its affiliates with
respect to the accounts as to which they exercise investment discretion.
In reaching such determination, OMC will not be required to place or
attempt to place a specific dollar value on the brokerage and/or research
services provided or being provided by such broker-dealer. In
demonstrating that such determinations were made in good faith, OMC shall
be prepared to show that all commissions were allocated for purposes
contemplated by this Agreement and that the total commissions paid by the
Fund over a representative period selected by the Fund's Trustees were
reasonable in relation to the benefits to the Fund.
(d) OMC shall have no duty or obligation to seek advance
competitive bidding for the most favorable commission rate applicable to
any particular portfolio transactions or to select any broker-dealer on
the basis of its purported or "posted" commission rate but will, to the
best of its ability, endeavor to be aware of the current level of the
charges of eligible broker-dealers and to minimize the expense incurred
by the Fund for effecting its portfolio transactions to the extent
consistent with the interests and policies of the Fund as established by
the determinations of the Board of Trustees of the Fund and the provisions
of this paragraph 7.
(e) Subject to the foregoing provisions of this paragraph 7, OMC
may also consider sales of shares of the funds advised by OMC and its
affiliates as a factor in the selection of broker-dealers for its
portfolio transactions.
8. Duration.
This Agreement will take effect on the date first set forth
above. Unless earlier terminated pursuant to paragraph 10 hereof, this
Agreement shall remain in effect until December 31, 1991, and thereafter
will continue in effect from year to year, so long as such continuance
shall be approved at least annually by the Fund's Board of Trustees,
including the vote of the majority of the Trustees of the Fund who are not
parties to this Agreement or "interested persons" (as defined in the
Investment Company Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval, or by the holders of
a "majority" (as defined in the Investment Company Act) of the outstanding
voting securities of the Fund and by such a vote of the Fund's Board of
Trustees.
9. Disclaimer of Shareholder Liability.
OMC understands and agrees that the obligations of the Fund under
this Agreement are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property; OMC represents
that it has notice of the provisions of the Declaration of Trust of the
Fund disclaiming shareholder liability for acts or obligations of the
Fund.
10. Termination.
This Agreement may be terminated (i) by OMC at any time without
penalty upon sixty days' written notice to the Fund (which notice may be
waived by the Fund); or (ii) by the Fund at any time without penalty upon
sixty days' written notice to OMC (which notice may be waived by OMC)
provided that such termination by the Fund shall be directed or approved
by the vote of a majority of all of the Trustees of the Fund then in
office or by the vote of the holders of a "majority" of the outstanding
voting securities of the Fund (as defined in the Investment Company Act).
11. Assignment or Amendment.
This Agreement may not be amended or the rights of OMC hereunder
sold, transferred, pledged or otherwise in any manner encumbered without
the affirmative vote or written consent of the holders of a "majority" of
the outstanding voting securities of the Fund. This Agreement shall
automatically and immediately terminate in the event of its "assignment,"
as defined in the Investment Company Act.
12. Definitions.
The terms and provisions of this Agreement shall be interpreted
and defined in a manner consistent with the provisions and definitions
contained in the Investment Company Act.
OPPENHEIMER PENNSYLVANIA
TAX-EXEMPT FUND
Attest:
By: /s/ Mitchell J. Lindauer By: /s/ Robert G. Galli
------------------------ --------------------
Mitchell J. Lindauer Robert G. Galli, Secretary
OPPENHEIMER MANAGEMENT CORPORATION
Attest:
By: /s/ Mitchell J. Lindauer By: /s/ Robert G. Zack
-------------------------- ------------------------
Mitchell J. Lindauer Robert G. Zack
Senior Vice President
ADVISORY\740
Exhibit 24(b)(6)
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
AND
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
Date: August 19, 1993
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST, a Massachusetts business
trust (the "Trust"), is registered as an investment company under the
Investment Company Act of 1940 (the "1940 Act"), and an indefinite number
of one or more classes of its shares of beneficial interest ("Shares") of
Oppenheimer Pennsylvania Tax-Exempt Fund and Oppenheimer Florida Tax-
Exempt Fund, each of which is series of the Trust and each of which is
individually referred to herein as a "Fund", have been registered under
the Securities Act of 1933 (the "1933 Act") to be offered for sale to the
public in a continuous public offering in accordance with the terms and
conditions set forth in each Fund's Prospectus and Statement of Additional
Information ("SAI") included in the Trust's Registration Statement as it
may be amended from time to time (the "current Prospectus and/or SAI").
In this connection, the Trust desires that your firm (the "General
Distributor") act in a principal capacity as General Distributor for the
sale and distribution of Shares which have been registered as described
above and of any additional Shares which may become registered during the
term of this Agreement. You have advised the Trust that you are willing
to act as such General Distributor, and it is accordingly agreed by and
between us as follows:
1. Appointment of the Distributor. The Trust hereby appoints you
as the sole General Distributor, pursuant to the aforesaid continuous
public offering of its Shares, and the Trust further agrees from and after
the date of this Agreement, that it will not, without your consent, sell
or agree to sell any Shares otherwise than through you, except (a) the
Trust may itself sell shares without sales charge as an investment to the
officers, trustees or directors and bona fide present and former full-time
employees of the Trust, the Trust's Investment Adviser and affiliates
thereof, and to other investors who are identified in the current
Prospectus and/or SAI as having the privilege to buy Shares at net asset
value; (b) the Trust may issue shares in connection with a merger,
consolidation or acquisition of assets on such basis as may be authorized
or permitted under the 1940 Act; (c) the Trust may issue shares for the
reinvestment of dividends and other distributions of the Trust or of any
other fund if permitted by the current Prospectus and/or SAI; and (d) the
Trust may issue shares as underlying securities of a unit investment trust
if such unit investment trust has elected to use Shares as an underlying
investment; provided that in no event as to any of the foregoing
exceptions shall Shares be issued and sold at less than the then-existing
net asset value.
2. Sale of Shares. You hereby accept such appointment and agree to
use your best efforts to sell Shares, provided, however, that when
requested by the Trust at any time because of market or other economic
considerations or abnormal circumstances of any kind, or when agreed to
by mutual consent of the Trust and the General Distributor, you will
suspend such efforts. The Trust may also withdraw the offering of Shares
at any time when required by the provisions of any statute, order, rule
or regulation of any governmental body having jurisdiction. It is
understood that you do not undertake to sell all or any specific number
of Shares.
3. Sales Charge. Shares shall be sold by you at net asset value
plus a front-end sales charge not in excess of 8.5% of the offering price,
but which front-end sales charge shall be proportionately reduced or
eliminated for larger sales and under other circumstances, in each case
on the basis set forth in the current Prospectus and/or SAI. The
redemption proceeds of Shares offered and sold at net asset value with or
without a front-end sales charge may be subject to a contingent deferred
sales charge ("CDSC") under the circumstances described in the current
Prospectus and\or SAI. You may reallow such portion of the front-end
sales charge to dealers or cause payment (which may exceed the front-end
sales charge, if any) of commissions to brokers through which sales are
made, as you may determine, and you may pay such amounts to dealers and
brokers on sales of Shares from your own resources (such dealers and
brokers shall collectively include all domestic or foreign institutions
eligible to offer and sell the Shares), and in the event a Fund has more
than one class of Shares outstanding, then you may impose a front-end
sales charge and/or a CDSC on Shares of one class that is different from
the charges imposed on Shares of the Fund's other class(es), in each case
as set forth in the current Prospectus and/or SAI, provided the front-end
sales charge and CDSC to the ultimate purchaser do not exceed the
respective levels set forth for such category of purchaser in the current
Prospectus and/or SAI.
4. Purchase of Shares.
(a) As General Distributor, you shall
have the right to accept or reject
orders for the purchase of Shares at
your discretion. Any consideration
which you may receive in connection
with a rejected purchase order will
be returned promptly.
(b) You agree promptly to issue or to
cause the duly appointed transfer or
shareholder servicing agent of the
Trust to issue as your agent
confirmations of all accepted
purchase orders and to transmit a
copy of such confirmations to the
Trust. The net asset value of all
Shares which are the subject of such
confirmations, computed in accordance
with the applicable rules under the
1940 Act, shall be a liability of the
General Distributor to the Trust to
be paid promptly after receipt of
payment from the originating dealer
or broker (or investor, in the case
of direct purchases) and not later
than eleven business days after such
confirmation even if you have not
actually received payment from the
originating dealer or broker, or
investor. In no event shall the
General Distributor make payment to
the Trust later than permitted by
applicable rules of the National
Association of Securities Dealers,
Inc.
(c) If the originating dealer or broker
shall fail to make timely settlement
of its purchase order in accordance
with applicable rules of the National
Association of Securities Dealers,
Inc., or if a direct purchaser shall
fail to make good payment for shares
in a timely manner, you shall have
the right to cancel such purchase
order and, at your account and risk,
to hold responsible the originating
dealer or broker, or investor. You
agree promptly to reimburse a Fund
for losses suffered by it that are
attributable to any such
cancellation, or to errors on your
part in relation to the effective
date of accepted purchase orders,
limited to the amount that such
losses exceed contemporaneous gains
realized by a Fund for either of such
reasons with respect to other
purchase orders.
(d) In the case of a canceled purchase
for the account of a directly
purchasing shareholder, the Trust
agrees that if such investor fails to
make you whole for any loss you pay
to a Fund on such canceled purchase
order, a Fund will reimburse you for
such loss to the extent of the
aggregate redemption proceeds of any
other Shares of a Fund owned by such
investor, on your demand that a Fund
exercise its right to claim such
redemption proceeds. The Trust shall
register or cause to be registered
all Shares sold to you pursuant to
the provisions hereof in such names
and amounts as you may request from
time to time and the Trust shall
issue or cause to be issued
certificates evidencing such Shares
for delivery to you or pursuant to
your direction if and to the extent
that the shareholder account in
question contemplates the issuance of
such certificates. All Shares, when
so issued and paid for, shall be
fully paid and non-assessable by the
Trust (which shall not prevent the
imposition of any CDSC that may
apply) to the extent set forth in the
current Prospectus and/or SAI.
5. Repurchase of Shares.
(a) In connection with the repurchase of
Shares, you are appointed and shall
act as Agent of the Trust. You are
authorized, for so long as you act as
General Distributor of the Trust, to
repurchase, from authorized dealers,
certificated or uncertificated Shares
of a Fund on the basis of orders
received from each dealer
("authorized dealer") with which you
have a dealer agreement for the sale
of Shares and permitting resales of
Shares to you, provided that such
authorized dealer, at the time of
placing such resale order, shall
represent (i) if such Shares are
represented by certificate(s), that
certificate(s) for the Shares to be
repurchased have been delivered to it
by the registered owner with a
request for the redemption of such
Shares executed in the manner and
with the signature guarantee required
by the then-currently effective
prospectus of a Fund, or (ii) if such
Shares are uncertificated, that the
registered owner(s) has delivered to
the dealer a request for the
redemption of such Shares executed in
the manner and with the signature
guarantee required by the then-
currently effective prospectus of a
Fund.
