Centennial
California Tax Exempt Trust
3410 South Galena Street, Denver, Colorado 80231
1-800-525-9310
Centennial California Tax Exempt Trust (the "Trust") is a no-load
"money market" mutual fund with the investment objective of seeking the
maximum current interest income exempt from Federal and California
personal income taxes for individual investors as is consistent with
preservation of capital. The Trust seeks to achieve this objective by
investing in municipal obligations meeting specified quality standards,
the income from which is tax-exempt as described above. Normally, the
Trust will invest at least 80% of its assets in U.S. dollar-denominated,
high quality tax-exempt municipal obligations. See "The Trust and Its
Investment Policies."
An investment in the Trust is neither insured nor guaranteed by the
U.S. Government. While the Trust seeks to maintain a stable net asset
value of $1.00 per share, there can be no assurance that the Trust will
be able to do so.
Shares of the Trust may be purchased directly from dealers having
sales agreements with the Trust's Distributor and also are offered to
participants in Automatic Purchase and Redemption Programs (the
"Programs") established by certain brokerage firms with which the Trust's
Distributor has entered into agreements for that purpose. See "How to Buy
Shares" in the Prospectus. Program participants should also read the
description of the Program provided by their broker.
This Prospectus sets forth concisely information about the Trust that
a prospective investor should know before investing. A Statement of
Additional Information about the Trust (the "Additional Statement") dated
November 1, 1995, has been filed with the Securities and Exchange
Commission ("SEC") and is available without charge upon written request
to Shareholder Services, Inc. (the "Transfer Agent"), P.O. Box 5143,
Denver, Colorado 80217-5143 or by calling the toll-free number shown
above. The Additional Statement (which is incorporated by reference in
its entirety in this Prospectus) contains more detailed information about
the Trust and its management.
Investors are advised to read and retain this Prospectus for future
reference.
Shares of the Trust are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency.
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.
This Prospectus is effective November 1, 1995.
Table of Contents
Page
Trust Expenses
Financial Highlights
Yield Information
The Trust and Its Investment Policies
Investment Restrictions
Management of the Trust
How To Buy Shares
Purchases Through Automatic Purchase and Redemption Programs
Direct Purchases
Payment by Check
Payment by Federal Funds Wire
Guaranteed Payment
Automatic Investment Plans
General
Service Plan
How To Redeem Shares
Program Participants
Shares of the Trust Owned Directly
Regular Redemption Procedure
Expedited Redemption Procedure
Check Writing
Telephone Redemptions
Automatic Withdrawal Plans
General Information on Redemptions
Exchanges of Shares
Dividends, Distributions and Taxes
Additional Information
<PAGE>
Trust Expenses
The following table sets forth the fees that an investor in the Trust
might pay, and the expenses paid by the Trust during its fiscal year ended
June 30, 1995.
Shareholder Transaction Expenses
Maximum Sales Charge on Purchases None
Sales Charge on Reinvested Dividends None
Redemption Fees None
Exchange Fee None
Annual Trust Operating Expenses (as a percentage of
average net assets)
Management Fees (after expense assumption) 0.47%
12b-1 (Service Plan) Fees 0.20%
Other Expenses 0.13%
Total Trust Operating Expenses
(after expense assumption) 0.80%
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in the Trust will bear
directly (shareholder transaction expenses) or indirectly (annual trust
operating expenses). "Other Expenses" includes such expenses as custodial
and transfer agent fees, audit, legal and other business operating
expenses, but excludes extraordinary expenses. The Annual Trust Operating
Expenses shown are net of a voluntary expense assumption undertaking by
the Trust's investment manager, Centennial Asset Management Corporation
(the "Manager"). Without such assumption, "Management Fees" and "Total
Trust Operating Expenses" would have been 0.50% and 0.83% of average net
assets, respectively. The expense assumption undertaking is described in
"Investment Management Services" in the Additional Statement and may be
withdrawn or amended at any time. For further details, see the Trust's
Financial Statements included in the Additional Statement.
The following example applies the above-stated expenses (after
expense assumption) to a hypothetical $1,000 investment in shares of the
Trust over the time periods shown below, assuming a 5% annual rate of
return on the investment and also assuming that the shares are redeemed
at the end of each stated period. The amounts shown below are the
cumulative costs of such hypothetical $1,000 investment for the periods
shown.
1 year 3 years 5 years 10 years
$8 $26 $44 $99
This example should not be considered a representation of past or
future expenses or performance. Expenses are subject to change and actual
performance and expenses may be less or greater than those illustrated
above.
<PAGE>
Financial Highlights
Selected data for a share of the Trust outstanding throughout each period
The table below presents selected financial information about the
Trust, including per share data and expense ratios and other data based
on the Trust's average net assets. This information has been audited by
Deloitte & Touche LLP, independent auditors, whose report on the financial
statements of the Trust for the fiscal year ended June 30, 1995 is
included in the Additional Statement.
<PAGE>
FINANCIAL HIGHLIGHTS
Centennial California Tax Exempt Trust
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994 1993 1992 1991 1990(1)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- ------- -------
Income from investment operations -
net investment income and net
realized gain on investments .03 .02 .02 .03 .04 .003
Dividends and distributions to
to shareholders (.03) (.02) (.02) (.03) (.04) (.003)
------- ------- ------- ------- ------- -------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
=======
TOTAL RETURN AT NET ASSET VALUE (2) 3.00% 1.82% 2.00% 3.29% 4.79% N/A
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $92,318 $60,376 $58,079 $48,483 $32,337 $2,018
Average net assets (in thousands) $71,278 $65,520 $56,082 $40,684 $16,150 $1,914
Number of shares outstanding at end
of period (in thousands) 92,329 60,376 58,076 48,484 32,337 2,018
Ratios to average net assets:
Net investment income 2.99% 1.79% 1.90% 3.13% 4.09% 6.29%(3)
Expenses, before voluntary
assumption by the Manager .83% .87% .86% .91% 1.09% 2.53%(3)
Expenses, net of voluntary
assumption by the Manager .80% .80% .80% .80% .84% .90%(3)
</TABLE>
<PAGE>
Yield Information
From time to time, the "yield," "tax-equivalent yield" and
"compounded effective yield" of an investment in the Trust may be
advertised. All yield figures are based on historical earnings per share
and are not intended to indicate future performance. The "yield" of the
Trust is the income generated by an investment in the Trust over a seven-
day period, which is then "annualized." In annualizing, the amount of
income generated by the investment during that seven days is assumed to
be generated each week over a 52-week period, and is shown as a percentage
of the investment. The "compounded effective yield" is calculated
similarly, but the annualized income earned by an investment in the Trust
is assumed to be reinvested. The "compounded effective yield" will
therefore be slightly higher than the yield because of the effect of the
assumed reinvestment. The Trust's "tax-equivalent yield" is calculated
by dividing that portion of the Trust's "yield" (calculated as described
above) which is tax-exempt by one minus a stated income tax rate and
adding the result to the portion (if any) of the Trust's yield that is not
tax-exempt. The "tax-equivalent yield" is then compounded and annualized
in the same manner as the Trust's yield. See "Yield Information" in the
Additional Statement for further information on the methods of calculating
these yields. From time to time the Manager may voluntarily assume a
portion of the Trust's expenses (which may include the management fee),
thereby lowering the overall expense ratio per share and increasing the
Trust's yield during the time such expenses are assumed.
The Trust and Its Investment Policies
The Trust is a no-load tax-exempt money market fund. It is an open-
end, non-diversified, management investment company organized as a
Massachusetts business trust on August 7, 1989. The Trust's investment
objective is to seek the maximum current interest income exempt from
Federal and California personal income taxes for individual investors as
is consistent with preservation of capital. The Trust's shares may be
purchased at their net asset value, which will remain fixed at $1.00 per
share except under extraordinary circumstances (see "Determination of Net
Asset Value Per Share" in the Additional Statement for further
information). There can be no assurance, however, that the Trust's net
asset value will not vary or that the Trust will achieve its investment
objective. The value of Trust shares is not insured or guaranteed by any
government agency. However, shares held in brokerage accounts may be
eligible for coverage by the Securities Investor Protection Corporation
for losses arising from the insolvency of the brokerage firm. In seeking
its objective, the Trust may invest in the types of instruments discussed
below. The Trust's investment policies and practices are not
"fundamental" policies (as defined below) unless a particular policy is
identified as fundamental. The Trust's investment objective is a
fundamental policy. The Board may change non-fundamental investment
policies without shareholder approval.
Municipal Securities. In seeking its objective, the Trust invests in
tax-exempt securities, consisting of municipal bonds, municipal notes
(which include 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, which include
variable rate demand notes and put bonds issued by or on behalf of the
State of California, 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 individual income tax,
in the opinion of bond counsel to the respective issuer (collectively,
these are referred to as "Municipal Securities"), and in Municipal
Securities the interest from which is not subject to California personal
income tax in the opinion of bond counsel to the respective issuer
(collectively, these are referred to as "California Municipal
Securities"). The Trust may also purchase Municipal Securities with
demand features that meet the requirements of Rule 2a-7 (discussed below).
All Municipal Securities in which the Trust invests must have, or,
pursuant to regulations adopted by the SEC, be deemed to have, remaining
maturities of one year or less at the date the Trust purchases them.
Under normal market conditions, the Trust attempts to invest 100% of
its assets in Municipal Securities and at least 65% of its assets in
California Municipal Securities, and, as a fundamental policy, the Trust
will make no investment that will reduce the portion of its total assets
that are invested in Municipal Securities to less than 80%. The balance
of the Trust's assets may be invested in investments the income from which
may be taxable, including: (i) repurchase agreements (explained below);
(ii) Municipal Securities issued to benefit a private user ("Private
Activity Municipal Securities"), the interest from which may be subject
to Federal alternative minimum tax (see "Dividends and Taxes" below and
"Private Activity Municipal Securities" in the Additional Statement); and
(iii) certain temporary investments defined below in "Temporary
Investments." The Trust may hold Temporary Investments pending the
investment of proceeds from the sale of Trust shares or portfolio
securities, pending settlement of Municipal Securities purchases or to
meet anticipated redemptions. Normally, the Trust will not invest more
than 20% of its total assets in Private Activity Municipal Securities and
the taxable investments described above. No independent investigation has
been made by the Manager as to the users of proceeds of such offerings or
the application of such proceeds. To the extent the Trust receives income
from taxable investments, it may not achieve its investment objective.
- - Ratings of Securities. Under Rule 2a-7 of the Investment Company Act of
1940, as amended (the "Investment Company Act"), the Trust uses the
amortized cost method to value its portfolio securities to determine the
Trust's net asset value per share. Rule 2a-7 places restrictions on a
money market fund's investments. Under the Rule, the Trust may purchase
only those securities that the Trust's Board of Trustees has determined
have minimal credit risks and are "Eligible Securities." An "Eligible
Security" is (a) one that has received a rating in one of the two highest
short-term rating categories by any two "nationally-recognized statistical
rating organizations" (as defined in the Rule) ("Rating Organizations"),
or, if only one Rating Organization has rated that security, by that
Rating Organization, or (b) an unrated security that is judged by the
Manager to be of comparable quality to investments that are "Eligible
Securities" rated by Rating Organizations.
The Rule permits the Trust to purchase "First Tier Securities," which
are Eligible Securities rated in the highest rating category for short-
term debt obligations by at least two Rating Organizations, or, if only
one Rating Organization has rated a particular security, by that Rating
Organization, or comparable unrated securities. Under the Rule, the Trust
may also invest in "Second Tier Securities," which are Eligible Securities
that are not "First Tier Securities." Additionally, under Rule 2a-7, the
Trust must maintain a dollar-weighted average portfolio maturity of no
more than 90 days; and the maturity of any single portfolio investment
may not exceed 397 days. Certain of the Trust's fundamental investment
restrictions (which may be changed only by shareholder vote) are more
restrictive than the provisions of Rule 2a-7, and the Trust must restrict
the maturity of portfolio securities to one year or less. The Trust's
Board has adopted procedures under Rule 2a-7 pursuant to which the Board
has delegated to the Manager certain responsibilities, in accordance with
that Rule, of conforming the Trust's investments with the requirements of
the Rule and those procedures.
Appendix A of the Additional Statement contains descriptions of the
rating categories of Rating Organizations. Ratings at the time of
purchase will determine whether securities may be acquired under the above
restrictions. Subsequent downgrades in ratings may require reassessment
of the credit risk presented by a security and may require its sale. The
rating restrictions described in this Prospectus do not apply to banks in
which the Trust's cash is kept. See "Municipal Securities" and "Ratings
of Securities" in "Investment Objective and Policies" in the Additional
Statement for further details.
- - Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Trust may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals of no
more than one year. Floating rates are automatically adjusted according
to a specified market rate for such investments, such as the PSA Municipal
Swap Index or the J.J. Kenney Index. The Trust may purchase these
obligations if they have a remaining maturity of one year or less; if
their maturity is greater than one year, they may be purchased if they
have a demand feature that permits the Trust to recover the principal
amount of the underlying security at specified intervals not exceeding one
year and on not more than 30 days' notice. The Manager may determine that
an unrated floating rate or variable rate demand obligation meets the
Trust's quality standards solely by reason of being backed by a letter of
credit or guarantee issued by a bank that meets the Trust's quality
standards. However, the letter of credit or bank guarantee must be rated
or meet the other requirements of Rule 2a-7.
- - Municipal Lease Obligations. The Trust may invest in certificates of
participation, which are tax-exempt obligations that evidence the holder's
right to share in lease, installment loan or other financing payments by
a public entity. Projects financed with certificates of participation
generally are not subject to state constitutional debt limitations or
other statutory requirements that may be applicable to Municipal
Securities. Payments by the public entity on the obligation underlying
the certificates are derived from available revenue sources; such revenue
may be diverted to the funding of other municipal service projects.
Payments of interest and/or principal with respect to the certificates are
not guaranteed and do not constitute an obligation of the state or any of
its political subdivisions. 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 Trust 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 Trust's Board of Trustees.
- - Puts and Stand-By Commitments. For liquidity purposes, the Trust may
purchase Municipal Securities with puts from banks, brokers, dealers or
other institutions. The put gives the Trust the right to sell the
underlying security within a specified time at a stated price. Under a
stand-by commitment, a dealer agrees to purchase, at the Trust's option,
specified Municipal Securities at a stated price on same-day settlement.
The aggregate price of a security subject to a put or a stand-by
commitment may be higher than the price which otherwise would be paid for
the security without such put or stand-by commitment, thereby increasing
the cost of such security and reducing its yield.
When-Issued or Delayed-Delivery Securities. The Trust may invest in
Municipal Securities on a "when-issued" or "delayed delivery" basis. In
those transactions, the Trust obligates itself to purchase or sell
securities, with delivery and payment to occur at a later date, to secure
what is considered to be an advantageous price and yield at the time the
obligation is entered into. The price, which is generally expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for when-issued securities take place at a later date
(normally within 45 days of purchase). During the period between purchase
and settlement, no payment is made by the Trust to the issuer and no
interest accrues to the Trust from the investment. Although the Trust is
subject to the risk of adverse market fluctuation during that period, the
Manager does not believe that the Trust's net asset value or income will
be materially adversely affected by the Trust's purchase of Municipal
Securities on a "when-issued" or "delayed delivery" basis. See "When-
Issued and Delayed Delivery Transactions" in the Additional Statement for
more details.
