OPPENHEIMER NEW YORK
TAX-EXEMPT FUND
Prospectus dated August 29, 1995
Oppenheimer New York Tax-Exempt Fund (the "Fund") is a mutual fund with
the investment objective of seeking the maximum current income exempt
from Federal, New York State and New York City income taxes for
individual investors that is consistent with preservation of capital.
The Fund seeks to achieve this objective by investing in municipal
obligations, the income from which is tax-exempt as described above.
However, in times of unstable economic or market conditions, the Fund's
investment manager may deem it advisable to temporarily invest a
portion of the Fund's assets in certain taxable instruments. The Fund
may also use certain hedging instruments in an effort to reduce the
risks of market fluctuations that affect the value of the securities
the Fund holds. You should carefully review the risks associated with
an investment in the Fund. Please refer to "Investment Policies and
Strategies" for more information about the types of securities the Fund
invests in and the risks of investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read it carefully and keep it for future
reference. You can find more detailed information about the Fund in
the August 29, 1995 Statement of Additional Information. For a free
copy, call Oppenheimer Shareholder Services, the Fund's Transfer Agent,
at 1-800-525-7048, or write to the Transfer Agent at the address on the
back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference (which means that it is legally part of
this Prospectus).
(logo) OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services,
and those expenses are subtracted from the Fund's assets to calculate
the Fund's net asset value per share. All shareholders therefore pay
those expenses indirectly. Shareholders pay other expenses directly,
such as sales charges and account transaction fees. The following
tables are provided to help you understand your direct expenses of
investing in the Fund and your share of the Fund's business operating
expenses that you will bear indirectly. The numbers below are based on
the Fund's expenses during its last fiscal year ended September 30,
1994.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages 22 through 41, for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge
on Purchases (as a %
of offering price) 4.75% None None
- --------------------------------------------------------------
Sales Charge on
Reinvested Dividends None None None
- --------------------------------------------------------------
Deferred Sales Charge
(as a % of the lower of
the original purchase
price or redemption
proceeds) None(1) 5% in the first 1% if shares
year, declining are redeemed
to 1% in the within 12 months
sixth year and of purchase(2)
eliminated
thereafter(2)
- --------------------------------------------------------------
Exchange Fee None None None
<FN>
- -----------------------
(1) If you invest more than $1 million in Class A shares, you may have to pay a sales charge of up to 1% if you sell your
shares within 18 calendar months from the end of the calendar month during which you purchased those shares. See "How
to Buy Shares - Class A Shares," below.
(2) See "How to Buy Shares - Class B Shares" and "How to Buy Shares - Class C Shares," below, for information on
contingent deferred sales charges.
</TABLE>
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For
example, the Fund pays management fees to its investment adviser,
Oppenheimer Management Corporation (referred to in this Prospectus as
the "Manager"). The rates of the Manager's fees are set forth in "How
the Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses.
Those expenses are detailed in the Fund's Financial Statements in the
Statement of Additional Information.
The numbers in the table below are projections of the Fund's
business expenses based on the Fund's expenses in its last fiscal year.
These amounts are shown as a percentage of the average net assets of
each class of the Fund's shares for that year. The 12b-1 Plan Fees for
Class A shares are service plan fees (maximum of 0.25% of average
annual net assets of the class); for Class B and Class C shares the
12b-1 Fees are the service plan fee (0.25% of average annual net assets
of the class) and the annual asset-based sales charge of 0.75%. These
plans are described in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may
be more or less than the numbers in the chart, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares. Class C shares were not publicly offered during
the Fund's fiscal year ended September 30, 1994; therefore, the Annual
Fund Operating Expenses for Class C shares are estimates of amounts
that would have been payable if Class C shares had been outstanding
during that period.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Management Fees 0.51% 0.51% 0.51%
12b-1 Plan Fees 0.24% 1.00% 1.00%
Other Expenses 0.11% 0.14% 0.14%
Total Fund Operating
Expenses 0.86% 1.65% 1.65%
</TABLE>
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of
shares of the Fund, and the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the Annual Fund
Operating Expenses table above. If you were to redeem your shares at
the end of each period shown below, your investment would incur the
following expenses by the end of 1, 3, 5 and 10 years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------
Class A Shares $56 $74 $ 93 $149
- -----------------------------------------------------------------
Class B Shares $67 $82 $110 $155
- -----------------------------------------------------------------
Class C Shares $27 $52 $90 $195
If you did not redeem your investment, it would incur the following expenses:
Class A Shares $56 $74 $93 $149
- -----------------------------------------------------------------
Class B Shares $17 $52 $90 $155
- -----------------------------------------------------------------
Class C Shares $17 $52 $90 $195
<FN>
_______________________
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your
Class B shares into Class A shares after 6 years. Because of the
effect of the asset-based sales charge and the contingent deferred
sales charge on Class B and Class C shares, long-term shareholders of
Class B and Class C shares could pay the economic equivalent of more
than the maximum front-end sales charge allowed under applicable
regulatory requirements. For Class B shareholders, the automatic
conversion of Class B shares to Class A Shares is designed to minimize
the likelihood that this will occur. Please refer to "How to Buy
Shares - Class B Shares" and "How to Buy Shares - Class C Shares" on
page 22 for more information.
These examples show the effect of expenses on an investment, but
are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire
Prospectus before making a decision about investing. Keep the
Prospectus for reference after you invest, particularly for information
about your account, such as how to sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund's investment
objective is to seek the maximum current income exempt from Federal,
New York State and New York City income taxes for individual investors
that is consistent with preservation of capital.
- What Does the Fund Invest In? Under normal market conditions,
the Fund (1) will invest at least 65% of its total assets in municipal
bonds, municipal notes and other debt obligations issued by or on
behalf of New York State and its agencies or authorities, the interest
on which is not subject to New York State individual income tax, and
(2) will invest at least 80% of its total assets in municipal bonds,
municipal notes and other debt obligations issued by or on behalf of
the State of New York, other states and the District of Columbia, the
interest from which is not subject to Federal individual income tax.
The Fund may also use hedging instruments and some derivative
investments in an effort to protect against market risks. These
investments are more fully explained in "Investment Objective and
Policies," starting on page 10.
- Who Manages the Fund? The Fund's investment advisor is
Oppenheimer Management Corporation, which (including a subsidiary)
manages investment company portfolios having over $35 billion in assets
at June 30, 1995. The Fund's portfolio manager, who is employed by the
Manager, is primarily responsible for the selection of the Fund's
securities, is Robert E. Patterson. The Manager is paid an advisory
fee by the Fund, based on its net assets. The Fund's Board of
Trustees, elected by shareholders, oversees the investment advisor and
the portfolio manager. Please refer to "How the Fund is Managed,"
starting on page 12 for more information about the Manager and its
fees.
- How Risky is the Fund? All investments carry risks to some
degree. The Fund's bond investments are subject to changes in their
value from a number of factors such as changes in general bond market
movements, the change in value of particular bonds because of an event
affecting the issuer, or changes in interest rates that can affect bond
prices. These changes affect the value of the Fund's investments and
its price per share. The Fund may invest in "inverse floater" variable
rate bonds, a type of derivative investment whose yields move in the
opposite direction as short-term interest rates change.
While the Manager tries to reduce risks by diversifying
investments and by carefully researching securities before they are
purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the Fund's
objective and your shares may be worth more or less than their original
cost when you redeem them. Please refer to "Investment Objective and
Policies" starting on page 10 for a more complete discussion.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page 22 for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. All three classes have the same investment
portfolio but different expenses. Class A shares are offered with a
front-end sales charge, starting at 4.75%, and reduced for larger
purchases. Class B shares and Class C shares are offered without a
front-end sales charge, but may be subject to a contingent deferred
sales charge if redeemed within 6 years or 12 months, respectively, of
purchase. There are also annual asset-based sales charges on Class B
and Class C shares. Please review "How To Buy Shares" starting on page
22 for more details, including a discussion about which class may be
appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through
your dealer. Please refer to "How To Sell Shares" on page 34. The
Fund also offers exchange privileges to other OppenheimerFunds,
described in "How to Exchange Shares" on page 36.
- How Has the Fund Performed? The Fund measures its performance
by quoting its yield, tax-equivalent yield, average annual total return
and cumulative total return, which measure historical performance.
Those yields and returns can be compared to the returns (over similar
periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance
can also be compared to a broad market index, which we have done on
page 21. Please remember that past performance does not guarantee
future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense ratios
and other data based on the Fund's average net assets. This
information has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors, whose report on the Fund's financial statements
for the fiscal year ended September 30, 1994 is included in the
Statement of Additional Information. The information for the six
months ended March 31, 1995 is unaudited. Class C shares of the Fund
were not publicly offered during the periods shown. Accordingly, no
information on Class C shares is included in the table or in the Fund's
financial statements for the fiscal year ended September 30, 1994.
</TABLE>
<TABLE>
<CAPTION>
Class A
------- -----------------------------------------------------------------------------
Six Months
Ended
March 31,
1995 Year Ended September 30,
(Unaudited) 1994 1993 1992 1991 1990 1989
--------- ------ --------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value, beginning
of period $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 11.87 $ 11.91
--------- ------ --------- --------- --------- --------- ------
Income (loss) from
investment operations:
Net investment income .36 .74 .73 .79 .81 .83 .84(2)
Net realized and
unrealized gain (loss)
on investments .27 (1.46) 1.01 .47 .64 (.25) .01
--------- ------ --------- --------- --------- --------- ------
Total income (loss) from
investment operations .63 (.72) 1.74 1.26 1.45 .58 .85
Dividends and distributions
to shareholders:
Dividends from net
investment income (.36) (.71) (.75) (.75) (.81) (.83) (.83)
Dividends in excess of net
investment income -- (.01) -- -- -- -- --
Distributions from net
realized gain on
investments -- (.03) (.08) (.13) (.04) (.01) (.06)
Distributions in excess of
net realized gain on
investments -- (.11) -- -- -- -- --
--------- ------ --------- --------- --------- --------- ------
Total dividends and
distributions to
shareholders (.36) (.86) (.83) (.88) (.85) (.84) (.89)
--------- ------ --------- --------- --------- --------- ------
Net asset value, end
of period $ 12.19 $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 11.87
========= ====== ========= =========
========= ========= ======
Total Return, at Net
Asset Value(3) 5.44% (5.55)% 14.33% 10.72% 12.93% 4.95% 6.91%
--------- ------ --------- --------- --------- --------- ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 668,467 $687,233 $ 756,934 $ 530,260 $ 349,480 $ 250,012 $197,321
--------- ------ --------- --------- --------- --------- ------
Average net assets
(in thousands) $ 648,096 $738,747 $ 652,327 $ 436,876 $ 292,134 $ 227,504 $156,572
--------- ------ --------- --------- --------- --------- ------
Number of shares
outstanding at end of
period (in thousands) 54,842 57,644 56,087 42,119 28,617 21,533 16,618
--------- ------ --------- --------- --------- --------- ------
Ratios to average
net assets:
Net investment income 6.00%(4) 5.68% 5.66% 6.33% 6.81% 6.97% 7.07%
Expenses .90%(4) .86% .91% .96% .96% .99% .98%(2)
--------- ------ --------- --------- --------- --------- ------
Portfolio turnover rate 6.3%(6) 9.4%(5) 39.1% 30.5% 8.9% 13.3% 11.8%
(Continued) Class B
------------------------------------------------------------------------------------------
Ten Months Six Months Year
Ended Ended Ended
Sept. 30, March 31, 1995 Sept. 30,
1988 1987 1986 1985 (Unaudited) 1994 1993(1)
--------- --------- --------- --------- --------- ------ ------
Per Share Operating Data:
Net asset value, beginning
of period $ 11.60 $ 12.51 $ 10.98 $ 10.32 $ 11.93 $ 13.50 $13.07
--------- --------- --------- --------- --------- ------ ------
Income (loss) from
investment operations:
Net investment income .88(2) .90(2) .86 .76 .31 .64 .36
Net realized and
unrealized gain (loss)
on investments .45 (.79) 1.62 .67 .27 (1.45) .44
--------- --------- --------- --------- --------- ------ ------
Total income (loss) from
investment operations 1.33 .11 2.48 1.43 .58 (.81) .80
Dividends and distributions
to shareholders:
Dividends from net
investment income (.94) (.88) (.86) (.77) (.32) (.60) (.37)
Dividends in excess of net
investment income -- -- -- -- -- (.02) --
Distributions from net
realized gain on
investments (.08) (.14) (.09) -- -- (.03) --
Distributions in excess of
net realized gain on
investments -- -- -- -- -- (.11) --
--------- --------- --------- --------- --------- ------ ------
Total dividends and
distributions to
shareholders (1.02) (1.02) (.95) (.77) (.32) (.76) (.37)
--------- --------- --------- --------- --------- ------ ------
Net asset value, end
of period $ 11.91 $ 11.60 $ 12.51 $ 10.98 $ 12.19 $ 11.93 $13.50
========= ========= ========= =========
========= ====== ======
Total Return, at Net
Asset Value(3) 11.48% .29% 22.73% 13.37% 4.95% (6.22)% 6.56%
--------- --------- --------- --------- --------- ------ ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 116,931 $ 79,479 $ 50,810 $ 28,166 $ 83,030 $73,943 $40,958
--------- --------- --------- --------- --------- ------ ------
Average net assets
(in thousands) $ 95,996 $ 65,102 $ 42,907 $ 15,240 $ 75,172 $61,008 $20,454
--------- --------- --------- --------- --------- ------ ------
Number of shares
outstanding at end of
period (in thousands) 9,817 6,851 4,061 2,565 6,809 6,200 3,033
--------- --------- --------- --------- --------- ------ ------
Ratios to average
net assets:
Net investment income 7.48% 7.33% 7.10% 8.05%(4) 5.21%(4) 4.88% 4.45%(4)
Expenses .90%(2) .67%(2) .86% 1.00%(4) 1.67%(4) 1.65% 1.73%(4)
--------- --------- --------- --------- --------- ------ ------
Portfolio turnover rate 11.7% 22.9% 29.7% 126.3% 6.3%(6) 9.4%(5) 39.1
</TABLE>
1. For the period from March 1, 1993 (inception of offering) to September 30,
1993.
2. Net investment income would have been $.83, $.87 and $.88 absent the
voluntary assumption of expenses, resulting in an expense ratio of 1.00%,
1.02% and .85% for 1989, 1988 and 1987.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns. Total returns are not
annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the year ended September 30, 1994 were $145,939,745 and $73,796,519,
respectively.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the six months ended March 31, 1995 were $45,588,316 and $72,870,419,
respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to seek maximum current
income exempt from Federal, New York State and New York City income
taxes for individual investors consistent with preservation of capital.
Toward that objective, the Fund may use certain hedging instruments
(discussed below) in an effort to protect against market risks. Since
market risks are inherent in all securities to varying degrees,
assurance cannot be given that the Fund will achieve its investment
objective.
Investment Policies and Strategies. Under normal market conditions,
the Fund attempts to invest 100% of its assets, and as a matter of
fundamental policy to invest at least 80% of its assets, in Municipal
Securities. In addition, under normal market conditions, as a matter
of fundamental policy, the Fund will invest at least 65% of its total
assets in New York Municipal Securities.
Dividends paid by the Fund derived from interest attributable to
New York Municipal Securities will be exempt from Federal, New York
State and New York City individual income taxes. Dividends derived
from interest on Municipal Securities of other governmental issuers
will be exempt from Federal income tax for individuals, but will be
subject to New York State and New York City individual income taxes.
Any net interest income on taxable investments will be taxable as
ordinary income when distributed to shareholders (see "Dividends,
Capital Gains, and Taxes" below).
- Municipal Securities. Municipal Securities are municipal bonds
and municipal notes and municipal commercial paper issued by or on
behalf of the State of New York, other states and the District of
Columbia, their political subdivisions or any commonwealths,
territories or possessions of the United States, or their respective
agencies, instrumentalities or authorities, the interest on which is,
in the opinion of bond counsel to the respective issuer at the time of
issue, not subject to Federal individual income tax. New York
Municipal Securities are obligations of the State of New York and its
political subdivisions, and their respective agencies, authorities or
instrumentalities, the interest from which is, in the opinion of bond
counsel to the respective issuer at the time of issue, not subject to
New York individual income tax. No independent investigation has been
made by the Manager as to the users of proceeds of bond offerings or
the application of such proceeds.
"Municipal bonds" are Municipal Securities that have a maturity
when issued of one year or more and "municipal notes" are Municipal
Securities that have a maturity when issued of less than one year. The
two principal classifications of Municipal Securities are "general
obligations" (secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest) and
"revenue obligations" (payable only from the revenues derived from a
particular facility or class of facilities, or specific excise tax or
other revenue source). The Fund may invest in Municipal Securities of
both classifications. See "Investment Objective and Policies" in the
Statement of Additional Information for further information about the
Fund's investment policies and about Municipal Securities.
- Special Considerations - New York Municipal Securities. Because
the Fund concentrates its investments in New York Municipal Securities,
a default or financial crisis relating to any of such issuers could
adversely affect the market value and marketability of such Municipal
Securities and the interest income and repayment of principal to the
Fund from them. Investors should consider these matters and the
financial difficulties experienced in past years by New York State and
certain of its agencies and subdivisions (particularly New York City),
as well as economic trends in New York, summarized in the Statement of
Additional Information under "Special Investment Considerations - New
York Municipal Securities." In addition, the Fund's portfolio
securities are affected by general changes in interest rates, which
result in changes in the value of portfolio securities held by the
Fund, which can be expected to vary inversely to changes in prevailing
interest rates.
- Can the Fund's Investment Objective and Policies Change? The
Fund has an investment objective, described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and
strategies in carrying out those investment policies. The Fund's
investment policies and techniques are not "fundamental" unless this
Prospectus or the Statement of Additional Information says that a
particular policy is "fundamental." The Fund's investment objective is
a fundamental policy.
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus. Fundamental policies are
those that cannot be changed without the approval of a "majority" of
the Fund's outstanding voting shares. The term "majority" is defined
in the Investment Company Act to be a particular percentage of
outstanding voting shares (and this term is explained in the Statement
of Additional Information).
- Investments in Taxable Securities and Temporary Defensive
Investment Strategy. Under normal market conditions, the Fund may
invest up to 20% of its assets in taxable investments, including (i)
certain "Temporary Investments" (described immediately below); (ii)
hedging instruments (described in "Hedging," below); (iii) repurchase
agreements (explained below); and (iv) municipal securities issued to
benefit a private user ("Private Activity Municipal Securities"), the
interest from which may be subject to Federal alternative minimum tax
(see "Taxes," below, and "Private Activity Municipal Securities" in the
Statement of Additional Information).
For temporary defensive purposes, the Fund may invest up to 100%
of its total assets in "Temporary Investments," including: (i)
obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities; (ii) corporate debt securities rated within the
three highest grades by Moody's or Standard & Poor's; (iii) commercial
paper rated "A-1" by Standard & Poor's or "Prime-1" by Moody's; and
(iv) certificates of deposit of domestic banks with assets of $1
billion or more. The Fund may hold Temporary Investments pending the
investment of proceeds from the sale of Fund shares or portfolio
securities, or to meet anticipated redemptions.
- Credit Risk and Interest Rate Risk. The values of Municipal
Securities will vary as a result of changing evaluations by rating
services and investors of the ability of the issuers of such securities
to meet the interest and principal payments. Such values will also
change in response to changes in interest rates. Should interest rates
rise, the values of outstanding Municipal Securities will probably
decline and (if purchased at principal amount) would sell at a
discount. If interest rates fall, the values of outstanding Municipal
Securities will probably increase and (if purchased at principal
amount) would sell at a premium. Changes in the values of the Fund's
Municipal Securities from these or other factors will not affect
interest income derived from these securities but will affect the
Fund's net asset value per share.
- Municipal Lease Obligations. The Fund may invest in
certificates of participation that represent a proportionate interest
in or right to the lease-purchase payment made under municipal lease
obligations. While some municipal lease securities may be deemed to be
"illiquid" securities (the purchase of which would be limited as
described below in "Illiquid and Restricted Securities"), from time to
time the Fund may invest more than 5% of its net assets in municipal
lease obligations that the Manager has determined to be liquid under
guidelines set by the Board of Trustees.
- Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals.
Floating rates are automatically adjusted according to a specified
market rate for such investments, such as the percentage of the prime
rate of a bank, or the 90-day U.S. Treasury Bill rate. Such
obligations may be secured by bank letters of credit or other credit
support arrangements.
- Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments." The Fund may use
some derivative investments for hedging purposes, and may invest in
others because they offer the potential for increased income and
principal value. In general, a "derivative investment" is a specially-
designed investment whose performance is linked to the performance of
another investment or security, such as an option, future or index. In
the broadest sense, derivative investments include exchange-traded
options and futures contracts (please refer to "Hedging," below).
The Fund may invest in "inverse floater" variable rate bonds, a
type of derivative investment whose yields move in the opposite
direction as short-term interest rates change. As interest rates rise,
inverse floaters produce less current income. Their price may be more
volatile than the price of a comparable fixed-rate security. Some
inverse floaters have a "cap" whereby if interest rates rise above the
"cap," the security pays additional interest income. If rates do not
rise above the "cap," the Fund will have paid an additional amount for
a feature that proves worthless. The Fund may also invest in municipal
securities that pay interest that depends on an external pricing
mechanism, also a type of derivative investment. Examples of external
pricing mechanisms are interest rate swaps or caps and municipal bond
or swap indices. The Fund anticipates that under normal circumstances
it will invest no more than 10% of its net assets in inverse floaters.
The risks of investing in derivative investments include not only
the ability of the issuer of the derivative investment to pay the
amount due on the maturity of the investment, but also the risk that
the underlying security or investment might not perform the way the
Manager expected it to perform. That can mean that the Fund will
realize less income than expected. Another risk of investing in
derivative investments is that their market value could be expected to
vary to a much greater extent than the market value of municipal
securities that are not derivative investments but have similar credit
quality, redemption provisions and maturities.
- Ratings of Municipal Securities. Municipal Securities purchased
by the Fund must be rated within the four highest rating categories of
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or, if
unrated, judged by the Manager to be of comparable quality to Municipal
Securities rated within such grades. See Appendix B of the Statement
of Additional Information for a description of these rating categories.