(b) You shall (i) have the right in your
discretion to accept or reject orders
for the repurchase of Shares; (ii)
promptly transmit confirmations of
all accepted repurchase orders; and
(iii) transmit a copy of such
confirmation to the Trust, or, if so
directed, to any duly appointed
transfer or shareholder servicing
agent of the Trust. In your
discretion, you may accept repurchase
requests made by a financially
responsible dealer which provides you
with indemnification in form
satisfactory to you in consideration
of your acceptance of such dealer's
request in lieu of the written
redemption request of the owner of
the account; you agree that the Trust
shall be a third party beneficiary of
such indemnification.
(c) Upon receipt by the Trust or its duly
appointed transfer or shareholder
servicing agent of any certificate(s)
(if any has been issued) for
repurchased Shares and a written
redemption request of the registered
owner(s) of such Shares executed in
the manner and bearing the signature
guarantee required by the then-
currently effective Prospectus or SAI
of a Fund, a Fund will pay or cause
its duly appointed transfer or
shareholder servicing agent promptly
to pay to the originating authorized
dealer the redemption price of the
repurchased Shares (other than
repurchased Shares subject to the
provisions of part (d) of Section 5
of this Agreement) next determined
after your receipt of the dealer's
repurchase order.
(d) Notwithstanding the provisions of
part (c) of Section 5 of this
Agreement, repurchase orders received
from an authorized dealer after the
determination of a Fund's redemption
price on a regular business day will
receive that day's redemption price
if the request to the dealer by its
customer to arrange such repurchase
prior to the determination of a
Fund's redemption price that day
complies with the requirements
governing such requests as stated in
the current Prospectus and/or SAI.
(e) You will make every reasonable effort
and take all reasonably available
measures to assure the accurate
performance of all services to be
performed by you hereunder within the
requirements of any statute, rule or
regulation pertaining to the
redemption of shares of a regulated
investment company and any
requirements set forth in the then-
current Prospectus and/or SAI of a
Fund. You shall correct any error or
omission made by you in the
performance of your duties hereunder
of which you shall have received
notice in writing and any necessary
substantiating data; and you shall
hold the Trust harmless from the
effect of any errors or omissions
which might cause an over- or under-
redemption of a Fund's Shares and/or
an excess or non-payment of
dividends, capital gains
distributions, or other
distributions.
(f) In the event an authorized dealer
initiating a repurchase order shall
fail to make delivery or otherwise
settle such order in accordance with
the rules of the National
Association of Securities Dealers,
Inc., you shall have the right to
cancel such repurchase order and, at
your account and risk, to hold
responsible the originating dealer.
In the event that any cancellation of
a Share repurchase order or any error
in the timing of the acceptance of a
Share repurchase order shall result
in a gain or loss to a Fund, you
agree promptly to reimburse a Fund
for any amount by which any losses
shall exceed then-existing gains so
arising.
6. 1933 Act Registration. The Trust has delivered to you a copy of
the current Prospectus and SAI. The Trust agrees that it will use its
best efforts to continue the effectiveness of the Registration Statement
under the 1933 Act. The Trust further agrees to prepare and file any
amendments to its Registration Statement as may be necessary and any
supplemental data in order to comply with the 1933 Act. The Trust will
furnish you at your expense with a reasonable number of copies of the
Prospectus and SAI and any amendments thereto for use in connection with
the sale of Shares.
7. 1940 Act Registration. The Trust has already registered under
the 1940 Act as an investment company, and it will use its best efforts
to maintain such registration and to comply with the requirements of the
1940 Act.
8. State Blue Sky Qualification. At your request, the Trust will
take such steps as may be necessary and feasible to qualify Shares for
sale in states, territories or dependencies of the United States, the
District of Columbia, the Commonwealth of Puerto Rico and in foreign
countries, in accordance with the laws thereof, and to renew or extend any
such qualification; provided, however, that the Trust shall not be
required to qualify shares or to maintain the qualification of shares in
any jurisdiction where it shall deem such qualification disadvantageous
to the Trust.
9. Duties of Distributor. You agree that:
(a) Neither you nor any of your officers
will take any long or short position
in the Shares, but this provision
shall not prevent you or your
officers from acquiring Shares for
investment purposes only;
(b) You shall furnish to the Trust any
pertinent information required to be
inserted with respect to you as
General Distributor within the
purview of the Securities Act of 1933
in any reports or registration
required to be filed with any
governmental authority; and
(c) You will not make any representations
inconsistent with the information
contained in the current Prospectus
and/or SAI.
(d) You shall maintain such records as
may be reasonably required for the
Trust or its transfer or shareholder
servicing agent to respond to
shareholder requests or complaints,
and to permit the Trust to maintain
proper accounting records, and you
shall make such records available to
the Trust and its transfer agent or
shareholder servicing agent upon
request.
(e) In performing under this Agreement,
you shall comply with all
requirements of a Fund's current
Prospectus and/or SAI and all
applicable laws, rules and
regulations with respect to the
purchase, sale and distribution of
Shares.
10. Allocation of Costs. The Trust shall pay the cost of
composition and printing of sufficient copies of a Fund's Prospectus and
SAI as shall be required for periodic distribution to a Fund's
shareholders and the expense of registering Shares for sale under federal
securities laws. You shall pay the expenses normally attributable to the
sale of Shares, other than as paid under a Fund's Distribution Plan under
Rule 12b-1 of the 1940 Act, including the cost of printing and mailing of
the Prospectus (other than those furnished to existing shareholders) and
any sales literature used by you in the public sale of the Shares and for
registering such shares under state blue sky laws pursuant to paragraph
8.
11. Duration. This Agreement shall take effect on the date first
written above, and shall supersede any and all prior General Distributor's
Agreements by and among the Trust and you. Unless earlier terminated
pursuant to paragraph 12 hereof, this Agreement shall remain in effect
until September 30, 1994. This Agreement shall continue in effect from
year to year thereafter, provided that such continuance shall be
specifically approved at least annually: (a) by the Trust's Board of
Trustees or by vote of a majority of the voting securities of the Trust;
and (b) by the vote of a majority of the Trustees, who are not parties to
this Agreement or "interested persons" (as defined in the 1940 Act) of any
such person, cast in person at a meeting called for the purpose of voting
on such approval.
12. Termination. This Agreement may be terminated (a) by the
General Distributor at any time without penalty by giving sixty days'
written notice (which notice may be waived by the Trust); (b) by the Trust
at any time without penalty upon sixty days' written notice to the General
Distributor (which notice may be waived by the General Distributor); or
(c) by mutual consent of the Trust and the General Distributor, provided
that such termination by the Trust shall be directed or approved by the
Board of Trustees of the Trust or by the vote of the holders of a majority
of the outstanding voting securities of the Trust. In the event this
Agreement is terminated by the Trust, the General Distributor shall be
entitled to be paid the CDSC under paragraph 3 hereof on the redemption
proceeds of Shares sold prior to the effective date of such termination.
13. Assignment. This Agreement may not be amended or changed except
in writing and shall be binding upon and shall enure to the benefit of the
parties hereto and their respective successors; however, this Agreement
shall not be assigned by either party and shall automatically terminate
upon assignment.
14. Disclaimer of Shareholder Liability. The General Distributor
understands and agrees that the obligations of the Trust under this
Agreement are not binding upon any Trustee or shareholder of the Trust
personally, but bind only the Trust and the Trust's property; the General
Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Trust disclaiming shareholder liability for
acts or obligations of the Trust.
15. Section Headings. The headings of each section is for
descriptive purposes only, and such headings are not to be construed or
interpreted as part of this Agreement.
If the foregoing is in accordance with your understanding, so
indicate by signing in the space provided below.
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
By: /s/ Robert G. Zack
----------------------
Robert G. Zack
Assistant Secretary
Accepted:
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
---------------------------
Katherine P. Feld
Vice President & Secretary
OFMI\7401B
Exhibit 24(b)(8)
CUSTODIAN AGREEMENT
I. DESIGNATION OF CUSTODIAN
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND (the "Fund"), an open-
end series management investment company organized as a Massachusetts
business trust having an office at Two World Trade Center, New York, New
York 10048, hereby designates Citibank, N.A. (the "Bank"), a National
Banking Corporation incorporated under the laws of the United States of
America and having an office at 399 Park Avenue, New York, NY 10043, as
Custodian of the Property (as defined in Section III) of the Fund. By its
acceptance, the Bank agrees to serve as such Custodian upon the terms and
conditions set forth in this Agreement.
II. DELIVERY OF DOCUMENTS
(a) Documents delivered. The Fund delivers to the Bank herewith
the following documents:
(i) Resolutions authorizing the appointment of the Bank
as the custodian of the Fund and the execution by the
Fund of this Agreement;
(ii) copies, certified by the appropriate officer or
officers, of the charter and the by-laws of the Fund;
and
(iii) incumbency and signature certificates identifying and
containing the signatures of the officers of the Fund
and/or other signatories authorized to sign
Instructions (as defined below) on behalf of the
Fund, specifying the number of signatures required
for Instructions and identifying the trustees and the
other officers, if any, of the Fund.
(b) Changes. In case of any change or changes affecting any of
the documents described in this Section II, the Fund shall deliver new
documents to the Bank, to the extent necessary to reflect such change or
changes. Unless and until such new documents are delivered and an
authorized signatory of the Bank has issued a receipt for the delivery
thereof, the Bank shall be under no obligation to act (or omit to act),
in accordance with any such change, nor shall the Bank be liable for
failure so to act (or omit to act), but the Bank shall act in accordance
with the documents which such new documents are to replace.
(c) Additional information. The Fund shall furnish to the Bank
any additional information and documentation relating to the Fund and the
Fund's management company (if any) which the Bank may reasonably request.
(d) "Resolutions" defined. The term "Resolutions," as used in
this Agreement, means (i) if the trustees of the Fund are authorized to
transact business of the Fund by signing an instrument setting forth such
business, resolutions signed by the number of trustees of the Fund so
authorized and (ii) in all other cases, copies of resolutions of the
trustees of the Fund, certified by the appropriate officer or officers of
the Fund.
(e) "Depository" defined. The term "Depository" as used in this
Agreement means any "system" or "person" contemplated by Section 17 (f)
of the Investment Company Act of 1940 in which the Banks may, under that
Section and any rules, regulations or orders thereunder, deposit all or
part of the Fund's securities with the consent of the Fund, and to which
the Fund has consented.
(f) "Receipt" of payment defined. Whenever this Agreement
contemplates receipt of payment by the Bank, such receipt shall mean
receipt by the Bank of (i) cash or check of a national securities exchange
certified or issued by a bank (which term, as used in this Agreement,
shall include a trust company and a Federal Reserve Bank), or a
Depository; or (ii) written or telegraphic advice from a bank, registered
clearing agency or a Depository that funds have or will be credited to the
account of the Fund or the Bank at one or more of the foregoing; or (iii)
a bank wire from a correspondent bank of the Bank; or (iv) payment other
than the foregoing, if specified in Instructions relating to the
transaction in question.
III. THE PROPERTY
(a) Property delivered. The Fund shall deliver the Property,
or cause the Property to be delivered, to the Bank or a Depository,
subject to the provisions of this Agreement. Upon delivery, the
securities at the time included in the Property, unless held by a
Depository, shall be in bearer form or shall be registered in the name of
a nominee of the Bank (with or without indication of fiduciary status) or
shall be properly endorsed and in form for transfer satisfactory to the
Bank.