Non-diversification. The Trust 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 Trust 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"), pursuant to which: (1) not more than 25% of the market
value of the Trust's total assets will be invested in the securities of
a single issuer, and (2) with respect to 50% of the market value of its
total assets, not more than 5% of the market value of its total assets may
be invested in the securities of a single issuer and the Trust must not
own more than 10% of the outstanding voting securities of a single issuer.
An investment in the Trust 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 Trust's portfolio, and economic, political
or regulatory developments may have a greater impact on the value of the
Trust's portfolio than would be the case if the portfolio were diversified
among more issuers.
Repurchase Agreements. The Trust may acquire securities that are subject
to repurchase agreements to generate income while providing liquidity.
The Trust's repurchase agreements must comply with the collateral
requirements of Rule 2a-7. However, if the seller of the securities fails
to pay the agreed-upon repurchase price on the delivery date, the Trust's
risks may include the costs of disposing of the collateral for the
agreement and losses that might result from any delays in foreclosing on
the collateral. The Trust will not enter into a repurchase agreement that
will cause more than 10% of its net assets to be subject to repurchase
agreements maturing in more than seven days and may not enter into
repurchase agreements if the scheduled repurchase date is greater than one
year. Income earned on repurchase transactions is not tax-exempt and
accordingly, under normal market conditions, including the foregoing
restrictions, the Trust will limit its investments in repurchase
transactions to 20% of its total assets. See "Repurchase Agreements" in
the Additional Statement for further details.
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 Trust's investments. Investments may be
illiquid because of the absence of an active trading market, making it
difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction
on its resale or which cannot be sold publicly until it is registered
under the Securities Act of 1933. The Trust will not invest more than 10%
of its net assets in illiquid or restricted securities. This policy does
not limit purchases of: (1) restricted securities eligible for resale to
qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933 that are determined to be liquid by the Board of
Trustees or by the Manager under Board-approved guidelines, or (2)
commercial paper that may be sold without registration under Sections
3(a)(3) or 4(2) of the Securities Act of 1933. Such guidelines take into
account trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in particular Rule 144A Securities, the Trust's holdings
of those securities may be illiquid. If due to changes in relative value,
more than 10% of the value of the Trust's net assets consist of illiquid
securities, the Manager would consider appropriate steps to protect the
Trust's maximum flexibility. There may be undesirable delays in selling
illiquid securities at prices representing their fair value.
Loans of Portfolio Securities. To attempt to increase its income, the
Trust may lend its portfolio securities to qualified borrowers (other than
in repurchase transactions) if the loan is collateralized in accordance
with applicable regulatory requirement and if, after any loan, the value
of the securities loaned do not exceed 25% of the value of its total
assets. The Trust does not intend to engage in securities loan
transactions during the current fiscal year. The income from such loans,
when distributed by the Trust, will be taxable. See "Loans of Portfolio
Securities" in the Additional Statement for further information.
Temporary Investments . The Trust may hold the following "Temporary
Investments" that are Eligible Securities: (i) obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities;
(ii) bankers' acceptances; (iii) taxable commercial paper rated in the
highest category by a Rating Organization; (iv) short-term taxable debt
obligations rated in one of the two highest rating categories of a Rating
Organization; or (v) certificates of deposit of domestic banks with assets
of $1 billion or more. To the extent the Trust assumes a temporary
defensive position, a significant portion of the Trust's distributions may
be subject to Federal and California income taxes.
Special Considerations - California Municipal Securities. Because the
Trust concentrates its investments in California Municipal Securities, the
market value and marketability of such Municipal Securities and the
interest income to the Trust from them could be adversely affected by a
default or a financial crisis relating to any of such issuers. Investors
should consider these matters as well as economic trends in California,
summarized in the Additional Statement under "Special Investment
Considerations - California Municipal Securities."
Investment Restrictions
The Trust has certain investment restrictions which, together with
its investment objective, are fundamental policies, changeable only by the
vote of a "majority of the outstanding voting securities" (as defined in
the Investment Company Act) of the Trust. Under some of those
restrictions, the Trust cannot: (1) make loans, may purchase debt
securities described in "The Trust and Its Investment Policies," and other
securities substantially similar thereto, and repurchase agreements; and
the Trust may lend its portfolio securities as described in its investment
policy stated above; (2) borrow money in excess of 10% of the value of its
total assets or make any investment when borrowings exceed 5% of the value
of its total assets; it may borrow only as a temporary measure for
extraordinary or emergency purposes; no assets of the Trust may be
pledged, mortgaged or assigned to secure a debt; (3) enter into a
repurchase agreement or purchase a security subject to a call if the
scheduled repurchase or redemption date is greater than one year; (4)
invest more than 25% of its total assets in any one industry; however for
the purposes of this restriction, Municipal Securities and U.S. Government
obligations are not considered to be part of any single industry; (5)
invest in any debt instrument having a maturity in excess of one year from
the date of purchase, unless purchased subject to a demand feature which
may not exceed one year and requires payment on not more than 30 days'
notice; or (6) invest more than 5% of the value of its total assets in
securities of companies that have operated less than three years,
including the operations of predecessors. The percentage restrictions
described above and in the Additional Statement apply only at the time of
investment and require no action by the Trust as a result of subsequent
changes in value of the investments or the size of the Trust. A
supplementary list of investment restrictions is contained in "Investment
Restrictions" in the Additional Statement.
Management of the Trust
The Trust's Board of Trustees has overall responsibility for the
management of the Trust under the laws of Massachusetts governing the
responsibilities of trustees of business trusts. "Trustees and Officers"
in the Additional Statement identifies the Trust's Trustees and officers
and provides information about them. Subject to the authority of the
Board, the Manager is responsible for the day-to-day management of the
Trust's business, supervises the investment operations of the Trust and
the composition of its portfolio and furnishes the Trust advice and
recommendations with respect to investments, investment policies and the
purchase and sale of securities, pursuant to a management agreement (the
"Agreement") with the Trust. The management fee, payable monthly to the
Manager under the terms of the Agreement, is computed on the aggregate net
assets as of the close of business each day at the following annual rates:
0.50% of the first $250 million of net assets; 0.475% of the next $250
million of net assets; 0.45% of the next $250 million of net assets;
0.425% of the next $250 million of net assets and 0.40% of net assets in
excess of $1 billion.
The Agreement lists examples of expenses paid by the Trust, the major
categories of which relate to interest, taxes, brokerage commissions,
certain insurance premiums, fees to certain Trustees, legal and audit
expenses, transfer agent and custodian expenses, certain registration
expenses and non-recurring expenses, including litigation costs. For
further information about the Agreement, including a description of
expense assumption arrangements by the Manager, exculpation provisions and
portfolio transactions, see "Investment Management Services" in the
Additional Statement.
The Manager, a wholly-owned subsidiary of Oppenheimer Management
Corporation ("OMC"), has operated as an investment adviser since 1978.
The Manager and OMC currently advise U.S. investment companies with assets
aggregating over $38 billion as of September 30, 1995, and having more
than 2.8 million shareholder accounts. OMC is owned by Oppenheimer
Acquisition Corp., a holding company owned in part by senior management
of OMC and the Manager and ultimately controlled by Massachusetts Mutual
Life Insurance Company, a mutual life insurance company which also advises
pension plans and investment companies.
How To Buy Shares
Shares of the Trust may be purchased at their offering price, which
is the net asset value per share, without sales charge. The net asset
value will remain fixed at $1.00 per share, except under extraordinary
circumstances (see "Determination of Net Asset Value Per Share" in the
Additional Statement for further details). There can be no guarantee that
the Trust will maintain a stable net asset value of $1.00 per share.
Centennial Asset Management Corporation, which also acts as the Trust's
distributor (and in that capacity is referred to as the "Distributor"),
may in its sole discretion accept or reject any order for purchase of the
Trust's shares. Oppenheimer Funds Distributor, Inc., an affiliate of the
Distributor, acts as the Trust's sub-distributor (the "Sub-Distributor").
The minimum initial investment is $500 ($2,500 if by Federal Funds
wire), except as otherwise described in this Prospectus. Subsequent
purchases must be in amounts of $25 or more, and may be made through
authorized dealers or brokers or by forwarding payment to the Distributor
at P.O. Box 5143, Denver, Colorado 80217, with the name(s) of all account
owners, the account number and the name of the Trust. The minimum initial
and subsequent purchase requirements are waived on purchases made by
reinvesting dividends from any of the "Eligible Funds" listed in "Exchange
Privilege" below or by reinvesting distributions from unit investment
trusts for which reinvestment arrangements have been made with the
Distributor. Under an Automatic Investment Plan, military allotment plan,
403(b)(7) custodial plan or payroll deduction plan, initial and subsequent
investments must be at least $25. No share certificates will be issued
unless specifically requested in writing by an investor or the dealer or
broker.
The Trust intends to be as fully invested as practicable to maximize
its yield. Therefore, dividends will accrue on newly-purchased shares
only after the Distributor accepts the purchase order for them at its
address in Denver, Colorado, on a day The New York Stock Exchange is open
(a "regular business day") under one of the methods of purchasing shares
described below. The purchase will be made at the net asset value next
determined after the Distributor accepts the purchase order.
The Trust's net asset value per share is determined twice each
regular business day, at 12:00 Noon and the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier on some
days (all references to time in this Prospectus mean New York time) by
dividing the net assets of the Trust by the total number of its shares
outstanding. The Trust's Board of Trustees has established procedures for
valuing the Trust's assets, using the amortized cost method, as described
in "Determination of Net Asset Value Per Share" in the Additional
Statement.
Purchases Through Automatic Purchase and Redemption Programs. Shares of
the Trust are available under Automatic Purchase and Redemption Programs
("Programs") of broker-dealers that have entered into agreements with the
Distributor for that purpose. Broker-dealers whose clients participate
in such Programs will invest the "free cash balances" of such client's
Program account in shares of the Trust if the Trust has been selected as
the primary Trust by the client for the Program account. Such purchases
will be made by the broker-dealer under the procedures described in
"Guaranteed Payment," below. The Program may have minimum investment
requirements established by the broker-dealer. The description of the
Program provided by the broker-dealer should be consulted for details, and
all questions about investing in, exchanging or redeeming shares of the
Trust through a Program should be directed to the broker-dealer.
Direct Purchases. An investor may directly purchase shares of the Trust
through any dealer which has a sales agreement with the Distributor or the
Sub-Distributor. There are two ways to make a direct initial investment:
either (1) complete a Centennial Funds New Account Application and mail
it with payment to the Distributor at P.O. Box 5143, Denver, Colorado
80217-5143 (if no dealer is named in the Application, the Sub-Distributor
will act as the dealer), or (2) order the shares through your dealer or
broker. Purchases made by Application should have a check enclosed, or
payment may be made by one of the alternative means described below.
- Payment by Check. Orders for shares purchased by check in U.S.
dollars drawn on a U.S. bank will be effected on the regular business day
on which the check (and a purchase application, if the account is new) is
accepted by the Distributor. Dividends will begin to accrue on such
shares the next regular business day after the purchase order is accepted.
For other checks, the shares will not be purchased until the Distributor
is able to convert the purchase payment to Federal Funds, and dividends
will begin to accrue on such shares on the next regular business day.
- Payment by Federal Funds Wire. Shares of the Trust may be
purchased by Federal Funds wire. The minimum investment by wire is
$2,500. The investor must first call the Distributor's Wire Department
at 1-800-852-8457 to notify the Distributor of the transmittal of the wire
and to order the shares. The investor's bank must wire the Federal Funds
to Citibank, N.A., ABA No. 0210-0008-9 for credit to Concentration Account
No. 3737-5674, for further credit to Centennial California Tax Exempt
Trust, Custodian Account No. 845-873.
The wire must state the investor's name. Shares will be purchased
on the regular business day on which the Federal Funds are received by
Citibank, N.A. prior to the close of The New York Stock Exchange (which
is normally 4:00 P.M.) and the Distributor has received and accepted the
investor's notification of the wire order. Shares will be purchased at
the net asset value next determined after receipt of the Federal Funds and
the order. Dividends on newly purchased shares will begin to accrue on
the purchase date if the Federal Funds and order for the purchase are
received and accepted by 12:00 Noon. Dividends will begin to accrue on
the next regular business day if the Federal Funds and purchase order are
received and accepted between 12:00 Noon and the close of The New York
Stock Exchange, which is normally 4:00 P.M. but may be earlier on some
days. The investor must also send the Distributor a completed Application
when the purchase order is placed to establish a new account.
- Guaranteed Payment. Broker-dealers with sales agreements with the
Distributor (including broker-dealers who have made special arrangements
with the Distributor for purchases for Program accounts) may place
purchase orders with the Distributor for purchases of the Trust's shares
prior to 12:00 Noon on a regular business day, and the order will be
effected at net asset value determined at 12:00 Noon that day if the
broker-dealer guarantees that payment for such shares in Federal Funds
will be received by the Trust's Custodian prior to 2:00 P.M. on the same
day. Dividends will begin to accrue on the purchase date. If an order
is received between 12:00 Noon and the close of The New York Stock
Exchange, which is normally 4:00 P.M. on a regular business day, with the
broker-dealer's guarantee that payment for such shares in Federal Funds
will be received by the Trust's Custodian by the close of the Exchange on
the next regular business day, the order will be effected on the day the
order is received, and dividends on such shares will begin to accrue on
the next regular business day the Federal Funds are received by the
required time. If the broker-dealer guarantees that the Federal Funds
payment will be received by the Trust's Custodian by 2:00 P.M. on a
regular business day on which an order is placed for shares after 12:00
Noon, the order will be effected at the close of the Exchange that day and
dividends will begin to accrue on such shares on the purchase date.
Automatic Investment Plans. Direct investors may purchase shares of the
Trust automatically. Automatic Investment Plans may be used to make
regular monthly investments ($25 minimum) from the investor's account at
a bank or other financial institution. To establish an Automatic
Investment Plan from a bank account, a check (minimum $25) for the initial
purchase must accompany the application. Shares purchased by Automatic
Investment Plan payments are subject to the redemption restrictions for
recent purchases described in "How to Redeem Shares." The amount of the
Automatic Investment Plan payment 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
receipt of such instructions to implement them. The Trust reserves the
right to amend, suspend, or discontinue offering such Automatic Investment
Plans at any time without prior notice.
General. Dealers and brokers who process orders for the Trust's shares
on behalf of their customers may charge a fee for this service. That fee
can be avoided by purchasing shares directly from the Trust. The
Distributor, in its sole discretion, may accept or reject any order for
purchases of the Trust's shares. The sale of shares will be suspended
during any period when the determination of net asset value is suspended,
and may be suspended by the Board of Trustees whenever the Board judges
it in the best interest of the Trust to do so.