Municipal Securities rated either "Baa" or "MIG2" by Moody's, or "BBB"
or "SP-2" by S&P, or "BBB" or "F-3" by Fitch, although investment-
grade, may be subject to greater market fluctuations and risks of loss
of income and principal than higher-rated Municipal Securities and may
be considered to have speculative characteristics. Investments in
unrated Municipal Securities will not exceed 20% of the Fund's total
assets.
A reduction in the rating of a security after its purchase by the
Fund will not require the Fund to dispose of such security. Securities
that have fallen below investment grade have a greater risk that the
ability of the issuers of such securities to meet their debt
obligations will be impaired. It is anticipated that the Municipal
Securities purchased for the Fund's portfolio will generally be those
having relatively longer maturities (approximately 7 to 30 years), but
the Fund may invest in Municipal Securities having a broad range of
maturities. The foregoing ratings restrictions do not apply to banks
in which the Fund's cash is kept.
The Fund's Board of Trustees and shareholders have changed the
Fund's current investment policy with respect to the ratings of
Municipal Securities purchased by the Fund. The Fund is permitted to
invest up to 25% of the Fund's total assets in Municipal Securities
rated below "investment grade," that is, below the four highest rating
categories of Moody's Investors Service, Inc., Standard & Poor's
Corporation or Fitch Investors Service, Inc. Although the yield in
non-investment grade Municipal Securities tends to be higher than that
of higher grade municipal securities, there is an increased credit risk
potential that issuers of non-investment grade Municipal Securities may
not be able to make interest or principal payments as they become due.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund generally will not engage
in the trading of securities for the purpose of realizing short-term
gains, but the Fund may sell securities as the Manager deems advisable
to take advantage of differentials in yield. The "Financial
Highlights," above, show the Fund's portfolio turnover rate during past
fiscal years. While short-term trading increases portfolio turnover,
the Fund incurs little or no brokerage costs because most of the Fund's
portfolio transactions are principal trades without brokerage
commissions.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information
contains more information about these practices, including limitations
on their use that are designed to reduce some of the risks.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis, and may
purchase or sell such securities on a "delayed delivery" basis.
"When-issued" or "delayed delivery" refer to securities whose terms and
indenture are available and for which a market exists, but which are
not available for immediate delivery. The Fund does not intend to make
such purchases for speculative purposes. During the period between the
purchase and settlement, no payment is made for the security and no
interest accrues to the buyer from the investment. The commitment to
purchase a security for which payment will be made on a future date may
be deemed a separate security and involves a risk of loss if the value
of the security declines prior to the settlement date.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor fails
to pay the resale price on the delivery date, the Fund may incur costs
in disposing of the collateral and may experience losses if there is
any delay in its ability to do so. The Fund will not enter into a
repurchase agreement that causes more than 10% of its net assets to be
subject to repurchase agreements having a maturity beyond seven days.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active trading
market, making it difficult to value them or dispose of them promptly
at an acceptable price. 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. As a matter of
fundamental policy, the Fund may not invest in securities that have a
restriction on their resale. The Fund will not invest more than 10% of
its net assets in illiquid or restricted securities (that limit may
increase to 15% if certain state laws are changed or the Fund's shares
are no longer sold in those states). The Fund's percentage limitation
on these investments does not apply to certain restricted securities
that are eligible for resale to qualified institutional purchasers.
- Loans of Portfolio Securities. To attempt to increase its
income, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions. The Fund must receive collateral for
a loan. These loans are limited to not more than 25% of the Fund's net
assets and are subject to other conditions described in the Statement
of Additional Information. The Fund presently does not intend to lend
its portfolio securities, but if it does, the value of securities
loaned is not expected to exceed 5% of the value of its total assets in
the coming year.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, and options
on futures and broadly-based municipal bond indices, or enter into
interest rate swap agreements. These are all referred to as "hedging
instruments." The Fund does not use hedging instruments for
speculative purposes, and has limits on the use of them, described
below. The hedging instruments the Fund may use are described below
and in greater detail in "Other Investment Techniques and Strategies"
in the Statement of Additional Information.
The Fund may buy and sell options and futures for a number of
purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary
substitute for purchasing individual securities. It may do so to try
to manage its exposure to changing interest rates. Some of these
strategies, such as selling futures, buying puts and writing covered
calls, hedge the Fund's portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Writing
covered call options may also provide income to the Fund for liquidity
purposes or to raise cash to distribute to shareholders.
- Futures. The Fund may buy and sell futures contracts that
relate to (1) broadly-based municipal bond indices (these are referred
to as Municipal Bond Index Futures) and (2) interest rates (these are
referred to as Interest Rate Futures). These types of Futures are
described in "Hedging With Options and Futures Contracts" in the
Statement of Additional Information.
- Put and Call Options. The Fund may buy and sell certain kinds
of put options (puts) and call options (calls).
The Fund may buy calls only on securities, broadly-based municipal
bond indices, Municipal Bond Index Futures or Interest Rate Futures, or
to terminate its obligation on a call the Fund previously wrote. The
Fund may write (that is, sell) covered call options. When the Fund
writes a call, it receives cash (called a premium). The call gives the
buyer the ability to buy the investment on which the call was written
from the Fund at the call price during the period in which the call may
be exercised. If the value of the investment does not rise above the
call price, it is likely that the call will lapse without being
exercised, while the Fund keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on a investment
gives the Fund the right to sell the investment at a set price to a
seller of a put on that investment. The Fund can buy only those puts
that relate to (1) securities that the Fund owns, (2) broadly-based
municipal bond indices, (3) Municipal Bond Index Futures or (4)
Interest Rate Futures. The Fund can buy a put on a Municipal Bond
Future or Interest Rate Future whether or not the Fund owns the
particular Future in its portfolio. The Fund may not sell a put other
than a put that it previously purchased.
The Fund may buy and sell puts and calls only if certain
conditions are met: (1) after the Fund writes a call, not more than 25%
of the Fund's total assets may be subject to calls; (2) calls the Fund
buys or sells must be listed on a securities or commodities exchange,
or quoted on the Automated Quotation System of the National Association
of Securities Dealers, Inc. (NASDAQ), or traded in the over-the-counter
market; (3) each call the Fund writes must be "covered" while is
outstanding: that means the Fund must own the investment on which the
call was written or it must own other securities that are acceptable
for the escrow arrangements required for calls; (4) the Fund may write
calls on Futures contracts it owns, but these calls must be covered by
securities or other liquid assets the Fund owns and segregates to
enable it to satisfy its obligations if the call is exercised; (5) a
call or put option may not be purchased if the value of all of the
Fund's put and call options would exceed 5% of the Fund's total assets.
- Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation to
pay interest on a security. For example, they may swap a right to
receive floating rate payments for fixed rate payments. The Fund
enters into swaps only on securities it owns. The Fund may not enter
into swaps with respect to more than 25% of its total assets. Also,
the Fund will segregate liquid assets (such as cash or U.S. Government
securities) to cover any amounts it could owe under swaps that exceed
the amounts it is entitled to receive, and it will adjust that amount
daily, as needed. Income from interest rate swaps may be taxable.
- Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills
and knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a
hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund
could also experience losses if the prices of its futures and options
positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market for the future
or option.
Options trading involves the payment of premiums and has special
tax effects on the Fund. There are also special risks in particular
hedging strategies. If a covered call written by the Fund is exercised
on an investment that has increased in value, the Fund will be required
to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the
call price. Interest rate swaps are subject to credit risks (if the
other party fails to meet its obligations) and also to interest rate
risks. The Fund could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate
changes. These risks are described in greater detail in the Statement
of Additional Information.
Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies. Under these fundamental
policies, the Fund cannot do any of the following:
- Invest in securities or any other investment other than the
types described in "Investment Objective and Policies," above;
- With respect to 75% of its assets, purchase securities issued
or guaranteed by any one issuer (other than the U.S. Government or its
agencies or instrumentalities), if more than 5% of the Fund's total
assets would be invested in securities of that issuer or the Fund would
then own more than 10% of that issuer's voting securities;
- Invest more than 25% of its assets in any 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;
- Make loans, except that the Fund may (i) purchase debt
securities described in "Investment Objective and Policies" and
repurchase agreements, and (ii) lend its portfolio securities as
described in "Loans of Portfolio Securities";
- 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;
- Pledge, mortgage or otherwise encumber, transfer or assign any
of its assets to secure a debt; collateral arrangements for premium and
margin payments in connection with hedging instruments are not deemed
to be a pledge of assets;
- Buy or sell futures contracts other than Interest Rate Futures
or Municipal Bond Index Futures; or
- Underwrite securities or invest in securities subject to
restrictions on resale.
All of the percentage restrictions described above and in the
Statement of Additional Information apply only at the time of
investment and require no action by the Fund as a result of subsequent
changes in value of the investments or the size of the Fund. A
supplementary list of investment restrictions is contained in
"Investment Restrictions" in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1984 as a
Massachusetts business trust. The Fund is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible
for protecting the interests of shareholders under Massachusetts law.
The Trustees meet periodically throughout the year to oversee the
Fund's activities, review its performance, and review the actions of
the Manager. "Trustees and Officers of the Fund" in the Statement of
Additional Information names the Trustees and officers of the Fund and
provides more information about them. Although the Fund is not
required by law to hold annual meetings, it may hold shareholder
meetings from time to time on important matters, and shareholders have
the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The
Board has done so, and the Fund currently has three classes of shares,
Class A, Class B and Class C. All classes invest in the same
investment portfolio. Each class has its own dividends and
distributions and pays certain expenses which may be different for the
different classes. Each class may have a different net asset value.
Each share has one vote at shareholder meetings, with fractional shares
voting proportionally. Only shares of a particular class vote on
matters that affect that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which is responsible for selecting
the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by
the Board of Trustees, under an Investment Advisory Agreement which
states the Manager's responsibilities. The Agreement establishes the
fees paid by the Fund to the Manager and describes the expenses that
the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $35 billion
as of June 30, 1995, and with more than 2.6 million shareholder
accounts. The Manager is owned by Oppenheimer Acquisition Corp., a
holding company that is owned in part by senior officers of the Manager
and controlled by Massachusetts Mutual Life Insurance Company.
- Portfolio Manager. The Portfolio Manager of the Fund is Robert
E. Patterson, a Senior Vice President of the Manager. He has been the
person principally responsible for the day-to-day management of the
Fund's portfolio since November, 1985, and is an officer and portfolio
manager of other OppenheimerFunds.
- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.60% of the first $200 million
of aggregate net assets, 0.55% of the next $100 million, 0.50% of the
next $200 million, 0.45% of the next $250 million, 0.40% of the next
$250 million, and 0.35% of net assets in excess of $1 billion. The
Fund's management fee for its last fiscal year ended September 30, 1994
was 0.51% of average annual net assets for both its Class A and Class B
shares, which may be higher than the rate paid by some other mutual
funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, and legal and
auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce
the net asset value of shares, and therefore are indirectly borne by
shareholders through their investment. More information about the
Investment Advisory Agreement and the other expenses paid by the Fund
is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its
portfolio securities directly from the sellers and not through brokers,
it incurs relatively little expense for brokerage. From time to time,
however, it may use brokers when buying portfolio securities. When
deciding which brokers to use, the Manager is permitted by the
investment advisory agreement to consider whether brokers have sold
shares of the Fund or any other funds for which the Manager serves as
investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor for the
Fund. The Distributor also distributes the shares of other mutual
funds managed by the Manager (the "OppenheimerFunds") and is sub-
distributor for funds managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free number
shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return", "average annual total return", "standardized yield", "dividend
yield", "yield" and "tax-equivalent yield" to illustrate its
performance. The performance of each class of shares is shown
separately, because the performance of each class will usually be
different as a result of the different kinds of expenses each class
bears. This performance information may be useful to help you see how
your investment has done and to compare it to other funds or to a
market index, as we have done below.
It is important to understand that the fund's total returns
represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns
are calculated is contained in the Statement of Additional Information,
which also contains information about other ways to measure and compare
the Fund's performance. The Fund's investment performance will vary
over time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.
- Total Returns. There are different types of total returns used
to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares. The cumulative total return measures the change in
value over the entire period (for example, ten years). An average
annual total return shows the average rate of return for each year in a
period that would produce the cumulative total return over the entire
period. However, average annual total returns do not show the Fund's
actual year-by-year performance.
When total returns are quoted for Class A shares, normally they
include the payment of the current maximum initial sales charge. When
total returns are shown for Class B shares, they include the effect of
the contingent deferred sales charge that applies to the period for
which total return is shown. When total returns are shown for Class C
shares, they also include the effect of the contingent deferred sales
charge. Total returns may also be quoted "at net asset value", without
considering the effect of the sales charge, and those returns would be
reduced if sales charges were deducted.
- Yield. Each Class of shares calculates its yield by dividing
the annualized net investment income per share on the portfolio during
a 30-day period by the maximum offering price on the last day of the
period. Tax-equivalent yield is the equivalent yield that would be
earned in the absence of taxes. It is calculated by dividing that
portion of the yield that is tax-exempt by a factor equal to one minus
the applicable tax rate. The yield of each Class will differ because
of the different expenses of each Class of shares. The yield data
represents a hypothetical investment return on the portfolio, and does
not measure an investment return based on dividends actually paid to
shareholders. To show that return, a dividend yield may be calculated.
Dividend yield is calculated by dividing the dividends of a Class
derived from net investment income during a stated period by the
maximum offering price on the last day of the period. Yields and
dividend yields for Class A shares reflect the deduction of the maximum
initial sales charge, but may also be shown based on the Fund's net
asset value per share. Yields for Class B and Class C shares do not
reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30,
1994, followed by a graphical comparison of the Fund's performance to
an appropriate broad-based market index.
- Management's Discussion of Performance. During the fiscal year
ended September 30, 1994, the Fund was affected by aggressive increases
in short-term interest rates by the Federal Reserve Board. The Fund's
focus on call protection (which prevents the issuer of the bond from
calling or redeeming it before maturity) and on bond quality helped
moderate price fluctuations. The Fund continued to maintain a strong
position in higher quality bonds that the Manager considered to be
related to essential services backed by predictable revenue streams,
such as transportation, utilities, housing and hospitals. In the
opinion of the Manager, the Fund is diversified both by geographic
location and by market sector within New York.
- Comparing the Fund's Performance to the Market. The graphs below
show the performance of a hypothetical $10,000 investment in each Class
of shares of the Fund held from the inception of the Class until
September 30, 1994. In the case of Class A shares, performance is
measured over a ten-year period, and in the case of Class B shares,
from the inception of the Class on March 1, 1993. In both cases, all
dividends and capital gains distributions were reinvested in additional
shares. The graph reflects the deduction of the 4.75% current maximum
initial sales charge on Class A shares and the maximum 5% contingent
deferred sales charge on Class B shares. Class C shares were not
publicly offered during the fiscal year ended September 30, 1994.
Accordingly, no information on Class C shares is presented in the
graphs below.
Because the Fund invests in a variety of Municipal Securities, the
Fund's performance is compared to the performance of the Lehman
Brothers Municipal Bond Index, an unmanaged index of a broad range of
investment grade municipal bonds widely regarded as a measure of the
performance of the general municipal bond market.
Index performance reflects the reinvestment of income but does not
consider the effect of capital gains or transaction costs, and none of
the data below shows the effect of taxes. Also, the Fund's performance
reflects the effect of Fund business and operating expenses. While
index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not
limited to the securities in the Lehman Brothers Municipal Bond Index.
Moreover, the index performance data does not reflect any assessment of
the risk of the investments included in the index.
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Class A and Class B Shares of
Oppenheimer New York Tax-Exempt Fund and
Lehman Brothers Municipal Bond Index
(Graph)
Average Annual Total Return of Class A and Class B shares of the Fund
at 9/30/94(1)
A Shares 1-Year 5-Year 10-Year
<10.04%> 6.18% 9.07%
B Shares 1-Year Life:
<10.90%> <2.77%>
- ----------------------
(1) The inception date of the Fund (Class A shares) was 8/16/84. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions
and are shown net of the applicable 4.75% maximum initial sales charge.
(2) Class B shares of the Fund were first publicly offered on 3/1/93.
The average annual total returns reflect reinvestment of all dividends
and capital gains distributions and are shown net of the applicable 5%
contingent deferred sales charges, respectively, for the 1-year period
and the life of the class. The ending account value in the graph is
net of the applicable 5% and 4% contingent deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the
same portfolio of securities but are subject to different expenses and
will likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, you will not pay an initial sales charge, but
if you sell any of those shares within 18 months after your purchase,
you may pay a contingent deferred sales charge, which will vary
depending on the amount you invested. Sales charges are described below
in "Class A Shares."
- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares. As described below,
the Fund automatically converts Class B shares into Class A shares
after 6 years. Long-term Class B shareholders could pay the economic
equivalent of more than the maximum front-end sales charge allowed
under applicable regulations, because of the effect of the asset-based
sales charge and the contingent deferred sales charge. The automatic
conversion of Class B shares to Class A shares is designed to minimize
the likelihood that this will occur. See "Class B Shares," below.
- Class C Shares. When you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within 12
months of buying them, you will normally pay a contingent deferred
sales charge of 1%. Please refer to "Class C Shares," below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors
which you should discuss with your financial advisor. The Fund's
operating costs that apply to a class of shares and the effect of the
different types of sales charges on your investment will vary your
investment results over time. The most important factors are how much
you plan to invest, how long you plan to hold your investment, and
whether you anticipate exchanging your shares for shares of other
OppenheimerFunds (not all of which currently offer Class B and/or Class
C shares). If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to
see if you should consider another class of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we have
made some assumptions using a hypothetical investment in the Fund. We
used the sales charge rates that apply to each class, and considered
the effect of the annual asset-based sales charge on Class B and Class
C expenses (which, like all expenses, will affect your investment
return). For the sake of comparison, we have assumed that there is a
10% rate of appreciation in the investment each year. Of course, the
actual performance of your investment cannot be predicted and will
vary, based on the Fund's actual investment returns and the operating
expenses borne by each class of shares, and which class you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are
different. The discussion below of the factors to consider in
purchasing a particular class of shares assumes that you will purchase
only one class of shares and not a combination of shares of different
classes.
- How Long Do You Expect to Hold Your Investment? The Fund is
designed for long-term investment. While future financial needs cannot
be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice
will also depend on how much you invest. For example, the reduced
sales charges available for larger purchases of Class A shares may,
over time, offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars used to
buy shares for your account), compared to the effect over time of
higher class-based expenses on shares of Class B or Class C for which
no initial sales charge is paid.
- Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares less than six
years), you should probably consider purchasing Class C shares rather
than Class A or Class B shares. This is because there is no initial
sales charge on Class C shares, and the contingent deferred sales
charge does not apply to amounts you sell after holding them one year.
However, if you plan to invest more than $250,000 for a period
less than six years, Class C shares might not be as advantageous as
Class A shares. This is because the annual asset-based sales charge on
Class C shares (and the contingent deferred sales charges that apply if
you redeem Class C shares within a year of purchase) might have a
greater impact on your account during the period than the initial sales
charge that would apply if Class A shares were purchased instead at the
applicable reduced Class A sales charge rate.
For most investors who invest $500,000 or more, in most cases,
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor
normally will not accept purchase orders of $500,000 or more of Class
B, or orders for more than $1 million of Class C shares from a single
investor.
- Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class A shares will
likely be more advantageous than Class B or Class C shares. This is
because of the effect of expected lower expenses for Class A shares and
the reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation. Class B shares
may be appropriate for smaller investments held for the longer term
because there is no initial sales charge on Class B shares and Class B
shares held six years following their purchase convert into Class A
shares.
Of course, all of these examples are based on approximations of
the effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and you should analyze your options carefully.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B or Class
C shareholders, or other features (such as Automatic Withdrawal Plans)
might not be advisable (because of the effect of the contingent
deferred sales charge for Class B and Class C shareholders), you should
carefully review how you plan to use your investment account before
deciding which class of shares to buy. For example, share certificates
are not available for Class B or Class C shares and if you are
considering using your shares as collateral for a loan, that may be a
factor to consider. Also, checkwriting privileges are not available
for Class B and Class C shares. Also, because not all OppenheimerFunds
currently offer Class B or Class C shares, and because exchanges are
permitted only to the same class of shares in other OppenheimerFunds,
you should consider how important the exchange privilege is likely to
be for you.
- How Does It Affect Payments to My Broker? A salesperson, such
as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different compensation
for selling one class rather than another class. It is important that
investors understand that the purpose of the contingent deferred sales
charges and asset-based sales charges for Class B and Class C shares
are the same as the purpose of the front-end sales charge on sales of
Class A shares: to compensate the Distributor for commissions it pays
to dealers and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any
time with as little as $25. There are reduced minimum investments under
special investment plans:
With Asset Builder Plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent
investments of as little as $25; and subsequent purchases of at least
$25 can be made by telephone through AccountLink.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other OppenheimerFunds
(a list of them appears in the Statement of Additional Information, or
you can ask your dealer or call the Transfer Agent), or by reinvesting
distributions from unit investment trusts that have made arrangements
with the Distributor.
- How Are Shares Purchased? You can buy shares several ways:
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan
under the OppenheimerFunds AccountLink service. When you buy shares,
be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your investment first
with a financial advisor, to be sure it is appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
to send redemption proceeds, and to transmit dividends and
distributions.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to initiate
the ACH transfer to buy shares. You can provide those instructions
automatically, under an Asset Builder Plan, described below, or by
telephone instructions using OppenheimerFunds PhoneLink, also described
below. You should request AccountLink privileges on the application or
dealer settlement instructions used to establish your account. Please
refer to "AccountLink" below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your
account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are on the Application and in the
Statement of Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales
charge that applies) that is next determined after the Distributor
receives the purchase order in Denver. In most cases, to enable you to
receive that day's offering price, the Distributor must receive your
order by the time of day the New York Stock Exchange closes, which is
normally 4:00 P.M., New York time, but may be earlier on some days (all
references to time in this Prospectus mean "New York time"). The net
asset value of each class of shares is determined as of that time on
each day The New York Stock Exchange is open (which is a "regular
business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before
the Distributor's close of business that day, which is normally 5:00
P.M. The Distributor may reject any purchase order for the Fund's
shares, in its sole discretion.