(b) "Property" defined. The term "Property," as used in the
Agreement, means:
(i) any and all securities and other property which the
Fund may from time to time deposit, or cause to be
deposited, with the Bank or a Depository,
(ii) all income, including option premiums, in respect of
any of such securities or other property,
(iii) all proceeds of the sale of any such securities or
other property,
(iv) all proceeds, of the sale of securities issued by the
Fund, which are received by the Bank from time to
time from the Fund or its transfer agent, and
(v) any stocks, shares, bonds, financial futures
contracts, indexes, debentures, notes, mortgages and
other obligations, and any certificates, receipts,
warrants or other financial instruments representing
absolute or conditional rights or options to receive,
purchase, subscribe for or sell the same or
evidencing or representing any other rights or
interests therein, or any other property or assets,
irrespective of their form, the name by which they
may be described, whether considered as securities or
commodities, or the character or form of the entities
by which they are issued or created.
(c) Holding of Securities. The Bank shall hold in a separate
account, and physically segregate at all times from those of any other
persons, firms or corporations, pursuant to the provisions hereof, all
securities which are part of the Property, other than those held by a
Depository. All such securities are to be held or disposed of by the
Bank, or by a Depository, subject at all times to Instructions pursuant
to the terms of this Agreement. The Bank shall have no power or authority
to (or to cause a Depository to) assign, hypothecate, pledge, or otherwise
dispose of any such securities except pursuant to Instructions and only
for the account of the Fund, as set forth in Section VI of this Agreement.
The Bank will, upon receipt of proper Instructions,
segregate cash and/or securities of the Fund into escrow accounts in the
name of a designated broker or exchange clearing organization which is a
party with the Fund to an agreement relating to the financial futures
contracts described in paragraph (b) of this Section III. The Bank will
confirm the terms of such escrow to the broker or clearing organization
and provide a copy of such confirmation to the Fund. The Bank will not,
however, make any payment or transfer from any such escrow account except
to the named broker or clearing organization upon receipt of written
notice by such broker or clearing organization representing that the Fund
is in default of a specified obligation for which the escrow was
established and setting forth the amount represented to be due by the Fund
to such broker or clearing organization.
IV. REGISTRATION OF SECURITIES:
COMMERCIAL ACCOUNTS; OVERDRAFTS; RECEIPT OF SECURITIES
(a) Registration of securities. The securities included in the
Property shall, unless held by a Depository, be held in bearer form or in
the name of one or more nominees of the Bank.
(b) Commercial accounts. The Bank shall open and maintain a
commercial account or accounts in the name of the Fund, subject only to
the Bank's draft or order after receipt of Instructions, and the Bank
shall deposit in such account or accounts all cash constituting, or which
is to become, part of the Property. The Bank shall make payments of cash
to or for the account, of the Fund from such cash accounts only pursuant
to Section VI of this Agreement or as otherwise specifically provided in
this Agreement.
(c) Overdrafts. At the sole discretion of the Bank, the Bank
will permit the incurrence of cash overdrafts in any account of the Fund
with the Bank (i) in aid of the timely and orderly clearance of securities
transactions in the course of the Fund's normal business, trading and
investment operations or (ii) in connection with payments to Shareholders
all or a portion of whose shares in the Fund have been or are being
Redeemed, but only upon receipt by the Bank of Instructions to do so. The
Bank shall not be obligated to incur or permit the incurrence of any such
overdraft and the Bank shall not be liable to the Fund or any third party
for any refusal, failure or neglect on the part of the Bank to incur or
permit the incurrence of any such overdraft. As used in this Agreement,
the terms "Redeem" and "Redemption" refer to redemptions, purchases and
other acquisitions by the Fund of shares in the Fund from Shareholders,
and the term "Shareholder" means a shareholder or former shareholder of
the Fund.
(d) Payment of overdrafts; interest. The Fund shall pay to the
Bank, and the Bank may deduct from the Property, the amount of each
overdraft referred to in Section IV (c), together with interest thereon
at such rate as the Bank may from time to time notify to the Fund (such
rate not to exceed the rate at such time charged by the Bank to its prime
commercial borrowers by more than 1-1/2 percentage points), upon the
Bank's demand therefore.
(e) "Receipt" of securities defined. Whenever this Agreement
contemplates receipt of securities by the Bank, such receipt shall mean
receipt by the Bank of (i) securities in bearer form or in form of
transfer satisfactory to the Bank; or (ii) written or telegraphic advice
from a Depository that securities have been credited to the account of the
Fund or the Bank at the Depository; or (iii) written or telegraphic advice
from any bank or responsible commercial agent doing business in the United
States or any foreign country and designated by the Bank as its agent for
this purpose that such securities have been deposited with it.
V. INSTRUCTIONS
(a) "Instructions" defined. As used in this Agreement, the term
"Instructions" means instructions, with respect to any specified
transaction (except as otherwise indicated in this Agreement), in writing
or by telecopier, tested telegram, cable or Telex or by facsimile sending
device, signed in the name of the Fund by the requisite number of Fund
officers or authorized signatories of the Fund as the Board of Trustees
or executive committee of the Fund has authorized to give the particular
class of Instructions in question. Different persons may be authorized
to give Instructions for different purposes. Instructions may be general
or specific in terms.
(b) Instructions consistent with charter, etc. Although the
Bank may take cognizance of the provisions of the charter and by-laws of
the Fund as from time to time amended, the Bank may assume that any
Instructions received hereunder are not in any way inconsistent with any
provision of such charter or by-laws or any vote, resolution or proceeding
of the shareholders or the trustees, or of any committee of either
thereof, of the Fund.
(c) Authority of Fund's signatories. The incumbency and
signature certificates most recently delivered to the Bank pursuant to
Section II (a) (iii) shall constitute evidence of the authority of the
signatories designated therein to act on behalf of the Fund.
VI. TRANSACTIONS REQUIRING INSTRUCTIONS
(a) Payments of cash. The Bank shall make payments of cash to
or for the account of the Fund only as follows or as otherwise
specifically provided in this Agreement:
(i) upon receipt of Instructions to do so, the Bank shall
make payment for and receive all securities purchased
for the account of the Fund (insofar as cash is
available, or insofar as the Bank is willing to
permit an overdraft or overdrafts in the Fund's
account or accounts with the Bank, for such purpose),
payment to be made only upon receipt of the
securities, provided that, if any such securities (or
any securities to be received free for the Fund's
account) are not received by the Bank on or before
the thirtieth day following the date of the Bank's
receipt of the Instructions to receive such
securities, the Bank may, but need not, consider such
Instructions cancelled unless and until the Bank
received further Instructions reinstating such
original Instructions;
(ii) upon receipt of Instructions to do so, the Bank shall
make payment to a bank of principal of or interest on
bank loans made to the Fund;
(iii) upon receipt of Instructions to do so, the Bank shall
make payments for the Redemption of shares of the
Fund (subject to the provisions of Section VIII (a)
of this Agreement);
(iv) upon receipt of Instructions to do so, the Bank shall
make payments for the payment of dividends, taxes,
management or supervisory fees or operating expenses
(including, without limitation thereto, fees for
legal, accounting and auditing services);
(v) upon receipt of Instructions to do so, the Bank shall
make payments in connection with conversion, exchange
or surrender of securities owned or subscribed to by
the Fund held by or to be received by the Bank;
(vi) upon receipt of Instructions to do so, the Bank will
make payments pursuant to a specified agreement for
loaning the Fund's securities (which Instructions
shall identify the loan agreement under which the
payment is to be made, the date of payment, the name
of the borrower and the securities to be received, if
any in exchange for the payment); and
(vii) upon receipt of Instructions to do so, the Bank shall
make payment for other proper corporate purposes, but
only on receipt of a Resolution certified as set
forth in the definition of that term and
countersigned by another officer of the Fund
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
such payment is to be made.
(b) Transfer, Exchange or Delivery of Securities. The bank
shall transfer, exchange or deliver securities which are part of the
Property only as follows: upon receipt of Instructions to do so, the Bank
shall deliver (or cause a Depository to deliver) securities against such
payment or other consideration or written receipt therefor as shall be
specified in such Instructions, in the following cases: (i) upon sales
of such securities for the account of the Fund and receipt by the Bank of
payment therefor; (ii) for examination by a broker selling for the account
of the Fund in accordance with street delivery custom; (iii) for payment
when such Property has been called, redeemed or retired, or has otherwise
become payable at the option of the holder thereof; (iv) in exchange for,
or for conversion into, other securities and/or cash pursuant to any plan
of merger, consolidation or reorganization, recapitalization, readjustment
or other rearrangement of the issuer; (v) for deposit with a
reorganization committee or protective committee pursuant to a deposit
agreement; (vi) for conversion into or exchange for other securities, or
into or for other securities and cash, in accordance with any conversion
or exchange right or option relating thereto; (vii) in the case of
warrants, rights or other similar securities, upon the exercise thereof;
(viii) in the case of interim receipts or temporary securities, upon the
surrender thereof for definitive securities; (ix) upon the exercise of
a call written by the Fund for which the Bank (or a Depository) has
written an escrow receipt (which term, as used in this Agreement, shall
include an option guarantee letter), subject to the provisions of Section
VI(e); (x) for the deposit of securities in a Depository; (xi) for the
purpose of Redemption in kind of shares of the Fund (subject to Section
VIII(a) of this Agreement); (xii) for the purpose of loaning securities
against receipt by the Bank of collateral therefor (the Instructions as
to which shall specify the securities to be delivered, the loan agreement
under which the delivery is to be made, the date of delivery, the name of
the borrower and the amount of collateral to be received in connection
therewith); and (xiii) for other proper corporate purposes. The Bank
shall make a delivery described in Section VI(c)(xiii) only on receipt of
a Resolution certified as set forth in the definition of that term and
countersigned by another officer of the Fund specifying the securities,
setting forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose and naming the person or
persons to whom said delivery is to be made.
(c) Exercise of rights, etc. The Bank shall deal with rights,
warrants and similar securities received by it hereunder only in the
manner and to the extent ordered by Instructions received by the Bank.
(d) Voting. Neither the Bank nor its nominees shall vote any
of the securities included in the Property or authorize the voting of any
such securities or give any consent, approval or waiver with respect
thereto, except as directed by Instructions received by the Bank. The
Bank shall promptly deliver, or cause to be executed and delivered, to the
Fund all notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered holder of
such securities (if registered otherwise than in the name of the Fund) but
without indicating the manner in which such proxies are to be voted.
(e) Escrow receipts. In accordance with mutually agreed-upon
arrangements and upon receipt of Instructions to do so, the Bank will
execute, or cause a Depository to execute, an escrow receipt relating to
a call written by the Fund upon receipt of payment for the premium
therefor. Such Instructions shall contain all information necessary for
the issuance of such receipts and will authorize the deposit of the
securities named in such Instructions into an escrow account of the Fund.