Service Plan. The Trust has adopted a service plan (the "Plan") under
Rule 12b-1 of the Investment Company Act pursuant to which the Trust will
reimburse the Distributor for a portion of its costs incurred in
connection with the personal service and maintenance of accounts that hold
Trust shares. The Distributor will use all the fees received from the
Trust to reimburse dealers, brokers, banks, or other institutions
("Recipients") each quarter for providing personal service and maintenance
of accounts that hold Trust shares. The services to be provided by
Recipients under the Plan include, but shall not be limited to, the
following: answering routine inquiries from the Recipient's customers
concerning the Trust, providing such customers with information on their
investment in Trust shares, assisting in the establishment and maintenance
of accounts or sub-accounts in the Trust, making the Trust'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 Trust may reasonably request. Plan payments by
the Trust to the Distributor will be made quarterly in the amount of the
lesser of: (i) 0.05% (0.20% annually) of the net asset value of the Trust,
computed as of the close of each business day or (ii) the Distributor's
actual distribution expenses for that quarter of the type approved by the
Board. Any unreimbursed expenses incurred for any quarter by the
Distributor may not be recovered in later periods. The Plan has the
effect of increasing annual expenses of the Trust by up to 0.20% of
average annual net assets from what its expenses would otherwise be. In
addition, the Manager may, under the Plan, from time to time from its own
resources (which may include the profits derived from the advisory fee it
receives from the Trust), make payments to Recipients for distribution,
administrative and accounting services performed by Recipients. For
further details, see "Service Plan" in the Additional Statement.
How to Redeem Shares
Program Participants. A program participant may redeem shares in the
Program by writing checks as described below, or by contacting the dealer
or broker. A program participant may also arrange for "Expedited
Redemptions," as described below, only through their dealer or broker.
Shares of the Trust Owned Directly. Shares of the Trust owned by a
shareholder directly (not through a Program) (a "direct shareholder"), may
be redeemed in the following ways:
- Regular Redemption Procedure. A direct shareholder who wishes to
redeem some or all shares in an account (whether or not represented by
certificates) under the Trust's regular redemption procedure, must send
the following to the Transfer Agent for the Trust, Shareholder Services,
Inc., P.O. Box 5143, Denver, Colorado 80217 (send courier or express mail
deliveries to 10200 E. Girard Avenue, Building D, Denver, Colorado 80231):
(1) a written request for redemption signed by all registered owners
exactly as the shares are registered, including fiduciary titles, if any,
and specifying the account number and the dollar amount or number of
shares to be redeemed; (2) a guarantee of the signatures of all registered
owners on the redemption request or on the endorsement on the share
certificate or accompanying stock power, by a U.S. bank, trust company,
credit union or savings association, or a foreign bank having 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, registered securities association or
clearing agency; (3) any share certificates issued for any of the shares
to be redeemed; and (4) any additional documents which may be required by
the Transfer Agent for redemption by corporations, partnerships or other
organizations, executors, administrators, trustees, custodians or
guardians, or if the redemption is requested by anyone other than the
shareholder(s) of record. Transfers of shares are subject to similar
requirements. A signature guarantee is not required for redemptions of
$50,000 or less, requested by and payable to all shareholders of record,
to be sent to the address of record for that account. To avoid delay
in redemption or transfer, shareholders having questions about these
requirements should contact the Transfer Agent in writing or by calling
1-800-525-9310 before submitting a request. From time to time the
Transfer Agent in its discretion may waive any or certain of the foregoing
requirements in particular cases. Redemption or transfer requests will
not be honored until the Transfer Agent receives all required documents
in proper form.
- Expedited Redemption Procedure. In addition to the regular
redemption procedure set forth above, direct shareholders whose shares are
not represented by certificates may arrange to have redemption proceeds
of $2,500 or more wired in Federal Funds to a designated commercial bank
if the bank is a member of the Federal Reserve wire system. To place a
wire redemption request, call the Transfer Agent at 1-800-852-8457. The
account number of the designated financial institution and the bank ABA
number must be supplied to the Transfer Agent on the Application or dealer
settlement instructions establishing the account or may be added to
existing accounts or changed only by signature-guaranteed instructions to
the Transfer Agent from all shareholders of record. Such redemption
requests may be made by telephone, wire or written instructions to the
Transfer Agent. The wire for the redemption proceeds of shares redeemed
prior to 12:00 Noon, normally will be transmitted by the Transfer Agent
to the shareholder's designated bank account on the day the shares are
redeemed (or, if that day is not a bank business day, on the next bank
business day). No dividends are paid on the proceeds of redeemed shares
awaiting transmittal by wire. Shares redeemed prior to 12:00 Noon do not
earn dividends on the redemption date. The wire for the redemption
proceeds of shares redeemed between 12:00 Noon and the close of The New
York Stock Exchange, which is normally 4:00 P.M. but may be earlier on
some days, normally will be transmitted by the Transfer Agent to the
shareholder's designated bank account on the next bank business day after
the redemption. Shares redeemed between 12:00 Noon and the close of the
Exchange earn dividends on the redemption date. See "Purchase, Redemption
and Pricing of Shares" in the Additional Statement for further details.
- - Check Writing. Upon request, the Transfer Agent will provide any
direct shareholder of the Trust or any Program participant whose shares
are not represented by certificates with forms of drafts ("checks")
payable through a bank selected by the Trust (the "Bank"). Program
participants must arrange for check writing through their brokers or
dealers. The Transfer Agent will arrange for checks written by direct
shareholders to be honored by the Bank after obtaining a specimen
signature card from the shareholder(s). Shareholders of joint accounts
may elect to have checks honored with a single signature. Checks may be
made payable to the order of anyone in any amount not less than $250 and
will be subject to the Bank's rules and regulations governing checks. If
a check is presented for an amount greater than the account value, it will
not be honored. For Program participants, checks will be drawn against
the primary account designated by the Program participant. Checks issued
for one Fund account must not be used if the shareholder's account has
been transferred to a new account or if the account number or registration
has been changed. Shares purchased by check or Automatic Investment Plan
payments within the prior 10 days may not be redeemed by checkwriting.
A check presented to the Bank for payment that would require redemption
of some or all of the shares so purchased is subject to non-payment. The
Bank will present checks to the Trust to redeem shares to cover the amount
of the check. Checks may not be presented for cash payment at the offices
of the Bank or the Trust's Custodian. This limitation does not affect the
use of checks for the payment of bills or to obtain cash at other banks.
The Trust reserves the right to amend, suspend or discontinue check
writing privileges at any time without prior notice.
- Telephone Redemptions. Direct shareholders of the Trust may redeem
their shares by telephone by calling the Transfer Agent at 1-800-852-8457.
This procedure for telephone redemptions is not available to Program
participants. Proceeds of telephone redemptions will be paid by check
payable to the shareholder(s) of record and sent to the address of record
for the account. Telephone redemptions are not available within 30 days
of a change of the address of record. Up to $50,000 may be redeemed by
telephone, once in any seven day period. The Transfer Agent may record
any calls. Telephone redemptions may not be available if all lines are
busy, and shareholders would have to use the Trust's regular redemption
procedure described above. Telephone redemption privileges are not
available for newly-purchased (within the prior 10 days) shares or for
shares represented by certificates. Telephone redemption privileges apply
automatically to each shareholder and the dealer representative of record
unless the Transfer Agent receives cancellation instructions from a
shareholder of record. If an account has multiple owners, the Transfer
Agent may rely on the instructions of any one owner.
- - Automatic Withdrawal Plans. Direct shareholders of the Trust 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 as of the close of The New York
Stock Exchange, which is normally 4:00 P.M. (but may be earlier on some
days), three business days prior to the date requested by the shareholder
for receipt of the payment. The Trust cannot guarantee receipt of payment
on the date requested and reserves the right to amend, discontinue or
cease offering such plans at any time without prior notice. For further
details, see the "Automatic Withdrawal Plan Provisions" in the Additional
Statement.
General Information on Redemptions. The redemption price will be the net
asset value per share of the Trust next determined after the receipt by
the Transfer Agent of a request in proper form. Under certain unusual
circumstances, shares of the Trust may be redeemed "in kind" (i.e., by
payment in portfolio securities). Under certain unusual circumstances,
shares of the Trust may be redeemed "in kind" (i.e., by payment in
portfolio securities). For details, see "Purchase, Redemption and Pricing
of Shares - Redemption of Shares" in the Additional Statement. Under the
Internal Revenue Code, the Trust may be required to impose "backup"
withholding of Federal income tax at the rate of 31% from any taxable
dividends and distributions the Trust may make, if the shareholder has not
furnished the Trust a certified taxpayer identification number or has not
complied with the provisions of the Internal Revenue Code and regulations
thereunder.
Payment for redeemed shares is made ordinarily in cash and forwarded
within seven days of the Transfer Agent's receipt of redemption
instructions in proper form, except under unusual circumstances as
determined by the Securities and Exchange Commission. The Transfer Agent
may delay forwarding a redemption check for recently-purchased shares only
until the purchase check has cleared, which may take up to 10 days or
more. Such delay may be avoided if the shareholder arranges telephone or
written assurance satisfactory to the Transfer Agent from the bank on
which the payment was drawn or by purchasing shares by Federal Funds wire,
as described above. The Trust makes no charge for redemption. Dealers
or brokers may charge a fee for handling redemption transactions, but such
fee can be avoided by requesting the redemption directly through the
Transfer Agent. Under certain circumstances, the proceeds of redemptions
of shares of the Trust acquired by exchange of Class A shares of "Eligible
Funds" (described below) that were purchased subject to a contingent
deferred sales charge ("CDSC") may be subject to the CDSC (see "Exchange
Privilege" below).
Exchanges of Shares
Exchange Privilege. Shares of the Trust held under a Program may be
exchanged for shares of Centennial Money Market Trust, Centennial
Government Trust, Centennial Tax Exempt Trust and Centennial California
Tax Exempt Trust (collectively, the "Centennial Trusts") only by
instructions of the broker. Shares of the Trust may, under certain
circumstances, be exchanged by direct shareholders for Class A shares of
the following funds, all collectively referred to as "Eligible Funds": (i)
Oppenheimer Target Fund, Oppenheimer Champion Income Fund, Oppenheimer
Asset Allocation Fund, Oppenheimer Discovery Fund, Oppenheimer U.S.
Government Trust, Oppenheimer Global Growth & Income Fund, Oppenheimer
Global Emerging Growth Fund, Oppenheimer Limited-Term Government Fund,
Oppenheimer Intermediate Tax-Exempt Fund, Oppenheimer Fund, Oppenheimer
Global Fund, Oppenheimer Growth Fund, Oppenheimer Equity Income Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Insured Tax-Exempt
Fund, Oppenheimer International Bond Fund, Oppenheimer Main Street Income
& Growth Fund, Oppenheimer Main Street California Tax-Exempt Fund,
Oppenheimer Florida Tax-Exempt Fund, Oppenheimer New Jersey Tax-Exempt
Fund, Oppenheimer Bond Fund, Oppenheimer Value Stock Fund, Oppenheimer
California Tax-Exempt Fund, Oppenheimer Pennsylvania Tax-Exempt Fund,
Oppenheimer High Yield Fund, Oppenheimer Total Return Fund, Inc.,
Oppenheimer Tax-Free Bond Fund, Oppenheimer New York Tax-Exempt Fund,
Oppenheimer Strategic Income Fund and, Oppenheimer Strategic Income &
Growth Fund, and (ii) the following "Money Market Funds": Oppenheimer
Money Market Fund, Inc., Oppenheimer Cash Reserves, any Centennial Trust,
and Daily Cash Accumulation Fund, Inc. There is an initial sales charge
on the purchase of Class A shares of each Eligible Fund except the Money
Market Funds (under certain circumstances described below, redemption
proceeds of Money Market Fund shares may be subject to a CDSC).
Shares of the Trust and of the other Eligible Funds may be exchanged
at net asset value if all of the following conditions are met: (1) shares
of the fund selected for exchange are available for sale in the
shareholder's state of residence; (2) the respective prospectuses of the
funds whose shares are to be exchanged and acquired offer the Exchange
Privilege to the investor; (3) newly-purchased shares (by initial or
subsequent investment) are held in an account for at least seven days
prior to the exchange; and (4) the aggregate net asset value of the shares
surrendered for exchange into a new account is at least equal to the
minimum investment requirements of the fund whose shares are to be
acquired.
In addition to the conditions stated above: shares of Eligible Funds
may be exchanged for shares of any Money Market Fund; shares of any Money
Market Fund (including the Trust) purchased without a sales charge may be
exchanged for shares of Eligible Funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to purchase
shares of Eligible Funds subject to a CDSC); and shares of the Trust
acquired by reinvestment of dividends and distributions from any Eligible
Fund (except Oppenheimer Cash Reserves) or from any unit investment trust
for which reinvestment arrangements have been made with the Distributor
or the sub-Distributor may be exchanged at net asset value for shares of
any Eligible Fund. The redemption proceeds of shares of the Trust,
acquired by exchange of Class A shares of an Eligible Fund purchased
subject to a CDSC, that are redeemed within 18 months of the end of the
calendar month of the initial purchase of the exchanged shares will be
subject to the CDSC as described in the prospectus of that other Eligible
Fund. In determining whether the CDSC is payable, shares of the Trust not
subject to the CDSC are redeemed first, including shares purchased by
reinvestment of dividends and capital gains distributions from any
Eligible Fund or shares of the Trust acquired by exchange of shares of
Eligible Funds on which a front-end sales charge was paid or credited, and
then other shares are redeemed in the order of purchase.
- - How to Exchange Shares. An exchange may be made by a direct shareholder
by submitting an Exchange Authorization Form to the Transfer Agent, signed
by all registered owners. In addition, direct shareholders of the Trust
may exchange shares of the Trust for shares of any Eligible Fund by
telephone exchange instructions to the Transfer Agent by a shareholder or
the dealer representative of record for an account. The Trust may modify,
suspend or discontinue this exchange privilege at any time. Although the
Trust will attempt to provide notice whenever it is reasonably able to do
so, it may impose these changes at any time. The Trust reserves the right
to reject requests submitted in bulk on behalf of 10 or more accounts.
Exchange requests must be received by the Transfer Agent by the close of
the Exchange on a regular business day to be effected that day. The
number of shares exchanged may be less than the number requested if the
number requested would include shares subject to a restriction cited above
or shares covered by a certificate that is not tendered with such request.
Only the shares available for exchange without restriction will be
exchanged.
- - Telephone Exchanges. Direct shareholders may place a telephone exchange
request by calling the Transfer Agent at 1-800-852-8457. Telephone
exchange calls may be recorded by the Transfer Agent. Telephone exchanges
are subject to the rules described above. By exchanging shares by
telephone, the shareholder is acknowledging receipt of a prospectus of the
fund to which the exchange is made and that for full or partial exchanges,
any special account features such as Automatic Investment Plans and
Automatic Withdrawal Plans will be switched to the new account unless the
Transfer Agent is otherwise instructed. Telephone exchange privileges
automatically apply to each direct shareholder of record and the dealer
representative of record unless and until the Transfer Agent receives
written instructions from the shareholder(s) of record cancelling such
privileges. If an account has multiple owners, the Transfer Agent may
rely on the instructions of any one owner.