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales charge.
However, in some cases, described below, purchases are not subject to
an initial sales charge, and the offering price may be net asset value.
In some cases, reduced sales charges may be available, as described
below. Out of the amount you invest, the Fund receives the net asset
value to invest for your account. The sales charge varies depending on
the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission.
The current sales charge rates and commissions paid to dealers and
brokers are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Amount of Purchase Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Percentage Percentage of Offering
of Offering of Amount Price
Price Invested
- -------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.98% 4.00%
- -------------------------------------------------------------------
$50,000 or more
but less than
$100,000 4.50% 4.71% 4.00%
- -------------------------------------------------------------------
$100,000 or more
but less than
$250,000 3.50% 3.63% 3.00%
- -------------------------------------------------------------------
$250,000 or more
but less than
$500,000 2.50% 2.56% 2.25%
- -------------------------------------------------------------------
$500,000 or more
but less than
$1 million 2.00% 2.04% 1.80%
- -------------------------------------------------------------------
</TABLE>
The Distributor reserves the right to reallow the entire
commission to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. Shares of any
OppenheimerFunds that offer only one class of shares that has no
designation are considered "Class A Shares" for this purpose. However,
the Distributor pays dealers of record commissions on such purchases in
an amount equal to the sum of 1.0% of the first $2.5 million, plus
0.50% of the next $2.5 million, plus 0.25% of share purchases over $5
million. That commission will be paid only on the amount of those
purchases in excess of $1 million that were not previously subject to a
front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of
the calendar month of their purchase, a contingent deferred sales
charge (called the "Class A contingent deferred sales charge") will be
deducted from the redemption proceeds. That sales charge will be equal
to 1.0% of the aggregate net asset value of either (1) the redeemed
shares (not including shares purchased by reinvestment of dividends or
capital gain distributions) or (2) the original cost of the shares,
whichever is less. However, the Class A contingent deferred sales
charge will not exceed the aggregate amount of the commissions the
Distributor paid to your dealer on all Class A shares of all
OppenheimerFunds you purchased subject to the Class A contingent
deferred sales charge.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to the
sales charge, including shares purchased by reinvestment of dividends
and capital gains, and then will redeem other shares in the order that
you purchased them. The Class A contingent deferred sales charge is
waived in certain cases described in "Waivers of Class A Sales Charges"
below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's Exchange Privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase of
the exchanged shares, the sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of
the following ways:
- Right of Accumulation. To qualify for the lower sales charge
rates that apply to larger purchases of Class A shares, you and your
spouse can add together Class A and Class B shares you purchase for
your individual accounts, or jointly, or on behalf of your children who
are minors, under trust or custodial accounts. A fiduciary can count
all shares purchased for a trust, estate or other fiduciary account
(including one or more employee benefit plans of the same employer)
that has multiple accounts.
Additionally, you can add together current purchases of Class A
and Class B shares of the Fund and other OppenheimerFunds to reduce the
sales charge rate that applies to current purchases of Class A shares.
You can also count Class A and Class B shares of OppenheimerFunds you
previously purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases of Class A
shares, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the
greater of the amount you paid for the shares or their current value
(at offering price). The OppenheimerFunds are listed in "Reduced Sales
Charges" in the Statement of Additional Information, or a list can be
obtained from the Distributor. The reduced sales charge will apply
only to current purchases and must be requested when you buy your
shares.
- Letter of Intent. Under a Letter of Intent, if you purchase
Class A shares or Class A and Class B shares of the Fund and other
OppenheimerFunds during a 13-month period, you reduce the sales charge
rate that applies to your purchases of Class A shares. The total
amount of your intended purchases of both Class A and Class B shares
will determine the reduced sales charge rate for the Class A shares
purchased during that period. This can include purchases made up to 90
days before the date of the Letter. More information is contained in
the Application and in "Reduced Sales Charges" in the Statement of
Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an
explanation of this policy in "Reduced Sales Charges" in the Statement
of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following investors
are not subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees
(and their "immediate families" as defined in "Reduced Sales Charges"
in the Statement of Additional Information) of the Fund, the Manager
and its affiliates, and retirement plans established by them for their
employees;
- registered management investment companies, or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are
identified to the Distributor) or with the Distributor; the purchaser
must certify to the Distributor at the time of purchase that the
purchase is for the purchaser's own account (or for the benefit of such
employee's spouse or minor children);
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products
made available to their clients; or
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor to sell shares of
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party,
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other OppenheimerFunds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor, or
- shares purchased and paid for with the proceeds of shares
redeemed in the prior 12 months from a mutual fund (other than a fund
managed by the Manager or any of its subsidiaries) on which an initial
sales charge or contingent deferred sales charge was paid (this waiver
also applies to shares purchased by exchange of shares of Oppenheimer
Money Market Fund, Inc. that were purchased and paid for in this
manner); this waiver must be requested when the purchase order is
placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver. There is a further
discussion of this policy in "Reduced Sales Charges" in the Statement
of Additional Information.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge is
also waived if shares that would otherwise be subject to the contingent
deferred sales charge are redeemed in the following cases:
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below); or
- if, at the time a purchase order is placed for Class A shares
that would otherwise be subject to the Class A contingent deferred
sales charge, the dealer agrees to accept the dealer's portion of the
commission payable on the sale in installments of 1/18th of the
commission per month (and no further commission will be payable if the
shares are redeemed within 18 months of purchase).
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of
its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. Reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of the
average annual net assets of Class A shares of the Fund. The
Distributor uses all of those fees to compensate dealers, brokers,
banks and other financial institutions quarterly for providing personal
service and maintenance of accounts of their customers that hold Class
A shares and to reimburse itself (if the Fund's Board of Trustees
authorizes such reimbursements) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details,
please refer to "Distribution and Service Plans" in the Statement of
Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of
dividends or capital gains distributions. The charge will be assessed
on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price. The contingent deferred
sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of
dividends and capital gains distributions). The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies
to a redemption, the Fund redeems shares in the following order: (1)
shares acquired by reinvestment of dividends and capital gains
distributions, (2) shares held for over 6 years, and (3) shares held
the longest during the 6-year period.
The amount of the contingent deferred sales charge will depend on
the number of years since you invested and the dollar amount being
redeemed, according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- -----------------------------------------------------------------------
<S> <C>
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will not be applied to shares purchased in certain types
of transactions nor will it apply to Class B shares redeemed in certain
circumstances as described below. The reasons for this policy are in
"Reduced Sales Charges" in the Statement of Additional Information.
Waivers for Redemptions of Shares in Certain Cases. The Class B
contingent deferred sales charge will be waived for redemptions of
shares in the following cases:
- Following the death or disability of the last surviving
shareholder (the death or disability must have occurred after the
account was established, and for disability you must provide evidence
of a determination of disability by the Social Security
Administration);
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- shares issued in plans of reorganization to which the Fund is a
party; and
- shares redeemed in involuntary redemptions as described below.
Further details about this policy are contained in "Reduced Sales
Charges" in the Statement of Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to
Class A shares. This conversion feature relieves Class B shareholders
of the asset-based sales charge that applies to Class B shares under
the Class B Distribution and Service Plan, described below. The
conversion is based on the relative net asset value of the two classes,
and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the
reinvestment of dividends and distributions on the converted shares
will also convert to Class A shares. The conversion feature is subject
to the continued availability of a tax ruling described in "Alternative
Sales Arrangements - Class A, Class B and Class C Shares" in the
Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to
compensate the Distributor for distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares
that are outstanding for 6 years or less. The Distributor also
receives a service fee of 0.25% per year. Both fees are computed on
the average annual net assets of Class B shares, determined as of the
close of each regular business day. The asset-based sales charge allows
investors to buy Class B shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class B
shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares.
Those services are similar to those provided under the Class A Service
Plan, described above. The asset-based sales charge and service fees
increase Class B expenses by up to 1.00% of average net assets per
year.
The Distributor pays the 0.25% service fee to dealers in advance
for the first year after Class B shares have been sold by the dealer.
After the shares have been held for a year, the Distributor pays the
fee on a quarterly basis. The Distributor pays sales commissions of
3.75% of the purchase price to dealers from its own resources at the
time of sale. The Distributor retains the asset-based sales charge to
recoup the sales commissions it pays, the advances of service fee
payments it makes, and its financing costs.
The Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class B shares. Therefore, those
expenses may be carried over and paid in future years. At September
30, 1994, the end of the Plan year, the Distributor had incurred
unreimbursed expenses under the Plan of $3,030,109 (equal to 4.10% of
the Fund's net assets represented by Class B shares on that date),
which have been carried over into the present Plan year. If the Plan
is terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to the Distributor
for expenses it incurred before the Plan was terminated.
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred
sales charge of 1.0% will be deducted from the redemption proceeds.
That sales charge will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions. The charge
will be assessed on the lesser of the net asset value of the shares at
the time of redemption or the original purchase price. The contingent
deferred sales charge is not imposed on the amount of your account
value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of
dividends and capital gains distributions). The Class C contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies
to a redemption, the Fund redeems shares in the following order: (1)
shares acquired by reinvestment of dividends and capital gains
distributions, (2) shares held for over 12 months, and (3) shares held
the longest during the 12-month period.
- Waivers of Class C Sales Charge. The Class C contingent
deferred sales charge will be waived if the shareholder requests it for
any of the redemptions or circumstances described above under "Waivers
of Class B Sales Charge."
- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to
compensate the Distributor for its services and costs in distributing
Class C shares and servicing accounts. Under the Plan, the Fund pays
the Distributor an annual "asset-based sales charge" of 0.75% per year
on Class C shares. The Distributor also receives a service fee of
0.25% per year. Both fees are computed on the average annual net
assets of Class C shares, determined as of the close of each regular
business day. The asset-based sales charge allows investors to buy
Class C shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares.
Those services are similar to those provided under the Class A Service
Plan, described above. The asset-based sales charge and service fees
increase Class C expenses by up to 1.00% of average net assets per
year.
The Distributor pays the 0.25% service fee to dealers in advance
for the first year after Class C shares have been sold by the dealer.
After the shares have been held for a year, the Distributor pays the
fee on a quarterly basis. The Distributor pays sales commissions of
0.75% of the purchase price to dealers from its own resources at the
time of sale. The Distributor retains the asset-based sales charge
during the first year shares are outstanding to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that
have been outstanding for a year or more.
Because the Distributor's actual expenses in selling Class C
shares may be more than the payments it receives from contingent
deferred sales charges collected on redeemed shares and from the Fund
under the Distribution and Service Plan for Class C shares, those
expenses may be carried over and paid in future years. If the Plan is
terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to the Distributor
for certain expenses it incurred before the plan was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to
your account at your bank or other financial institution to enable you
to send money electronically between those accounts to perform a number
of types of account transactions. These include purchases of shares by
telephone (either through a service representative or by PhoneLink,
described below), automatic investments under Asset Builder Plans, and
sending dividends and distributions or Automatic Withdrawal Plan
payments directly to your bank account. Please refer to the Application
for details or call the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you
use to buy shares, or on your dealer's settlement instructions if you
buy your shares through your dealer. After your account is
established, you can request AccountLink privileges on signature-
guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your
account as well as to your dealer representative of record unless and
until the Transfer Agent receives written instructions terminating or
changing those privileges. After you establish AccountLink for your
account, any change of bank account information must be made by
signature-guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone representative,
call the Distributor at 1-800-852-8457. The purchase payment will be
debited from your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone. PhoneLink
may be used on already-established Fund accounts after you obtain a
Personal Identification Number (PIN), by calling the special PhoneLink
number: 1-800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with the
Fund, to pay for these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically by
phone from your Fund account to another OppenheimerFunds account you
have already established by calling the special PhoneLink number.
Please refer to "How to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will send
the proceeds directly to your AccountLink bank account. Please refer
to "How to Sell Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans
that enable you to sell shares automatically or exchange them to
another OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or annual
basis. The checks may be sent to you or sent automatically to your bank
account on AccountLink. You may even set up certain types of
withdrawals of up to $1,500 per month by telephone. You should consult
the Application and Statement of Additional Information for more
details.
- Automatic Exchange Plans. You can authorize the Transfer Agent
automatically to exchange an amount you establish in advance for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The minimum
purchase for each OppenheimerFunds account is $25. These exchanges are
subject to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or
Class B shares, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other
OppenheimerFunds without paying a sales charge. This privilege applies
only to Class A shares you purchased subject to an initial sales charge
and to Class A or Class B shares or on which you paid a contingent
deferred sales charge when you redeemed them. It does not apply to
Class C shares. You must be sure to ask the Distributor for this
privilege when you send your payment. Please consult the Statement of
Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers
you a number of ways to sell your shares: in writing, by using
Checkwriting or by telephone. You can also set up an Automatic
Withdrawal Plan to redeem shares on a regular basis, as described
above. If you have questions about any of these procedures, and
especially if you are redeeming shares in a special situation, such as
due to the death of the owner, please call the Transfer Agent first, at
1-800-525-7048, for assistance.
- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations
(there may be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- The redemption check is not payable to all shareholders listed
on the account statement
- The redemption check is not sent to the address of record on
your statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent
will accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If
you are signing on behalf of a corporation, partnership or other
business, or as a fiduciary, you must also include your title in the
signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the
redemption price on a regular business day, your call must be received
by the Transfer Agent by the close of the New York Stock Exchange that
day, which is normally 4:00 P.M., but which may be earlier on some
days. You may not redeem shares held under a share certificate by
telephone.
- To redeem shares through a service representative, call 1-800-
852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to
your bank account on AccountLink, you may have the proceeds wired to
that bank account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone, in any 7-day period. The check must be payable
to all owners of record of the shares and must be sent to the address
on the account statement. This service is not available within 30 days
of changing the address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account
designated when you establish AccountLink. Normally the ACH wire to
your bank is initiated on the business day after the redemption. You
do not receive dividends on the proceeds of the shares you redeemed
while they are waiting to be wired.
Checkwriting. To be able to write checks against your Fund account,
you may request that privilege on your account Application or you can
contact the Transfer Agent for signature cards, which must be signed
(with a signature guarantee) by all owners of the account and returned
to the Transfer Agent so that checks can be sent to you to use.
Shareholders with joint accounts can elect in writing to have checks
paid over the signature of one owner. If you previously signed a
signature card to establish Checkwriting in one of the other
OppenheimerFunds, you may call 1-800-525-7048 to request Checkwriting
for an account in this Fund that has the same registration as that
other fund account.
- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding
Class B or Class C shares, or Class A shares that are subject to a
contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments
within the prior 10 days.
- Don't use your checks if you changed your Fund account number.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:
- Shares of the fund selected for exchange must be available for
sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of
the same class in the other OppenheimerFunds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another
fund. At present, not all of the OppenheimerFunds offer the same
classes of shares. If a fund has only one class of shares that does not
have a class designation, they are "Class A" shares for exchange
purposes. Certain OppenheimerFunds offer Class A shares and Class B
and/or Class C shares, and a list can be obtained by calling the
Distributor at 1-800-525-7048. In some cases, sales charges may be
imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are
registered with the same name(s) and address. Shares held under
certificates may not be exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. Exchanges of shares
involve a redemption of the shares of the fund you own and a purchase
of shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from
the other fund in the exchange transaction on the same regular business
day on which the Transfer Agent receives an exchange request by that is
in proper form by the close of the New York Stock Exchange that day,
which is normally 4:00 P.M., but may be earlier on some days. However,
either fund may delay the purchase of shares of the fund you are
exchanging into up to 7 days if it determines it would be disadvantaged
by a same-day transfer of the proceeds to buy shares. For example, the
receipt of multiple exchange requests from a dealer in a "market-
timing" strategy might require the disposition of portfolio securities
at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes at
any time.
- For tax purposes, exchanges of shares involve a redemption of
the shares of the fund you own and a purchase of shares of the other
fund, which may result in a capital gain or loss. For more information
about taxes affecting exchanges, please refer to "How to Exchange
Shares" in the Statement of Additional Information.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
The Distributor has entered into agreements with certain dealers
and investment advisers permitting them to exchange their clients'
shares by telephone. These privileges are limited under those
agreements and the Distributor has the right to reject or suspend those
privileges. As a result, those exchanges may be subject to notice
requirements, delays and other limitations that do not apply to
shareholders who exchange their shares directly by calling or writing
to the Transfer Agent.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of the New York Stock Exchange on each regular business
day by dividing the value of the Fund's net assets attributable to a
class by the number of shares of that class that are outstanding. The
Fund's Board of Trustees has established procedures to value the Fund's
securities to determine net asset value. In general, securities values
are based on market value. There are special procedures for valuing
illiquid and restricted securities, obligations for which market values
cannot be readily obtained, and call options and hedging instruments.
These procedures are described more completely in the Statement of
Additional Information.
- The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone
privileges apply to each owner of the account and the dealer
representative of record for the account unless and until the Transfer
Agent receives cancellation instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to
confirm that telephone instructions are genuine, by requiring callers
to provide tax identification numbers and other account data or by
using PINs, and by confirming such transactions in writing. If the
Transfer Agent does not use reasonable procedures it may be liable for
losses due to unauthorized transactions, but otherwise neither it nor
the Fund will be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine. If you are unable to
reach the Transfer Agent during periods of unusual market activity, you
may not be able to complete a telephone transaction and should consider
placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From
time to time, the Transfer Agent in its discretion may waive certain of
the requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities
Clearing Corporation are responsible for obtaining their clients'
permission to perform those transactions and are responsible to their
clients who are shareholders of the Fund if the dealer performs any
transaction erroneously or improperly.
- The redemption price for shares will vary from day to day
because the value of the securities in the Fund's portfolio fluctuates,
and the redemption price, which is the net asset value per share, will
normally be different for Class A, Class B and Class C shares.
Therefore, the redemption value of your shares may be more or less than
their original cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within 7
days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer,
payment will be forwarded within 3 business days. The Transfer Agent
may delay forwarding a check or processing a payment via AccountLink
for recently purchased shares, but only until the purchase payment has
cleared. That delay may be as much as 10 days from the date the shares
were purchased. That delay may be avoided if you purchase shares by
certified check or arrange with your bank to provide telephone or
written assurance to the Transfer Agent that your purchase payment has
cleared.
- Involuntary redemptions of small accounts may be made by the
Fund if the account value has fallen below $500 for reasons other than
the fact that the market value of shares has dropped, and in some cases
involuntary redemptions may be made to repay the Distributor for losses
from the cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed
"in kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from taxable dividends, distributions and redemption
proceeds (including exchanges) if you fail to furnish the Fund a
certified Social Security or Employer Identification Number when you
sign your application, or if you violate Internal Revenue Service
regulations on tax reporting of income.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer
Agent. Under the circumstances described in "How To Buy Shares," you
may be subject to a contingent deferred sales charges when redeeming
certain Class A, Class B and Class C shares.
- To avoid sending duplicate copies of materials to households,
the Fund will mail only one copy of each annual and semi-annual report
to shareholders having the same last name and address on the Fund's
records. However, each shareholder may call the Transfer Agent at 1-
800-525-7048 to ask that copies of those materials be sent personally
to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B
and Class C shares from net investment income each regular business day
and pays such dividends to shareholders monthly. Normally, dividends
are paid on or about the tenth business day of each month, but the
Board of Trustees can change that date. It is expected that
distributions paid with respect to Class A shares will generally be
higher than for Class B and Class C shares because expenses allocable
to Class B and Class C shares will generally be higher.
For the fiscal year ended September 30, 1994, the Fund maintained
the practice, to the extent consistent with the amount of the Fund's
net investment income and other distributable income, of attempting to
pay dividends on Class A shares at a constant level, although the
amount of such dividends was subject to change from time to time
depending on market conditions, the composition of the Fund's portfolio
and expenses borne by the Fund or borne separately by that Class. The
practice of attempting to pay dividends on Class A shares at a constant
level requires the Manager, consistent with the Fund's investment
objective and investment restrictions, to monitor the Fund's portfolio
and select higher yielding securities when deemed appropriate to
maintain necessary net investment income levels. The Fund anticipates
paying dividends at the targeted dividend level from net investment
income and other distributable income without any impact on the Fund's
net asset value per share. The Board of Trustees may change the Fund's
targeted dividend level at any time, without prior notice to
shareholders; the Fund does not otherwise have a fixed dividend rate
and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
Capital Gains. Although the Fund does not seek capital gains, it may
realize capital gains on the sale of portfolio securities. If it does,
it may make distributions out of any net short- or long-term capital
gains in December. The Fund may make supplemental distributions of
dividends and capital gains following the end of its fiscal year (which
ends September 30th). Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of
the year. Short-term capital gains are treated as dividends for tax
purposes. There can be no assurance that the Fund will pay any capital
gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest all distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
- Reinvest long-term capital gains only. You can elect to
reinvest long-term capital gains in the Fund while receiving dividends
by check or sent to your bank account on AccountLink.
- Receive all distributions in cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or
have them sent to your bank on AccountLink.
- Reinvest your distributions in another OppenheimerFunds account.
You can reinvest all distributions in another OppenheimerFunds account
you have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary income.
Dividends paid from net investment income earned by the Fund on
Municipal Securities will be excludable from your gross income for
Federal income tax purposes. A portion of the dividends paid by the
Fund may be an item of tax preference if you are subject to the
alternative minimum tax. Distributions are subject to Federal income
tax and may be subject to state and/or local taxes. Your distributions
are taxable when paid, whether you reinvest them in additional shares
or take them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you received
in the previous year.
- "Buying a Dividend". When a fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy shares
on or just before the ex-dividend date, or just before the Fund
declares a capital gains distribution, you will pay the full price for
the shares and then receive a portion of the price back as a taxable
dividend or capital gain.
- Taxes on Transactions. Even though the Fund seeks tax-exempt
income for distribution to shareholders, you may have a capital gain or
loss when you sell or exchange your shares. A capital gain or loss is
the difference between the price you paid for the shares and the price
you receive when you sell them. Any capital gain is subject to capital
gains tax.
- Returns of Capital. In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders. A
non-taxable return of capital may reduce your tax basis in your Fund
shares.