Securities so deposited into an escrow account will be held by the Bank
or Depository subject to the terms of such escrow receipt. However, the
Bank agrees that it will not deliver, or cause a Depository to deliver,
any securities deposited in an escrow account pursuant to an exercise
notice unless the Bank has received Instructions to do so or (i) the Bank
has duly requested the issuance of such Instructions, (ii)
at least two business days have elapsed since the receipt of such request
by the Fund, and (iii) the Fund has not advised the Bank by Instructions
that it has purchased securities that are to be delivered by the Bank or
a Depository pursuant to the exercise notice. The Fund agrees that it
will not issue any Instructions to the Bank with respect to the Property
which shall conflict with the terms of any escrow receipt executed by the
Bank or any Depository in relation to the Fund and which is then in
effect. The parties understand that the Fund may write calls on
securities ("underlying securities") which are not part of the Property
and issue Instructions to the Bank to execute, or cause a Depository to
execute, an escrow receipt on securities ("convertible securities") which
are, or are to be, part of the Property and are convertible into the
underlying securities. In such event, the Fund agrees that (i) any
Instructions by it as to the execution of the escrow receipt will relate
only to such convertible securities, and (ii) any Instructions by it as
to the delivery of securities relating to such call will relate only to
such convertible securities without responsibility on the part of the Bank
to effect any conversion thereof.
VII. TRANSACTIONS NOT REQUIRING INSTRUCTIONS
(a) Collection of income and other payments. In the absence of
contrary instructions, the Bank shall:
(i) collect and receive, for the account of the Fund, all
income and other payments and distributions,
including (without limitation) stock dividends,
rights, warrants and similar items, included or to be
included in the Property, and promptly advise the
Fund of such receipt;
(ii) take any action which may be necessary and proper in
connection with the collection and receipt of such
income and other payments and distributions,
including (without limitation) the execution of
ownership and exemption certificates, the
presentation of coupons and other interest items, the
presentation for payment of securities which have
become payable as a result of their being called,
redeemed or retired, or otherwise becoming payable,
otherwise than at the option of the holder thereof,
and the endorsement for collection of checks, drafts
and other negotiable instruments; and
(iii) receive and hold for the account of the Fund all
securities received as a distribution on securities
held by the Fund as a result of a stock dividend,
share split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution
of rights or similar securities issued with respect
to any securities of the Fund held by the Bank
hereunder, provided that the Bank shall not be
required to transact any item of business referred to
in this Section VII(a) with respect to a security
which is not covered by a published securities manual
reasonably available to the Custodian Services
Department of the Bank (or the successor to such
Department in the event of any administrative
rearrangement of the Bank) unless and until such
Custodian Services Department (or its successor) has
received a notice specifying (x) the item of business
in question and (y) such additional information as
will permit the Bank to transact such item of
business properly and without unreasonable
inconvenience to such Custodian Services Department
(or its successor).
(b) Cash disbursements. In the absence of contrary
Instructions, the Bank may make cash disbursements for minor expenses in
handling securities and for similar items in connection with the Bank's
duties under this Agreement. The Bank shall promptly advise the Fund of
disbursements so made.
(c) Delivery of information and documents. The Bank shall
promptly deliver to the Fund all information and documents received by the
Bank and relating to the Property including (without limitation) pendency
of calls and maturities of securities and expiration of rights in
connection therewith received by the Bank from issuers of securities being
held for the Fund. With respect to tender or exchange offers, the Bank
shall transmit promptly to the Fund all written information received from
issuers of the securities whose tender or exchange is being sought and
from the party (or his agents) making the tender or exchange offer.
VIII TRANSACTIONS REQUIRING SPECIAL INSTRUCTIONS
(a) Redemptions. Upon receipt of Instructions to do so, the
Bank shall deliver Property in connection with Redemptions (insofar as
monies or, in a case referred to in clause (iii) below, other Property is
available, or insofar as the Bank is willing to permit an overdraft or
overdrafts in the Fund's account or accounts with the Bank for such
purpose), provided that the Instructions covering each Redemption shall
contain (i) the number of shares Redeemed, (ii) the net asset value
(determined pursuant to the regulations of the Fund, as from time to time
amended, which govern determination of net asset value) of such shares on
the effective date of such Redemption and (iii) specification of any
Property other than cash which the Bank is to deliver pursuant thereto.
(b) Extraordinary transactions. In the case of any of the
following transactions, not in the ordinary course of the business of the
Fund:
(i) the merger or consolidation of the Fund and another
investment company,
(ii) the sale by the Fund of all or substantially all of
its assets, or
(iii) liquidation of the Fund or dissolution of the Fund
and distribution of its assets,
the Bank shall deliver Property only upon receipt of Instructions and
advice of counsel satisfactory to the Bank (who may be counsel for the
Fund, at the option of the Bank) to the effect that all necessary
corporate action therefor has been taken, or will be taken concurrently
with the Bank's action.
IX. RIGHT TO RECEIVE ADVICE
(a) Advice of Fund. If the Bank shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall receive,
from the Fund directions or advice, including Instructions where
appropriate.
(b) Advice of counsel. If the Bank shall be in doubt as to any
questions of law involved in any action to be taken or omitted by the
Bank, it may request advice from counsel of its own choosing (who may be
counsel for the Fund, at the option of the Bank).
(c) Conflicting advice. In case of conflict between directions,
advice or Instructions received by the Bank pursuant to Section IX(a) and
advice received by the Bank pursuant to Section IX(b), the Bank shall be
entitled to rely on and follow the advice received pursuant to Section
IX(b) alone.
(d) Absolute protection to Bank. The Bank shall be absolutely
protected in any action or inaction which it takes in reliance on any
directions, advice or Instructions received pursuant to Section IX(a) or
(b) or which the Bank, after receipt of any such directions, advice or
Instructions, in good faith believes to be consistent with such
directions, advice or Instructions, as the case may be. However, nothing
in this Section IX shall be construed as imposing upon the Bank any
obligation (i) to seek such directions, advice or Instructions, or (ii)
to act in accordance with such directions or advice when received, unless,
under the terms of another provision of this Agreement, the same is a
condition to the Bank's properly taking or omitting to take such action.
X. STATEMENTS
The Bank shall render to the Fund statements of the transactions
in the accounts of the Fund at the following times: the Bank shall
furnish the Fund both on a daily and a monthly basis with a statement
summarizing all transactions and entries for the account of the Fund. The
Bank shall furnish the Fund at the end of every month with a list of the
portfolio securities held by it or a Depository as custodian for the Fund,
adjusted for all commitments confirmed by the Fund as of such time,
certified by a duly authorized officer of the Bank. The books and records
of the Bank pertaining to its actions under this Agreement shall be open
to inspection and audit at all times by officers of the Fund, its auditors
and officers of its investment adviser.
XI. COMPENSATION
(a) Ordinary services. The Fund shall pay to the Bank, and the
Bank may deduct from the Property, for its services under this Agreement
(other than the services referred to in Section XI(c)) compensation based
on a schedule of charges to be agreed from time to time.
(b) Expenses. The Fund shall reimburse the Bank for all
expenses, taxes and other charges (including, without limitation, interest
and other items charged by brokers in respect of debit balances and
delayed deliveries) paid by the Bank with respect to the property of the
Fund, or incurred by the Bank on behalf of the Fund in the performance of
the Bank's duties hereunder, provided that the Bank shall be entitled to
reimbursement with respect to the fees and disbursements of counsel only
(i) as set forth in Sections XI(c) and XII or (ii) when the Fund breaches
or threatens to breach, or the Fund's management company (if any)
threatens to cause a breach, of this Agreement or when it would reasonably
appear to a man untrained in the law that such a breach exists or is
threatened, to the extent that the fees and disbursements of such counsel
relate to such actual or apparent breach or threatened breach. If the
Bank submits to the Fund a bill for such reimbursement and the Fund does
not, within 15 days after such submission, notify the Bank that the bill
is disapproved and make a reasonable counter-offer in writing, the bill
shall be deemed approved and the Bank may deduct such reimbursement from
the Property.
(c) Extraordinary services. The Fund shall pay to the Bank, and
the Bank may deduct from the Property, for its services as the Fund's
agent in paying a Shareholder consideration, consisting wholly or
partially of property other than cash, in connection with the Redemption
of all or any part of such Shareholder's shares in the Fund compensation
equal to 1/10 of 1% of the amount computed by subtracting from the
aggregate Redemption price of such shares the cash, if any, paid to such
Shareholder in respect of such Redemption. Without limiting the
generality of the provisions of Section XI(b),
the Fund shall reimburse to the Bank, and the Bank may deduct from the
Property reimbursement for, the fees and disbursements of the Bank's
counsel attributable to such counsel's services in respect of each such
Redemption.
XII. INDEMNIFICATION
The Fund, as sole owner of the Property, will indemnify the Bank
and each of the Bank's nominees, and hold the Bank and such nominees
harmless, and the Bank may deduct from the Property indemnification,
against all costs, liabilities (including, without limitation, liabilities
under the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940 and any state and foreign securities and
blue sky laws, all as from time to time amended) and expenses, including
(without limitation) attorney's fees and disbursements, arising directly
or indirectly (i) from the fact that securities included in the Property
are registered in the name of any such nominee, or (ii) without limiting
the generality of the foregoing clause (i), from any action or thing which
the Bank takes or does or omits to take or do, (A) at the request or on
the directions or in reliance on the advice of the Fund, or of the Fund's
management company (if any), or (B) upon Instructions, provided that
neither the Bank nor any of its nominees shall be indemnified against any
liability to the Fund or to its Shareholders (or any expense incident to
such liability) arising out of (x) the Bank's or such nominee's own
willful misfeasance, bad faith, negligence or reckless disregard of its
duties under this Agreement or (y) the Bank's own negligent failure to
perform its duties under Section VII(a)(ii).
XIII. RESPONSIBILITY: COLLECTIONS
(a) Responsibility of Bank. The Bank shall be under no duty to
take any action on behalf of the Fund except as specifically set forth
herein or as may be specifically agreed to by the Bank in writing. In the
performance of the Bank's duties hereunder, the Bank shall be obligated
to exercise care and diligence, but the Bank shall not be liable for any
act or omission which does not constitute gross negligence, willful
misfeasance or bad faith on the part of the Bank or reckless disregard by
the Bank of its duties under this Agreement, provided that the Bank shall
be responsible for its own negligent failure to perform any of its duties
under this Agreement. Without limiting the generality of the foregoing
or of any other provisions of this Agreement, the Bank shall not be under
any duty or obligation to inquire into and shall not be liable for or in
respect of (i) the validity or invalidity or authority or lack thereof of
any Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, if any, and which the Bank
reasonably believes to be genuine, or (ii) the validity or invalidity of
the issuance of any securities included or to be included in the Property,
the legality or illegality of the purchase of such securities, or the
propriety or impropriety of the amount paid therefor, or (iii) the
legality or illegality of the sale (or exchange) of any Property or the
propriety or impropriety of the amount for which such Property is sold (or
exchanged), nor shall the Bank be under any duty or obligation to
ascertain whether any property at any time delivered to or held by the
Bank may properly be held by or for the Fund.
(b) Collections. All collections of monies or other property
in respect, or which are to become part, of the Property shall be at the
sole risk of the Fund.