The Transfer Agent has adopted reasonable procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification number(s) and other account data and by recording calls and
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 Trust will be liable for
losses or expenses arising out of any telephone instructions it reasonably
believed to be genuine. The Transfer Agent reserves the right to require
shareholders to confirm, in writing, telephone exchange privileges for an
account. Shares acquired by telephone exchange must be registered exactly
as the account from which the exchange was made. Certificated shares are
not eligible for telephone exchange. If all telephone exchange lines are
busy (which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request telephone
exchanges and would have to submit written exchange requests.
- - General Information on Exchanges. Shares to be exchanged are redeemed
on the day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date") as of the close of The New York Stock Exchange,
which is normally 4:00 P.M., but may be earlier on some days. Normally,
shares of the fund to be acquired are purchased on the Redemption Date,
but such purchases may be delayed by either fund for up to five business
days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Trust in its discretion reserves
the right to refuse any exchange request that will disadvantage it.
The Eligible Funds have different investment objectives and policies.
Each of those funds except the Money Market Funds imposes a sales charge
on purchases of Class A shares. For complete information, including sales
charges and expenses, a prospectus of the fund into which the exchange is
being made should be read prior to an exchange. Dealers and brokers who
process exchange orders on behalf of customers may charge for their
services. Direct shareholders may avoid those charges by requesting the
Trust directly to exchange shares. For Federal tax purposes, an exchange
is treated as a redemption and purchase of shares.
Dividends, Distributions and Taxes
This discussion relates solely to Federal tax laws and California
income tax laws and is not exhaustive; a qualified tax adviser should be
consulted. A portion of the Trust's dividends may be subject to federal,
state and local taxation. The Additional Statement contains further
discussion of tax matters affecting the Trust and its distributions, and
information about the possible applicability of the Alternative Minimum
Tax to the Trust's as well as a procedure for electing to reinvest
dividends and distributions of any of the Eligible Funds into shares of
The Trust at net asset value.
Dividends and Distributions. The Trust intends to declare all of its net
income, as defined below, as dividends on each regular business day and
to pay dividends monthly. Dividends will be payable to shareholders as
described in "How to Buy Shares" above.
All dividends and capital gains distributions for the accounts of
Program participants are automatically reinvested in additional shares of
the Trust. Dividends accumulated since the prior payment will be
reinvested in full and fractional shares of the Trust (or paid in cash)
at net asset value on the third Thursday of each calendar month. Program
participants may receive cash payments by asking the broker to redeem
shares. Dividends and distributions payable to direct shareholders will
also be automatically reinvested in shares of the Trust at net asset
value, unless the shareholder asks the Transfer Agent in writing to pay
dividends in cash, or to reinvest them in another Eligible Fund, as
described in "Dividend Reinvestment in Another Fund" in the Additional
Statement. That notice must be received prior to a dividend record date
to be effective as to that dividend. If a shareholder redeems all shares
at any time during a month, the redemption proceeds include all the
dividends accrued up to the redemption date for shares redeemed prior to
12:00 Noon, and include all dividends accrued through the redemption date
for shares redeemed between 12:00 Noon and the close of The New York Stock
Exchange. Dividends, distributions and the proceeds of redemptions of
Trust shares represented by checks returned to the Transfer Agent by the
Postal Service as undeliverable will be reinvested in shares of the Trust,
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.
Under the terms of a Program, a broker-dealer may pay out the value
of some or all of a Program participant's Trust shares prior to redemption
of such shares by the Trust. In such cases, the shareholder will be
entitled to dividends on such shares only up to and including the date of
such payment. Dividends on such shares accruing between the date of
payment and the date such shares are redeemed by the Trust will be paid
to the broker-dealer. Program participants should discuss these
arrangements with their broker-dealer.
The Trust's net investment income for dividend purposes consists of
all interest accrued on portfolio assets, less all expenses of the Trust
for such period. Distributions from net realized gains on securities, if
any, will be paid at least once each year, and may be made more frequently
in compliance with the Internal Revenue Code and the Investment Company
Act. Any net realized capital loss is carried forward to offset against
capital gains in later years. The Trust will not make any distributions
from net realized securities gains unless capital loss carry forwards, if
any, have been used or have expired. Long-term capital gains, if any,
will be identified separately when tax information for the Trust is
distributed to shareholders. Receipt of tax-exempt income must be
reported on the taxpayer's Federal income tax return. The Additional
Statement describes how dividends and distributions received by direct
shareholders of the Trust may be reinvested in shares of any Eligible Fund
at net asset value. To effect its policy of maintaining a net asset value
of $1.00 per share, the Trust, under certain circumstances, may withhold
dividends or make distributions from capital or capital gains.
Tax Status of the Trust's Dividends. The Trust intends to qualify under
the Internal Revenue Code during each fiscal year to pay "exempt-interest
dividends" to its shareholders, and qualified during its last fiscal year.
Exempt-interest dividends which are derived from net investment income
earned by the Trust on Municipal Securities will be excludable from gross
income of the shareholders for Federal income tax purposes. Net
investment income includes income allocated from Municipal Securities in
the Trust's portfolio which are free from Federal and California
individual income taxes. This allocation will be made by uniformly
applying a designated percentage to all income dividends made during the
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 differ substantially
from the percentage of the Trust's income that was tax-exempt for a given
period. The net amount of any income on Municipal Securities subject to
the alternative minimum tax will be identified when tax information is
distributed by the Trust. All or a portion of the Trust's exempt-interest
dividends may be a component of the "adjusted current earnings" preference
item under the corporate alternative minimum tax. The Trust will report
annually to shareholders the percentage of interest income it received
during the preceding year on Municipal Securities. Although not subject
to tax, the receipt of tax-exempt income must be reported on the
taxpayer's Federal income tax return. 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.
A shareholder treats a dividend as a receipt of ordinary income
(whether paid in cash or reinvested in additional shares) if derived from
net interest income earned by the Trust from one or more of: (i) certain
taxable temporary investments (such as certificates of deposit, commercial
paper, obligations of the U.S. government, its agencies or
instrumentalities or repurchase agreements), (ii) income from securities
loans, or (iii) an excess of net short-term capital gains over net long-
term capital losses. Losses realized by shareholders on the redemption
or other disposition of Trust shares within six months of purchase (which
period may be shortened by regulation and may be extended in certain
circumstances) will be disallowed for Federal income tax purposes to the
extent of exempt-interest dividends received on such shares.
In any year in which the Trust qualifies as a regulated investment
company under the Internal Revenue Code, (i) the Trust will also qualify
as a regulated investment company for California corporate income and
franchise tax purposes, and (ii) provided that the Trust's assets satisfy
the 50% requirement discussed below, the Trust will be qualified under
California law to pay "exempt-interest dividends" which will be exempt
from the California personal income tax. Individual shareholders of the
Trust will not be subject to California personal income tax on exempt-
interest dividends received from the Trust to the extent such
distributions are attributable to interest on obligations which, if held
by an individual, would not be subject to California personal income tax,
provided that at least 50% of the Trust's assets at the close of each
quarter of its taxable year are invested in such obligations.
Distributions from the Trust attributable to other sources will generally
be taxable to shareholders as ordinary income. However, amounts treated
as long-term capital gain distributions for Federal income tax purposes
are treated as long-term capital gains for California personal income tax
purposes. In addition, distributions to shareholders of other than
exempt-interest dividends are includable in income subject to the
California alternative minimum tax. Interest on indebtedness
incurred or continued by shareholders to purchase or carry shares of the
Trust will not be deductible for Federal or California personal income tax
purposes.
Distributions from investment income and long-term and short-term
capital gains will generally not be excluded from taxable income in
determining the California corporate franchise or income tax for corporate
shareholders. Distributions are also includable in income that is subject
to the corporate alternative minimum tax.
If the Trust has net realized long-term capital gains in a taxable
year, it may make an annual "long-term capital gains distribution," which
will be so identified when paid and when tax information is distributed.
Long-term gains are taxable to shareholders as long-term capital gains,
whether received in cash or reinvested, regardless of how long the Trust
shares have been held. Losses realized by shareholders on the redemption
or other sale of shares within six months of purchase (which period may
be shortened by regulation and may be extended in certain circumstances)
will be treated for Federal income tax purposes as a long-term capital
loss to the extent that the shareholder received (or was treated as
receiving, as described below) a capital-gain dividend on the shares. The
Trust will report annually to its shareholders the percentage of interest
income it received during the preceding year on Municipal Securities. It
will also report the net amount of its income that is subject to the
alternative minimum tax. Receipt of tax-exempt income must be reported
on a taxpayer's Federal income tax return.
Tax Status of the Trust. If the Trust 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 Trust so qualified during its last fiscal year and
intends to qualify in the current and future fiscal years, while reserving
the right not to so qualify. However, the Internal Revenue Code contains
a number of complex tests relating to qualification which the Trust might
not meet in any particular year. If the Trust does not qualify, it would
be treated for Federal tax purposes as an ordinary corporation, would
receive no tax deduction for payments made to shareholders and would be
unable to pay "exempt-interest dividends" as discussed above.
Additional Information
Description of the Trust and its Shares. The Trust's shares are of one
class, are transferrable without restriction and have equal rights and
privileges. Each share of the Trust represents an interest in the Trust
equal to the interest of each other share in the Trust and entitles the
holder to one vote per share (and a fractional vote for a fractional
share) on matters submitted to a shareholder vote, and to participate pro-
rata in dividends and distributions and in the net distributable assets
of the Trust on liquidation. The Trustees may divide or combine shares
into a greater or lesser number of shares without thereby changing the
proportionate beneficial interest in the Trust. Shares do not have
cumulative voting rights or conversion, preemptive or subscription rights.
The Trust's Board of Trustees is empowered to issue additional "series"
of shares of the Trust, which may have separate assets and liabilities.
The Trust does not anticipate holding annual meetings. Under certain
circumstances, shareholders of the Trust have the right to remove a
Trustee. See "Additional Information" in the Additional Statement for
details.
The Custodian and the Transfer Agent. The Custodian of the assets of the
Trust is Citibank, N.A. The Manager and its affiliates presently have
banking relationships with the Custodian; see "Additional Information" in
the Additional Statement for further information. The Trust's cash
balances in excess of $100,000 held by the Custodian are not protected by
Federal deposit insurance. Such uninsured balances may at times be
substantial. The rating restrictions under Rule 2a-7 (see "Ratings of
Securities," above) do not apply to banks in which the Trust's cash is
kept.
Shareholder Services, Inc., a subsidiary of OMC, acts as Transfer
Agent and shareholder servicing agent on an at-cost basis for the Trust
and other mutual funds advised by the Manager. The fees to the Transfer
Agent do not include payments for any services of the type paid, or to be
paid, by the Trust to the Distributor and to Recipients under the Service
Plan. Shareholders should direct any inquiries regarding the Trust to the
Transfer Agent at the address or toll-free phone number on the back cover.
Program participants should direct any inquiries regarding the Trust to
their broker.
<PAGE>
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 Trust, the Manager, the
Distributor, or any affiliate thereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state.
Investment Adviser and Distributor
Centennial Asset Management Corporation
3410 South Galena Street
Denver, Colorado 80231
Transfer and Shareholder Servicing Agent
Shareholder Services, Inc.
P.O. Box 5143
Denver, Colorado 80217-5143
1-800-525-9310
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf P.C.
Colorado State Bank Building
1600 Broadway, Suite 1850
Denver, Colorado 80202
PR180001.1195.R * Printed on recycled paper
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CENTENNIAL CALIFORNIA TAX EXEMPT TRUST
3410 South Galena Street, Denver, Colorado 80231
1-800-525-9310
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement should be read in
conjunction with the Prospectus (the "Prospectus") dated November 1, 1995
of Centennial California Tax Exempt Trust (the "Trust"), which may be
obtained upon written request to Shareholder Services, Inc. (the "Transfer
Agent"), P.O. Box 5143, Denver, Colorado 80217-5143 or by calling the
toll-free number shown above.
TABLE OF CONTENTS
Page
Investment Objective and Policies 2
Special Investment Considerations -
California Municipal Securities 8
Investment Restrictions 10
Trustees and Officers 11
Investment Management Services 15
Service Plan 17
Purchase, Redemption and Pricing of Shares 18
Yield Information 20
Additional Information 21
Automatic Withdrawal Plan Provisions 23
Independent Auditors' Report 25
Financial Statements 26
Appendix A: Description of Securities Ratings A-1
Appendix B: Tax Equivalent Yield Tables B-1
Appendix C: Industry Classifications C-1
This Additional Statement is effective November 1, 1995.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Trust are described in
the Prospectus. Set forth below is supplemental information about those
policies. Certain capitalized terms used in this Additional Statement are
defined in the Prospectus.
The Trust will not make investments with the objective of seeking
capital growth. However, the value of the securities held by the Trust 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
rise. However, those fluctuations in value will not generally result in
realized gains or losses to the Trust since the Trust does not usually
intend to dispose of securities prior to their maturity. A debt security
held to maturity is redeemable by its issuer at full principal value plus
accrued interest. To a limited degree, the Trust may engage in short-term
trading to attempt to take advantage of short-term market variations, or
may dispose of a portfolio security prior to its maturity if, on the basis
of a revised credit evaluation of the issuer or other considerations, the
Trust believes such disposition advisable or it needs to generate cash to
satisfy redemptions. In such cases, the Trust may realize a capital gain
or loss. The Trust will not engage in option activity.
There are, of course, variations in the quality of Municipal
Securities, both within a particular classification and between
classifications, depending on numerous factors. The yields of Municipal
Securities depend on, among other things, general conditions of the
Municipal Securities market, size of a particular offering, the maturity
of the obligation and rating of the issue. 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
Municipal Bonds. The principal classifications of Municipal Bonds are
"general obligations" (secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest),
"revenue obligations" (payable only from the revenues derived from a
particular facility or class of facilities, or specific excise tax or
other revenue source) and "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, 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 seasonal tax revenue, such as income, sales, use or
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 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 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 Trust may invest more
than 5% of its net assets in municipal lease obligations, generally
through the acquisition of certificates of participation, that the Manager
has determined to be liquid under guidelines set by the Board of
Directors. 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 Trust and the credit quality of the instrument.
Municipal leases may take the form of a lease or an installment purchase
contract issued by a state or local government authority to obtain funds
to acquire a wide variety of equipment and facilities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. Projects financed with certificates
of participation generally are not subject to state constitutional debt
limitations or other statutory requirements that may be applicable to
Municipal Securities. Payments by the public entity on the obligation
underlying the certificates are derived from available revenue sources;
such revenue may be diverted to the funding of other municipal service
projects. Payments of interest and/or principal with respect to the
certificates are not guaranteed and do not constitute an obligation of the
State of California or any of its political subdivisions.
In addition to the risk of "non-appropriation," municipal lease
securities do not yet have a highly developed market to provide the degree
of liquidity of conventional municipal bonds. Municipal leases, like
other municipal debt obligations, are subject to the risk of non-payment.
The ability of issuers of municipal leases to make timely lease payments
may be adversely affected in general economic downturns and as relative
governmental cost burdens are reallocated among federal, state and local
governmental units. Such non-payment would result in a reduction of
income to the Trust, 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 Trust. Municipal lease obligations purchased by
the Trust must meet the credit quality requirements of Rule 2a-7.