This information is only a summary of certain Federal tax
information about your investment. More information is contained in
the Statement of Additional Information, and in addition you should
consult with your tax adviser about the effect of an investment in the
Fund on your particular tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
Graphic material included in Prospectus of Oppenheimer New York
Tax-Exempt Fund: "Comparison of Total Return of Oppenheimer New York
Tax-Exempt Fund and the Lehman Bros. Municipal Bond Index - Change in
Value of a $10,000 Hypothetical Investment"
Linear Graphs will be included in the Prospectus of Oppenheimer
New York Tax-Exempt Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in (i) Class A shares of the Fund for the ten years ended September 30,
1994, and (ii) Class B shares of the Fund from March 1, 1993 (the date
Class B shares were first publicly-offered) to September 30, 1994, and
comparing such values with the same investments over the same time
periods in the Lehman Brothers Municipal Bond Index. Since no Class C
shares of the Fund were outstanding until after September 30, 1994, no
figures are included for this class. Set forth below are the relevant
data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description of
the Lehman Brothers Municipal Bond Index, is set forth in the
Prospectus under "Fund Information - Management's Discussion of
Performance."
<TABLE>
<CAPTION>
Oppenheimer
New York
Tax-Exempt Lehman
Fund Brothers
Fiscal Year Class A Municipal
(Period) Ended Shares Bond Index
<S> <C> <C>
09/30/84 $ 9,525 $10,000
09/30/85 $11,257 $11,624
09/30/86 $13,882 $14,489
09/30/87 $13,973 $14,566
09/30/88 $15,648 $16,457
09/30/89 $16,806 $17,885
09/30/90 $17,638 $19,101
09/30/91 $19,908 $21,621
09/30/92 $22,019 $23,880
03/01/93 $23,563 $25,487
09/30/93 $25,175 $26,925
09/30/94 $23,833 $26,268
Oppenheimer
New York
Tax-Exempt Lehman
Fund Brothers
Fiscal Year Class B Municipal
(Period) Ended Shares(1) Bond Index
03/01/93 $10,000 $10,000
09/30/93 $10,596 $10,564
09/30/94 $ 9,601 $10,306
<FN>
____________________
(1)For the period from March 1, 1993 (commencement of class) to
September 30, 1994.
</TABLE>
<PAGE>
Oppenheimer New York Tax-Exempt Fund
Two World Trade Center
New York, New York 10048-0203
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional
Information, and if given or made, such information and representations
must not be relied upon as having been authorized by the Fund,
Oppenheimer Management Corporation, Oppenheimer Funds Distributor,
Inc., or any affiliate thereof. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securit-
ies offered hereby in any state to any person to whom it is unlawful to
make such an offer in such state.
(OppenheimerFunds Logo)
PR360.001.0895 * Printed on recycled paper
<PAGE>
Oppenheimer New York Tax-Exempt Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated August 29, 1995
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated August 29, 1995. It should be read
together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above.
Contents
Page
About The Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Special Investment Considerations -
New York Municipal Securities 5
Other Investment Techniques and Strategies 11
Other Investment Restrictions17
How the Fund is Managed 18
Organization and History 18
Trustees and Officers of the Fund 19
The Manager and Its Affiliates 23
Brokerage Policies of the Fund 24
Performance of the Fund 26
Distribution and Service Plans 30
About Your Account
How To Buy Shares 32
How To Sell Shares 38
How To Exchange Shares 42
Dividends, Capital Gains and Taxes 44
Additional Information About the Fund 47
Financial Information About the Fund
Independent Auditors' Report 48
Financial Statements 49
Appendix A: Description of Ratings Categories A-1
Appendix B: Tax-Equivalent Yield Chart B-1
Appendix C: Industry Classifications C-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund may invest, as well as the strategies the Fund may use
to try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information have the same meaning as those terms
used in the Prospectus.
Municipal Securities
- Municipal Bonds. The principal classifications of long-term
municipal bonds are "general obligation" and "revenue" or "industrial
development" bonds.
- General Obligation Bonds. Issuers of general obligation bonds
include states, counties, cities, towns, and regional districts. The
proceeds of these obligations are used to fund a wide range of public
projects, including construction or improvement of schools, highways and
roads, and water and sewer systems. The basic security behind general
obligation bonds is the issuer's pledge of its full faith and credit and
taxing power for the payment of principal and interest. The taxes that
can be levied for the payment of debt service may be limited or unlimited
as to the rate or amount of special assessments.
- Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, and/or
the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
- Industrial Development Bonds. Industrial development bonds,
which are considered municipal bonds if the interest paid is exempt from
federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports, and pollution control. These bonds
are also used to finance public facilities such as airports, mass transit
systems, ports, and parking. The payment of the principal and interest
on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.
- Municipal Notes. Municipal Securities having a maturity when
issued of less than one year are generally known as municipal notes.
Municipal notes generally are used to provide for short-term working
capital needs and include:
- Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use of business taxes, and are payable from these specific future
taxes.
- Revenue Anticipation Notes. Revenue anticipation notes are
issued in expectation of receipt of other types of revenue, such as
federal revenues available under the Federal revenue sharing programs.
- Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the notes.
- Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and
acceptance, many projects receive permanent financing through the Federal
Housing Administration.
- Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is
issued by state and local governments or their agencies to finance
seasonal working capital needs or as short-term financing in anticipation
of longer-term financing.
- Municipal Lease Obligations. From time to time the Fund may invest
5% in municipal lease obligations, some of which may be illiquid and
others which the Manager has determined to be liquid under guidelines set
by the Board of Trustees. Those guidelines require the Manager to
evaluate: (1) the frequency of trades and price quotations for such
securities; (2) the number of dealers or other potential buyers willing
to purchase or sell such securities; (3) the availability of market-
makers; and (4) the nature of the trades for such securities. The Manager
will also evaluate the likelihood of a continuing market for such
securities throughout the time they are held by the Fund and the credit
quality of the instrument. Municipal leases may take the form of a lease
or an installment purchase contract issued by a state or local government
authority to obtain funds to acquire a wide variety of equipment and
facilities. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power
is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate and make the payments due under the
lease obligation. However, certain lease obligations contain "non-
appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years
unless money is appropriated for such purpose on a yearly basis. In
addition to the risk of "non-appropriation," municipal lease securities
do not yet have a highly developed market to provide the degree of
liquidity of conventional municipal bonds. Municipal leases, like other
municipal debt obligations, are subject to the risk of non-payment. The
ability of issuers of municipal leases to make timely lease payments may
be adversely affected in general economic downturns and as relative
governmental cost burdens are reallocated among federal, state and local
governmental units. Such non-payment would result in a reduction of
income to the Fund, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the
net asset value of the Fund.
- Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules
governing tax exemption for interest on Municipal Securities. The Tax
Reform Act generally does not change the tax treatment of bonds issued in
order to finance governmental operations. Thus, interest on obligations
issued by or on behalf of state or local government, the proceeds of which
are used to finance the operations of such governments (e.g., general
obligation bonds) continues to be tax-exempt. However, the Tax Reform Act
further limited the use of tax-exempt bonds for non-governmental (private)
purposes. More stringent restrictions were placed on the use of proceeds
of such bonds. Interest on certain private activity bonds (other than
those specified as "qualified" tax-exempt private activity bonds, e.g.,
exempt facility bonds including certain industrial development bonds,
qualified mortgage bonds, qualified Section 501(c)(3) bonds, qualified
student loan bonds, etc.) is taxable under the revised rules.
Interest on certain private activity bonds issued after August 7,
1986, which continues to be tax-exempt, will be treated as a tax
preference item subject to the alternative minimum tax (discussed below)
to which certain taxpayers are subject. Further, a private activity bond
which would otherwise be a qualified tax-exempt private activity bond will
not, under Internal Revenue Code Section 147(a), be a qualified bond for
any period during which it is held by a person who is a "substantial user"
of the facilities or by a "related person" of such a substantial user.
This "substantial user" provision is applicable primarily to exempt
facility bonds, including industrial development bonds. The Fund may not
be an appropriate investment for entities which are "substantial users"
(or persons related thereto) of such exempt facilities, and such persons
should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-
exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be
a "related person" under the Internal Revenue Code unless such investor
or the investor's immediate family (spouse, brothers, sisters and
immediate descendants) own directly or indirectly in the aggregate more
than 50% in value of the equity of a corporation or partnership which is
a "substantial user" of a facility financed from the proceeds of exempt
facility bonds. In addition, the Tax Reform Act revised downward the
limitations as to the amount of private activity bonds which each state
may issue, which will reduce the supply of such bonds. The value of the
Fund's portfolio could be affected if there is a reduction in the
availability of such bonds. That value may also be affected by a 1988
U.S. Supreme Court decision upholding the constitutionality of the
imposition of a Federal tax on the interest earned on Municipal Securities
issued in bearer form.
A Municipal Security is treated as a taxable private activity bond
under a test for: (a) a trade or business use and security interest, or
(b) a private loan restriction. Under the trade or business use and
security interest test, an obligation is a private activity bond if: (i)
more than 10% of bond proceeds are used for private business purposes and
(ii) 10% or more of the payment of principal or interest on the issue is
directly or indirectly derived from such private use or is secured by the
privately used property or the payments related to the use of the
property. For certain types of uses, a 5% threshold is substituted for
this 10% threshold. (The term "private business use" means any direct or
indirect use in a trade or business carried on by an individual or entity
other than a state 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 Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference
items in arriving at alternative minimum taxable income. The Tax Reform
Act made tax-exempt interest from certain private activity bonds a tax
preference item for purposes of the alternative minimum tax on individuals
and corporations. Any exempt-interest dividend paid by a regulated
investment company will be treated as interest on a specific private
activity bond to the extent of its proportionate share of the interest on
such bonds received by the regulated investment company. The Treasury is
authorized to issue regulations implementing this provision. In addition,
corporate taxpayers subject to the alternative minimum tax may, under some
circumstances, have to include exempt-interest dividends in calculating
their alternative minimum taxable income in situations where the "adjusted
current earnings" of the corporation exceeds its alternative minimum
taxable income. The Fund may hold Municipal Securities the interest on
which (and thus a proportionate share of the exempt-interest dividends
paid by the Fund) will be subject to the alternative minimum tax on
individuals and corporations. The Fund anticipates that under normal
circumstances it will not purchase any such securities in an amount
greater than 20% of the Fund's total assets.
- Ratings of Municipal Securities. Moody's and S&P's ratings (see
Appendix A) represent their respective opinions of the quality of the
Municipal Securities they undertake to rate. However, such ratings are
general and are not absolute standards of quality. Consequently, Municipal
Securities with the same maturity, coupon and rating may have different
yields, while Municipal Securities of the same maturity and coupon with
different ratings may have the same yield. Investment in lower quality
securities may produce a higher yield than securities rated in the higher
rating categories described in the Prospectus (or judged by the Manager
to be of comparable quality). However, the added risk of lower quality
securities might not be consistent with a policy of preservation of
capital.
Subsequent to its purchase by the Fund, a Municipal Security may
cease to be rated or its rating may be reduced below the minimum required
for purchase by the Fund. Neither event requires the Fund to sell the
security, but Oppenheimer Management Corporation (the "Manager") will
consider such events in determining whether the Fund should continue to
hold the security. To the extent that ratings given by Moody's or S&P
change as a result of changes in such organizations or their rating
systems, the Fund will attempt to use comparable ratings as standards for
investments in accordance with the Fund's investment policies.
Special Investment Considerations - New York Municipal Securities. As
explained in the Prospectus, the Trust is highly sensitive to the fiscal
stability of New York State (the "State") and its subdivisions, agencies,
instrumentalities or authorities, including New York City, which issue the
Municipal Securities in which the Trust concentrates its investments. The
following information on risk factors in concentrating in New York
Municipal Securities is only a summary, based on publicly available
information, and official statements relating to offerings of New York
issuers of Municipal Securities prior to January 18, 1995, and no
representation is made as to the accuracy of such information.
- - New York City
- General. More than any other municipality, the fiscal health of
New York City (the "City") has a significant effect on the fiscal health
of the State. The national economic downturn which began in July 1990
adversely affected the local economy which had been declining since late
1989. In order to achieve a balanced budget as required by the laws of
the State for the 1992 fiscal year, the City increased taxes and reduced
services during the 1991 fiscal year to close a then projected gap of $3.3
billion in the 1992 fiscal year which resulted from, among other things,
lower than projected tax revenue of approximately $1.4 billion, reduced
State aid for the City and greater than projected increases in legally
mandated expenditures, including public assistance and Medicaid
expenditures. Beginning in calendar year 1992, the improvement in the
national economy helped stabilize conditions in the City. Employment
losses moderated toward year-end and real Gross City Product ("GCP")
increased, boosted by strong wage gains. The City's current four-year
financial plan assumes that, after noticeable improvements in the City's
economy during calendar year 1994, economic growth will slow in calendar
years 1995 and 1996 with local employment increasing modestly. In
December 1994, the City experienced substantial shortfalls in payments of
non-property tax revenues from those forecasted. Through December 1994,
collections of non-property taxes were approximately $200 million lower
than projected.
For each of the 1981 through 1994 fiscal years, the City achieved
balanced operating results as reported in accordance with then applicable
generally accepted accounting principles ("GAAP"). The City was required
to close substantial budget gaps in recent years in order to maintain
balanced operating results. For fiscal year 1995, the City adopted a
budget which halted the trend in recent years of substantial increases in
City spending from one year to the next. There can be no assurance that
the City will continue to maintain a balanced budget as required by State
law without additional tax or other revenue increases or reductions in
City services, which could adversely affect the City's economic base.
The Mayor is responsible for preparing the City's four-year financial
plan, including the City's current financial plan for the 1995 through
1998 fiscal years (the "1995-1998 Financial Plan", "Financial Plan" or
"City Plan").
The City Comptroller and other agencies and public officials have
issued reports and made public statements which, among other things, state
that projected revenues may be different from those forecast in the City
Plan. In addition, the Control Board staff and others have questioned
whether the City has the capacity to generate sufficient revenues in the
future to provide the level of services included in the City Plan. It is
reasonable to expect that such reports and statements will continue to be
issued and to engender public comment.
- 1995-1998 Financial Plan. On October 25, 1994, the City published
the City Plan for the 1995-1998 fiscal years which is a proposed
modification to a financial plan submitted to the Control Board on July
8, 1994 (the "July City Plan") and which relates to the City, the Board
of Education ("BOE") and the City University of New York ("CUNY").
The City's July City Plan set forth proposed actions for the 1995
fiscal year to close a previously projected gap of approximately $2.3
billion for the 1995 fiscal year, which included City actions aggregating
$1.9 billion, a $288 million increase in State actions over the 1994 and
1995 fiscal years, and a $200 million increase in Federal assistance. The
City actions included proposed agency actions aggregating $1.1 billion,
including productivity savings; tax and fee enforcement initiatives;
service reductions; and savings from the restructuring of City services.
City actions also included savings of $45 million resulting from proposed
tort reform, the projected transfer to the 1995 fiscal year of $171
million of the projected 1994 fiscal year surplus, savings of $200 million
for employee health care costs, $51 million in reduced pension costs,
savings of $225 million from refinancing City bonds and $65 million from
the proposed sale of certain City assets.
The 1995-1998 City Plan published on October 25, 1994 reflects actual
receipts and expenditures and changes in forecast revenues and
expenditures since the July City Plan and projects revenues and
expenditures for the 1995 fiscal year balanced in accordance with GAAP.
For the 1995 fiscal year, the City Plan includes actions to offset an
additional potential $1.1 billion budget gap, resulting principally from
a $104 million decrease in the $171 million projected surplus from the
1994 fiscal year to be transferred to the 1995 fiscal year, due primarily
to lower projected tax revenues for the 1994 fiscal year; reductions in
projected tax revenues for the 1995 fiscal year totalling $170 million;
$60 million of increased City pension contributions resulting from lower
than expected earnings on pension fund assets for the 1994 fiscal year;
a $166 million shortfall in projected increased Federal assistance due
primarily to the failure to enact national health care reform; the failure
of the State Legislature to approve tort reform; the failure to achieve
the projected savings of $200 million for employee health care costs; a
$165 million increase in projected overtime expenditures; and additional
agency spending requirements, primarily for increased costs for foster
care and homeless services, and other decreased projected revenues.
The gap closing measures for the 1995 fiscal year include additional
proposed agency actions aggregating $851 million, which together with the
$1.1 billion of agency actions proposed in the July City Plan, are
substantial and may be difficult to implement. The City Plan is subject
to the ability of the City to implement proposed reductions in City
personnel and other cost reduction initiatives. In addition, legislation
has been adopted by the State Legislature that would impose a maintenance
of effort requirement on the level of funding required of the City for the
BOE. This legislation has not been forwarded to the Governor for
signature. If enacted into law, this legislation would require the City
to increase its fiscal year 1995 funding for the BOE by approximately $500
million over the amount included in the 1995-1998 City Plan, and could
also result in increased funding for the BOE in subsequent years.
The City Plan also sets forth projections for the 1996 through 1998
fiscal years and outlines a proposed gap-closing program to close
projected budget gaps of $1.0 billion, $1.5 billion and $2.0 billion for
the 1996 through 1998 fiscal years, respectively, after successful
implementation of the $1.1 billion gap-closing program for the 1995 fiscal
year. These projections take into account expected increases in Federal
and State assistance. Various actions proposed in the City Plan,
including the proposed continuation of the personal income tax surcharge
and the proposed increase in State aid, are subject to approval by the
Governor and the State Legislature, and the proposed increase in Federal
aid is subject to approval by Congress and the President. The State
Legislature has in previous legislative sessions failed to approve
proposals for the State assumption of certain Medicaid costs and
reallocation in State education aid, thereby increasing the uncertainty
as to the receipt of the State assistance included in the City Plan. If
these actions cannot be implemented, the City will be required to take
other actions to decrease expenditures or increase revenues to maintain
a balanced financial plan.
In January, 1993, the City announced settlement with a coalition of
municipal unions covering approximately 44% of the City's workforce.
Subsequently, the City reached agreement with all but four of its major
bargaining units under terms generally consistent with the coalition
agreement. Taken together, these agreements cover approximately 95% of
the City's workforce. Contract disputes with the four major bargaining
units that did not reach agreement with the City are in arbitration. The
City Plan reflects the costs associated with these settlements, provides
for similar increases for all City-funded employees, and provides no
additional wage increases for City employees after the 1995 fiscal year.
In the event of a collective bargaining impasse, the terms of wage
settlements could be determined through the impasse procedure in the New
York City Collective Bargaining Law, which can impose a binding
settlement.
The City's projections set forth in the City Plan are based on
various assumptions and contingencies which are uncertain and which may
not materialize. Changes in major assumptions could significantly affect
the City's ability to balance its budget as required by State law and to
meet its annual cash flow and financial requirements. Such assumptions
and contingencies include the timing and pace of any regional and local
economic recovery, the impact of real estate tax revenues on the real
estate market, wage increases for City employees consistent with those
assumed in the City Plan, employment growth, the results of a pending
actuarial audit of the City's pension system which is expected to
significantly increase the City's annual pension costs, the ability to
implement proposed reductions in City personnel and other cost reduction
initiatives, which may require in certain cases the cooperation of the
City's municipal unions, and provision of State and Federal aid and
mandate relief.
Implementation of the City Plan is also dependent upon the City's
ability to market its securities successfully in the public credit
markets. The City's financing program for fiscal years 1995 through 1998
contemplates the issuance of $11.3 billion of general obligation bonds
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make other capital investments. In addition, the
City issues revenue and tax anticipation notes to finance its seasonal
working capital requirements. The success of projected public sales of
City bonds and notes will be subject to prevailing market conditions, and
no assurance can be given that such sales will be completed. If the City
were unable to sell its general obligation bonds and notes, it would be
prevented from meeting its planned capital and operating expenditures.
- Ratings. In 1975, Standard & Poor's suspended its A rating of City
bonds. This suspension remained in effect until March 1981, at which time
the City received an investment grade rating of BBB from Standard &
Poor's. On July 2, 1985, Standard & Poor's revised its rating of City
bonds upward to BBB+ and on November 19, 1987, to A-. Moody's ratings of
City bonds were revised in November 1981 from B (in effect since 1977) to
Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A
and again in February 1991 to Baa1. Since July 15, 1993, Fitch has rated
City bonds A-.
On January 17, 1995, mayor Rudolph Giuliani announced that the City
would borrow money to help close its budget gap instead of turning to the
BOE to find savings this school year, which announcement resulted in
Standard & Poor's placing City bonds on a negative credit watch. Standard
& Poor's further indicated that it would reconsider the City's bond rating
in April 1995.
Such ratings reflect only the views of these rating agencies, from
which an explanation of the significance of such ratings may be obtained.
There is no assurance that such ratings will continue for any given period
of time or that they will not be revised downward or withdrawn entirely.
Any such downward revision or withdrawal could have an adverse effect on
the market prices of bonds.
- Outstanding Net Indebtedness. As of September 30, 1994, the City
and the Municipal Assistance Corporation for the City of New York had,
respectively, $21.218 billion and $4.146 billion of outstanding net long-
term debt.
The City depends on the State for State aid both to enable the City
to balance its budget and to meet its cash requirements. If the State
experiences revenue shortfalls or spending increases beyond its
projections during its 1995 fiscal year or subsequent years, such
developments could result in reductions in anticipated State aid to the
City. In addition, there can be no assurance that State budgets in future
fiscal years will be adopted by the April 1 statutory deadline and that
there will not be adverse effects on the City's cash flow and additional
City expenditures as a result of such delays.
- Litigation. The City is a defendant in a significant number of
lawsuits. Such litigation includes, but is not limited to, routine
litigation incidental to the performance of its government and other
functions, actions commenced and claims asserted against the City arising
out of alleged constitutional violations, alleged torts, alleged breaches
of contracts and other violations of law and condemnation proceedings and
other tax and miscellaneous actions. While the ultimate outcome and
fiscal impact, if any, on the proceedings and claims are not currently
predictable, adverse determination in certain of them might have a
material adverse effect upon the City's ability to carry out the City
Plan. As of June 30, 1994, the City estimated its potential future
liability on account of all outstanding claims to be approximately $2.6
billion.