(c) Depositories. In using the facilities of a Depository, the
Bank undertakes to comply with the requirements of Rule 17f-4(d) insofar
as the same apply to a custodian, and shall be responsible for the prompt
and effective enforcement of its rights against the Depository in respect
of the property including the proper replacement of any certificated
security which has been lost, destroyed, wrongfully taken, mislaid or
erroneously delivered while in the custody of the Depository.
XIV. ADVERTISING
No printed or other matter in any language which mentions the
Bank's name other than in the context of the Bank's rights, powers or
duties as the custodian of the Fund shall be issued by the Fund or on the
Fund's behalf unless the Bank shall first have been given notice thereof.
XV. EFFECTIVE DATE; TERMINATION; SUCCESSOR; DISSOLUTION
(a) Effective date. This Agreement shall become effective as
of the date entered in the final paragraph of this Agreement and shall
continue in effect until terminated in the manner set forth below.
(b) Termination. Either party to this Agreement may terminate
this Agreement, without penalty, upon at least two weeks' prior written
notice to the other. The effective date of such notice shall be specified
in such notice, except that, at the option of the party receiving the
notice of termination, the effective date of termination may be postponed,
by notice (given prior to the effective date specified in the termination
notice) to the other party, to a date not more than sixty days from the
date of the notice of termination, provided that the Fund shall have no
right so to postpone the effective date of termination if the Fund is at
the time in default under the provisions of Section XIV.
(c) Successor custodian. The Bank shall, in the event of such
termination, deliver the Property, or cause it to be delivered, to any new
custodian which may be designated in Instructions received by the Bank.
(d) Successor custodian not available. In the event that no new
custodian can be found by the Fund at the time of termination of this
Agreement, the Fund shall, before authorizing the delivery of the Property
to anyone other than a successor custodian, submit to its shareholders the
question of whether the Fund shall be liquidated or shall function without
a custodian. The Bank shall, pending the finding of such a new custodian,
the dissolution of the Fund or the decision of the Fund's shareholders
that the Fund shall function without a custodian, continue to hold the
Property in safekeeping subject to the terms of this Agreement, but the
Bank will not carry out any transaction requiring Instructions, the
Instructions with respect to which are received by the Bank subsequent to
the effective date of the termination of this Agreement, or issue any
advice provided for by Section VII or any statement provided for by
Section X, provided that, upon its receipt of Instructions to do so, the
Bank will deliver the Property to a new custodian (which shall be a
person, firm or corporation having aggregate capital, surplus and
undivided profits of at least $2,000,000 as shown by its last published
report, and meeting such other requirements as may be imposed by
applicable law), distribute the Property (after liquidating any part of
the Property which does not consist of cash, if such Instructions so
order) upon dissolution of the Fund or deliver the Property to any other
person if the Fund's shareholders have decided that the Fund shall
function without a custodian. The Bank shall not be liable to the Fund
or any third party on account of any incidents or omissions occurring
during such period of safekeeping except those arising through the Bank's
own willful misconduct or negligence.
(e) Dissolution; no successor custodian. Upon its receipt of
Instructions to do so, the Bank shall distribute the Property (after
liquidating any part of the Property which does not consist of cash, if
such Instructions so order) upon dissolution of the Fund or deliver the
Property to any person who is to take the place of the Fund's custodian
if the Fund's shareholders have decided that the Fund shall function
without a custodian, provided, in either case, that such Instructions
shall be accompanied by a certified copy of the minutes of the meeting of
the Fund's shareholders at which the same was approved.
XVI. NOTICES
All notices and other communications, including Instructions
(collectively referred to as "Notices" in this Section XVI), hereunder
shall be in writing or by tested telegram, cable or Telex. Notices shall
be addressed (i) if to the Bank, at the Bank's address set forth at the
head of this Agreement, marked for the attention of the Custodian Services
Department (or its successor, referred to in Section VII(a)), (ii) if to
the Fund, at the address of the Fund set forth at the head of this
Agreement, or (iii) if to either of the foregoing, at such other address
as shall have been notified to the sender of any such Notice or other
communication. If the location of the sender of a Notice and the address
of the addressee thereof are, at the time of sending, more than 100 miles
apart, the Notice shall be sent by airmail, in which case it shall be
deemed given three days after it is sent, or by tested telegram, cable or
Telex, in which case it shall be deemed given immediately, and, if the
location of the sender of a Notice and the address of the addressee
thereof are, at time of sending, not more than 100 miles apart, the Notice
may be sent by first-class mail, in which case it shall be deemed given
two days after it is sent, or by messenger, in which case it shall be
deemed given on the day it is delivered, or by tested telegram or Telex,
in which case it shall be deemed given immediately, provided that the Bank
shall in no event be liable in respect of any delay in its actual receipt
of any Notice. All postage, cable, telegraph and Telex charges arising
from the Sending of a Notice hereunder shall be paid by the sender.
XVII. DEPOSITORIES; ASTRA
The Fund authorizes the Bank, for any securities held hereunder,
to use the services of any United States central securities depository
permitted to perform such services for registered investment companies and
their custodians under Rule 17f-4 under the Act ("System"), the use of
which is subject to the terms and conditions of this Section XVII.
The terms of the use of any System under this Agreement shall be
governed by the terms and conditions of Rule 17f-4 under the Investment
Company Act of 1940, to which terms and conditions the parties hereto
agree as if set forth in full in this Agreement. The parties also agree
that such terms and conditions shall supersede any conflicting provisions
of this Agreement. Nothing herein shall be deemed to require that the
Custodian ascertain, as a condition to the use of any System, that any
required action has been taken by the Board of Trustees of the Fund.
If and to the extent that a System permits the withdrawal of a
security from that System in certificate form and the Fund requires a
certificate for making a loan or otherwise, the Bank shall take all
necessary and appropriate action to obtain such certificate upon receipt
of an officer's certificate requesting the same.
The liability of the Bank to the Fund in connection with the use
of any System shall be subject to the provisions of Section XIII of this
Agreement.
The Bank agrees that it will effectively enforce such rights as
it may have against any System and will use its best efforts, and will
enforce any such rights as it may have against any System, to require that
such System shall take all appropriate and necessary steps to obtain
replacement of any certificated security in such System which has been
lost, apparently destroyed, wrongfully taken, mislaid or erroneously
delivered while in the custody of the System.
The Fund can have dial-up access to its own custodian account in
the Bank's computerized accounting system (the "ASTRA System") in order
to: (i) accept or reject executed securities transactions (other than in
foreign securities) as submitted for confirmation by brokers and dealers
through the Institutional Delivery ("ID") System of Depository Trust
Company ("DTC") in which the Bank is a participant; and (ii) issue
instructions for the settlement of accepted transactions by the Bank
(through the ID System of DTC or otherwise) pursuant to the terms of this
Agreement.
1. The Bank will provide such current instructions and password
as may be necessary for the Fund to have dial-up access to its own custody
account in the ASTRA System, which instructions and password, including
any changed instructions or password, will be delivered personally or by
certified mail, return receipt requested, to such officer(s) of the Fund
as may, from time to time, be designated in a written instruction given
by the Fund in accordance with Article V of this Agreement and signed by
the Secretary, Assistant Secretary or Treasurer of the Fund.
2. The Bank will change such instructions or password as
frequently as may reasonably be requested by the Fund for security
reasons.
3. The Bank is obligated and authorized to act and rely upon
any instructions received by it through the ASTRA System, as fully as in
the case of instructions given pursuant to Article V of this Agreement,
regardless of whether such instructions have been authorized by the Fund,
provided that such instructions are accompanied by the code password and
account identification information furnished, from time to time, by the
Bank to the Fund as hereinabove provided. Any such instructions received
by the Bank through the ASTRA System will be considered "Instructions" for
all purposes under this Agreement, including without limitation the
indemnification provisions of Article XII hereof.
4. Both the Fund and the Bank will keep for at least five years
and produce on request, in machine readable form, copies of any
instructions sent or received pursuant to the provisions hereof.
XVIII. MISCELLANEOUS
(a) Amendments, etc. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by the party
against which enforcement of such change or waiver is sought. The
headings in this Agreement are for convenience of reference only, are not
a part of this Agreement and shall be disregarded in connection with any
interpretation of all or any part of this Agreement.
(b) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto, and supersedes all
prior agreements and understandings, relating to the subject matter
hereof, provided that the parties hereto may embody in one or more
separate documents their agreement, if any, with respect to delegated
and/or oral Instructions.
(c) Successors and assigns; assignment. All terms of this
Agreement shall be binding upon the respective successors and assigns of
the parties hereto, the Fund's management company (if any) and the Fund's
shareholders and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns, provided that
this Agreement shall not be assignable in whole or in part by either party
hereto without the written consent of the other party hereto.
(d) Counterparts. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed an original but all
of which, taken together, shall constitute one and the same Agreement.
(e) Disclaimer of Shareholder Liability. The Bank understands
that the obligations of the Fund under this Agreement are not binding upon
any trustee or shareholder of the Fund personally, but bind only the Fund
and the Fund's property. The Bank represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.
(f) Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by the hands of their signatories thereunto duly authorized
as of the 18th day of September, 1989.
CITIBANK, N.A.
By:
------------------------------------
(Name and Title)
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
By: /s/ Robert G. Galli
--------------------------
Robert G. Galli, Secretary
CUSTODY\740
Exhibit 24(b)(10)
GORDON HURWITZ BUTOWSKY WEITZEN SHAVLOV & WEIN
100 Park Avenue
New York, N.Y. 10178
September 15, 1989
Oppenheimer Pennsylvania Tax-Exempt Fund
Two World Trade Center
New York, New York 10048-0669
Dear Sirs:
In connection with the proposed public offering of shares of
beneficial interest in Oppenheimer Pennsylvania Tax-Exempt Fund (the
"Fund"), we have examined such records and documents and have made such
further investigations and examinations as we have deemed necessary for
the purposes of this opinion. In rendering this opinion, as to the
matters of Massachusetts law we have relied on the opinion of Lane &
Altman, Massachusetts counsel to the Fund.
It is our opinion that the Fund is a business trust duly organized
and validly existing under the laws of the Commonwealth and that an
indefinite number of shares of the Fund covered by the Fund's Registration
Statement on Form N-1A (SEC Reg. No. 33-30198) (the "Registration
Statement"), when issued and paid for in accordance with the terms of the
offering, as set forth in the Prospectus and Statement of Additional
Information forming a part of the Registration Statement, will be legally
issued, fully paid and non-assessable by the Fund to the extent set forth
in the Registration Statement.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us in the Prospectus and
Statement of Additional Information forming a part thereof. We also
consent to the filing of this opinion with the authorities administering
the "Blue Sky" or securities law of any jurisdiction in connection with
the registration or qualification under such law of the Fund's shares.
Very truly yours,
/s/ Gordon Hurwitz Butowsky
Weitzen Shalov & Wein
---------------------------
Gordon Hurwitz Butowsky
Weitzen Shalov & Wein
opinion\740
Exhibit 24(b)(11)
August 29, 1989
The Board of Trustees
Oppenheimer Pennsylvania Tax-Exempt Fund
Two World Trade Center
New York, New York 10048-0669
Dear Sirs:
Oppenheimer Management Corporation ("OMC") herewith purchases 8,748.906
shares of Oppenheimer Pennsylvania Tax-Exempt Fund (the "Fund") for an
aggregate purchase price of $100,000.