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 on not more than
thirty days' notice at any time or at specified intervals not exceeding
one year. 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 the PSA
Municipal Swap Index or the J.J. Kenney Index, 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. There is no limit on the amount of the Trust's assets that may
be invested in floating rate and variable rate obligations. Floating rate
or variable rate obligations which do not provide for recovery of
principal and interest within thirty days may be subject to the
limitations applicable to illiquid securities described in "Illiquid and
Restricted Securities" in the Prospectus.
Puts and Stand-by Commitments. When the Trust buys Municipal Securities,
it may obtain a stand-by commitment from the seller to repurchase the
securities that entitles the Trust 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 Trust to sell the underlying security within a specified
period of time at a fixed exercise price. The Trust may pay for a stand-
by commitment or put either separately in cash or by paying a higher price
for the securities acquired subject to the stand-by commitment or put.
The Trust will enter into these transactions only with banks and dealers
which, in the Manager's opinion, present minimal credit risks. The
Trust's purchases of puts are subject to the provisions of Rule 2a-7 under
the Investment Company Act because the Trust uses the amortized cost
method to value its portfolio securities. For purposes of the Trust's
compliance with Rule 2a-7 when investing in puts, a put will be considered
to be issued by the party to which the Trust will look for payment of the
exercise price, and an unconditional put will be considered to be a
guarantee of the underlying security. An unconditional put or guarantee
with respect to a security will not be deemed to be issued by the
institution providing the guarantee or put provided that the value of all
securities held by the Trust and issued or guaranteed by the issuer
providing the guarantee or put shall not exceed 10% of the Trust's total
assets.
The Trust's ability to exercise a put or stand-by commitment will
depend on the ability of the bank or dealer to pay for the securities if
the put or stand-by commitment is exercised. If the bank or dealer should
default on its obligation, the Trust might not be able to recover all or
a portion of any loss sustained from having to sell the security
elsewhere. Puts and stand-by commitments are not transferable by the
Trust, and therefore terminate if the Trust sells the underlying security
to a third party. The Trust intends to enter into these arrangements to
facilitate portfolio liquidity, although such arrangements may enable the
Trust to sell a security at a pre-arranged price which may be higher than
the prevailing market price at the time the put or stand-by commitment is
exercised. However, the Trust might refrain from exercising a put or
stand-by 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 Trust's business relationship with the seller. Any
consideration paid by the Trust for the put or stand-by commitment (which
increases the cost of the security and reduces the yield otherwise
available from the security) will be reflected on the Trust's books as
unrealized depreciation while the put or stand-by commitment is held, and
a realized gain or loss when the put or commitment is exercised or
expires. Interest income received by the Trust from Municipal Securities
subject to puts or stand-by commitments may not qualify as tax exempt in
its hands if the
terms of the put or stand-by commitment cause the Trust not to be treated
as the tax owner of the underlying Municipal Securities.
Private Activity Municipal Securities. The Tax Reform Act of 1986 (the
"Tax Reform Act") reorganized, as well as amended, the rules governing tax
exemption for interest on Municipal Securities. The Tax Reform Act
generally did not change the tax treatment of bonds issued in order to
finance governmental operations. Thus, interest on obligations issued by
or on behalf of a 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 Federal 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 Trust 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, limitations on the dollar amount of private
activity bonds which each state may issue were revised downward by the Tax
Reform Act, which will reduce the supply of such bonds. The value of the
Trust'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 Trust makes no independent investigation of the
users of such bonds or their use of proceeds. If the Trust holds a bond
that loses its tax-exempt status retroactively, an adjustment to the tax-
exempt income previously paid to shareholders may result.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if they have no other income tax obligation.
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 Trust may hold
Municipal Securities the interest on which (and thus a proportionate share
of the exempt-interest dividends paid by the Trust) will be subject to the
Federal alternative minimum tax. For calendar year 1994, approximately
9.2% of the Trust dividends paid to shareholders were a tax preference
item for shareholders subject to the Federal alternative minimum tax. The
Trust anticipates that under normal circumstances it will not purchase any
such securities in an amount greater than 20% of the Trust's total assets.
Ratings of Securities. The prospectus describes "Eligible Securities" in
which the Trust may invest and indicates that if a security's rating is
downgraded, the Manager and/or the Board may have to reassess the
security's credit risks. If a security has ceased to be a First Tier
Security, the Manager will promptly reassess whether the security
continues to present "minimal credit risks." If the Manager becomes aware
that any Rating Organization has downgraded its rating of a Second Tier
Security or rated an unrated security below its second highest rating
category, the Trust's Board of Trustees shall promptly reassess whether
the security presents minimal credit risks and whether it is in the best
interests of the Trust to dispose of it. If a security is in default, or
ceases to be an Eligible Security, or is determined no longer to present
minimal credit risks, the Board must determine whether it would be in the
best interests of the Trust to dispose of the security; but if the Trust
disposes of the security within five days of the Manager learning of the
downgrade, the Manager will provide the Board with subsequent notice of
such downgrade. The Rating Organizations currently designated as such by
the Securities and Exchange Commission ("SEC") are Standard & Poor's
Corporation, Moody's Investors Service, Inc., Fitch Investors Services,
Inc., Duff and Phelps, Inc., IBCA Limited and its affiliate, IBCA, Inc.
and Thomson BankWatch, Inc. A description of the ratings categories of
those Rating Organizations is contained in Appendix A.
Other Investment Techniques and Strategies
When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Trust may invest in Municipal Securities on a "when-
issued" or "delayed delivery" basis. Payment for and delivery of the
securities generally settles within 30 days of the date the offer is
accepted. The purchase price and yield are fixed at the time the buyer
enters into the commitment. During the period between the time of
commitment and settlement, no payment is made by the Trust to the issuer
and no interest accrues to the Trust from the investment. However, the
Trust intends to be as fully invested as possible and will not invest in
when-issued securities if its income or net asset value will be materially
adversely affected. At the time the Trust makes the commitment to
purchase a Municipal Security on a when-issued basis, it will record the
transaction on its books and reflect the value of the security in
determining its net asset value. It will also segregate cash or liquid
high-grade Municipal Securities equal in value to the commitment for the
when-issued securities. While when-issued securities may be sold prior
to settlement date, the Trust intends to acquire the securities upon
settlement unless a prior sale appears desirable for investment reasons.
There is a risk that the yield available in the market when delivery
occurs may be higher than the yield on the security acquired.
Repurchase Agreements. In a repurchase transaction, the Trust acquires
a security, from, and simultaneously resells it to, an approved vendor
which satisfies the requirements of Rule 2a-7. The resale price exceeds
the purchase price by an amount that reflects an agreed-upon interest rate
effective for the period during which the repurchase agreement is in
effect. The majority of these transactions run from day to day, and
delivery pursuant to the resale typically will occur within one to five
days of the purchase. Repurchase agreements are considered loans under
the Investment Company Act, collateralized by the underlying security.
The Trust's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
Loans of Portfolio Securities. The Trust may lend its portfolio
securities subject to the restrictions stated in the Prospectus, to
attempt to increase the Trust's income for liquidity purposes. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the value of
the loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities)
or other cash equivalents in which the Trust is permitted to invest. To
be acceptable as collateral, letters of credit must obligate a bank to pay
amounts demanded by the Trust if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Trust. The
Trust 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 Trust may also pay
reasonable finder's, custodian and administrative fees and will not lend
its portfolio securities to any officer, trustee, employee or affiliate
of the Trust or the Manager. The terms of the Trust's loans must meet
applicable tests under the Internal Revenue Code and permit the Trust to
reacquire loaned securities on five business 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 Trust.
SPECIAL INVESTMENT CONSIDERATIONS - CALIFORNIA
MUNICIPAL SECURITIES
As stated in the Prospectus, the values of the Trust's California
Municipal Securities are highly sensitive to the fiscal stability of
California and its subdivisions, agencies, instrumentalities or
authorities, which issue the Municipal Securities in which the Trust
concentrates its investments. Certain amendments to the California State
constitution, legislative measures, executive orders, civil actions and
voter initiatives in recent years that could adversely affect the ability
of California issuers to pay interest and principal on Municipal
Securities are described below. The following constitutes only a brief
summary, and is based on information drawn from the relevant statutes and
certain other publicly available information. The Trust has not
independently verified such information.
Changes in California constitutional and other laws during the last
several years have caused concerns about the ability of California state
and municipal issuers to obtain sufficient revenue to pay their bond
obligations. In 1978, California voters approved an amendment to the
California Constitution known as Proposition 13, which added Article XIIIA
to the California Constitution. Article XIIIA limits ad valorem taxes on
real property and restricts the ability of taxing entities to increase
real property taxes. However, legislation passed subsequent to
Proposition 13 provided for the redistribution of California's General
Fund surplus to local agencies, the reallocation of revenues to local
agencies and the assumption of certain local obligations by the state so
as to help California municipal issuers raise revenue to pay their bond
obligations. It is unknown whether additional revenue redistribution
legislation will be enacted in the future and whether, if enacted, such
legislation will provide sufficient revenue for such California issuers
to pay their obligations.
The state is also subject to another constitutional amendment,
Article XIIIB, which may have an adverse impact on California state and
municipal issuers. Article XIIIB restricts the state from spending
certain appropriations in excess of an appropriations limit imposed for
each state and local government entity. If revenues exceed such
appropriations limit, such revenues must be returned either as revisions
in the tax rates or fee schedules. In 1988, California voters approved
an initiative known as Proposition 98, which in addition to amending
Article XIIIB, amended Article XVI to require a minimum level of funding
for public schools and community colleges.
Because of the uncertain impact of the aforementioned legislation,
the possible inconsistencies in the respective terms of the statutes and
the impossibility of predicting the level of future appropriations and
applicability of related statutes to such questions, it is not currently
possible to assess the impact of such legislation and policies on the long
term ability of the State of California and California municipal issuers
to pay interest or repay principal on their obligations.
Although the national economic recovery continued at a strong pace
in the first quarter of 1994, California is still experiencing the effects
of a recession. Substantial contracting in California's defense related
industries, overbuilding in commercial real estate, and consolidation and
decline in the state's financial services industry will likely produce
slower overall growth in 1995 and 1996.
These economic difficulties have exacerbated the budget imbalance
which has been evident since 1985-86, during which time the state has
recorded General Fund operating deficits in several fiscal years. Many
of these problems have been attributable to a great population increase
which has increased demand for educational and social services at a pace
far greater than the growth in revenues.
By June 1995 the state's General Fund had an accumulated deficit, on
a budgeted basis, of approximately $1 billion. On August 3, 1995, the
Governor signed into law a new $57.5 billion budget which, among other
things, reduces welfare payments and increases education spending from the
previous fiscal year. The budget forecasts levels of revenues and
expenditures which are expected to result in an operating surplus in the
1995-96 fiscal year, and to lead to the elimination of the budget deficit
by June 30, 1996.
Because of the State of California's continuing budget problems, the
state's General Obligation bonds were downgraded in July 1994 from Aa to
A1 by Moody's, from A+ to A by Standard & Poor's and from AA to A by
Fitch. All three rating agencies expressed uncertainty in the state's
ability to balance its budget by 1996.
On December 6, 1994, Orange County (California) became the largest
municipality in the United States to file for protection under the Federal
bankruptcy laws. The filing stemmed from approximately $1.7 billion in
losses suffered by the county's investment pool due to investment in high
risk "derivative" securities. In September 1995 the state legislature
approved legislation permitting Orange County to use for bankruptcy
recovery $820 million over 20 years in sales taxes previously earmarked
for highway, transit and development. Such legislation also permits the
Governor to appoint a trustee to take over Orange County's financial
affairs if the county does not have a full recovery plan filed with the
Bankruptcy Court by May 1996.
Los Angeles County, the nation's largest county, is also experiencing
financial difficulty. In August 1995 the credit rating of the county's
long-term bonds was downgraded for the third time since 1992 as a result
of, among other things, severe operating deficits for the county's health
care system. In September 1995, federal and state aid to Los Angeles
County totalling $514 million was pledged, providing a short-term solution
to the county's budget problems.
INVESTMENT RESTRICTIONS
The Trust's most significant investment restrictions are set forth
in the Prospectus. The following investment restrictions are also
fundamental investment policies of the Trust and, together with the
fundamental policies and investment objective described in the Prospectus,
cannot be changed without the vote of a "majority" of the Trust's
outstanding shares. Under the Investment Company Act, such a "majority"
vote is defined as the vote of the holders of the lesser of (i) 67% or
more of the shares present or represented by proxy at a shareholder's
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 Trust cannot: (1) invest
in commodities or commodity contracts, or invest in interests in oil, gas,
or other mineral exploration or development programs; (2) invest in real
estate; however, the Trust may purchase Municipal Bonds or Notes secured
by interests in real estate; (3) make short sales of securities or
purchase securities on margin, except for short-term credits necessary for
the clearance of purchases and sales of portfolio securities; (4) invest
in or hold securities of any issuer if those officers and Trustees of the
Trust or 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;
(5) underwrite securities of other companies; or (6) invest in securities
of other investment companies except as they may be acquired as part of
a merger, consolidation or acquisition of assets.
For purposes of investment restriction (4) above and the investment
restrictions in the Prospectus, the identification of the "issuer" of a
Municipal Security depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the
sole issuer. Similarly, in the case of an industrial development bond,
if that bond is backed only by the assets and revenues of the
nongovernmental user, then such nongovernmental user would be deemed to
be the sole issuer. However, if in either case the creating government
or some other entity guarantees the security, such guarantee would be
considered a separate security and would be treated as an issue of such
government or other agency.
In applying the restrictions in the Prospectus as to the Trust'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 there is no industry
concentration limitation as to municipal securities the Trust may own.
Although this application of the restriction is not technically a
fundamental policy of the Trust, it will not be changed without
shareholder approval. Should any such change be made, the Prospectus
and/or Additional Statement will be supplemented to reflect the change.
For purposes of the Trust's policy not to concentrate its assets,
described under restriction number (4) in the Prospectus, the Trust has
adopted the industry classifications set forth in Appendix C to this
Statement of Additional Information. This is not a fundamental policy.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and their principal
occupations and business affiliations during the past five years are
listed below. Except as noted below, each Trustee is also a Trustee,
Director or Managing General Partner of Daily Cash Accumulation Fund,
Inc., Centennial Money Market Trust, Centennial Government Trust,
Centennial Tax Exempt Trust, Centennial New York Tax Exempt Trust,
Centennial America Fund, L.P. (collectively with the Trust the "Centennial
Trusts"), Oppenheimer Total Return Fund, Inc., Oppenheimer High Yield
Fund, Oppenheimer Equity Income Fund, Oppenheimer Cash Reserves,
Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Income & Growth
Fund, Oppenheimer Variable Account Funds, Oppenheimer Champion Income
Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer Limited-Term
Government Fund, Oppenheimer Tax-Exempt Fund, Oppenheimer Bond Fund,
Oppenheimer Value Stock Fund, Oppenheimer International Bond Fund and The
New York Tax-Exempt Income Fund, Inc. (collectively referred to as the
"Denver-based Oppenheimer funds"). Mr. Fossel is a Trustee, Director or
Managing Partner of all the Denver-based Oppenheimer funds except
Oppenheimer Bond Fund and Oppenheimer Strategic Income Fund. Mr. Fossel
is President and Mr. Swain is Chairman of all of the funds listed. All
other officers, with the exception of Mr. Carbuto, hold similar positions
with all of the funds listed. As of September 30, 1995, the Trustees and
officers of the Trust in the aggregate owned less than 1% of the Trust's
outstanding shares.