- - New York State
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State economy has grown more slowly
than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of this relative decline are
varied and complex, in many cases involving national and international
developments beyond the State's control. Part of the reason for the long-
term relative decline in the State economy has been attributed to the
combined State and local tax burden, which is one of the highest in the
nation. The existence of this tax burden limits the State's ability to
impose higher taxes in the event of future financial difficulties.
Recently, the State has been relatively successful in bringing the rate
of growth in the public sector in the State in line with changes in the
private economy.
As a result of the national and regional economic recession, the
State's tax receipts for its 1991 and 1992 fiscal years were substantially
lower than projected, which resulted in reductions in State aid to
localities for the State's 1992 and 1993 fiscal years from amounts
previously projected and increases in certain states taxes and fees. The
State completed its 1993 fiscal year with a positive margin of $671
million in the General Fund, which was deposited into a tax refund reserve
account. The State's economy, as measured by employment, started to
recover near the start of the 1993 calendar year and the State completed
its 1994 fiscal year with a cash-basis balanced budget in the State's
General Fund (the major operating fund of the State), after depositing
$1.5 billion in various reserve funds.
The State's 1994-95 Financial Plan, which is based upon the enacted
State budget, projects a balanced General Fund. The State's 1994-95
Financial Plan provided the City with savings through various actions,
which include increased State education aid and State assumption of
certain costs previously paid by the City and restoration of certain prior
year revenue sharing reductions. However, the State Legislature failed
to enact a substantial portion of the proposed State assumption of local
Medicaid costs, other significant mandate relief items, and the proposed
tort reform legislation, which would have provided the City with
additional savings. The State's second quarterly update was released on
October 28, 1994. It projects a year-end surplus in the General Fund of
$14 million. The update revises the projected General Fund receipt and
disbursements contained in the 1994-95 State Financial Plan as revised by
the first quarterly update issued on July 29, 1994. Receipts are now
projected at $34.054 billion, a decreased of $267 million from the State's
first quarterly update, reflecting primarily recent weakness in the
financial services sector. The State's estimated disbursements are
projected at $33.967 billion, a decrease of $281 million from July,
attributable largely to anticipated decreases in social services spending.
However, the State Division of the Budget cautioned that its projections
were subject to the risk that increases in interest rates could impede
economic growth. It has been reported the State will face a potential
budget gap for its 1995-96 fiscal year which could approximate $4 billion.
As a result, the State would be required to take actions to increase
receipts and/or reduce disbursements from projected levels when it
proposes its budget for the 1995-96 fiscal year, which could result in
reductions in State aid to localities.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant
disparity between tax revenues projected from a lower recurring receipts
base and the spending required to maintain state programs at current
levels. To address any potential budgetary imbalance, the State may need
to take significant actions to align recurring receipts and disbursements
in future fiscal years.
- Ratings. On January 13, 1992, Standard & Poor's reduced its
ratings on the State's general obligation bonds from A to A- and, in
addition, reduced its ratings on the State's moral obligation, lease
purchase, guaranteed and contractual obligation debt. Standard & Poor's
also continued its negative rating outlook assessment on State general
obligation debt. On April 26, 1993, Standard & Poor's revised the rating
outlook assessment to stable. On February 14, 1994, Standard & Poor's
raised its outlook to positive and, on June 27, 1994, confirmed its A-
rating.
On January 6, 1992, Moody's reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from
A to Baa1. On June 27, 1994, Moody's reconfirmed its A rating on the
State's general obligation long-term indebtedness.
Ratings reflect only the respective views of such organizations. See
"New York City - Ratings," above on page 8.
- Litigation.
Abandoned Property Law. On May 31, 1988, the Supreme Court of the
United States took jurisdiction of a claim of the State of Delaware that
certain unclaimed dividends, interest and other distributions made by
issuers of securities and held by New York-based brokers incorporated in
Delaware for beneficial owners who cannot be identified or located, had
been, and were being, wrongfully taken by the State of New York pursuant
to New York's Abandoned Property Law (State of Delaware v. State of New
York). Texas intervened, claiming a portion of such distributions and
similar property taken by the State of New York from New York-based banks
and depositories incorporated in Delaware. All other states and the
District of Columbia moved to intervene. In a decision dated March 30,
1993, the United States Supreme Court granted all pending motions of the
states and the District of Columbia to intervene and remanded the case to
a Special Master for further proceedings consistent with the Court's
decision. The Court determined that the abandoned property should be
remitted first to the state of the beneficial owner's last known address,
if ascertainable and, if not, then to the state of incorporation of the
intermediary bank, broker or depository. New York and Delaware have
executed a settlement agreement which provides for payments by New York
to Delaware of $35 million in the State's 1993-94 fiscal year and five
annual payments thereafter of $33 million. New York and Massachusetts
have executed a settlement agreement which provides for aggregate payments
by New York of $23 million, payable over five consecutive years. The
claims of the other states and the District of Columbia remain.
Public Authority Financing Programs. On June 30, 1994, the Court of
Appeals unanimously affirmed the rulings of the trial court and the
Appellate Division on favor of the State in case of Schulz et al. v. State
of New York, et al. (commencement May 24, 1993) and upheld the
constitutionality of certain highway, bridge and mass transportation
bonding programs of the New York State Thruway Authority and the
Metropolitan Transportation Authority authorized by Chapter 56 of the Laws
of 1993.
In upholding the State's position, the Court of Appeals found that,
because the State itself does not become "indebted" in financing
arrangements with public authorities where the State's obligation to make
payments is subject to appropriation, such as lease-purchase and
contractual-obligation financing arrangements described in the State's
Annual Information Statement, those financing arrangements do not
constitute indebtedness of the State for purposes of the State
constitutional limits on debt and are thus not required to be submitted
to the voters for approval at a general election.
Plaintiffs' motion for reargument before the Court of Appeals was
denied on September 1, 1994. The time for appeal to the United States
Supreme Court by petition for a writ of certiorari has not yet expired.
Medicaid Cases. In Matter of New York Association of Homes and
Services for the Aging, Inc. v. Commissioner, by decision dated June 30,
1994, the Court of Appeals held invalid the State Department of Health's
retroactive application to rate years 1989 through 1991 of the nursing
home Medicaid reimbursement rate recalibration adjustment set forth in 10
NYCRR Section 86-2.31(a).
Other Investment Techniques and Strategies
- When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may purchase securities on a "when-issued" basis, and
may purchase or sell such securities on a "delayed delivery" basis.
Although the Fund will enter into such transactions for the purpose of
acquiring securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the Fund may dispose of a commitment prior
to settlement. "When-issued" or "delayed delivery" refers to securities
whose terms and indenture are available and for which a market exists, but
which are not available for immediate delivery. When such transactions
are negotiated the price (which is generally expressed in yield terms) is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. During the period between
commitment by the Fund and settlement (generally within two months but not
to exceed 120 days), no payment is made for the securities purchased by
the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation; the value
at delivery may be less than the purchase price. The Fund will maintain
a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure to do so may result
in the Fund losing the opportunity to obtain a price and yield considered
to be advantageous. If the Fund chooses to (i) dispose of the right to
acquire a when-issued security prior to its acquisition or (ii) dispose
of its right to deliver or receive against a forward commitment, it may
incur a gain or loss. At the time the Fund makes a commitment to purchase
or sell a security on a when-issued or forward commitment basis, it
records the transaction and reflects the value of the security purchased,
or if a sale, the proceeds to be received in determining its net asset
value.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates in a direction other than that expected by the
Manager before settlement will affect the value of such securities and may
cause loss to the Fund.
When-issued transactions and forward commitments can be used by the
Fund as a defensive technique to use against anticipated changes in
interest rates and prices. For instance, in periods of rising interest
rates and falling prices, the Fund might sell securities in its portfolio
on a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and
rising prices, the Fund might sell portfolio securities and purchase the
same or similar securities on a when-issued or forward commitment basis,
thereby obtaining the benefit of currently higher cash yields.
- Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank or U.S. branch of a foreign bank with total
domestic assets of a least $1 billion or broker-dealer with net capital
of at least $50 million which has been designated a primary dealer in
government securities) for delivery on an agreed-on future date. The
resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these transactions run
from day to day, and delivery pursuant to resale typically will occur
within one to five days of the purchase. Repurchase agreements are
considered loans under the Investment Company Act, collateralized by the
underlying security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the
collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager will
continuously monitor the collateral's value and will impose
creditworthiness requirements to confirm that the vendor is financially
sound.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal the market value
of the loaned securities and must consist of cash, bank letters of credit,
securities of the U.S. Government or its agencies or instrumentalities,
or other cash equivalents in which the Fund is permitted to invest. To
be acceptable as collateral, letters of credit must obligate a bank to pay
amounts demanded by the Fund if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Fund. The
Fund receives an amount equal to the dividends or interest on loaned
securities and also receives one or more of: (a) negotiated loan fees, (b)
interest on securities used as collateral, or (c) interest on short-term
debt securities purchased with such loan collateral; either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's custodian and administrative fees. The terms of the
Fund's loans must meet certain tests under the Internal Revenue Code and
permit the Fund to reacquire loaned securities on five days' notice or in
time to vote on any important matter. Income from securities loans is not
included in the exempt-interest dividends paid by the Fund. The Fund will
not enter into any securities loans having a duration of more than one
year.
- Hedging. As described in the Prospectus, the Fund may employ one
or more types of hedging instruments. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, to permit
the Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Interest Rate Futures or Municipal Bond
Index Futures, (ii) buy puts on such Futures or securities, or (iii) write
covered calls on securities, Interest Rate Futures or Municipal Bond Index
Futures (as described in the Prospectus). Covered calls may also be
written on debt securities to attempt to increase the Fund's income. When
hedging to permit the Fund to establish a position in the debt securities
market as a temporary substitute for purchasing individual debt securities
(which the Fund will normally purchase, and then terminate that hedging
position), the Fund may: (i) buy Interest Rate Futures or Municipal Bond
Index Futures, or (ii) buy calls on such Futures or on securities. The
Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's activities in the underlying cash market.
Additional information about the covered calls and hedging instruments the
Fund may use is provided below.
- Writing Covered Call Options. When the Fund writes a call on
a security, it receives a premium and agrees to sell the underlying
investment to a purchaser of a corresponding call during the call period
(usually not more than nine months) at a fixed exercise price (which may
differ from the market price of the underlying investment) regardless of
market price changes during the call period. To terminate its obligation
on a call it has written, the Fund may purchase a corresponding call in
a "closing purchase transaction." A profit or loss will be realized,
depending upon whether the net of the option transaction costs and the
premium received on the call written was more or less than the price of
the call subsequently purchased. A profit may also be realized if the
call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Any such profits are considered
short-term gains for Federal tax purposes, as are premiums on lapsed
calls, and when distributed by the Fund are taxable as ordinary income.
If the Fund could not effect a closing purchase transaction due to a lack
of a market, it would have to hold the underlying investment until the
call lapsed or were exercised.
- Interest Rate Futures. The Fund may buy and sell futures
contracts relating to debt securities ("Interest Rate Futures") and
municipal bond indices ("Municipal Bond Index Futures," discussed below).
An Interest Rate Future obligates the seller to deliver and the purchaser
to take the related debt securities at a specified price on a specified
date. No amount is paid or received upon the purchase or sale of an
Interest Rate Future.
The Fund may concurrently buy and sell Futures contracts in the
expectation that the Future purchased will outperform the Future sold.
For example, the Fund might simultaneously buy Municipal Bond Futures and
sell U.S. Treasury Bond Futures. This type of transaction would be
profitable to the Fund if municipal bonds, in general, outperform U.S.
Treasury bonds. Risks of this type of Futures strategy include the
possibility that the Manager does not correctly assess the relative
durations of the investments underlying the Futures, with the result that
the strategy changes the overall duration of the Fund's portfolio in a
manner that increases the volatility of the Fund's price per share.
Duration is a volatility measure that refers to the expected percentage
change in the value of a bond resulting from a change in general interest
rates (measured by each 1% change in the rates on U.S. Treasury
securities). For example, if a bond has an effective duration of three
years, a 1% increase in general interest rates would be expected to cause
the bond to decline about 3%.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment, equal to a specified percentage of
the contract amount, with the futures commission merchant (the "futures
broker"). The initial margin will be deposited with the Fund's Custodian
in an account registered in the futures broker's name; however, the
futures broker can gain access to that account only under specified
conditions. As the Future is marked to market to reflect changes in its
market value, subsequent margin payments, called variation margin, will
be made to and from the futures broker on a daily basis. At any time
prior to the expiration of the Future, the Fund may elect to close out its
position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required
to be paid by or released to the Fund. Any gain or loss is then realized.
Although Interest Rate Futures by their terms call for settlement by the
delivery of debt securities, in most cases the obligation is fulfilled
by entering into an offsetting transaction. All futures transactions are
effected through a clearinghouse associated with the exchange on which the
contracts are traded.
- Municipal Bond Index Futures. A "municipal bond index" assigns
relative values to the municipal bonds in the index, and is used as the
basis for trading long-term municipal bond futures contracts. Municipal
Bond Index Futures are similar to Interest Rate Futures except that
settlement is made in cash. The obligation under such contracts may also
be satisfied by entering into an offsetting contract to close out the
futures position. Net gain or loss on options on Municipal Bond Index
Futures depends on the price movements of the securities included in the
index. The strategies which the Fund employs regarding Municipal Bond
Index Futures are similar to those described above with regard to Interest
Rate Futures.
- Purchasing Calls and Puts. When the Fund purchases a call
(other than in a closing purchase transaction), it pays a premium and,
except as to calls on Municipal Bond Index Futures, has the right to buy
the underlying investment from a seller of a corresponding call on the
same investment during the call period at a fixed exercise price. The
Fund benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of
the exercise price plus the transaction costs and premium paid for the
call, and the call is exercised. If the call is not exercised or sold
(whether or not at a profit), it will become worthless at its expiration
date and the Fund will lose its premium payment and the right to purchase
the underlying investment.
When the Fund purchases a call or put on a municipal bond index,
Municipal Bond Index Future or Interest Rate Future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in
question (and thus on price movements in the debt securities market
generally) rather than on price movements in individual futures contracts.
When the Fund buys a put, it pays a premium and, except as to puts
on municipal bond indices, has the right to sell the underlying investment
to a seller of a corresponding put on the same investment during the put
period at a fixed exercise price. Buying a put on a debt security,
Interest Rate Future or Municipal Bond Index Future the Fund owns enables
the Fund to protect itself during the put period against a decline in the
value of the underlying investment below the exercise price by selling
such underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is
equal to or above the exercise price and as a result the put is not
exercised or resold, the put will become worthless at its expiration date
and the Fund will lose its premium payment and the right to sell the
underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit).
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular
option. The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause it to sell underlying investments, thus increasing its turnover rate
in a manner beyond its control. The exercise by the Fund of puts may also
cause the sale of underlying investments, also causing turnover, since the
underlying investment might be sold for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a call or a put or sells a call. Premiums paid for options
are small in relation to the market value of the related investments and,
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could cause the Fund's net asset
value to be more sensitive to changes in the value of the underlying
investments.
- Additional Information about Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written calls traded on exchanges, or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the calls or upon the
Fund's entering into a closing purchase transaction. An option position
may be closed out only on a market which provides secondary trading for
options of the same series and there is no assurance that a liquid
secondary market will exist for any particular option. When the Fund
writes an over-the-counter("OTC") option, it intends to into an
arrangement with a primary U.S. Government securities dealer, which would
establish a formula price at which the Fund would have the absolute right
to repurchase that OTC option. This formula price would generally be
based on a multiple of the premium received for the option, plus the
amount by which the option is exercisable below the market price of the
underlying security ("in-the-money"). For any OTC option the Fund writes,
it will treat as illiquid (for purposes of its restriction on illiquid
securities, stated in the Prospectus) the mark-to-market value of any OTC
option held by it. The Securities and Exchange Commission is evaluating
the general issue of whether or not OTC options should be considered as
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
The Fund's option activities may affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
portfolio turnover rate. The exercise by the Fund of puts on securities
will cause the sale of related investments, increasing portfolio turnover.
Although such exercise is within the Fund's control, holding a put might
cause the Fund to sell the related investments for reasons which would not
exist in the absence of the put. The Fund will pay a brokerage commission
each time it buys a call or put, sells a call, or buys or sells an
underlying investment in connection with the exercise of a call or put.
Such commissions may be higher on a relative basis than those which would
apply to direct purchases or sales of such underlying investments.
Premiums paid for options as to underlying investments are small in
relation to the market value of such investments and consequently, put and
call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investment.
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of futures and options thereon as established by the Commodities
Futures Trading Commission ("CFTC"). In particular, the Fund is excluded
from registration as a "commodity pool operator" if it complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and
related options premiums for a bona fide hedging position. However, under
the Rule the Fund must limit its aggregate Futures margin and related
option premiums to no more than 5% of the Fund's net assets for hedging
strategies that are not considered bona fide hedging strategies under the
Rule.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or through
one or more brokers. Thus, the number of options which the Fund may write
or hold may be affected by options written or held by other entities,
including other investment companies having the same adviser as the Fund
or an affiliated investment adviser. Position limits also apply to
Futures. An exchange may order the liquidation of positions found to be
in violation of those limits and may impose certain other sanctions. Due
to requirements under the Investment Company Act, when the Fund purchases
an Interest Rate Future or Municipal Bond Index Future, the Fund will
maintain, in a segregated account or accounts with its Custodian, cash or
readily marketable short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the investments
underlying such Future, less the margin deposit applicable to it.
- Tax Aspects of Hedging Instruments and Covered Calls. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. One of the tests for such qualification is that less than
30% of its gross income (irrespective of losses) must be derived from
gains realized on the sale of securities held for less than three months.
Due to this limitation, the Fund will limit the extent to which it engages
in the following activities, but will not be precluded from them: (i)
selling investments, including Interest Rate Futures and Municipal Bond
Index Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii) writing calls
on investments held less than three months; (iii) purchasing calls or puts
which expire in less than three months; (iv) effecting closing
transactions with respect to calls or puts purchased less than three
months previously; and (v) exercising puts or calls held by the Fund for
less than three months.
- Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above,
there is a risk in using short hedging by selling Interest Rate Futures
and Municipal Bond Index Futures that the prices of such Futures or the
applicable index will correlate imperfectly with the behavior of the cash
(i.e., market value) prices of the Fund's securities. The ordinary
spreads between prices in the cash and futures markets are subject to
distortions due to differences in the natures of those markets. First,
all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash
and futures markets. Second, the liquidity of the futures market depends
on participants entering into offsetting transactions rather than making
or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation
by speculators in the futures market may cause temporary price
distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of debt securities being hedged and movements in the price of the
Hedging Instruments, the Fund may use Hedging Instruments in a greater
dollar amount than the dollar amount of debt securities being hedged if
the historical volatility of the prices of such debt securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that where the Fund has used Hedging Instruments in
a short hedge, the market may advance and the value of debt securities
held in the Fund's portfolio may decline. If this occurred, the Fund
would lose money on the Hedging Instruments and also experience a decline
in value of its debt securities. However, while this could occur for a
very brief period or to a very small degree, over time the value of a
diversified portfolio of debt securities will tend to move in the same
direction as the indices upon which the Hedging Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the debt
securities markets as a temporary substitute for the purchase of
individual debt securities (long hedging) by buying Interest Rate Futures,
Municipal Bond Index Futures and/or calls on such Futures or debt
securities, it is possible that the market may decline; if the Fund then
concludes not to invest in such securities at that time because of
concerns as to possible further market decline or for other reasons, the
Fund will realize a loss on the Hedging Instruments that is not offset by
a reduction in the price of the debt securities purchased.
Other Investment Restrictions
The Fund's significant investment restrictions are described in the
Prospectus. The following investment restrictions are also fundamental
policies of the Fund, and, together with the fundamental policies and
investment objective described in the Prospectus, can be changed only by
the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, such a "majority" vote is defined as the
vote of the holders of the lesser of: (i) 67% or more of the shares
present or represented by proxy at such meeting, if the holders of more
than 50% of the outstanding shares are present, or (ii) more than 50% of
the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) Invest in
real estate, but the Fund may invest in Municipal Securities or other
permitted securities secured by real estate or interests therein; (2)
Purchase securities other than Hedging Instruments on margin; however, the
Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; (3) Make short sales of
securities; (4) Invest in or hold securities of any issuer if those
officers and trustees of the Fund or its adviser beneficially owning
individually more than .5% of the securities of such issuer together own
more than 5% of the securities of such issuer; or (5) Invest in securities
of any other investment company, except in connection with a merger with
another investment company.
- Diversification. For purposes of diversification under the
Investment Company Act and the investment restrictions set forth in the
Prospectus and above, the identification of the "issuer" of a Municipal
Security depends on the terms and conditions of the security. When the
assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating
the subdivision, and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the
sole issuer. Similarly, in the case of an industrial development bond,
if that bond is backed only by the assets and revenues of the
nongovernmental user, then such nongovernmental user would be deemed the
sole issuer. However, if in either case the creating government or some
other entity guarantees the security, such a guarantee would be considered
a separate security and would be treated as an issue of such government
or other agency. In applying these restrictions to its 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. Although this application of the restriction is not
technically a fundamental policy of the Fund, it will not be changed
without shareholder approval. The Manager has no present intention of
investing more than 25% of the Fund's assets in securities paying interest
from revenues of similar type projects. This is not a fundamental policy,
and therefore may be changed without shareholder approval. Should any
such change be made, the Prospectus and/or this Statement of Additional
Information will be supplemented accordingly.
For purposes of the Fund's policy not to concentrate its assets,
described under restriction number (3) in the Prospectus, the Fund has
adopted the industry classifications set forth in Appendix C to this
Statement of Additional Information. This is not a fundamental policy.