In connection with such purchase, OMC represents that such purchase is
made for investment purposes by OMC without any present intention of
redeeming or selling such shares. OMC agrees to advance the start-up
expenses of the Fund and in that regard agrees that such advance for such
start-up expenses shall be reimbursed to OMC by the Fund over a five-year
period that commences on the effective date of the Fund's initial
prospectus; provided, however, that if any of the above-referenced shares
of the Fund purchased by OMC are redeemed during the five-year period in
which such expenses are amortized by the Fund, OMC will reimburse the Fund
for any unamortized organization expenses in the same proportion as the
number of shares redeemed bears to the number of initial shares remaining
at the time of such redemption.
Very truly yours,
OPPENHEIMER MANAGEMENT CORPORATION
By: /s/ Robert G. Galli
----------------------
Robert G. Galli
Executive Vice President
opinion\740#2
Exhibit 24(b)(15)(i)
SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND AND
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 10th day of June, 1993
by and between OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND (to be named:
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST) (the "Trust") on behalf of
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND (the "Fund") and OPPENHEIMER
FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class
A Shares described in the Trust's registration statement as of the date
this Plan takes effect, contemplated by and to comply with Article III,
Section 26 of the Rules of Fair Practice of the National Association of
Securities Dealers, pursuant to which the Trust will reimburse the
Distributor for a portion of its costs incurred in connection with the
personal service and the maintenance of shareholder accounts ("Accounts")
that hold Class A Shares (the "Shares") of such series and class of the
Fund. The Trust may be deemed to be acting as distributor of securities
of which it is the issuer, pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"), according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients," as
hereinafter defined, for rendering services and for the maintenance of
Accounts. Such Recipients are intended to have certain rights as third-
party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a)
"Recipient" shall mean any broker, dealer, bank or other financial
institution which: (i) has rendered services in connection with
the personal service and maintenance of Accounts; (ii) shall
furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer
such questions as may arise concerning such service; and (iii) has
been selected by the Distributor to receive payments under the
Plan. Notwithstanding the foregoing, a majority of the Trust's
Board of Trustees (the "Board") who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any
agreements relating to this Plan (the "Independent Trustees") may
remove any broker, dealer, bank or other institution as a
Recipient, whereupon such entity's rights as a third party
beneficiary hereof shall terminate.
(b)
"Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii)
such customers, clients and/or accounts as to which such Recipient
is a fiduciary or custodian or co-fiduciary or co-custodian
(collectively, the "Customers"), but in no event shall any such
Shares be deemed owned by more than one Recipient for purposes of
this Plan. In the event that two entities would otherwise qualify
as Recipients as to the same Shares, the Recipient which is the
dealer of record on the Fund's books shall be deemed the Recipient
as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance.
(a)
Under the Plan, the Trust will make payments to the Distributor,
within forty-five (45) days of the end of each calendar quarter,
in the amount of the lesser of: (i) .0375% (.15% on an annual
basis) of the average during the calendar quarter of the aggregate
net asset value of the Shares computed as of the close of each
business day, or (ii) the Distributor's actual expenses under the
Plan for that quarter of the type approved by the Board. The
Distributor will use such fee received from the Trust in its
entirety to reimburse itself for payments to Recipients and for
its other expenditures and costs of the type approved by the Board
incurred in connection with the personal service and maintenance
of Accounts including, but not limited to, the services described
in the following paragraph. The Distributor may make Plan
payments to any "affiliated person" (as defined in the 1940 Act)
of the Distributor if such affiliated person qualifies as a
Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of
Accounts may include, but shall not be limited to, the following:
answering routine inquiries from the Recipient's customers
concerning the Fund, providing such customers with information on
their investment in shares, assisting in the establishment and
maintenance of accounts or sub-accounts in the Fund, making the
Fund's investment plans and dividend payment options available,
and providing such other information and customer liaison services
and the maintenance of Accounts as the Distributor or the Fund may
reasonably request. It may be presumed that a Recipient has
provided services qualifying for compensation under the Plan if it
has Qualified Holdings of Shares to entitle it to payments under
the Plan. In the event that either the Distributor or the Board
should have reason to believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate
services, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other
information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not
satisfied, it may take appropriate steps to terminate the
Recipient's status as such under the Plan, whereupon such entity's
rights as a third-party beneficiary hereunder shall terminate.
Payments received by the Distributor from the Trust under the Plan
will not be used to pay any interest expense, carrying charge or
other financial costs, or allocation of overhead of the
Distributor, or for any other purpose other than for the payments
described in this Section 3. The amount payable to the
Distributor each quarter will be reduced to the extent that
reimbursement payments otherwise permissible under the Plan have
not been authorized by the Board of Trustees for that quarter. Any
unreimbursed expenses incurred for any quarter by the Distributor
may not be recovered in later periods.
(b)
The Distributor shall make payments to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter,
at a rate not to exceed .0375% (.15% on an annual basis) of the
average during the calendar quarter of the aggregate net asset
value of the Shares computed as of the close of each business day
of Qualified Holdings (excluding Shares acquired in
reorganizations with investment companies for which Oppenheimer
Management Corporation or an affiliate acts as investment adviser
and which have not adopted a distribution plan at the time of
reorganization with the Fund). However, no such payments shall be
made to any Recipient for any such quarter in which its Qualified
Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, to be set
from time to time by a majority of the Independent Trustees. A
majority of the Independent Trustees may at any time or from time
to time increase or decrease and thereafter adjust the rate of
fees to be paid to the Distributor or to any Recipient, but not to
exceed the rate set forth above, and/or increase or decrease the
number of shares constituting Minimum Qualified Holdings. The
Distributor shall notify all Recipients of the Minimum Qualified
Holdings and the rate of payments hereunder applicable to
Recipients, and shall provide each such Recipient with written
notice within thirty (30) days after any change in these
provisions. Inclusion of such provisions or a change in such
provisions in a revised current prospectus shall be sufficient
notice.
(c)
Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it
receives from the Trust), or (ii) by the Distributor (a subsidiary
of OMC), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection or replacement of Independent Trustees and the nomination
of those persons to be Trustees of the Trust who are not "interested
persons" of the Fund shall be committed to the discretion of the
Independent Trustees. Nothing herein shall prevent the Independent
Trustees from soliciting the views or the involvement of others in such
selection or nomination if the final decision on any such selection and
nomination is approved by a majority of the incumbent Independent
Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust
shall provide at least quarterly a written report to the Trust's Board for
its review, detailing the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, and the purposes
for which the payments were made. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year with respect to the personal service and
maintenance of Accounts in conjunction with the Board's annual review of
the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding Shares of the Class,
on not more than sixty days written notice to any other party to the
agreement; (ii) such agreement shall automatically terminate in the event
of its "assignment" (as defined in the 1940 Act); (iii) it shall go into
effect when approved by a vote of the Board and its Independent Trustees
cast in person at a meeting called for the purpose of voting on such
agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has
been approved by a vote of the Independent Trustees cast in person at a
meeting called on June 10, 1993 for the purpose of voting on this Plan,
and takes effect as of July 1, 1993. Unless terminated as hereinafter
provided, it shall continue in effect until December 31, 1993 and from
year to year thereafter or as the Board may otherwise determine only so
long as such continuance is specifically approved at least annually by the
Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated
at any time by vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities of the Class. This Plan may not be
amended to increase materially the amount of payments to be made without
approval of the Class A Shareholders, in the manner described above, and
all material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Shareholder and Trustee Liability Disclaimer. The Distributor
understands and agrees that the obligations of the Trust under this Plan
are not binding upon any shareholder or Trustee of the Trust personally,
but only the Trust and the Trust's property. The Distributor represents
that it has notice of the provisions of the Declaration of Trust of the
Trust disclaiming shareholder and Trustee liability for acts or
obligations of the Trust and the Fund.
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
By: /s/ Robert G. Zack
------------------------------------
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
-----------------------------
Katherine P. Feld
Vice President & Secretary
OFMI/740A
Exhibit 24(b)(15)(ii)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 10th
day of February, 1994 by and between OPPENHEIMER MULTI-STATE TAX-EXEMPT
TRUST (the "Trust"), on behalf of OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
(the "Fund"), and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Trust will compensate the Distributor for a
portion of its costs incurred in connection with the distribution of
Shares, and the personal service and maintenance of shareholder accounts
that hold Shares ("Accounts"). The Trust may act as distributor of
securities of which it is the issuer, pursuant to the Rule, according to
the terms of this Plan. The Distributor is authorized under the Plan to
pay "Recipients," as hereinafter defined, for rendering (1) distribution
assistance in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are intended
to have certain rights as third-party beneficiaries under this Plan. The
terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the
1940 Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., or
its successor (the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of
distribution, to which the Fund is subject under any order on which the
Fund relies, issued at any time by the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Trust's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the 1940 Act)
and who have no direct or indirect financial interest in the operation
of this Plan or in any agreements relating to this Plan (the
"Independent Trustees") may remove any broker, dealer, bank or other
institution as a Recipient, whereupon such entity's rights as a third-
party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Trust will make payments to the Distributor, (i) within forty-
five (45) days of the end of each calendar quarter, in the aggregate
amount of 0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of the Shares
computed as of the close of each business day (the "Service Fee"),
plus (ii) within ten (10) days of the end of each month, in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average
during the month of the aggregate net asset value of Shares computed
as of the close of each business day (the "Asset-Based Sales Charge")
outstanding for six years or less (the "Maximum Holding Period").
Such Service Fee payments received from the Trust will compensate the
Distributor and Recipients for providing administrative support
services of the type approved by the Board with respect to Accounts.
Such Asset-Based Sales Charge payments received from the Fund will
compensate the Distributor and Recipients for providing distribution
assistance in connection with the sales of Shares.
The administrative support services in connection with the Accounts
to be rendered by Recipients may include, but shall not be limited to,
the following: answering routine inquiries concerning the Fund,
assisting in the establishment and maintenance of accounts or sub-
accounts in the Fund and processing Share redemption transactions,
making the Fund's investment plans and dividend payment options
available, and providing such other information and services in
connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably
request.