ROBERT G. AVIS, Trustee*; Age 64
One North Jefferson Avenue, St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent
holding company); Chairman of A.G.E. Asset Management and A.G. Edwards
Trust Company (its affiliated investment adviser and trust company,
respectively).
WILLIAM A. BAKER, Trustee; Age 80
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
CHARLES CONRAD, JR., Trustee; Age 65
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems Co.; formerly associated
with the National Aeronautics and Space Administration.
RAYMOND J. KALINOWSKI, Trustee; Age 66
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; formerly Vice Chairman
and a Director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. HOWARD KAST, Trustee; Age 73
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
ROBERT M. KIRCHNER, Trustee; Age 73
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
NED M. STEEL, Trustee; Age 80
3416 South Race Street, Englewood, Colorado 80112
Chartered Property and Casualty Underwriter; Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a Director of
Van Gilder Insurance Corp. (insurance brokers).
JAMES C. SWAIN, Chairman and Trustee*; Age 61
3410 South Galena Street, Denver, Colorado 80231
President and Director of Centennial Asset Management Corporation (the
"Manager"); Vice Chairman and a Director of Oppenheimer Management
Corporation ("OMC"), the immediate parent of the Manager; formerly
Chairman of the Board of Shareholder Services, Inc. (the "Transfer
Agent"), the Trust's transfer agent, which is a subsidiary of OMC.
___________________
*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act.
JON S. FOSSEL, Trustee and President*; Age 53
Two World Trade Center, New York, New York 10048
Chairman and a director of OMC; President and Director of Oppenheimer
Acquisition Corp. ("OAC"), OMC's parent holding company; President and a
director of HarbourView Asset Management Corporation, an investment
advisory subsidiary of OMC ("HarbourView"); a director of the Transfer
Agent and Shareholder Financial Services, Inc. ("SFSI"), transfer agent
subsidiaries of OMC; formerly President of OMC.
ANDREW J. DONOHUE, Vice President; Age 45
Two World Trade Center, New York, New York 10048
Executive Vice President and General Counsel of OMC and Oppenheimer Funds
Distributor, Inc. ("OFDI"); an officer of other Oppenheimer funds;
formerly Senior Vice President and Associate General Counsel of OMC and
OFDI; Partner in Kraft & McManimon (a law firm); an officer of First
Investors Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser); director and an
officer of First Investors Family of Funds and First Investors Life
Insurance Company.
MICHAEL A. CARBUTO, Vice President and Portfolio Manager; Age 40
Two World Trade Center, New York, New York 10048
Vice President of the Manager and OMC; an officer of other Oppenheimer
funds.
GEORGE C. BOWEN, Vice President, Secretary and Treasurer; Age 59
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of OMC; Vice President and Treasurer
of OFDI and HarbourView; Senior Vice President, Treasurer, Assistant
Secretary and a director of the Manager; Vice President, Treasurer and
Secretary of the Transfer Agent and SFSI; an officer of other Oppenheimer
funds; formerly Senior Vice President/Comptroller and Secretary of OAMC.
ROBERT G. ZACK, Assistant Secretary; Age 47
Two World Trade Center, New York, New York 10048
Senior Vice President and Associate General Counsel of OMC; Assistant
Secretary of the Transfer Agent and SFSI; an officer of other Oppenheimer
funds.
ROBERT BISHOP, Assistant Treasurer; Age 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of OMC/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously a Fund Controller for the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions Supervisor
for Stuart James Company, Inc., a broker-dealer.
___________________
*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act.
SCOTT FARRAR, Assistant Treasurer; Age 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of OMC/Mutual Fund Accounting; an officer of
other OppenheimerFunds; formerly 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 Trust (including Messrs.
Fossel and Swain) are affiliated with the Manager and receive no salary
or fee from the Trust. The Trust has an Audit and Review Committee
composed of William A. Baker (Chairman), Charles Conrad, Jr. and Robert
M. Kirchner. This Committee meets regularly to review audit procedures,
financial statements and other financial and operational matters of the
Trust. The Trustees of the Trust (excluding Messrs. Fossel and Swain)
received the total amounts shown below (i) from the Trust, during its
fiscal year ended June 30, 1995 and (ii) from all 21 of the funds
(including the Trust) listed in the first paragraph of this section (and
from Oppenheimer Tax-Exempt Cash Reserves, Oppenheimer Strategic
Investment Grade Bond Fund and Oppenheimer Strategic Short-Term Income
Fund, which ceased operation following the acquisition of their assets by
certain other Oppenheimer funds), for services in the positions shown.
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
CompensationDenver-based
Name Position from Trust Oppenheimer funds1
<S> <C> <C> <C>
Robert G. Avis Director $249 $53,000.00
William A. Baker Audit and Review $343 $73,257.01
Committee Chairman
and Director
Charles Conrad, Jr. Audit and Review $321 $68,293.67
Committee
Member and Director
Raymond J. KalinowskiDirector $249 $53,000.00
C. Howard Kast Director $249 $53,000.00
Robert M. Kirchner Audit and Review $321 $68,293.67
Committee Member
and Director
Ned M. Steel Director $249 $53,000.00
______________________
1For the 1994 calendar year.
</TABLE>
Major Shareholders. As of October 6, 1995 A.G. Edwards & Sons, Inc.
("Edwards"), 1 North Jefferson Avenue, St. Louis, MO 63103, was the record
owner of 100,287,695.640 shares of the Trust (approximately 98.81% of
outstanding shares). The Trust has been informed that the shares held of
record by Edwards were beneficially owned by its brokerage clients. As of
that date, no other person owned of record or was known by the Trust to
own beneficially 5% or more of the Trust's outstanding shares.
INVESTMENT MANAGEMENT SERVICES
The Manager is wholly-owned by OMC, which is a wholly-owned
subsidiary of Oppenheimer Acquisition Corp. ("OAC"), a holding company
controlled by Massachusetts Mutual Life Insurance Company. The remaining
stock of OAC is owned by (i) certain of OMC's directors and officers, some
of whom may serve as officers of the Trust, and two of whom (Messrs. Jon
S. Fossel and James C. Swain) serve as a Trustee of the Trust and (ii)
Edwards, which owns less than 5% of its equity.
The Code of Ethics governing the Fund is designed to detect and
prevent improper personal trading by certain employees, including
portfolio managers, that would compete with or take advantage of the
Trust's portfolio transactions. Compliance with the Code of Ethics is
carefully monitored and strictly enforced by the Manager.
A management fee is payable monthly to the Manager under the terms
of the investment advisory agreement between the Manager and the Trust
(the "Agreement"), and is computed on the aggregate net assets of the
Trust as of the close of business each day. The Agreement requires the
Manager, at its expense, to provide the Trust with adequate office space,
facilities and equipment, and to provide and supervise the activities of
all administrative and clerical personnel required to provide effective
administration for the Trust, including the compilation and maintenance
of records with respect to its operations, the preparation and filing of
specified reports, and the composition of proxy materials and registration
statements for continuous public sale of shares of the Trust. Expenses
not expressly assumed by the Manager under the Agreement or by the
Distributor of the shares of the Trust, are paid by the Trust. A
description of examples of such expenses is in the Prospectus.
The Agreement contains no expense limitation. However, independently
of the Agreement, the Manager has undertaken that the total expenses of
the Trust in any fiscal year shall not exceed the most stringent
applicable state regulatory limitation. California's regulatory
limitation is currently 2.5% of the first $30 million of net assets, 2%
on the next $70 million of net assets and 1.5% of assets in excess of $100
million. In addition, the Manager has undertaken that the total expenses
of the Trust, in any fiscal year of the Trust, exclusive of taxes,
interest, brokerage commissions and non-recurring expenses, including
litigation, shall not exceed 0.80% of the average annual net assets of the
Trust. The payment of the management fee at the end of any month will be
reduced so that there will not be any accrued but unpaid liability under
those expense limitations. Any assumption of the Trust's expenses under
either limitation lowers the Trust's overall expense ratio and increases
its yield and total return during the time such expenses are assumed. The
Manager reserves the right to vary the amount of expenses assumed or
eliminate the assumption of expenses altogether. For the fiscal years
ended June 30, 1993, 1994 and 1995, the management fees payable by the
Trust would have been $280,452, $327,466 and $356,181, respectively.
Those amounts do not reflect the effect of the expense assumptions of
$33,188, $48,265 and $23,310 respectively, in those periods by the
Manager.
The Agreement provides that in the absence of willful misfeasance,
bad faith, or gross negligence in the performance of its duties or
reckless disregard of its obligations and duties thereunder, the Manager
is not liable for any loss sustained by reason of any good faith errors
or omissions in connection with any matters covered by the Agreement. The
Agreement permits the Manager to act as investment adviser for any other
person, firm or corporation and to use the name "Centennial" 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 Trust, the right of the Trust to use the name
"Centennial" as part of its name may be withdrawn.
Portfolio Transactions. Portfolio decisions are based upon the
recommendations and judgment of the Manager subject to the overall
authority of the Board of Trustees. As most purchases made by the Trust
are principal transactions at net prices, the Trust incurs little or no
brokerage costs. The Trust deals directly with the selling or purchasing
principal or market maker without incurring charges for the services of
a broker on its behalf unless it is determined that a better price or
execution may be obtained by using 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 prices.
The Trust seeks to obtain prompt and reliable execution of orders at
the most favorable net price. If brokers are used for portfolio
transactions, transactions may be directed to brokers furnishing execution
and research services. 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 Trust 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 for
in commission dollars. 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 Trust's portfolio or being considered for purchase. In the
rare instances where the Trust pays commissions for research, the Board
of Trustees, including the independent Trustees of the Trust, will review
information furnished by the Manager as to the commissions paid to brokers
furnishing such services in an effort to ascertain that the amount of such
commissions was reasonably related to the value or the benefit of such
services. The Trust does not direct the handling of purchases or sales
of portfolio securities, whether on a principal or agency basis, to
brokers for selling shares of the Trust. No portfolio transactions are
handled by brokers which are affiliated with the Trust or the Manager if
that broker is acting as principal. The Trust's policy of investing in
short-term debt securities with maturities of less than one year results
in high portfolio turnover. However, since brokerage commissions, if any,
are small and securities are usually held to maturity, high turnover does
not have an appreciable adverse effect upon the net asset value or income
of the Trust.
Other funds advised by the Manager have investment objectives and
policies similar to that of the Trust. Such other funds may purchase or
sell the same securities at the same time as the Trust, 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 cost
among such funds.
SERVICE PLAN
The Trust has adopted a service plan (the "Plan") under Rule 12b-1
of the Investment Company Act, as described in the Prospectus. No payment
will be made by the Distributor to any Recipient if the aggregate net
asset value of the Trust shares held by it or its customers at the end of
a calendar quarter is less than the minimum level of qualified holdings,
if any, established under the Plan from time to time by the "Independent
Trustees". Currently, no minimum level of qualified holdings has been
established by the Board of Trustees. The Distributor will make monthly
payments to a Recipient if the aggregate net asset value of the Trust's
shares held by it or its customers are in excess of $20 million. For the
Trust's fiscal year ended June 30, 1995, payments under the Plan totalled
$141,609, all of which was paid by the Distributor to Recipients.
The Distributor has entered into Supplemental Distribution Assistance
Agreements ("Supplemental Agreements") under the Plan with selected
dealers distributing shares of Oppenheimer Cash Reserves, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial America
Fund, L.P. and the Trust. Quarterly payments by the Distributor for
distribution-related services will range from 0.10% to 0.30%, annually,
of the average net asset value of shares of the above-mentioned funds
owned during the quarter beneficially or of record by the dealer or its
customers. However, no payment shall be made to any dealer for any
quarter during which the average net asset value of shares of the above-
mentioned funds owned during that quarter by the dealer or its customers
is less than $5 million. Payments made pursuant to Supplemental
Agreements are not a Trust expense, but are made by the Distributor out
of its own resources or out of the resources of the Manager which may
include profits derived from the advisory fee it receives from the Trust.
Payments to affiliates of the Distributor are not permitted under the
Supplemental Agreements.
The Plan shall, unless terminated as described below, continue in
effect from year to year but only so long as such continuance is
specifically approved at least annually by the Trust's Board of Trustees
including its Independent Trustees by a vote cast in person at a meeting
called for that purpose. The Supplemental Agreements are subject to the
same renewal requirement. The Plan and the Supplemental Agreements may
be terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" of the Trust's
outstanding voting securities. The Supplemental Agreements will
automatically terminate in the event of their "assignment" (as defined in
the Investment Company Act), and each may be terminated by the
Distributor: (i) in the event the Trust amends the Plan, or (ii) if the
net asset value of shares of the above-mentioned funds covered by
Supplemental Agreements held by the dealer or its customers is less than
$5 million for two or more consecutive quarters. A dealer may terminate
a Supplemental Agreement at any time upon giving 30 days' notice. The
Plan may not be amended without shareholder approval, as set forth above,
to increase materially the amount of payments to be made, and all material
amendments must be approved by the Board and the Independent Trustees.
While the Plan is in effect, the Treasurer of the Trust shall provide
a report to the Board of Trustees in writing at least quarterly on the
amount of all payments made pursuant to the Plan and the identity of each
Recipient that received any such payment and the purposes for which the
payments were made. The Plan further provides that while it is in effect,
the selection and nomination of those Trustees of the Trust who are not
"interested persons" of the Trust is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision as to the selection
or nomination is approved by a majority of the Independent Trustees.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Net Asset Value Per Share. The net asset value per share
of the Trust is determined twice each day, as of 12:00 Noon (all
references to time mean New York time) and the close of The New York Stock
Exchange (the "Exchange") which is normally 4:00 P.M., but may be earlier
on some days, each day the Exchange is open (a "regular business day") by
dividing the Trust's net assets (the total value of the Trust's portfolio
securities, cash and other assets less all liabilities) by the total
number of shares outstanding. Shares of the Trust are sold at their
offering price (net asset value, without a sales charge) as described in
the Prospectus. The Exchange's most recent annual holiday schedule states
that it will close New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
Exchange may also close on other days. Dealers other than Exchange
members may conduct trading in Municipal Securities on certain days on
which the Exchange is closed (e.g., Good Friday), so that securities of
the same type held by the Trust may be traded, and its net asset value per
share may be significantly affected, on such days when shareholders may
not purchase or redeem shares.
The Trust will seek to maintain a net asset value of $1.00 per share
for purchases and redemptions. There can be no assurance that it will do
so. The Trust operates under Rule 2a-7 under which it may use the
amortized cost method of valuing its shares. The amortized cost method
values a security initially at its cost and thereafter assumes a constant
amortization of any market discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the security. This
method does not take into account unrealized capital gains or losses.