How the Fund is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. The address of each Trustee and officer is Two
World Trade Center, New York, New York 10048-0203, unless another address
is listed below. All of the Trustees are also trustees or directors of
Oppenheimer Fund, Oppenheimer Growth Fund, Oppenheimer Global Fund,
Oppenheimer Money Market Fund, Inc., Oppenheimer U.S. Government Trust,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Discovery Fund,
Oppenheimer Target Fund, Oppenheimer Asset Allocation Fund, Oppenheimer
Global Emerging Growth Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Tax-Free Bond Fund, Oppenheimer California Tax-Exempt Fund,
Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Multi-Sector Income
Trust and Oppenheimer Multi-Government Trust (collectively, the "New York-
based OppenheimerFunds). Messrs. Spiro, Donohue, Bowen, Zack, Bishop and
Farrar respectively, hold the same offices with the other New York-based
OppenheimerFunds as with the Fund. As of June 26, 1995, the officers and
Trustees of the Fund as a group owned of record or beneficially 3.09% of
the Class A shares of the Fund and less than 1% of the Class B shares of
the Fund. The foregoing statement does not reflect ownership of shares
held of record by an employee benefit plan for employees of the Manager
for which an officer of the Fund (Andrew J. Donohue) is a trustee, other
than the shares beneficially owned under that plan by the officers of the
Fund listed above.
Leon Levy, Chairman of the Board of Trustees; Age 69
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership);
Chairman of Avatar Holdings Inc. (real estate development).
Leo Cherne, Trustee, Age 82
122 East 42nd Street, New York, New York 10168
Chairman Emeritus of the International Rescue Committee
(philanthropic organization); formerly Executive Director of The
Research Institute of America.
Robert G. Galli, Trustee, Age 62
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company;
formerly he held the following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager, an officer of other OppenheimerFunds and Executive Vice
President and General Counsel of the Manager and the Distributor.
Benjamin Lipstein, Trustee, Age 72
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex Publishers,
Inc. (Publishers of Psychology Today and Mother Earth News) and a
Director of Spy Magazine, L.P.
Elizabeth B. Moynihan, Trustee; Age 65
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art (Smithsonian Institute), the Institute of Fine Arts (New York
University) and the National Building Museum; a member of the
Trustees Council, Preservation League of New York State; a member of
the Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age 68
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil & gas
producer), Enron-Dominion Cogen Corp. (cogeneration company), Kemper
Corporation (insurance and financial services company), and Fidelity
Life Association (mutual life insurance company); formerly Chairman
of the Board of ICL, Inc. (information systems) and President and
Chief Executive Officer of The Conference Board, Inc. (international
economic and business research).
Edward V. Regan, Trustee; Age 65
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc. (health
care provider); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age 63
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee; Age 83
50 Overlook Road, Ossining, NY 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting Professor
of Finance, University of Hawaii; a director of The Korea Fund, Inc.
(a closed-end investment company); a member of the Board of Advisors,
Olympus Private Placement Fund, L.P.; Professor Emeritus of Finance,
Adelphi University.
Donald W. Spiro, President and Trustee; Age 69
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and the Distributor.
Pauline Trigere, Trustee; Age 82
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Trustee; Age 64
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments,
Inc. (electronics) and The Vigoro Corporation (fertilizer
manufacturer); formerly (in descending chronological order)
Counsellor to the President (Bush) for Domestic Policy, Chairman of
the Republican National Committee, Secretary of the U.S. Department
of Agriculture, and U.S. Trade Representative.
Andrew J. Donohue, Secretary; Age: 45
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, prior to which he was a partner in Kraft & McManimon (a
law firm), an officer of First Investors Corporation (a broker-
dealer) and First Investors Management Company, Inc. (broker-dealer
and investment adviser), and a director and an officer of First
Investors Family of Funds and First Investors Life Insurance Company.
Robert E. Patterson, Vice President and Portfolio Manager; Age 52
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
George C. Bowen, Treasurer; Age 58
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Secretary and Treasurer of SSI and SFSI;
an officer of other OppenheimerFunds.
Robert G. Zack, Assistant Secretary; Age 47
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI, SFSI; an officer of other
OppenheimerFunds.
Robert Bishop, Assistant Treasurer; Age 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age 29
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Galli and Spiro; Mr. Spiro is also an officer)
receive no salary or fee from the Fund. The Trustees of the Fund
(including Mr. Delaney, a former Trustee, but excluding Messrs. Galli and
Spiro) received the total amounts shown below (i) from the Fund, during
its fiscal year ended September 30, 1994, and (ii) from all 17 of the New
York-based OppenheimerFunds (including the Fund) listed in the first
paragraph of this section (and from Oppenheimer Global Environment Fund,
a former New York-based OppenheimerFund), for services in the positions
shown:
<TABLE>
<CAPTION>
Aggregate Retirement Benefits Total Compensation
Compensation Accrued as Part From All
Name and from of Fund New York-based
Position Fund Expenses OppenheimerFunds1
<S> <C> <C> <C>
Leon Levy $9,548 $3,812 $141,000.00
Chairman and
Trustee
Leo Cherne $4,661 $1,861 $ 68,800.00
Audit Committee
Member and
Trustee
Benjamin Lipstein $5,838 $2,331 $ 86,200.00
Study Committee
Member and Trustee
Elizabeth B. Moynihan $4,104 $1,639 $ 60,625.00
Study Committee
Member2 and Trustee
Kenneth A. Randall $5,310 $2,120 $ 78,400.00
Audit Committee
Member and Trustee
Edward V. Regan $3,809 $1,521 $ 56,275.00
Audit Committee
Member2 and Trustee
Russell S. Reynolds, Jr. $3,531 $1,410 $ 52,100.00
Trustee
Sidney M. Robbins $8,273 $3,303 $122,100.00
Study Committee
Chairman, Audit
Committee Vice-Chairman
and Trustee
Pauline Trigere $3,531 $1,410 $ 52,100.00
Trustee
Clayton K. Yeutter $3,531 $1,410 $ 52,100.00
Trustee
______________________
1 For the 1994 calendar year.
2 Committee position held during a portion of the period shown.
</TABLE>
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was
received. A Trustee must serve in that capacity for any of the New York-
based OppenheimerFunds for at least 15 years to be eligible for the
maximum payment. Because each Trustee's retirement benefits will depend
on the amount of the Trustee's future compensation and length of service,
the amount of those benefits cannot be determined at this time, nor can
we estimate the number of years of credited service that will be used to
determine those benefits. No payments have been made by the Fund under
the plan as of September 30, 1994.
- Major Shareholders. As of August 23, 1995, no person owned of
record or is known by the Fund to own beneficially 5% or more of the
Fund's outstanding Class A, Class B or Class C shares.
The Manager and Its Affiliates. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the
Manager's directors and officers, some of whom may also serve as officers
of the Fund, and two of whom (Messrs. Galli and Spiro) serve as Trustees
of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced by the Manager.
- The Investment Advisory Agreement. A management fee is payable
monthly to the Manager under the terms of the investment advisory
agreement between the Manager and the Fund, and is computed on the
aggregate net assets of the Fund as of the close of business each day.
The investment advisory agreement between the Manager and the Fund
requires the Manager, at its expense, to provide the Fund with adequate
office space, facilities and equipment, and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective administration for the Fund, including the compilation
and maintenance of records with respect to its operations, the preparation
and filing of specified reports, and the composition of proxy materials
and registration statements for continuous public sale of shares of the
Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
fees to certain Trustees, legal and audit expenses, custodian and transfer
agent expenses, share issuance costs, certain printing and registration
costs, brokerage commissions, and non-recurring expenses, such as
litigation.
The advisory agreement contains no expense limitation. However,
independently of the advisory agreement, the Manager has voluntarily
undertaken that the total expenses of the Fund in any fiscal year
(including the management fee, but excluding taxes, interest, brokerage
commissions, distribution plan payments and extraordinary expenses such
as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Currently, the
most stringent state expense limitation is imposed by California, and
limits the Fund's expenses (with specific exclusions) to 2.5% of the first
$30 million of average annual net assets, 2% of the next $70 million, and
1.5% of average annual net assets in excess of $100 million. The Manager
reserves the right to change or eliminate the undertaking at any time.
Any assumption of the Fund's expenses under that limitation would lower
the Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
For the fiscal years ended September 30, 1992, 1993 and 1994 the
management fees paid by the Fund to the Manager were $2,432,697,
$3,486,365, and $4,074,417, respectively.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations thereunder, the Manager is not liable for any loss sustained
by reason of any investment of Fund assets made with due care and in good
faith. The advisory agreement permits the Manager to act as investment
adviser for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with one or more additional companies for
which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
- The Distributor. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A, Class B and Class C
shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (excluding payments under the
Distribution and Service Plans but including advertising and the cost of
printing and mailing prospectuses other than those furnished to existing
shareholders), are borne by the Distributor. During the fiscal years
ended September 30, 1992, 1993 and 1994, the aggregate sales charges on
sales of the Fund's Class A shares were $6,102,413, $8,118,017 and
$2,933,373, respectively, of which the Distributor and an affiliated
broker-dealer retained in the aggregate $1,165,277, $1,410,798 and
$551,881 in those respective years. During the Fund's fiscal year ended
September 30, 1994, the contingent deferred sales charge collected on the
Fund's Class B shares totaled $149,477, all of which the Distributor
retained. Class C shares were not publicly offered during this fiscal
period, and no contingent deferred sales charges were collected. For
additional information about distribution of the Fund's shares and the
expenses connected with such activities, please refer to "Distribution and
Service Plans," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon new recommendations from the
Manager's portfolio managers. In certain instances, portfolio managers
may directly place trades and allocate brokerage, also subject to the
provisions of the advisory agreement and the procedures and rules
described above. In each case, brokerage is allocated under the
supervision of the Manager's executive officers. As most purchases made
by the Fund are principal transactions at net prices, the Fund incurs
little or no brokerage costs. The Fund usually deals directly with the
selling or purchasing principal or market maker without incurring charges
for the services of a broker on its behalf unless it is determined that
better price or execution may be obtained by utilizing the services of a
broker. Purchases of portfolio securities from underwriters include a
commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
The Fund seeks to obtain prompt execution of orders at the most favorable
net price. When the Fund engages in an option transaction, ordinarily the
same broker will be used for the purchase or sale of the option and any
transaction in the securities to which the option relates. When possible,
concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are averaged
as to price and allocated in accordance with the purchase or sale orders
actually placed for each account.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other
accounts may be useful both to the Fund and one or more of such other
accounts. Such research, which may be supplied by a third party at the
instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions. The Board has also
permitted the Manager to use stated commissions on secondary fixed-income
agency trades to obtain research where the broker has represented to
Manager that (i) the trade is not from the broker's own inventory, (ii)
the trade was not executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal transaction.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
Other funds advised by the Manager have investment objectives and
policies similar to those of the Fund. Such other funds may purchase or
sell the same securities at the same time as the Fund, which could affect
the supply or price of such securities. If two or more of such funds
purchase the same security on the same day from the same dealer, the
Manager may average the price of the transactions and allocate the average
among such funds.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "dividend yield," "average annual total return", "total return,"
and "total return at net asset value" of an investment in each class of
Fund shares may be advertised. An explanation of how yields and total
returns are calculated for each class and the components of those
calculations is set forth below. No yield and total return calculations
are presented below for Class B shares because no shares of that class
were publicly issued during the Fund's fiscal year ending September 30,
1994.
Yield and total return information may be useful to investors in
reviewing the Fund's performance. The Fund's advertisement of its
performance must, under applicable SEC rules, include the average annual
total returns for each class of shares of the Fund for the 1, 5 and 10-
year period (or the life of the class, if less) as of the most recently
ended calendar quarter. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its yield and total return are not
guaranteed and normally will fluctuate on a daily basis. When redeemed,
an investor's shares may be worth more or less than their original cost.
Yield and total return for any given past period are not a prediction or
representation by the Fund of future yields or rates of return on its
shares. The yield and total returns of the Class A, Class B and Class C
shares of the Fund are affected by portfolio quality, portfolio maturity,
the type of investments the Fund holds and its operating expenses
allocated to the particular class.
- Standardized Yields
- Yield. The Fund's "yield" (referred to as "standardized yield") for
a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of that class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended September 30, 1994, the standardized yields for
the Fund's Class A and Class B shares were 5.24% and 4.72%, respectively.
- Tax-Equivalent Yield. The Fund's "tax-equivalent yield" adjusts
the Fund's current yield, as calculated above, by a stated combined
Federal, state and city tax rate. The tax equivalent yield is based on
a 30-day period, and is computed by dividing the tax-exempt portion of the
Fund's current yield (as calculated above) by one minus a stated income
tax rate and adding the result to the portion (if any) of the Fund's
current yield that is not tax exempt. The tax equivalent yield may be
used to compare the tax effects of income derived from the Fund with
income from taxable investments at the tax rates stated. Appendix B
includes a tax equivalent yield table, based on various effective tax
brackets for individual taxpayers. Such tax brackets are determined by
a taxpayer's Federal, state and city taxable income (the net amounts
subject to Federal and state income taxes after deductions and
exemptions). The tax equivalent yield table assumes that the investor is
taxed at the highest bracket, regardless of whether a switch to non-
taxable investments would cause a lower bracket to apply. For taxpayers
with income above certain levels, otherwise allowable itemized deductions
are limited. The Fund's tax-equivalent yields (after expense assumptions
by the Manager) for its Class A and Class B shares for the 30-day period
ended September 30, 1994, for an individual New York City resident in the
47.05% combined tax bracket were 9.90% and 8.91%, respectively.
- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A, Class B or Class C share dividends
derived from net investment income during a stated period. Distribution
return includes dividends derived from net investment income and from
realized capital gains declared during a stated period. Under those
calculations, the dividends and/or distributions for that class declared
during a stated period of one year or less (for example, 30 days) are
added together, and the sum is divided by the maximum offering price per
share of that class on the last day of the period. When the result is
annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares and Class C shares, the
maximum offering price is the net asset value per share, without
considering the effect of contingent deferred sales charges.
From time to time similar yield or distribution return calculations
may also be made using the Class A net asset value (instead of its
respective maximum offering price) at the end of the period.
The dividend yields on Class A shares for the 30-day period ended
September 30, 1994, were 5.79% and 6.08% when calculated at maximum
offering price and at net asset value, respectively. The dividend yield
on Class B shares for the 30-day period ended September 30, 1994, was
5.30%. Distribution returns for the 30-day period ended September 30,
1994 are the same as the above-quoted dividend yields. No portion of the
Class A or Class B dividends for the three months ended September 30, 1994
were derived from realized capital gains.
- Total Return Information
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV"), according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over
an entire period of years. Its calculation uses some of the same factors
as average annual total return, but it does not average the rate of return
on an annual basis. Total return is determined as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as discussed below). For Class B shares, payment of the contingent
deferred sales charge of 5.0% for the first year, 4.0% for the second
year, 3.0% for the third and fourth years, 2.0% in the fifth year, 1.0%
in the sixth year and none thereafter is applied, as described in the
Prospectus. For Class C shares, the payment of the 1.0% contingent
deferred sales charge is applied to the investment result for the one-year
period (or less). Total returns also assume that all dividends and
capital gains distributions during the period are reinvested to buy
additional shares at net asset value per share, and that the investment
is redeemed at the end of the period.
The "average annual total return" on an investment in Class A shares
of the Fund for the one, five and ten year periods ended September 30,
1994 were -10.04%, 6.18% and 9.07%, respectively. The cumulative "total
return" on Class A shares for the ten year period ended September 30, 1994
was 138.24%. The average annual total returns on an investment in Class
B shares for the fiscal year ended September 30, 1994 and for the period
March 1, 1993 (the date Class B shares were first publicly offered)
through September 30, 1994 were -10.63% and -2.56%, respectively. The
cumulative total return on Class B shares for the period March 1, 1993
through September 30, 1994 was -4.02%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent sales
charges) and takes into consideration the reinvestment of dividends and
capital gains distributions.
The average annual total returns at net asset value for Class A
shares for the one, five and ten-year periods ended September 30, 1994
were -5.55%, 7.22% and 9.6%, respectively. The cumulative total return
at net asset value for Class A shares for the ten-year period ended
September 30, 1994 was 150.13%.
The average annual total returns at net asset value for Class B
shares for the fiscal year ended September 30, 1994 and for the period
March 1, 1993 (the date Class B shares were first publicly offered)
through September 30, 1994 were -6.22% and -0.23%, respectively. The
cumulative total return at net asset value for Class B shares for the
period March 1, 1993 through September 30, 1994 was -0.36%.
- Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent
mutual fund monitoring service. Lipper monitors the performance of
regulated investment companies, including the Fund, and ranks their
performance for various periods based on categories relating to investment
objectives. The performance of the Fund's classes is ranked against (i)
all other funds, excluding money market funds, and (ii) all other New York
municipal bond funds. The Lipper performance rankings are based on total
returns that include the reinvestment of capital gains distributions and
income dividends but do not take sales charges or taxes into
consideration. From time to time the Fund may include in its
advertisement and sales literature performance information about the Fund
cited in other newspapers and periodicals such as The New York Times,
which may include performance quotations from other sources, including
Lipper and Morningstar.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks mutual funds,
including the Fund, monthly in broad investment categories (equity,
taxable bond, municipal bond and hybrid) based upon risk-adjusted
investment returns. Investment return measures a fund's three, five and
ten-year average annual total returns (when available) in excess of 90-day
U.S. Treasury bill returns after considering sales charges and expenses.
Risk measures fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and return are combined to produce star rankings reflecting
performance relative to the average fund in a given fund's category. Five
stars is the "highest" ranking (top 10%), four stars is "above average"
(next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). Morningstar
ranks the Class A, Class B and Class C shares of the Fund in relation to
other rated municipal bond funds. Rankings are subject to change.
Investors may also wish to compare the Fund's Class A, Class B or
Class C return to the return on fixed income investments available from
banks and thrift institutions, such as certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed
or variable time deposits, and various other instruments such as Treasury
bills. However, the Fund's returns and share price are not guaranteed and
will fluctuate daily, while bank depository obligations may be insured by
the FDIC and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A,
Class B and Class C shares of the Fund are affected by portfolio quality,
the type of investments the Fund holds and its operating expenses
allocated to a particular class.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or the Transfer Agent), by independent third-parties, on
the investor services provided by them to shareholders of the
OppenheimerFunds, other than the performance rankings of the
OppenheimerFunds themselves. These ratings or rankings of
shareholder/investor services may compare the OppenheimerFunds services
to those of other mutual fund families selected by the rating or ranking
services, and may be based upon the opinions of the rating or ranking
service itself, using its own research or judgment, or based upon surveys
of investors, brokers, shareholders or others. in relation to other equity
funds.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares, a
Distribution and Service Plan for Class B shares and a Distribution and
Service Plan for Class C shares under Rule 12b-1 of the Investment Company
Act pursuant to which the Fund makes payments to the Distributor in
connection with the distribution and/or servicing of the shares of that
class as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class. For the
Distribution and Service Plans for Class B shares and for Class C shares,
that vote was cast by the Manager as the sole initial holder of Class B
shares and of Class C shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Any Plan may be terminated at any
time by the vote of a majority of the Independent Trustees or by the vote
of the holders of a "majority" (as defined in the Investment Company Act)
of the outstanding shares of that class. In addition, because Class B
shares automatically convert into Class A shares after six years, the Fund
is required by an exemptive order issued by the Securities and Exchange
Commission to obtain the approval of Class B as well as Class A
shareholders for a proposed amendment to the Class A Plan that would
materially increase the amount to be paid by Class A shareholders under
the Class A Plan. Such vote must be by a "majority" of the Class A and
Class B shares (as defined in the Investment Company Act), voting
separately by class. None of the Plans may be amended to increase
materially the amount of payments to be made unless such amendment is
approved by shareholders of the class affected by the amendment. All
material amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan or Class
C Plan shall also include the distribution costs for that quarter, and
such costs for previous fiscal periods that are carried forward, as
explained in the Prospectus and below. Those reports, including the
allocations on which they are based, will be subject to the review and
approval of the Independent Trustees in the exercise of their fiduciary
duty. Each Plan further provides that while it is in effect, the
selection and nomination of those Trustees of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on any such selection
or nomination is approved by a majority of such Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate allowed under the Plans and set no minimum amount.
For the fiscal year ended September 30, 1994, payments under the
Class A Plan totaled $1,780,777, all of which was paid by the Distributor
to Recipients, including $26,802 paid to an affiliate of the Distributor.
Any unreimbursed expenses incurred with respect to Class A shares for any
fiscal year by the Distributor may not be recovered in subsequent years.
Payments received by the Distributor under the Plan for Class A shares
will not be used to pay any interest expense, carrying charge, or other
financial costs, or allocation of overhead by the Distributor.
The Class B Plan and the Class C Plan allow the service fee payment
to be paid by the Distributor to Recipients in advance for the first year
such shares are outstanding, and thereafter on a quarterly basis, as
described in the Prospectus. Service fee payments by the Distributor to
Recipients will be made (i) in advance for the first year Class B and
Class C shares are outstanding, following the purchase of shares, in an
amount equal to 0.25% of the net asset value of the shares purchased by
the Recipient or its customers and (ii) thereafter, on a quarterly basis,
computed as of the close of business each day at an annual rate of .25%
of the average daily net asset value of Class B shares and Class C shares
respectively, held in accounts of the Recipient or its customers. An
exchange of shares does not entitle the Recipient to an advance service
fee payment. In the event Class B shares or Class C shares are redeemed
during the first year such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor. For the fiscal year ended September 30, 1994, payments made
under the Class B Plan totaled $612,760, of which the Distributor paid
$902 to an affiliate of the Distributor and retained $582,434 as
reimbursement for Class B sales commissions and service fee advances, as
well as financing costs; the balance of such Class B Plan payments was
paid by the Distributor to Recipients not affiliated with the Distributor.
Since Class C shares were not outstanding during the Fund's fiscal year
ended September 30, 1994, no payments were made under the Class C Plan.