The distribution assistance in connection with the sale of Shares
to be rendered by the Distributor and Recipients may include, but
shall not be limited to, the following: distributing sales literature
and prospectuses other than those furnished to current holders of the
Fund's Shares ("Shareholders"), and providing such other information
and services in connection with the distribution of Shares as the
Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it to
payments under the Plan. In the event that either the Distributor or
the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the Recipient
to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor still is not satisfied,
it may take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-party
beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum
period (the "Minimum Holding Period"), if any, to be set from time to
time by a majority of the Independent Trustees. Alternatively, the
Distributor may, at its sole option, make service fee payments
("Advance Service Fee Payments") to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate
not to exceed (i) 0.25% of the average during the calendar quarter of
the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified
Holdings sold by the Recipient during that quarter and owned
beneficially or of record by the Recipient or by its Customers, plus
(ii) 0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of Shares computed
as of the close of each business day, constituting Qualified Holdings
owned beneficially or of record by the Recipient or by its Customers
for a period of more than one (1) year, subject to reduction or
chargeback so that the Advance Service Fee Payments do not exceed the
limits on payments to Recipients that are, or may be, imposed by
Article III, Section 26, of the NASD Rules of Fair Practice. In the
event Shares are redeemed less than one year after the date such
Shares were sold, the Recipient is obligated and will repay to the
Distributor on demand a pro rata portion of such Advance Service Fee
Payments, based on the ratio of the time such shares were held to one
(1) year. The Advance Service Fee Payments described in part (i) of
the preceding sentence may, at the Distributor's sole option, be made
more often than quarterly, and sooner than the end of the calendar
quarter. However, no such payments shall be made to any Recipient for
any such quarter in which its Qualified Holdings do not equal or
exceed, at the end of such quarter, the minimum amount ("Minimum
Qualified Holdings"), if any, to be set from time to time by a
majority of the Independent Trustees. A majority of the Independent
Trustees may at any time or from time to time decrease and thereafter
adjust the rate of fees to be paid to the Distributor or to any
Recipient, but not to exceed the rate set forth above, and/or direct
the Distributor to increase or decrease the Maximum Holding Period,
the Minimum Holding Period or the Minimum Qualified Holdings. The
Distributor shall notify all Recipients of the Minimum Qualified
Holdings, Maximum Holding Period or Minimum Holding Period, if any,
and the rate of payments hereunder applicable to Recipients, and shall
provide each Recipient with written notice within thirty (30) days
after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a revised current prospectus shall
constitute sufficient notice. The Distributor may make Plan payments
to any "affiliated person" (as defined in the 1940 Act) of the
Distributor if such affiliated person qualifies as a Recipient.
(c) The Distributor is entitled to retain from the payments described
in Section 3(a) the aggregate amount of (i) the Service Fee on Shares
outstanding for less than the Minimum Holding Period plus (ii) the
Asset-Based Sales Charge on Shares outstanding for not more than the
Maximum Holding Period, in each case computed as of the close of each
business day during that period and subject to reduction or
elimination of such amounts under the limits to which the Distributor
is, or may become, subject under Article III, Section 26, of the NASD
Rules of Fair Practice. Such amount is collectively referred to as
the "Quarterly Limitation." The distribution assistance and
administrative support services in connection with the sale of Shares
to be rendered by the Distributor may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker,
dealer, bank or other institution that sells Shares, and\or paying
such persons Advance Service Fee Payments in advance of, and\or
greater than, the amount provided for in Section 3(a) of this
Agreement; (ii) paying compensation to and expenses of personnel of
the Distributor who support distribution of Shares by Recipients;
(iii) paying of or reimbursing the Distributor for interest and other
borrowing costs on unreimbursed Carry Forward Expenses (as hereafter
defined) at the rate paid by the Distributor or, if such amounts are
financed by the Distributor from its own resources or by an affiliate,
at the rate of 1% per annum above the prime rate (which shall mean the
most preferential interest rate on corporate loans at large U.S. money
center commercial banks) then being reported in the Eastern edition of
the Wall Street Journal (or if such prime rate is no longer so
reported, such other rate as may be designated from time to time by
the Distributor with the approval of the Independent Trustees); (iv)
other direct distribution costs of the type approved by the Board,
including without limitation the costs of sales literature,
advertising and prospectuses (other than those furnished to current
Shareholders) and state "blue sky" registration expenses; and (v) any
service rendered by the Distributor that a Recipient may render
pursuant to part (a) of this Section 3. The Distributor's costs of
providing the above-mentioned services are hereinafter collectively
referred to as "Distribution and Service Costs." "Carry Forward
Expenses" are Distribution and Service Costs that are not paid in the
fiscal quarter in which they arise because they exceed the Quarterly
Limitation. In the event that the Board should have reason to believe
that the Distributor may not be rendering appropriate distribution
assistance or administrative support services in connection with the
sale of Shares, then the Distributor, at the request of the Board,
shall provide the Board with a written report or other information to
verify that the Distributor is providing appropriate services in this
regard.
(d) The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied
in the following order of priority: first, to interest on unreimbursed
Carry Forward Expenses, second, to reduce any unreimbursed Carry
Forward Expenses, third, to reduce Distribution and Service Costs
during that quarter, and fourth, to reduce the Asset-Based Sales
Charge payments by the Trust to the Distributor in that quarter.
Carry Forward Expenses shall be carried forward by the Trust until
payment can be made under the Quarterly Limitation.
(e) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC), from
its own resources, from Asset-Based Sales Charge payments or from its
borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Trust
who are not "interested persons" of the Trust ("Disinterested Trustees")
shall be committed to the discretion of such Disinterested Trustees.
Nothing herein shall prevent the Disinterested Trustees from soliciting
the views or the involvement of others in such selection or nomination if
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust
shall provide at least quarterly a written report to the Trust's Board for
its review, detailing distribution expenditures properly attributable to
the Shares, including the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, the amount paid
to the Distributor and the Distribution and Service Costs and Carry
Forward Expenses for that period. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses incurred in prior years
and not previously recovered with respect to the distribution of Shares
in conjunction with the Board's annual review of the continuation of the
Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has
been approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called on February 10, 1994 for the purpose of voting
on this Plan, and replaces the Fund's Distribution and Service Plan and
Agreement dated as of July 1, 1993. Unless terminated as hereinafter
provided, it shall continue in effect until December 31, 1994 and from
year to year thereafter or as the Board may otherwise determine only so
long as such continuance is specifically approved at least annually by a
vote of the Board and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such continuance. This Plan may not
be amended to increase materially the amount of payments to be made
without approval of the Class B Shareholders, in the manner described
above, and all material amendments must be approved by a vote of the Board
and of the Independent Trustees. This Plan may be terminated at any time
by vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities of the Class. In the event of such
termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of any
Carry Forward Expenses and related costs properly incurred in respect of
Shares sold prior to the effective date of such termination, and whether
the Fund shall continue to make payment to the Distributor in the amount
the Distributor is entitled to retain under part (c) of Section 3 hereof,
until such time as the Distributor has been reimbursed for all or part of
such amounts by the Fund and by retaining CDSC payments.
8. Disclaimer of Shareholder Liability. The Distributor understands that
the obligations of the Trust under this Plan are not binding upon any
Trustee or shareholder of the Trust personally, but bind only the Trust
and the Trust's property. The Distributor represents that it has notice
of the provisions of the Declaration of Trust of the Trust disclaiming
shareholder and Trustee liability for acts or obligations of the Trust and
the Fund.
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST,
on behalf of
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
By: /s/ Andrew J. Donohue
--------------------------------
Andrew J. Donohue, Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
------------------------------
Katherine P. Feld, Vice President &
Secretary
OFMI/740B.2
Oppenheimer Pennsylvania 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
10/18/89 0.06138 0.0000 11.470
11/15/89 0.06138 0.0000 11.490
12/13/89 0.06138 0.0000 11.560
01/10/90 0.06138 0.0000 11.590
02/07/90 0.06138 0.0000 11.420
03/07/90 0.06138 0.0000 11.410
04/04/90 0.06138 0.0000 11.350
05/02/90 0.06138 0.0000 11.170
05/30/90 0.06138 0.0000 11.370
06/27/90 0.06438 0.0000 11.390
07/25/90 0.06438 0.0000 11.470
08/22/90 0.0643804 0.0000 11.300
09/19/90 0.0643804 0.0000 11.230
10/17/90 0.0643804 0.0000 11.150
11/14/90 0.0643804 0.0000 11.360
12/12/90 0.0554378 0.0000 11.470
01/09/91 0.0543545 0.0000 11.410
02/06/91 0.0549114 0.0000 11.550
03/06/91 0.0548285 0.0000 11.460
04/03/91 0.0538807 0.0000 11.450
05/01/91 0.0566611 0.0000 11.520
05/29/91 0.0559256 0.0000 11.590
06/26/91 0.0576342 0.0000 11.530
07/24/91 0.0551782 0.0000 11.620
08/21/91 0.0562467 0.0000 11.740
09/18/91 0.0572580 0.0000 11.770
10/16/91 0.0572049 0.0000 11.840
11/13/91 0.0570070 0.0000 11.870
12/11/91 0.0570536 0.0377 11.810
01/08/92 0.0580493 0.0000 11.970
02/05/92 0.0589865 0.0000 11.870
03/04/92 0.0593178 0.0000 11.800
04/01/92 0.0566334 0.0000 11.780
04/29/92 0.0621603 0.0000 11.810
05/27/92 0.0604800 0.0000 11.850
06/24/92 0.0604800 0.0000 11.880
07/22/92 0.0604800 0.0000 12.140
08/19/92 0.0604800 0.0000 12.140
09/16/92 0.0139560 0.0697 12.050
10/14/92 0.0585480 0.0000 11.970
11/11/92 0.0585480 0.0000 11.920
12/09/92 0.0585480 0.0053 12.020
01/06/93 0.0585480 0.0000 12.070
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 2
April 24, 1995
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
02/03/93 0.0585480 0.0000 12.110
03/03/93 0.0585480 0.0000 12.520
03/31/93 0.0585480 0.0000 12.380
04/28/93 0.0585480 0.0000 12.430
05/26/93 0.0585480 0.0000 12.410
07/09/93 0.0609000 0.0000 12.660
08/10/93 0.0609000 0.0000 12.640
09/10/93 0.0609000 0.0000 12.970
10/08/93 0.0609000 0.0000 12.960
11/10/93 0.0590033 0.0000 12.770
12/10/93 0.0571000 0.0044 12.850
01/10/94 0.0571000 0.0000 12.860
02/10/94 0.0571000 0.0000 12.850
03/10/94 0.0571000 0.0000 12.290
04/08/94 0.0571000 0.0000 11.790
05/10/94 0.0571000 0.0000 11.630
06/10/94 0.0571000 0.0000 12.010
07/08/94 0.0571000 0.0000 11.590
08/10/94 0.0571000 0.0000 11.720
09/09/94 0.0571000 0.0000 11.700
10/10/94 0.0571000 0.0000 11.450
11/10/94 0.0571000 0.0000 10.900
12/09/94 0.0571000 0.0000 11.050
Class B Shares
05/26/93 0.0386471 0.0000 12.410
07/09/93 0.0438922 0.0000 12.660
08/10/93 0.0520567 0.0000 12.630
09/10/93 0.0510076 0.0000 12.970
10/08/93 0.0523471 0.0000 12.960
11/10/93 0.0495851 0.0000 12.770
12/10/93 0.0480903 0.0044 12.850
01/10/94 0.0490847 0.0000 12.860
02/10/94 0.0484937 0.0000 12.850
03/10/94 0.0496200 0.0000 12.290
04/08/94 0.0493571 0.0000 11.790
05/10/94 0.0494176 0.0000 11.630
06/10/94 0.0489772 0.0000 12.010
07/08/94 0.0500546 0.0000 11.590
08/10/94 0.0493409 0.0000 11.720
09/09/94 0.0490793 0.0000 11.700
10/10/94 0.0500195 0.0000 11.450
11/10/94 0.0497783 0.0000 10.900
12/09/94 0.0497066 0.0000 11.050
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 3
April 24, 1995
1. Average Annual Total Returns for the Periods Ended 12/31/94:
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
$ 879.39 1 $1,270.04 .2
(---------) - 1 = -12.06% (---------) - 1 = 4.90%
$1,000 $1,000
Inception
$1,311.36 .1892
(---------) - 1 = 5.26%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 4.00% for the second year:
One Year Inception
$ 873.23 1 $ 941.97 .5991
(---------) - 1 = -12.68% (---------) - 1 = -3.52%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Five Year
$ 923.25 1 $1,333.37 .2
(---------) - 1 = -7.68% (---------) - 1 = 5.92%
$1,000 $1,000
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 4
April 24, 1995
1. Average Annual Total Returns for the Periods Ended 12/31/94 (Continued):
Examples at NAV:
Class A Shares
Inception
$1,376.76 .1892
(---------) - 1 = 6.24%
$1,000
Class B Shares
One Year Inception
$ 916.80 1 $ 977.98 .5991
(---------) - 1 = -8.32% (---------) - 1 = -1.33%
$1,000 $1,000
2. Cumulative Total Returns for the Periods Ended 12/31/94:
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
$ 879.39 - $1,000 $1,270.04 - $1,000
------------------ = -12.06% ------------------ = 27.00%
$1,000 $1,000
Inception
$1,311.36 - $1,000
------------------ = 31.14%
$1,000
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 5
April 24, 1995
2. Cumulative Total Returns for the Periods Ended 12/31/94 (Continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 4.00% for the second year:
One Year Inception
$ 873.23 - $1,000 $ 941.97 - $1,000
------------------ = -12.68% ------------------ = -5.80%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Five Year
$ 923.25 - $1,000 $1,333.37 - $1,000
------------------ = -7.68% ------------------ = 33.34%
$1,000 $1,000
Inception
$1,376.76 - $1,000
------------------ = 37.68%
$1,000
Class B Shares
One Year Inception
$ 916.80 - $1,000 $ 977.98 - $1,000
------------------ = -8.32% ------------------ = -2.20%
$1,000 $1,000
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 6
April 24, 1995
3. Standardized Yield for the 30-Day Period Ended 12/31/94:
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%:
$337,340.29 - $45,314.16 6
2{(------------------------ + 1) - 1} = 5.58%
5,404,829 x $11.75
Class B Shares
Example at NAV:
$ 51,909.82 - $12,795.41 6
2{(------------------------ + 1) - 1} = 5.10%
831,749 x $11.19
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 7
April 24, 1995
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/94:
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 $.0564861/30 x 365
------------------ = 5.85%
$11.75
Dividend Yield
at Net Asset Value $.0564861/30 x 365
------------------ = 6.14%
$11.19
Class B Shares
Dividend Yield
at Net Asset Value $.0494788/30 x 365
------------------ = 5.38%
$11.19
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 8
April 24, 1995
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/94:
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
.0558
----------- + 0 = 9.50%
1 - .4129
Class B Shares
.0510
----------- + 0 = 8.69%
1 - .4129
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 Pennsylvania State tax rate (e.g., for an individual in the
39.6% federal and 2.80% state tax bracket filing singly).