The Trust's Board of Trustees has established procedures intended to
stabilize the Trust's net asset value at $1.00 per share. If the Trust's
net asset value per share were to deviate from $1.00 by more than 0.5%,
Rule 2a-7 requires the Board promptly to consider what action, if any,
should be taken. If the Trustees find that the extent of any such
deviation may result in material dilution or other unfair effects on
shareholders, the Board will take whatever steps as it considers
appropriate to eliminate or reduce any such dilution or unfair effects,
including without limitation selling portfolio securities prior to
maturity, shortening the average portfolio maturity, withholding or
reducing dividends, reducing the number of outstanding Trust shares
without monetary consideration, or calculating net asset value per share
by using available market quotations.
As long as it uses Rule 2a-7, the Trust must abide by certain
conditions described in the Prospectus. Some of those conditions which
relate to portfolio management are that the Trust must: (i) maintain a
dollar-weighted average portfolio maturity not in excess of 90 days; (ii)
limit its investments, including repurchase agreements, to those
instruments which are denominated in U.S. dollars, and which are rated in
one of the two highest short-term rating categories by at least two
"nationally-recognized statistical rating organizations" ("NRSROs"), as
defined in the Rule, or by one NRSRO if only one NRSRO has rated the
security; an instrument that is not rated must be of comparable quality
as determined by the Manager under guidelines approved by the Board; and
(iii) not purchase any instruments with a remaining maturity of more than
397 days. The Trust's fundamental investment policy that the remaining
maturity of an instrument shall not exceed one year is more restrictive
than the provisions of Rule 2a-7. Under Rule 2a-7, the maturity of an
instrument is generally considered to be its stated maturity (or in the
case of an instrument called for redemption, the date on which the
redemption payment must be made), with special exceptions for certain
variable and floating rate instruments. Repurchase agreements and
securities loan agreements are, in general, treated as having a maturity
equal to the period scheduled until repurchase or return, or if subject
to demand, equal to the notice period.
While the amortized cost method provides certainty in valuation,
there may be periods during which the value of an instrument as determined
by amortized cost is higher or lower than the price the Trust would
receive if it sold the instrument. During periods of declining interest
rates, the daily yield on shares of the Trust may tend to be lower (and
net investment income and daily dividends higher) than a like computation
made by a fund with identical investments utilizing a method of valuation
based upon market prices or estimates of market prices for its portfolio.
Thus, if the use of amortized cost by the Trust resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in
the Trust would be able to obtain a somewhat higher yield than would
result from investment in a fund utilizing solely market values, and
existing investors in the Trust would receive less investment income than
if the Trust were priced at market value. Conversely, during periods of
rising interest rates, the daily yield on Trust shares will tend to be
higher and its aggregate value lower than that of a portfolio priced at
market value. A prospective investor would receive a lower yield than
from an investment in a portfolio priced at market value, while existing
investors in the Trust would receive more investment income than if the
Trust were priced at market value.
Redemption of Shares. Information on how to redeem shares of the Trust
is stated in the Prospectus. The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash. If, however,
the Board of Trustees determines that it would be detrimental to the best
interests of the remaining shareholders of the Trust to make payment
wholly in cash, the redemption price may be paid in whole or in part by
a distribution in kind of securities from the portfolio of the Trust in
lieu of cash or in conformity with applicable Securities and Exchange
Commission rules. The Trust has elected to be governed by Rule 18f-1
under the Investment Company Act, pursuant to which the Trust is obligated
to redeem shares solely in cash up to the lesser of $250,000 or 1% of the
net assets of the Trust during any 90-day period for any one shareholder.
If shares are redeemed in kind, the redeeming shareholder might incur
transaction or other costs in converting the assets to cash. The method
of valuing securities used to make redemptions in kind will be the same
as the method of valuing securities described under "Determination of Net
Asset Value" above, and such valuation will be made as of the same time
the redemption price is determined.
The Trust's Board of Trustees has the right, in conformity with
applicable law, to cause the involuntary redemption of 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. Should the Board elect to
exercise this right, it may also fix, in accordance with the Investment
Company Act or Massachusetts law, the requirements for any notice to be
given to the shareholder(s) in question (not less than 30 days) or may set
requirements for permission to allow the shareholder to increase the
investment so that the shares would not be involuntarily redeemed.
Expedited Redemption Procedures. Under the Expedited Redemption Procedure
available to direct shareholders of the Trust, discussed in the
Prospectus, the wiring of redemption proceeds may be delayed if the
Trust's Custodian bank is not open for business on a day that the Trust
would normally authorize the wire to be made, which is usually the same
day for redemptions prior to 12:00 Noon and the Trust's next regular
business day for redemptions between 12:00 Noon and the close of the
Exchange, which is normally 4:00 P.M., but may be earlier on some days.
In those circumstances, the wire will not be transmitted until the next
bank business day on which the Trust is open for business and no dividends
will be paid on the proceeds of redeemed shares awaiting transfer by wire.
Dividend Reinvestment in Another Fund. Direct shareholders of the Trust
may elect to reinvest all dividends and/or distributions in Class A shares
of any of the other funds listed in the Prospectus as "Eligible Funds" at
net asset value without sales charge. To elect this option, a shareholder
must notify the Transfer Agent in writing, and either must have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and application from the Transfer Agent
to establish an account. The investment will be made at the net asset
value per share next determined on the payable date of the dividend or
distribution.
YIELD INFORMATION
The Trust's current yield is calculated for a seven-day period of
time in accordance with regulations adopted under the Investment Company
Act. First, a base period return is calculated for the seven-day period
by determining the net change in the value of a hypothetical pre-existing
account having one share at the beginning of the seven-day period. The
change includes dividends declared on the original share and dividends
declared on any shares purchased with dividends on that share, but such
dividends are adjusted to exclude any realized or unrealized capital gains
or losses affecting the dividends declared. Next, the base period return
is multiplied by 365/7, to obtain the current yield to the nearest
hundredth of one percent. The compounded effective yield for a seven-day
period is calculated by (a) adding 1 to the base period return (obtained
as described above), (b) raising the sum to a power equal to 365 divided
by 7 and (c) subtracting 1 from the result. For the seven-day period
ended June 30, 1995, the Trust's current yield was 3.37% and its
compounded effective yield was 3.42%.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each daily
dividend to the nearest full cent. Since the calculation of yield under
either procedure described above does not take into consideration any
realized or unrealized gains or losses on the Trust's portfolio securities
which may affect dividends, the return on dividends declared during a
period may not be the same on an annualized basis as the yield for that
period.
The Trust's "tax equivalent yield" adjusts the Trust's current yield,
as calculated above, by a stated combined Federal and California tax rate.
The tax equivalent yield is computed by dividing the tax-exempt portion
of the Trust's current yield by one minus a stated income tax rate and
adding the result to the portion (if any) of the Trust's current yield
that is not tax-exempt. The tax equivalent yield may be compounded as
described above to provide a compounded effective tax equivalent yield.
The tax equivalent yield may be used to compare the tax effects of income
derived from the Trust with income from taxable investments at the tax
rates stated. Appendix B includes a tax equivalent yield table, based on
various effective tax brackets for individual taxpayers. Such tax
brackets are determined by a taxpayer's Federal and state taxable income
(the net amount subject to Federal 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. For the seven-day period ended June 30, 1995, the
Trust's tax-equivalent yield was 6.27% and its tax-equivalent compounded
effective yield was 6.36% for an investment subject to a 46.24% combined
effective tax rate.
Yield information may be useful to investors in reviewing the Trust's
performance. The Trust's yield may be compared to that of other
investments, by citing various indices such as The Bank Rate Monitor
National Index (provided by Bank Rate Monitor), which measures the
average rate paid on bank money market accounts, NOW accounts and
certificates of deposit by the 100 largest banks and thrift institutions
in the top ten metropolitan areas. However, a number of factors should
be considered before using yield information as a basis for comparison
with other investments. An investment in the Trust is not insured. Its
yield is not guaranteed and normally will fluctuate on a daily basis. The
yield for any given past period is not an indication or representation by
the Trust of future yields or rates of return on its shares. The Trust's
yield is affected by portfolio quality, portfolio maturity, type of
instruments held and operating expenses. The Trust's performance reflects
the voluntary assumption of expenses by the Manager, absent which such
figures would have been lower than those shown above. When comparing the
Trust's yield and investment risk with that of other investments,
investors should understand that certain other investment alternatives,
such as certificates of deposit, U.S. Government Securities, money market
instruments or bank accounts may provide fixed yields or yields that may
vary above a stated minimum, and also that bank accounts may be insured
or guaranteed. Certain types of bank accounts may not pay interest when
the balance falls below a specified level and may limit the number of
withdrawals by check per month. In order to compare the Trust's dividends
to the rate of return on taxable investments, federal and state income
taxes on such investments should be considered.
ADDITIONAL INFORMATION
Description of the Trust. The Trust's Declaration of Trust contains an
express disclaimer of shareholder or Trustee liability for the Trust'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
Trust shall, upon request, assume a defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any
judgment thereon. Thus, while Massachusetts law permits a shareholder of
a trust (such as the Trust) to be held personally liable as a "partner"
for the Trust's obligations under certain circumstances, the risk of a
Trust shareholder incurring any financial loss on account of such
shareholder liability is limited to the relatively remote circumstance in
which the Trust itself would be unable to meet its obligations. 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. It is not
contemplated that regular annual meetings of shareholders will be held.
The Trust 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. 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 in the aggregate shares of
the Trust valued at $25,000 or more or holding 1% or more of the Trust's
outstanding shares, whichever is less, that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Trust's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth in Section 16(c) of the Investment Company Act.
Tax Status of the Trust's Dividends and Distributions. The Federal and
California tax treatment of the Trust's dividends and distributions to
shareholders is explained in the Prospectus under the caption "Dividends
and Taxes." Under the Internal Revenue Code, by December 31 each year the
Trust 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 Trust must pay an excise tax on the
amounts not distributed. While it is presently anticipated that the
Trust's distributions will meet those requirements, the Trust's Board and
Manager might determine in a particular year that is in the best interests
of the Trust not to distribute income or capital gains at the mandated
levels and to pay the excise tax on the undistributed amounts, which would
reduce the amount available for distribution to shareholders.
The Custodian and the Transfer Agent. The Custodian's responsibilities
include safeguarding and controlling the Trust's portfolio securities and
handling the delivery of portfolio securities to and from the Trust. The
Manager has represented to the Trust that its banking relationship with
the Custodian have been and will continue to be unrelated to and
unaffected by the relationships between the Trust and the Custodian. It
will be the practice of the Trust to deal with the Custodian in a manner
uninfluenced by any banking relationship the Custodian may have with the
Manager or its affiliates. The Transfer Agent (Shareholder Services,
Inc.) is responsible for maintaining the Trust's shareholder registry and
shareholder accounting records, and for shareholder servicing and
administrative functions.
General Distributor's Agreement. Under the General Distributor's
Agreement between the Trust and the Distributor, the Distributor acts as
the Trust's principal underwriter in the continuous public offering of its
shares. The General Distributor is not obligated to sell a specific
number of shares. Expenses normally attributable to sales (other than
those paid under the Service Plan), including advertising and the cost of
printing and mailing prospectuses other than those furnished to existing
shareholders, are borne by the Distributor.
Independent Auditors and Financial Statements. The independent auditors
of the Trust audit the Trust's financial statements and perform other
related audit services. They also act as auditors for the Manager and
Oppenheimer Management Corporation, the Manager's immediate parent, as
well as for certain other funds advised by the Manager and Oppenheimer
Management Corporation.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the shareholder agrees
to the terms and conditions applicable to such plans, as stated below and
elsewhere in the Application for such Plans, the Prospectus and this
Statement of Additional Information as they may be amended from time to
time by the Trust and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
Trust 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 distributions
followed by shares acquired with a sales charge will be redeemed to the
extent necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made to
shareholders under such plans should not be considered as a yield or
income on an investment. Purchases of additional shares concurrently with
withdrawals are undesirable because of sales charges on purchases when
made. Accordingly, a shareholder may not maintain an Automatic Withdrawal
Plan while simultaneously making regular purchases.
1. Shareholder Services, Inc., the Transfer Agent of the Trust, will
administer the Automatic Withdrawal Plan (the "Plan") as agent for the
person (the "Planholder") who executed the Plan authorization and
application submitted to the Transfer Agent.
2. Certificates will not be issued for shares of the Trust 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 Trust. Any
share certificates now held by the 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. Those
shares will be carried on the Planholder's Plan Statement.
3. Distributions of capital gains must be reinvested in shares of
the Trust, which will be done at net asset value without a sales charge.
Dividends may be paid in cash or reinvested.
4. Redemptions of shares in connection with disbursement payments
will be made at the net asset value per share determined on the redemption
date.
5. Checks or ACH payments will be transmitted approximately three
business days prior to the date selected for receipt of the monthly or
quarterly payment (the date of receipt is approximate), according to the
choice specified in writing by the Planholder.
6. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed at any time by the
Planholder on written notification to the Transfer Agent. The Planholder
should allow at least two weeks' time in mailing such notification before
the requested change can be put in effect.
7. 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 Trust) to redeem all, or any part of, the
shares held under the Plan. In such case, the Transfer Agent will redeem
the number of shares requested at the net asset value per share in effect
in accordance with the Trust's usual redemption procedures and will mail
a check for the proceeds of such redemption to the Planholder.
8. The Plan may, at any time, be terminated by the Planholder on
written notice to the Transfer Agent, or by the Transfer Agent upon
receiving directions to that effect from the Trust. The Transfer Agent
will also terminate the Plan upon receipt of evidence satisfactory to it
of the death or legal incapacity of the Planholder. Upon termination of
the Plan by the Transfer Agent or the Trust, shares remaining unredeemed
will be held in an uncertificated account 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, his executor or guardian, or as otherwise appropriate.
9. For purposes of using shares held under the Plan as collateral,
the Planholder may request issuance of a portion of his shares in
certificated form. Upon written request from the Planholder, the Transfer
Agent will determine the number of shares as to which a certificate may
be issued, so as not to cause the withdrawal checks to stop because of
exhaustion of uncertificated shares needed to continue payments. Should
such uncertificated shares become exhausted, Plan withdrawals will
terminate.
10. The Transfer Agent shall incur no liability to the Planholder
for any action taken or omitted by the Transfer Agent in good faith.
11. In the event that the Transfer Agent shall cease to act as
transfer agent for the Trust, the Planholder will be deemed to have
appointed any successor transfer agent to act as his agent in
administering the Plan.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Centennial California Tax Exempt Trust
The Board of Trustees and Shareholders of
Centennial California Tax Exempt Trust:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Centennial California Tax
Exempt Trust as of June 30, 1995, the related statement of operations
for the year then ended, the statements of changes in net assets for the
years ended June 30, 1995 and 1994, and the financial highlights for the
period June 12, 1990 (commencement of operations) to June 30, 1995.