Although the Class B Plan and the Class C Plan permit the Distributor
to retain both the asset-based sales charges and the service fees on Class
B and Class C shares, or to pay Recipients the service fee on a quarterly
basis, without payment in advance, the Distributor presently intends to
pay the service fee to Recipients in the manner described above. A
minimum holding period may be established from time to time under the
Class B Plan and the Class C Plan by the Board. Initially, the Board has
set no minimum holding period. All payments under the Class B and Class
C plans are subject to the limitations imposed by the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. on
payments of asset-based sales charges and service fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution
expenses are more or less than the amounts paid by the Fund during that
period. Such payments are made in recognition that the Distributor (i)
pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described in the Prospectus, (ii) may
finance such commissions and/or the advance of the service fee payment to
Recipients under those Plans, or may provide such financing from its own
resources, or from an affiliate, (iii) employs personnel to support
distribution of shares, and (iv) may bear the costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders), state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation
for selling Fund shares may receive different compensation with respect
to one class of shares than the other. The Distributor will not accept
any order for $500,000 or more of Class B shares or $1 million or more of
Class C shares on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund
instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on such shares will be
reduced by incremental expenses borne solely by those classes, including
the asset-based sales charge to which both classes of shares are subject.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of a private letter ruling from the Internal
Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event
for the holder under Federal income tax law. If such a revenue ruling or
opinion is no longer available, the automatic conversion feature may be
suspended, in which event no further conversions of Class B shares would
occur while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative net
asset value of the two classes, without the imposition of a sales charge
or fee, such exchange could constitute a taxable event for the holder, and
absent such exchange, Class B shares might continue to be subject to the
asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to a class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of the New York Stock Exchange (the "NYSE")
on each day that the NYSE is open by dividing the value of the Fund's net
assets attributable to a class by the total number of shares of that class
that are outstanding. The NYSE normally closes at 4:00 P.M. New York
time, but may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The NYSE's most recent
annual holiday schedule states that it will close on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than NYSE members may conduct trading in Municipal
Securities on certain days on which the NYSE is closed (including weekends
and holidays) or after 4:00 P.M. on a regular business day). Because the
Fund's net asset values will not be calculated on those days, the Fund's
net asset value per Class A, Class B or Class C shares may be
significantly affected at times when shareholders may not purchase or
redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for which
last sale information is regularly reported are valued at the last
reported sale price on their primary exchange or NASDAQ that day (or, in
the absence of sales that day, at values based on the last sales prices
of the preceding trading day, or closing bid and asked prices); (ii)
securities actively traded on a foreign securities exchange are valued at
the last sales price available to the pricing service approved by the
Fund's Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded; (iii) unlisted foreign
securities or listed foreign securities not actively traded are valued as
in (i) above, if available, or at the mean between "bid" and "asked"
prices obtained from active market makers in the security on the basis of
reasonable inquiry; (iv) long-term debt securities having a remaining
maturity in excess of 60 days are valued at the mean between the "bid" and
"asked" prices determined by a portfolio pricing service approved by the
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (v) debt instruments having
a maturity of more than one year when issued, and non-money market type
instruments having a maturity of one year or less when issued, which have
a remaining maturity of 60 days or less are valued at the mean between the
"bid" and "asked" prices determined by a pricing service approved by the
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (vi) money market-type debt
securities having a maturity of less than one year when issued that having
a remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vii) securities
(including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures.
In the case of Municipal Securities, when last sale information is
not generally available, such pricing procedures may include "matrix"
comparisons to the prices for comparable instruments on the basis of
quality, yield, maturity, and other special factors involved (such as the
tax-exempt status of the interest paid by Municipal Securities). The
Fund's Board of Trustees has authorized the Manager to employ a pricing
service, bank or broker-dealer experienced in such matters to price any
of the types of securities described above. The Trustees will monitor the
accuracy of such pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls, Interest Rate Futures and Municipal Bond Index Futures
are valued at the last sales price on the principal exchange on which they
are traded or on NASDAQ, as applicable, or if there were no sales that
day, in accordance with (i), above. When the Fund writes an option, an
amount equal to the premium received is included in the Fund's Statement
of Assets and Liabilities as an asset, and an equivalent deferred credit
is included in the liability section. The deferred credit is adjusted
("marked-to-market") to reflect the current market value of the call.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy the shares. Dividends will begin to accrue on
such shares on the day the Fund receives Federal Funds for such purchase
through the ACH system before the close of the NYSE. The NYSE normally
closes at 4:00 P.M. but may close earlier on certain days. The proceeds
of ACH transfers are normally received by the Fund three days after the
ACH transfer is initiated. The Distributor and the Fund are not
responsible for any delays. If the Federal Funds are received after the
close of the NYSE, dividends will begin to accrue on the next regular
business day after such Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction of expenses realized by the Distributor and dealers making such
sales. In the instances discussed in the Prospectus in which no sales
charge is imposed, that policy has been adopted because the Distributor
or dealer or broker incurs little or no selling expenses in such
circumstances. The term "immediate family" refers to one's spouse,
children, grandchildren, parents, grandparents, parents-in-law, siblings,
a spouse's siblings and a sibling's spouse.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-Distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Bond Fund
Oppenheimer International Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Bond Fund
Oppenheimer Strategic Income & Growth Fund
and, the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent (referred to as a "Letter")
is an investor's statement in writing to the Distributor of the intention
to purchase Class A shares or Class A and Class B shares of the Fund (and
other OppenheimerFunds during a 13-month period (the "Letter of Intent
period"), which may, at the investor's request, include purchases made up
to 90 days prior to the date of the Letter. The Letter states the
investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds,
will equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to
count the Class A and Class B shares purchased under the Letter to obtain
the reduced sales charge rate on purchases of Class A shares of the Fund
(and other OppenheimerFunds) that applies under the Right of Accumulation
to current purchases of Class A shares. Each purchase of Class A shares
under the Letter will be made at the public offering price applicable to
a single lump-sum purchase of shares in the intended amount, as described
in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended amount, the investor agrees to pay the additional
amount of sales charge applicable to such purchases, as set forth in
"Terms of Escrow," below (as those terms may be amended from time to
time). The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Transfer Agent subject to
the Terms of Escrow. Also, the investor agrees to be bound by the terms
of the Prospectus, this Statement of Additional Information and the
Application used for such Letter of Intent, and if such terms are amended,
as they may be from time to time by the Fund, that those amendments will
apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value to 5% of the
intended amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended amount specified under the
Letter is $50,000, the escrow shall be shares valued in the amount of
$2,500 (computed at the public offering price adjusted for a $50,000
purchase). Any dividends and capital gains distributions on the escrowed
shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within twenty days after a request from the Distributor or the dealer, the
Distributor will, within sixty days of the expiration of the Letter,
redeem the number of escrowed shares necessary to realize such difference
in sales charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of a Letter) include (a) Class
A shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge, (b) Class B shares acquired subject to
a contingent deferred sales charge, and (c) Class A or B shares acquired
by reinvestment of dividends and distributions or acquired in exchange for
either (i) Class A shares of one of the other OppenheimerFunds that were
acquired subject to a Class A initial or contingent deferred sales charge
or (ii) Class B shares of one of the other OppenheimerFunds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds.
An application should be obtained from the Transfer Agent, completed and
returned, and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating Asset Builder payments.
The amount of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Involuntary Redemptions. The Fund's Board of Trustees has the right
to cause the involuntary redemption of the shares held in any account if
the aggregate net asset value of such shares is less than $500 or such
lesser amount as the Board may fix. The Board of Trustees will not cause
the involuntary redemption of shares in an account if the aggregate net
asset value of such shares has fallen below the stated minimum solely as
a result of market fluctuations. Should the Board elect to exercise this
right, it may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in question
(not less than 30 days), or may set requirements for permission to
increase the investment, and other terms and conditions so that the shares
would not be involuntarily redeemed.
- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, if the Board
of Trustees of the Fund determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity
with applicable rules of the Securities and Exchange Commission. The Fund
has elected to be governed by Rule 18f-1 under the Investment Company Act,
pursuant to which the Fund is obligated to redeem shares solely in cash
up to the lesser of $250,000 or 1% of the net assets of the Fund during
any 90-day period for any one shareholder. If shares are redeemed in kind,
the redeeming shareholder might incur brokerage or other costs in selling
the securities for cash. The method of valuing securities used to make
redemptions in kind will be the same as the method the Fund uses to value
it portfolio securities described above under "Determination of Net Asset
Value Per Share" and such valuation will be made as of the time the
redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable, as
described below, at the net asset value next computed the Transfer Agent
receives the reinvestment order. The shareholder must ask the Distributor
for such privilege at the time of reinvestment. Any capital gain that was
realized when the shares were redeemed is taxable, and reinvestment will
not alter any capital gains tax payable on that gain. If there has been
a capital loss on the redemption, some or all of the loss may not be tax
deductible, depending on the timing and amount of the reinvestment. Under
the Internal Revenue Code, if the redemption proceeds of Fund shares on
which a sales charge was paid are reinvested in shares of the Fund or
another of the OppenheimerFunds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the
shares acquired by the reinvestment of the redemption proceeds. The Fund
may amend, suspend or cease offering this reinvestment privilege at any
time as to shares redeemed after the date of such amendment, suspension
or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B or the Class C
contingent deferred sales charge will be followed in determining the order
in which shares are transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of the New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the broker or dealer
from its customer prior to the time the Exchange closed (normally that is
4:00 P.M., but may be earlier some days) and the order was transmitted to
and received by the Distributor prior to its close of business (normally
5:00 P.M.). Ordinarily, for accounts redeemed by a broker-dealer under
this procedure, payment will be made within three business days after the
shares have been redeemed upon the Distributor's receipt of the required
redemption documents in proper form, with the signature(s) of the
registered owners guaranteed on the redemption document as described in
the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are by check
payable to all shareholders of record and sent to the address of record
for the account (and if the address has not been changed within the prior
30 days). Required minimum distributions from OppenheimerFunds-sponsored
retirement plans may not be arranged on this basis. Payments are normally
made by check, but shareholders having AccountLink privileges (see "How
To Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the OppenheimerFunds New
Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of the payment on the date requested and reserves the
right to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A
purchases while participating in an Automatic Withdrawal Plan. Class B
and Class C shareholders should not establish withdrawal plans, because
of the imposition of the contingent deferred sales charge on such
withdrawals (except where the Class B or Class C contingent deferred sales
charge is waived as described in "Waivers of Class B Sales Charge" or
"Waivers of Class C Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus, and below in this Statement of Additional
Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
such plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
OppenheimerFunds that have a single class of shares without a class
designation are deemed "Class A" shares for this purpose. All of the
OppenheimerFunds offer Class A shares, but only the following
OppenheimerFunds offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Bond Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Cash Reserves (Class B shares are only available by
exchange)
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund
Only the following other OppenheimerFunds offer Class C shares:
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Cash Reserves (Class C shares available only by
exchange)
Oppenheimer Strategic Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer Target Fund
Oppenheimer Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer International Bond Fund
Class A shares of OppenheimerFunds may be exchanged for shares of any
Money Market Fund. Shares of any Money Market Fund purchased without a
sales charge may be exchanged for shares of OppenheimerFunds offered with
a sales charge upon payment of the sales charge (or, if applicable, may
be used to purchase shares of OppenheimerFunds subject to a contingent
deferred sales charge). However, if the Distributor receives, at the time
of purchase, notice that shares of Oppenheimer Money Market Fund, Inc. are
being purchased with the redemption proceeds of other mutual funds (other
than other money market funds) that are not part of the OppenheimerFunds
family, those shares of Oppenheimer Money Market Fund, Inc. may be
exchanged for shares of other OppenheimerFunds at net asset value without
paying a sales charge.
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the OppenheimerFunds or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor may be exchanged at net asset value for shares of any of
the OppenheimerFunds. No contingent deferred sales charge is imposed on
exchanges of shares of either class purchased subject to a contingent
deferred sales charge. However, shares of Oppenheimer Money Market Fund,
Inc. purchased with the redemption proceeds of shares of other mutual
funds (other than funds managed by the Manager or its subsidiaries)
redeemed within the 12 months prior to that purchase may subsequently be
exchanged for shares of other OppenheimerFunds without being subject to
an initial or contingent deferred sales charge, whichever is applicable.
To qualify for that privilege, the investor or the investor's dealer must
notify the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and, if
requested, must supply proof of entitlement to this privilege. The Class
C contingent deferred sales charge is imposed on Class C shares acquired
by exchange if they are redeemed within 12 months of the initial purchase
of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B or Class C contingent deferred sales charge will
be followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or shares covered by a share
certificate that is not tendered with the request. In those cases, only
the shares available for exchange without restriction will be exchanged.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges
of an account made by telephone, any special account features such as
Asset Builder Plans, Automatic Withdrawal Plans and retirement plan
contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. Shares purchased through dealers or brokers
normally are paid for by the third business day following the placement
of the purchase order. Shares redeemed through the regular redemption
procedure will be paid dividends through and including the day on which
the redemption request is received by the Transfer Agent in proper form.
Dividends will be declared on shares repurchased by a dealer or broker for
three business days following the trade date (i.e., to and including the
day prior to settlement of the repurchase). If all shares in an account
are redeemed, all dividends accrued on shares of the same class in the
account will be paid together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and Class
C Shares," above. Dividends are calculated in the same manner, at the same
time and on the same day for shares of each class. However, dividends on
Class B and Class C shares are expected to be lower as a result of the
asset-based sales charge on Class B and Class C shares, and Class B and
Class C dividends will also differ in amount as a consequence of any
difference in net asset value between Class A, Class B and Class C shares.
Distributions may be made annually in December out of any net short-
term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from
hedging instruments and closing purchase transactions realized in the
twelve months ending on October 31 of the current year. Any difference
between the net asset values of Class A, Class B and Class C shares will
be reflected in such distributions. Distributions from net short-term
capital gains are taxable to shareholders as ordinary income and when paid
by the Fund are considered "dividends." The Fund may make a supplemental
distribution of capital gains and ordinary income following the end of its
fiscal year. Long-term capital gains distributions, if any are taxable
as long-term capital gains whether received in cash or reinvested and
regardless of how long Fund shares have been held. There is no fixed
dividend rate (although the Fund may have a targeted dividend rate for
Class A shares) and there can be no assurance as to the payment of any
dividends or the realization of any capital gains.
Tax Status of the Fund's Dividends and Distributions. The Fund intends
to qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest
dividends which are derived from net investment income earned by the Fund
on Municipal Securities will be excludable from gross income of
shareholders for Federal income tax purposes. Net investment income
includes the allocation of amounts of income from the Municipal Securities
in the Fund's portfolio which are free from Federal income taxes. This
allocation will be made by the use of one designated percentage applied
uniformly to all income dividends made during the Fund's tax year. Such
designation will normally be made following the end of each fiscal year
as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of
the Fund's income that was tax-exempt for a given period. All of the
Fund's dividends (excluding capital gains distributions) paid during 1994
were exempt from Federal and New York income taxes. A portion of the
exempt-interest dividends paid by the Fund may be an item of tax
preference for shareholders subject to the alternative minimum tax. The
amount of any dividends attributable to tax preference items for purposes
of the alternative minimum tax will be identified when tax information is
distributed by the Fund. 10.2% of the Fund's dividends (excluding
distributions) paid during 1994 were a tax preference item for
shareholders subject to the alternative minimum tax.
A shareholder receiving a dividend from income earned by the Fund
from one or more of: (1) certain taxable temporary investments (such as
certificates of deposit, repurchase agreements, commercial paper and
obligations of the U.S. government, its agencies and instrumentalities);
(2) income from securities loans; (3) income or gains from options or
Futures; or (4) an excess of net short-term capital gain over net long-
term capital loss from the Fund, treats the dividend as a receipt of
either ordinary income or long-term capital gain in the computation of
gross income, regardless of whether the dividend is reinvested. The
Fund's dividends will not be eligible for the dividends-received deduction
for corporations. Shareholders receiving Social Security benefits should
be aware that exempt-interest dividends are a factor in determining
whether such benefits are subject to Federal income tax. Losses realized
by shareholders on the redemption of Fund shares within six months of
purchase (which period may be shortened by regulation) will be disallowed
for Federal income tax purposes to the extent of exempt-interest dividends
received on such shares.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. The Manager might determine in a particular year that it
might be in the best interest of shareholders for the Fund not to make
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital
gains available for distribution to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue as income each year a portion of the
discount at which the security was purchased even though the Fund receives
no interest payment in cash on the security during the year. As an
investment company, the Fund must pay out substantially all of its net
investment income each year or be subject to excise taxes, as described
above. Accordingly, when the Fund holds zero coupon securities, it may
be required to pay out as an income distribution each year an amount which
is greater than the total amount of cash interest the Fund actually
received during that year. Such distributions will be made from the cash
assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they
would have had in the absence of such transactions.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Class B
and Class C shareholders should be aware that as of the date of this
Statement of Additional Information, only certain OppenheimerFunds offer
Class B or Class C shares. To elect this option, a shareholder must
notify the Transfer Agent in writing and either have an existing account
in the fund selected for reinvestment or must obtain a prospectus for that
fund and an application from the Distributor to establish an account. The
investment will be made at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from certain of the OppenheimerFunds may
be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities, collecting income on the portfolio securities
and handling the delivery of such securities to and from the Fund. The
Manager has represented to the Fund that the banking relationships between
the Manager and the Custodian have been and will continue to be unrelated
to and unaffected by the relationship between the Fund and the Custodian.
It will be the practice of the Fund to deal with the Custodian in a manner
uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer New York Tax-Exempt Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer New York Tax-Exempt Fund as of September 30, 1994,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in the nine-year
period then ended and the ten-month period ended September 30, 1985. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 1994, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer New York Tax-Exempt Fund as of September 30, 1994, the
results of its operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the nine-year period then ended
and the ten-month period ended September 30, 1985, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
October 21, 1994
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1994
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--98.6%
- ---------------------------------------------------------------------------------------------------------------------------------
NEW YORK--76.9% City of New York General Obligation Bonds:
Series A, 7.75%, 8/15/16 Baa1/A- $ 2,500,000 $ 2,737,152
Series B, 8.25%, 6/1/07 Baa1/A- 1,750,000 2,014,670
Series B, FSA Insured, 8.638%, 10/1/07(1) Aaa/AAA 7,500,000 7,231,462
Prerefunded, Series F, 8.25%, 11/15/17 Aaa/A- 7,820,000 9,300,505
Series F, 8.25%, 11/15/17 Baa1/A- 680,000 767,514
7.482%, 8/1/08(1) NR/NR 9,250,000 7,575,305
8.245%, 8/1/13(1) Baa1/A- 5,000,000 4,155,170
8.245%, 8/1/14(1) Baa1/A- 8,150,000 6,742,234
---------------------------------------------------------------------------------------------------
Dormitory Authority of the State of New York:
Revenue Bonds:
City University System:
Series A, 5.75%, 7/1/18 Baa1/BBB 2,500,000 2,219,317
Prerefunded, Series A, 7.625%, 7/1/20 AAA/BBB 1,475,000 1,679,425
Series C, 6%, 7/1/16 Baa1/BBB 9,000,000 8,311,788
Series U, 6.375%, 7/1/08 Baa1/BBB 3,000,000 2,961,834
Series V, 5.60%, 7/1/10 Baa1/BBB 10,880,000 9,872,478
Cornell University System, FGIC Insured,
6.875%, 7/1/14 Aa/AA 7,000,000 7,291,837
Department of Health, Prerefunded, 7.70%, 7/1/20 Aaa/BBB 2,750,000 3,141,974
Judicial Facilities Lease, Escrowed
to Maturity, MBIA Insured, 7.375%, 7/1/16 Aaa/AAA 2,300,000 2,586,035
Pooled Capital Program, Prerefunded,
FGIC Insured, 7.80%, 12/1/05 Aaa/AAA 8,145,000 8,827,045
Rockefeller University System,
MBIA Insured, 7.375%, 7/1/14 Aaa/AAA 4,000,000 4,295,555
Revenue Refunding Bonds:
City University System:
Second Series A, 5.75%, 7/1/18 Baa1/BBB 6,750,000 6,014,114
Series B, 6%, 7/1/14 Baa1/BBB 10,875,000 10,102,657
Fordham University System,
FGIC Insured, 5.75%, 7/1/15 Aaa/AAA/AAA 5,700,000 5,289,389
State University Educational Facilities System:
Series A, 5.25%, 5/15/15 Baa1/BBB+ 23,090,000 19,718,305
Series A, 5.25%, 5/15/21 Baa1/BBB+ 5,010,000 4,060,108
Prerefunded, Series B, 7.25%, 5/15/15 NR/AAA 1,735,000 1,940,519
Prerefunded, Series B, 7.25%, 5/15/15 Aaa/BBB+ 15,230,000 17,034,068
Series B, 7%, 5/15/16 Baa1/BBB+ 9,020,000 9,314,196
---------------------------------------------------------------------------------------------------
Grand Central District Management Assn., Inc.,
New York Business District Capital Improvement:
Revenue Bonds, Prerefunded, 6.50%, 1/1/22 Aaa/AAA 2,000,000 2,168,866
Revenue Refunding Bonds:
5.125%, 1/1/14 A1/A 1,000,000 849,551
5.25%, 1/1/22 A1/A 2,500,000 2,053,837
---------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority
of New York Revenue Bonds:
Commuter Facilities, Series A,
MBIA Insured, 6.125%, 7/1/12 Aaa/AAA 4,090,000 4,007,234
Transportation Facilities Service
Contracts, 6%, 7/1/21 Baa1/BBB 12,950,000 11,723,581
---------------------------------------------------------------------------------------------------
New York City Health and Hospital Corp.
Revenue Refunding Bonds, Series A,
AMBAC Insured, 7.595%, 2/15/23(1) Aaa/AAA/AAA 8,300,000 6,549,206
</TABLE>
4 Oppenheimer New York Tax-Exempt Fund
<PAGE> 5
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED) New York City Housing Development Corp.