Example: 1 - {(1 - .3960)(1 - .0280)} = 41.29%
Oppenheimer New Jersey 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
04/08/94 0.0510000 0.0000 10.810
05/10/94 0.0510000 0.0000 10.800
06/10/94 0.0510000 0.0000 11.100
07/08/94 0.0510000 0.0000 10.750
08/10/94 0.0510000 0.0000 10.870
09/09/94 0.0510000 0.0000 10.880
10/10/94 0.0510000 0.0000 10.610
11/10/94 0.0510000 0.0000 10.120
12/09/94 0.0510000 0.0000 10.290
Class B Shares
04/08/94 0.0356294 0.0000 10.800
05/10/94 0.0436201 0.0000 10.790
06/10/94 0.0423901 0.0000 11.090
07/08/94 0.0449888 0.0000 10.740
08/10/94 0.0430984 0.0000 10.860
09/09/94 0.0432218 0.0000 10.870
10/10/94 0.0440405 0.0000 10.600
11/10/94 0.0441921 0.0000 10.100
12/09/94 0.0443710 0.0000 10.280
Oppenheimer New Jersey Tax-Exempt Fund
Page 2
April 24, 1995
1. Average Annual Total Returns for the Periods Ended 12/31/94:
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%:
Inception
$ 908.45 1.2000
(---------) - 1 = -10.88%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year:
Inception
$ 900.56 1.2000
(---------) - 1 = -11.81%
$1,000
Examples at NAV:
Class A Shares
Inception
$ 953.75 1.2000
(---------) - 1 = -5.52%
$1,000
Class B Shares
Inception
$ 946.06 1.2000
(---------) - 1 = -6.44%
$1,000
Oppenheimer New Jersey Tax-Exempt Fund
Page 3
April 24, 1995
2. Cumulative Total Returns for the Periods Ended 12/31/94:
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%:
Inception
$ 908.45 - $1,000
------------------ = -9.16%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year:
Inception
$ 900.56 - $1,000
------------------ = -9.94%
$1,000
Examples at NAV:
Class A Shares
Inception
$ 953.75 - $1,000
------------------ = -4.63%
$1,000
Class B Shares
Inception
$ 946.06 - $1,000
------------------ = -5.39%
$1,000
Oppenheimer New Jersey Tax-Exempt Fund
Page 4
April 24, 1995
3. Standardized Yield for the 30-Day Period Ended 12/31/94:
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%:
$17,643.98 - $ 433.05 6
2{(---------------------- + 1) - 1} = 5.68%
336,530 x $10.93
Class B Shares
Example at NAV:
$14,948.11 - $2,614.17 6
2{(---------------------- + 1) - 1} = 5.04%
285,138 x $10.40
Oppenheimer New Jersey Tax-Exempt Fund
Page 5
April 24, 1995
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/94:
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 $.0504508/30 x 365
------------------ = 5.62%
$10.93
Dividend Yield
at Net Asset Value $.0504508/30 x 365
------------------ = 5.90%
$10.41
Class B Shares
Dividend Yield
at Net Asset Value $.0447396/30 x 365
------------------ = 5.23%
$10.40
Oppenheimer New Jersey Tax-Exempt Fund
Page 6
April 24, 1995
5. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/94:
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
.0568
----------- + 0 = 10.07%
1 - .4362
Class B Shares
.0504
----------- + 0 = 8.94%
1 - .4362
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 New Jersey State tax rate (e.g., for an individual in the
39.6% federal and 6.65% state tax bracket filing singly).
Example: 1 - {(1 - .3960)(1 - .0665)} = 43.62%
Oppenheimer Florida Tax-Exempt Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions, for the
past 10 years which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
11/10/93 0.0530 0.0000 11.590
12/10/93 0.0530 0.0000 11.770
01/10/94 0.0530 0.0000 11.790
02/10/94 0.0530 0.0000 11.750
03/10/94 0.0530 0.0000 11.140
04/08/94 0.0530 0.0000 10.730
05/10/94 0.0530 0.0000 10.670
06/10/94 0.0530 0.0000 11.040
07/08/94 0.0530 0.0000 10.620
08/10/94 0.0530 0.0000 10.750
09/09/94 0.0530 0.0000 10.710
10/10/94 0.0530 0.0000 10.440
11/10/94 0.0530 0.0000 9.930
12/09/94 0.0530 0.0000 10.140
Class B Shares
11/10/93 0.0410915 0.0000 11.590
12/10/93 0.0436759 0.0000 11.780
01/10/94 0.0468184 0.0000 11.810
02/10/94 0.0456769 0.0000 11.760
03/10/94 0.0461788 0.0000 11.160
04/08/94 0.0461931 0.0000 10.740
05/10/94 0.0463047 0.0000 10.680
06/10/94 0.0450584 0.0000 11.060
07/08/94 0.0468869 0.0000 10.640
08/10/94 0.0459714 0.0000 10.770
09/09/94 0.0457576 0.0000 10.730
10/10/94 0.0470162 0.0000 10.460
11/10/94 0.0469221 0.0000 9.940
12/09/94 0.0463407 0.0000 10.150
Oppenheimer Florida Tax-Exempt Fund
Page 2
April 24, 1995
1. Average Annual Total Returns for the Periods Ended 12/31/94:
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 Inception
$ 879.57 1 $918.21 .8000
(---------) - 1 = -12.04% (---------) - 1 = -6.60%
$1,000 $1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year, and 4.00% for the second year:
One Year Inception
$ 872.31 1 $ 919.64 .8000
(---------) - 1 = -12.77% (---------) - 1 = -6.48%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Inception
$ 923.43 1 $964.00 .8000
(---------) - 1 = -7.66% (---------) - 1 = -2.89%
$1,000 $1,000
Class B Shares
One Year Inception
$ 915.79 1 $ 955.58 .8000
(---------) - 1 = -8.42% (---------) - 1 = -3.57%
$1,000 $1,000
Oppenheimer Florida Tax-Exempt Fund
Page 3
April 24, 1995
2. Cumulative Total Returns for the Periods Ended 12/31/94:
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 Inception
$ 879.57 - $1,000 $ 918.21 - $1,000
------------------ = -12.04% ------------------ = -8.18%
$1,000 $1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year, and 4.00% for the second year:
One Year Inception
$ 872.31 - $1,000 $ 919.64 - $1,000
------------------ = -12.77% ------------------ = -8.04%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Inception
$ 923.43 - $1,000 $964.00 - $1,000
------------------ = -7.66% ------------------ = -3.60%
$1,000 $1,000
Class B Shares
One Year Inception
$ 915.79 - $1,000 $ 955.58 - $1,000
------------------ = -8.42% ------------------ = -4.44%
$1,000 $1,000
Oppenheimer Florida Tax-Exempt Fund
Page 4
April 24, 1995
3. Standardized Yield for the 30-Day Period Ended 12/31/94:
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%:
$60,082.60 - $3,738.42 6
2{(---------------------- + 1) - 1} = 5.72%
1,110,326 x $10.77
Class B Shares
Example at NAV:
$41,634.15 - $7,325.59 6
2{(---------------------- + 1) - 1} = 5.28%
768,105 x $10.27
Oppenheimer Florida Tax-Exempt Fund
Page 5
April 24, 1995
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/94:
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 $.0524303/30 x 365
------------------ = 5.92%
$10.77
Dividend Yield
at Net Asset Value $.0524303/30 x 365
------------------ = 6.22%
$10.26
Class B Shares
Dividend Yield
at Net Asset Value $.0462677/30 x 365
------------------ = 5.48%
$10.27
Oppenheimer Florida Tax-Exempt Fund
Page 6
April 24, 1995
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/94:
The Fund's tax-equivalent yields are calculated using the
following formula:
a
----- + b = Tax-Equivalent Yield
1 - c
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Stated income tax rate for an individual in the 39.6% federal tax
bracket filing singly).
Examples:
Class A Shares
.0572
----------- + 0 = 9.47%
1 - .3960
Class B Shares
.0528
----------- + 0 = 8.74%
1 - .3960
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> OPPENHEIMER FLORIDA TAX-EXEMPT FUND
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