These financial statements and financial highlights are the
responsibility of the Trust'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 at June 30, 1995 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, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Centennial California Tax Exempt Trust at June 30, 1995, the results of
its operations, the changes in its net assets, and the financial
highlights for the respective stated periods, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
July 24, 1995
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
Centennial California Tax Exempt Trust
--------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS, AT AMORTIZED COST 97.0% $89,575,049
----------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 3.0 2,742,786
------- -----------
NET ASSETS 100.0% $92,317,835
======= ===========
</TABLE>
[FN]
1. Floating or variable rate obligation maturing in more than one year.
The interest rate, which is based on specific, or an index of, market
interest rates, is subject to change periodically and is the effective
rate on June 30, 1995. 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.
2. Put obligation redeemable at full face value on the date reported.
See accompanying Notes to Financial Statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES June 30, 1995
Centennial California Tax Exempt Trust
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at amortized cost - see accompanying
statement $89,575,049
Cash 300,214
Receivables:
Shares of beneficial interest sold 3,038,132
Interest 771,260
Other 8,333
-----------
Total assets 93,692,988
-----------
LIABILITIES:
Payables and other liabilities:
Shares of beneficial interest redeemed 1,179,171
Dividends 120,319
Service plan fees - Note 3 41,835
Transfer and shareholder servicing agent
fees - Note 3 2,006
Trustees' fees 90
Other 31,732
-----------
Total liabilities 1,375,153
-----------
NET ASSETS $92,317,835
===========
COMPOSITION OF NET ASSETS:
Paid-in capital $92,329,399
Accumulated net realized loss from investment
transactions (11,564)
-----------
Net assets - Applicable to 92,329,399 shares of
beneficial interest outstanding $92,317,835
===========
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING
PRICE PER SHARE $1.00
=====
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended June 30, 1995
Centennial California Tax Exempt Trust
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME - Interest $2,703,820
----------
EXPENSES:
Management fees - Note 3 356,181
Service plan fees - Note 3 141,609
Transfer and shareholder servicing agent
fees - Note 3 33,954
Shareholder reports 13,522
Registration and filing fees 11,940
Custodian fees and expenses 11,612
Legal and auditing fees 10,556
Trustees' fees and expenses 1,981
Other 11,869
----------
Total expenses 593,224
Less assumption of expenses by Centennial Asset
Management Corporation - Note 3 (23,310)
----------
Net expenses 569,914
----------
NET INVESTMENT INCOME 2,133,906
NET REALIZED LOSS ON INVESTMENTS (11,564)
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $2,122,342
==========
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Centennial California Tax Exempt Trust
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994
----------- -----------
OPERATIONS:
<S> <C> <C>
Net investment income $ 2,133,906 $ 1,174,691
Net realized gain (loss) on investments (11,564) 80
----------- -----------
Net increase in net assets resulting
from operations 2,122,342 1,174,771
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS (2,133,965) (1,177,627)
BENEFICIAL INTEREST TRANSACTIONS:
Net increase in net assets resulting from
beneficial interest transactions
- Note 2 31,953,795 2,299,586
----------- -----------
NET ASSETS:
Total increase 31,942,172 2,296,730
Beginning of year 60,375,663 58,078,933
----------- -----------
End of year $92,317,835 $60,375,663
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
Centennial California Tax Exempt Trust
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994 1993 1992 1991 1990(1)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- ------- -------
Income from investment operations -
net investment income and net
realized gain on investments .03 .02 .02 .03 .04 .003
Dividends and distributions to
to shareholders (.03) (.02) (.02) (.03) (.04) (.003)
------- ------- ------- ------- ------- -------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
=======
TOTAL RETURN AT NET ASSET VALUE (2) 3.00% 1.82% 2.00% 3.29% 4.79% N/A
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $92,318 $60,376 $58,079 $48,483 $32,337 $2,018
Average net assets (in thousands) $71,278 $65,520 $56,082 $40,684 $16,150 $1,914
Number of shares outstanding at end
of period (in thousands) 92,329 60,376 58,076 48,484 32,337 2,018
Ratios to average net assets:
Net investment income 2.99% 1.79% 1.90% 3.13% 4.09% 6.29%(3)
Expenses, before voluntary
assumption by the Manager .83% .87% .86% .91% 1.09% 2.53%(3)
Expenses, net of voluntary
assumption by the Manager .80% .80% .80% .80% .84% .90%(3)
</TABLE>
[FN]
1. For the period from June 12, 1990 (commencement of operations)
to June 30, 1990.
2. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period, with all dividends
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. Total returns are not annualized for
periods of less than one full year. Total returns reflect changes
in net investment income only.
3. Annualized.
See accompanying Notes to Financial Statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Centennial California Tax Exempt Trust
1. SIGNIFICANT ACCOUNTING POLICIES
Centennial California Tax Exempt Trust (the Trust) is registered under
the Investment Company Act of 1940, as amended, as a non-diversified,
open-end management investment company. The Trust's investment advisor
is Centennial Asset Management Corporation (the Manager), a subsidiary
of Oppenheimer Management Corporation (OMC). The following is a summary
of significant accounting policies consistently followed by the Trust.
INVESTMENT VALUATION. Portfolio securities are valued on the basis of
amortized cost, which approximates market value.
FEDERAL TAXES. The Trust 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 to shareholders.
Therefore, no federal income or excise tax provision is required.
DISTRIBUTIONS TO SHAREHOLDERS. The Trust intends to declare dividends
from net investment income each day the New York Stock Exchange is open
for business and pay such dividends monthly. To effect its policy of
maintaining a net asset value of $1.00 per share, the Trust may withhold
dividends or make distributions of net realized gains.
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Realized gains and
losses on investments are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
2. SHARES OF BENEFICIAL INTEREST
The Trust has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995 YEAR ENDED JUNE 30, 1994
------------------------ ------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold 279,468,671 $ 279,468,671 231,741,608 $ 231,741,608
Dividends and distri-
butions reinvested 2,013,397 2,013,397 1,131,972 1,131,972
Redeemed (249,528,273) (249,528,273) (230,573,994) (230,573,994)
------------- -------------- ------------- --------------
Net increase 31,953,795 $ 31,953,795 2,299,586 $ 2,299,586
============= ============== =============
==============
</TABLE>
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust which provides for a fee of
.50% on the first $250 million of average annual net assets with a
reduction of .025% on each $250 million thereafter, to .40% on net
assets in excess of $1 billion. The Manager has agreed to assume Trust
expenses (with specified exceptions) in excess of the regulatory
limitation of the State of California. In addition, the Manager has
voluntarily undertaken to assume Trust expenses in excess of .80% of
average annual net assets.
Shareholder Services, Inc. (SSI), a subsidiary of OMC, is the transfer
and shareholder servicing agent for the Trust, and for other registered
investment companies. SSI's total costs of providing such services are
allocated ratably to these companies.
Under an approved plan of distribution, the Trust may expend up to .20%
of its net assets annually to reimburse Centennial Asset Management
Corporation, as distributor, for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the
Trust, including amounts paid to brokers, dealers, banks and other
institutions.
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
Below is a description of the two highest rating categories for Short Term
Debt and Long Term Debt by the "Nationally-Recognized Statistical Rating
Organizations" which the Manager evaluates in purchasing securities on
behalf of the Trust. The ratings descriptions are based on information
supplied by the ratings organizations to subscribers.
Short Term Debt Ratings.
Moody's Investors Service, Inc. ("Moody's"): The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months), are
judged by Moody's to be investment grade, and indicate the relative
repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling market
positions in well-established industries; (b) high rates of
return on funds employed; (c) conservative capitalization
structures with moderate reliance on debt and ample asset
protection; (d) broad margins in earning coverage of fixed
financial charges and high internal cash generation; and (e)
well established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced
by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are
designated "Moody's Investment Grade" ("MIG"). Short-term notes which
have demand features may also be designated as "VMIG". These rating
categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by
established cash flows, superior liquidity support or
demonstrated broadbased access to the market for
refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample although
not so large as in the preceding group.
Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of
no more than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to
possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the relative
degree of safety is not as high as for issues designated "A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have a demand
or double feature as part of their provisions. The first rating addresses
the likelihood of repayment of principal and interest as due, and the
second rating addresses only the demand feature. With short-term demand
debt, S&P's note rating symbols are used with the commercial paper symbols
(for example, "SP-1+/A-1+").
Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the following
short-term ratings to debt obligations that are payable on demand or have
original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is only
slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues
assigned "F-1+" or "F-1" ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for
commercial paper (defined by Duff & Phelps as obligations with maturities,
when issued, of under one year), asset-backed commercial paper, and
certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year, including
bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
Duff 2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term ratings,
including commercial paper (with maturities up to 12 months), are as
follows:
A1+: Obligations supported by the highest capacity for timely
repayment.
A1: Obligations supported by a very strong capacity for timely
repayment.
A2: Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in
business, economic, or financial conditions.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply
to commercial paper, certificates of deposit, unsecured notes, and other
securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding
timely repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety
regarding timely repayment of principal and interest is strong,
the relative degree of safety is not as high as for issues
rated "TBW-1".
Long Term Debt Ratings. These ratings are relevant for securities
purchased by the Trust with a remaining maturity of 397 days or less, or
for rating issuers of short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
positions of such issues.
Aa: Judged to be of high quality by all standards. Together with the
"Aaa" group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in "Aaa" securities or
fluctuations of protective elements may be of greater amplitude
or there may be other elements present which make the long-term
risks appear somewhat larger than in "Aaa" securities.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the security ranks in the
higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks
in the lower end of its generic rating category.
Standard & Poor's: Bonds (including municipal bonds) are rated as
follows:
AAA: The highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and differ
from "AAA" rated issues only in small degree.
Fitch:
AAA: Considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA: Considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated "AAA". Plus (+) and minus (-) signs are used in the "AA"
category to indicate the relative position of a credit within
that category.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+".
Duff & Phelps:
AAA: The highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of
economic conditions. Plus (+) and minus (-) signs are used in
the "AA" category to indicate the relative position of a credit
within that category.
IBCA: Long-term obligations (with maturities of more than 12 months) are
rated as follows:
AAA: The lowest expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial such that
adverse changes in business, economic, or financial conditions
are unlikely to increase investment risk significantly.
AA: A very low expectation for investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse
changes in business, economic, or financial conditions may
increase investment risk albeit not very significantly.
A plus (+) or minus (-) sign may be appended to a long term rating to
denote relative status within a rating category.
TBW: TBW issues the following ratings for companies. These ratings
assess the likelihood of receiving payment of principal and interest on
a timely basis and incorporate TBW's opinion as to the vulnerability of
the company to adverse developments, which may impact the market's
perception of the company, thereby affecting the marketability of its
securities.
A: Possesses an exceptionally strong balance sheet and earnings
record, translating into an excellent reputation and unquestioned
access to its natural money markets. If weakness or
vulnerability exists in any aspect of the company's business, it
is entirely mitigated by the strengths of the organization.
A/B: The company is financially very solid with a favorable track
record and no readily apparent weakness. Its overall risk
profile, while low, is not quite as favorable as for companies in
the highest rating category.
<PAGE>
APPENDIX B
TAX-EQUIVALENT YIELDS
The equivalent yield tables below compare tax-free income with taxable
income under Federal individual income tax rates, and California state
individual income tax rates effective January 1, 1995. "Combined Taxable
Income" refers to the net amount subject to Federal and California income
taxes after deductions and exemptions. The tables assume that an
investor's highest tax bracket applies to the change in taxable income
resulting from a switch between taxable and non-taxable investments, and
that state tax payments are currently deductible for Federal tax purposes
and that the investor is not subject to Federal or state alternative
minimum tax. The income tax brackets are subject to indexing in future
years to reflect changes in the Consumer Price Index. The brackets do not
reflect the phaseout of itemized deductions and personal exemptions at
higher income levels, resulting in higher effective tax rates (and tax
equivalent yields). For the years beginning after January 1, 1996, the
top marginal California personal tax rate will be reduced to 9.3% and the
top combined marginal tax rate will be 45.22%.
<TABLE>
<CAPTION>
Combined Taxable Income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Centennial California Tax-Exempt Trust Yield of:
Joint ReturnEffective Tax Bracket 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
But Cali-
Over Not OverFederal fornia Combined Is Approximately Equivalent to a Taxable Yield of:
$ 22,384 $ 35,32415.00% 4.00% 18.40% 2.45% 3.06% 3.68% 4.29% 4.90%
5.51%
$ 35,324 $ 39,00015.00% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 5.01%
5.63%
$ 39,000 $ 49,03828.00% 6.00% 32.32% 2.96% 3.69% 4.43% 5.17% 5.91%
6.65%
$ 49,038 $ 61,97428.00% 8.00% 33.76% 3.02% 3.77% 4.53% 5.28% 6.04%
6.79%
$ 61,974 $ 94,25028.00% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 6.13%
6.89%
$ 94,250 $143,60031.00% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.39%
7.19%
$143,600 $214,92836.00% 9.30% 41.95% 3.45% 4.31% 5.17% 6.03% 6.89%
7.75%
$214,928 $256,50036.00% 10.00% 42.40% 3.47% 4.34% 5.21% 6.08% 6.94%
7.81%
$256,500 $429,85839.60% 10.00% 45.64% 3.68% 4.60% 5.52% 6.44% 7.36%
8.28%
$429,858 39.60% 11.00% 46.24% 3.72% 4.65% 5.58% 6.51% 7.44%
8.37%
Single Return:
But
Over Not Over
$ 17,662 $ 23,35015.00% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 5.01%
5.63%
$ 23,350 $ 24,51928.00% 6.00% 32.32% 2.96% 3.69% 4.43% 5.17% 5.91%
6.65%
$ 24,519 $ 30,98728.00% 8.00% 33.76% 3.02% 3.77% 4.53% 5.28% 6.04%
6.79%
$ 30,987 $ 56,55028.00% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 6.13%
6.89%
$ 56,550 $107,46431.00% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.39%
7.19%
$107,464 $117,95031.00% 10.00% 37.90% 3.22% 4.03% 4.83% 5.64% 6.44%
7.25%
$117,950 $214,92936.00% 10.00% 42.40% 3.47% 4.34% 5.21% 6.08% 6.94%
7.81%
$214,929 $256,50036.00% 11.00% 43.04% 3.51% 4.39% 5.27% 6.14% 7.02%
7.90%
$256,500 39.60% 11.00% 46.24% 3.72% 4.65% 5.58% 6.51% 7.44%
8.37%
</TABLE>
<PAGE>
Appendix C
Industry Classifications
General Obligation Bonds
Special Tax Bonds
Lease/Rental
Revenue
Education
Hospitals
Housing
Transportation
Utilities
Student Loans
Corporate Backed Municipals
Industrial Development
Pollution Control
<PAGE>
<PAGE>
Investment Adviser and Distributor
Centennial Asset Management Corporation
3410 South Galena Street
Denver, Colorado 80231
Transfer And Shareholder Servicing Agent
Shareholder Services, Inc.
P.O. Box 5270
Denver, Colorado 80217-5270
1-800-525-9310
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf P.C.
Colorado State Bank Building
1600 Broadway, Suite 1850
Denver, Colorado 80202