Multi-Family Housing Revenue Bonds:
1985 First Series, FHA Insured, 9.875%, 10/1/17 Aa/AA $ 500,000 $ 518,653
Glenn Garden Project, 6.50%, 1/15/18 NR/NR 3,045,199 2,928,446
Keith Plaza Project, 6.50%, 2/15/18 NR/NR 2,011,262 2,018,292
---------------------------------------------------------------------------------------------------
New York City Industrial Development Agency
Revenue Bonds, Terminal One Group Assn.:
6%, 1/1/15 A/A/A- 5,000,000 4,640,580
6.125%, 1/1/24 A/A/A- 3,000,000 2,784,918
---------------------------------------------------------------------------------------------------
New York City Municipal Water Finance Authority
Revenue Bonds, Water and Sewer System:
Prerefunded, Series A,
MBIA Insured, 7.25%, 6/15/15 Aaa/AAA 7,000,000 7,811,586
Series B, AMBAC Insured, 5.375%, 6/15/19 Aaa/AAA/AAA 5,000,000 4,320,170
Prerefunded, Series B, 6.375%, 6/15/22 A/A-/A 2,650,000 2,846,709
Series B, 6.375%, 6/15/22 A/A-/A 6,100,000 5,936,935
Prerefunded, Series C, 7.75%, 6/15/20 Aaa/A- 11,500,000 13,256,751
---------------------------------------------------------------------------------------------------
New York State Energy Research and
Development Authority:
Electric Facilities Revenue Bonds:
Consolidated Edison Co. of New York Project:
Series B, 6.375%, 12/1/27 Aa3/A+ 10,000,000 9,651,749
Series C, 7.25%, 11/1/24 Aa3/A+ 3,450,000 3,620,864
Long Island Lighting Co.:
Series A, 7.15%, 12/1/20 Ba1B+ 7,500,000 7,481,332
Series C, 6.90%, 8/1/22 Ba1/BB+/NR 9,200,000 8,901,081
Gas Facilities Revenue Bonds,
Brooklyn Union Gas Co. Project:
Series B, 10.546%, 7/1/26(1) A1/A/A 6,000,000 6,217,487
Series D, MBIA Insured, 7.569%, 7/8/26(1) Aaa/AAA/A 2,000,000 1,439,272
Pollution Control Revenue Bonds,
Orange and Rockland Utilities, Inc. Project,
10.25%, 10/1/14 Baa1/A-/A+ 1,700,000 1,734,000
---------------------------------------------------------------------------------------------------
New York State Housing Finance Agency:
Revenue Bonds, Service Contracts, Series D,
5.375%, 3/15/23 Baa1/BBB 9,000,000 7,566,570
Revenue Refunding Bonds:
New York City Health Facility:
Series A, 7.90%, 11/1/99 Baa/A- 3,500,000 3,843,826
Series A, 8%, 11/1/08 Baa/A- 3,240,000 3,646,785
State University Construction, Escrowed
to Maturity, Prerefunded, Series A, 7.90%, 11/1/06 Aaa/AAA 1,750,000 2,052,674
---------------------------------------------------------------------------------------------------
New York State Local Government
Assistance Corp. Revenue Bonds:
Series A, 5.375%, 4/1/14 A/A/A+ 5,500,000 4,812,962
Prerefunded, Series C, 7%, 4/1/21 Aaa/AAA/AAA 9,455,000 10,513,771
Series C, 5.50%, 4/1/22 A/A/A+ 16,175,000 14,022,560
Prerefunded, Series D, 6.75%, 4/1/21 Aaa/AAA/AAA 4,700,000 5,177,801
Revenue Refunding Bonds:
Series B, 5.50%, 4/1/21 A/A/A+ 12,800,000 11,091,160
Series C, 5%, 4/1/21 A/A/A+ 15,000,000 11,951,159
</TABLE>
5 Oppenheimer New York Tax-Exempt Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED) New York State Medical Care
Facilities Finance Agency:
Revenue Bonds:
Hospital and Nursing Home Mortgage:
Series B, FHA Insured, 6.20%, 8/15/22 NR/AAA $11,470,000 $10,873,581
Series C, FHA Insured, 6.375%, 8/15/29 NR/AAA 10,000,000 9,620,979
Long-Term Health Care,
Series C, CGIC Insured, 6.40%, 11/1/14 Aaa/AAA 3,000,000 3,006,168
Mental Health Services Facilities
Improvement Project:
Prerefunded, Series A, 8.875%, 8/15/07 Aaa/AAA 6,200,000 6,993,860
Series A, 8.875%, 8/15/07 Baa1/BBB+ 6,800,000 7,526,967
Series A, FGIC Insured, 6.375%, 8/15/17 Aaa/AAA/AAA 5,000,000 5,000,000
Series A, 7.70%, 2/15/18 Baa1/BBB+ 765,000 824,447
Prerefunded, Series B, 7.875%, 8/15/20 Aaa/AAA 2,800,000 3,229,346
Series B, 7.875%, 8/15/20 Baa1/BBB+ 2,020,000 2,210,954
St. Francis Hospital Project,
Series 1988A, FGIC Insured, 7.625%, 11/1/21 Aaa/AAA/AAA 2,690,000 2,924,640
Saint Luke's-Roosevelt Hospital Center Mtg.,
Prerefunded, Series B, FHA Insured, 7.45%, 2/15/29 Aaa/AAA 7,500,000 8,429,542
Revenue Refunding Bonds:
Hospital Mtg., Series A,
FHA Insured, 5.25%, 8/15/14 Aa/AAA 16,940,000 14,594,621
Mental Health Services Facilities
Improvement Project:
Series F, 5.375%, 2/15/14 Baa1/BBB+ 6,600,000 5,635,627
Series F, FSA Insured, 5.25%, 2/15/21 Aaa/AAA 4,400,000 3,705,236
---------------------------------------------------------------------------------------------------
New York State Mortgage Agency Revenue Bonds:
Eighth Series C, Verex Pool Insured, 8.40%, 10/1/17 Aa/NR 1,715,000 1,807,568
Ninth Series B, Verex Pool Insured, 8.30%, 10/1/17 Aa/NR 1,760,000 1,822,880
8.334%, 10/1/24(1) NR/NR 9,000,000 5,678,135
Homeowner Mortgage:
Series 1, 7.95%, 10/1/21 Aa/NR 2,270,000 2,343,532
Series GG, 7.60%, 10/1/18 Aa/NR 280,000 287,583
Series UU, FHA Insured, 7.75%, 10/1/23 Aa/NR 2,000,000 2,125,164
---------------------------------------------------------------------------------------------------
New York State Power Authority:
Revenue Bonds, Series Y, 6.50%, 1/1/11 Aa/AA- 2,500,000 2,557,287
Revenue Refunding Bonds, Series V, 8%, 1/1/17 Aa/AA- 5,580,000 6,076,168
---------------------------------------------------------------------------------------------------
New York State Thruway Authority Revenue Bonds,
Service Contract, Series A, 5.75%, 1/1/19 A1/A 10,000,000 8,999,829
---------------------------------------------------------------------------------------------------
New York State Urban Development Corp.,
Correctional Facilities Capital Project:
Revenue Bonds:
Prerefunded, Series G, 7.25%, 1/1/14 Aaa/NR 3,650,000 4,061,483
Prerefunded, Series G, 7%, 1/1/17 Aaa/NR 2,000,000 2,202,696
Revenue Refunding Bonds:
5.50%, 1/1/15 Baa1/BBB/A 10,000,000 8,699,229
5.50%, 1/1/18 Baa1/BBB/A 17,490,000 15,013,853
---------------------------------------------------------------------------------------------------
Onondaga County, New York Resources Recovery
Agency Revenue Bonds, Resources Recovery
Facilities Project, 7%, 5/1/15 Baa/NR/A- 14,500,000 14,451,758
</TABLE>
6 Oppenheimer New York Tax-Exempt Fund
<PAGE> 7
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED) Port Authority of New York and New Jersey,
Consolidated Revenue Bonds:
Sixty Series, 8.25%, 4/1/23 A1/AA-/AA- $ 8,775,000 $ 9,096,761
Sixty-Second Series, 8%, 12/1/23 A1/AA-/AA- 1,370,000 1,441,595
Sixty-Third Series, 7.875%, 3/1/24 A1/AA-/AA- 9,000,000 9,502,596
Eighty-Fifth Series, 5.375%, 3/1/28 A1/AA-/AA- 9,000,000 7,555,680
---------------------------------------------------------------------------------------------------
Suffolk County, New York General Obligation
Refunding Bonds, Southwest Sewer District,
Escrowed to Maturity, Prerefunded, Series B,
22.875%, 2/1/95 NR/AAA 2,500,000 2,655,395
---------------------------------------------------------------------------------------------------
Triborough Bridge and Tunnel Authority
of New York General Purpose Revenue Bonds:
Series A, 5%, 1/1/12 Aa/A+ 13,130,000 11,237,468
Series A, 5%, 1/1/15 Aa2/A+ 7,500,000 6,286,778
Series B, 0%, 1/1/09 Aa2/A+ 3,925,000 1,605,800
Series B, 0%, 1/1/16 Aa2/A+ 2,540,000 644,266
Series B, 0%, 1/1/17 Aa2/A+ 13,045,000 3,095,343
Series X, 6%, 1/1/14 Aa2/A+ 14,510,000 13,871,065
Series Y, 5.50%, 1/1/17 Aa2/A+ 5,000,000 4,453,135
------------
585,474,039
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--21.7% Puerto Rico Commonwealth Aqueduct and Sewer
Authority Revenue Bonds, Escrowed to Maturity,
Prerefunded, 10.25%, 7/1/09 Aaa/AAA 500,000 674,951
---------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth General Obligation
Refunding Bonds:
Series A, 6%, 7/1/14 Baa1/A 12,000,000 11,387,472
5.25%, 7/1/18 Baa1/A 20,000,000 16,823,898
Prerefunded, 7.70%, 7/1/20 NR/AAA 5,000,000 5,712,679
YCNS, FSA Insured, 8.021%, 7/1/20(1) Aaa/AAA 11,500,000 9,974,111
---------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway and
Transportation Authority Revenue Bonds:
Prerefunded, Series S, 6.50%, 7/1/22 NR/AAA 13,500,000 14,643,611
Prerefunded, Series T, 6.50%, 7/1/22 NR/AAA 2,790,000 3,026,346
Series W, 7.385%, 7/1/10(1) Baa1/A 9,000,000 7,361,333
---------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure
Financing Authority Special Tax Revenue Bonds,
Series A, 7.75%, 7/1/08 Baa1/BBB+ 6,000,000 6,525,828
---------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority:
Revenue Bonds:
Prerefunded, Series O, 7.125%, 7/1/14 Baa1/AAA 6,145,000 6,759,554
Series O, 7.125%, 7/1/14 Baa1/A- 3,235,000 3,434,288
Series P, 7%, 7/1/21 Baa1/A- 6,000,000 6,213,215
Series T, 6%, 7/1/16 Baa1/A- 7,500,000 7,099,005
Revenue Refunding Bonds:
Series N, 5%, 7/1/12 Baa1/A- 6,545,000 5,519,149
Series U, 6%, 7/1/14 Baa1/A- 8,025,000 7,572,718
---------------------------------------------------------------------------------------------------
Puerto Rico Housing Bank and Finance
Agency Single Family Mtg. Revenue Bonds,
Homeownership--Fourth Portfolio,
Prerefunded, FHA Insured, 8.50%, 12/1/18 Aaa/NR 1,580,000 1,904,532
</TABLE>
7 Oppenheimer New York Tax-Exempt Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C>
U.S. POSSESSIONS (CONTINUED) Puerto Rico Housing Finance Corp. Single
Family Mtg. Revenue Bonds, Prerefunded,
GNMA Collateral, 6.85%, 10/15/24 Aaa/AAA $ 3,250,000 $ 3,328,958
---------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical and Environmental
Pollution Control Revenue Bonds:
American Airlines, Inc. Project,
Series A, 8.75%, 12/1/25 Baa1/A+ 850,000 894,734
Warner Lambert Co. Project, 7.60%, 5/1/14 AA/NR/AAA 3,000,000 3,335,067
---------------------------------------------------------------------------------------------------
Puerto Rico Public Buildings Authority
Guaranteed Public Education and Health Facilities:
Revenue Bonds:
Prerefunded, Series J, 7.25%, 7/1/17 Aaa/AAA 6,000,000 6,561,065
Prerefunded, Series L, 6.875%, 7/1/21 Aaa/A 6,000,000 6,647,825
Revenue Refunding Bonds:
Series L, 5.75%, 7/1/16 Baa1/A 12,100,000 11,089,118
Series M, 5.75%, 7/1/15 Baa1/A 11,500,000 10,523,581
---------------------------------------------------------------------------------------------------
Puerto Rico Telephone Authority Revenue Bonds,
MBIA Insured, 7.039%, 1/16/15(1) Aaa/AAA 11,000,000 8,577,271
------------
165,590,309
------------
Total Municipal Bonds and Notes (Cost $779,391,028) 751,064,348
==========================================================
==========================================================
=============
SHORT-TERM TAX-EXEMPT OBLIGATIONS--0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
City of New York Cultural Resources Revenue
Refunding Bonds, American Museum of Natural
History, Series A, MBIA Insured, 3.35%(2)
(Cost $1,200,000) Aaa/AAA 1,200,000 1,200,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $780,591,028) 98.8%
752,264,348
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.2 8,911,968
----------- ------------
NET ASSETS 100.0% $761,176,316
===========
============
</TABLE>
(1) Represents the current interest rate for a
variable rate bond. Variable rate bonds known as
"inverse floaters" pay interest at a rate that
varies inversely with short-term interest rates.
As interest rates rise, inverse floaters produce
less current income. Their price may be more
volatile than the price of a comparable fixed-rate
security.
(2) Floating or variable rate obligation
maturing in more than one year. The interest rate,
which is based on specific, or an index of, market
interest rates, is subject to change periodically
and is the effective rate on September 30, 1994.
A demand feature allows the recovery of principal
at any time, or at specified intervals not
exceeding one year, on up to 30 days notice.
See accompanying Notes to Financial Statements.
8 Oppenheimer New York Tax-Exempt Fund
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
<TABLE>
<S> <C> <C>
==========================================================
==========================================================
============
ASSETS Investments, at value (cost $780,591,028)--see accompanying statement $752,264,348
--------------------------------------------------------------------------------------------------
Cash 782,054
--------------------------------------------------------------------------------------------------
Receivables:
Interest 13,783,056
Shares of beneficial interest sold 1,123,453
--------------------------------------------------------------------------------------------------
Other 22,259
------------
Total assets 767,975,170
==========================================================
==========================================================
============
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 3,431,982
Dividends 2,646,422
Distribution and service plan fees--Note 4 487,162
Other 233,288
------------
Total liabilities 6,798,854
==========================================================
==========================================================
============
NET ASSETS $761,176,316
============
==========================================================
==========================================================
============
COMPOSITION OF Paid-in capital $786,272,600
NET ASSETS --------------------------------------------------------------------------------------------------
Undistributed net investment income 1,685,934
--------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment transactions 1,544,462
--------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (28,326,680)
------------
Net assets $761,176,316
============
==========================================================
==========================================================
============
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $687,233,355 and 57,643,750 shares of beneficial interest outstanding) $11.92
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $12.51
--------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $73,942,961 and 6,199,583 shares of beneficial interest outstanding) $11.93
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer New York Tax-Exempt Fund
<PAGE> 10
STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
<TABLE>
<S> <C> <C>
==========================================================
==========================================================
============
INVESTMENT INCOME Interest $ 52,336,632
==========================================================
==========================================================
============
EXPENSES Management fees--Note 4 4,074,417
--------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 1,780,777
Class B--Note 4 612,760
--------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 487,979
--------------------------------------------------------------------------------------------------
Shareholder reports 133,381
--------------------------------------------------------------------------------------------------
Trustees' fees and expenses 81,122
--------------------------------------------------------------------------------------------------
Custodian fees and expenses 56,356
--------------------------------------------------------------------------------------------------
Legal and auditing fees 48,479
--------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 13,281
Class B 14,549
--------------------------------------------------------------------------------------------------
Other 86,167
------------
Total expenses 7,389,268
==========================================================
==========================================================
============
NET INVESTMENT INCOME 44,947,364
==========================================================
==========================================================
============
REALIZED AND UNREALIZED Net realized gain on investments 1,578,448
GAIN (LOSS) ON INVESTMENTS --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (92,939,878)
-----------
Net realized and unrealized loss on investments (91,361,430)
==========================================================
==========================================================
============
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(46,414,066)
============
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer New York Tax-Exempt Fund
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1994 1993
==========================================================
==========================================================
============
<S> <C> <C> <C>
OPERATIONS Net investment income $ 44,947,364 $ 37,419,311
--------------------------------------------------------------------------------------------------
Net realized gain on investments 1,578,448 10,840,246
--------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (92,939,878) 42,115,874
------------ ------------
Net increase (decrease) in net assets resulting from operations (46,414,066) 90,375,431
==========================================================
==========================================================
============
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.7155 and $.75 per share, respectively) (41,273,404) (37,617,756)
SHAREHOLDERS Class B ($.6033 and $.37 per share, respectively) (2,926,006) (558,098)
--------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0081 per share) (464,748) --
Class B ($.0201 per share) (32,947) --
--------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.0260 and $.078 per share, respectively) (1,480,818) (3,645,107)
Class B ($.0260 per share) (97,630) --
--------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments:
Class A ($.1144 per share) (6,524,436) --
Class B ($.1144 per share) (430,153) --
==========================================================
==========================================================
============
BENEFICIAL INTEREST Net increase in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 22,278,985 179,235,850
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 40,649,454 39,841,699
==========================================================
==========================================================
============
NET ASSETS Total increase (decrease) (36,715,769) 267,632,019
--------------------------------------------------------------------------------------------------
Beginning of year 797,892,085 530,260,066
----------- -----------
End of year (including undistributed net investment
income of $1,685,934 and $1,237,047, respectively) $761,176,316 $797,892,085
============
============
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer New York Tax-Exempt Fund
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30,
1994 1993 1992 1991 1990 1989 1988
==========================================================
==========================================================
============
<S> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $13.50 $12.59 $12.21 $11.61 $11.87 $11.91 $11.60
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .74 .73 .79 .81 .83 .84(2) .88(2)
Net realized and unrealized
gain (loss) on investments (1.46) 1.01 .47 .64 (.25) .01 .45
-------- --------- -------- ------- -------- ------- ------
Total income (loss) from
investment operations (.72) 1.74 1.26 1.45 .58 .85 1.33
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.71) (.75) (.75) (.81) (.83) (.83) (.94)
Dividends in excess
of net investment income (.01) -- -- -- -- -- --
Distributions from net
realized gain on investments (.03) (.08) (.13) (.04) (.01) (.06) (.08)
Distributions in excess of net
realized gain on investments (.11) -- -- -- -- -- --
-------- --------- -------- ------- -------- ------- ------
Total dividends and
distributions to shareholders (.86) (.83) (.88) (.85) (.84) (.89) (1.02)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.92 $13.50 $12.59 $12.21 $11.61 $11.87 $11.91
======== ========= ======== =======
======== ======= ======
==========================================================
==========================================================
============
Total Return, at Net Asset Value(3) (5.55)% 14.33% 10.72% 12.93% 4.95% 6.91%
11.48%
==========================================================
==========================================================
============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $687,233 $756,934 $530,260 $349,480 $250,012 $197,321 $116,931
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $738,747 $652,327 $436,876 $292,134 $227,504 $156,572 $95,996
- --------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 57,644 56,087 42,119 28,617 21,533 16,618 9,817
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.68% 5.66% 6.33% 6.81% 6.97% 7.07% 7.48%
Expenses .86% .91% .96% .96% .99% .98%(2) .90%(2)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 9.4% 39.1% 30.5% 8.9% 13.3% 11.8% 11.7%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- -----------------
TEN MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1987 1986 1985 1994 1993(1)
==========================================================
========================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.51 $10.98 $10.32 $13.50 $13.07
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .90(2) .86 .76 .64 .36
Net realized and unrealized
gain (loss) on investments (.79) 1.62 .67 (1.45) .44
-------- -------- ------- -------- -------
Total income (loss) from
investment operations .11 2.48 1.43 (.81) .80
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.88) (.86) (.77) (.60) (.37)
Dividends in excess
of net investment income -- -- -- (.02) --
Distributions from net
realized gain on investments (.14) (.09) -- (.03) --
Distributions in excess of net
realized gain on investments -- -- -- (.11) --
------- -------- -------- ------- --------
Total dividends and
distributions to shareholders (1.02) (.95) (.77) (.76) (.37)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.60 $12.51 $10.98 $11.93 $13.50
======= ======== ======== =======
========
==========================================================
========================================================
Total Return, at Net Asset Value(3) .29% 22.73% 13.37% (6.22)% 6.56%
- ------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $79,479 $50,810 $28,166 $73,943 $40,958
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $65,102 $42,907 $15,240 $61,008 $20,454
- ------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 6,851 4,061 2,565 6,200 3,033
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.33% 7.10% 8.05%(4) 4.88% 4.45%(4)
Expenses .67%(2) .86% 1.00%(4) 1.65% 1.73%(4)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 22.9% 29.7% 126.3% 9.4% 39.1%
</TABLE>
(1) For the period from March 1, 1993 (inception of offering) to September 30,
1993.
(2) Net investment income would have been $.83, $.87 and $.88 absent the
voluntary assumption of expenses, resulting in an expense ratio of 1.00%,
1.02% and .85% for 1989, 1988 and 1987, respectively.
(3) Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
(4) Annualized.
(5) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the year ended September 30, 1994 were $145,939,745 and $73,796,519,
respectively.
See accompanying Notes to Financial Statements.
12 Oppenheimer New York Tax-Exempt Fund
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
1. SIGNIFICANT Oppenheimer New York Tax-Exempt Fund (the Fund) is registered under the Investment Company
Act of
ACCOUNTING POLICIES 1940, as amended, as a diversified, open-end management investment company. The Fund's
investment
advisor is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class
B shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge. Both classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution and/or service plan, expenses
directly attributable to a particular class and exclusive voting rights with respect to matters
affecting a single class. Class B shares will automatically convert to Class A shares six years
after the date of purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
------------------------------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at 4:00 p.m. (New York time) on each
trading
day. Long-term debt securities are valued by a portfolio pricing service approved by the Board of
Trustees. Long-term debt securities which cannot be valued by the approved portfolio pricing service
are valued by averaging the mean between the bid and asked prices obtained from two active market
makers in such securities. Short-term debt securities having a remaining maturity of 60 days or less
are valued at cost (or last determined market value) adjusted for amortization to maturity of any
premium or discount. Securities for which market quotes are not readily available are valued under
procedures established by the Board of Trustees to determine fair value in good faith.
------------------------------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses (other than
those attributable
to a specific class) and gains and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses directly attributable
to a specific class are charged against the operations of that class.
------------------------------------------------------------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to continue to comply with provisions of the Internal
Revenue
Code applicable to regulated investment companies and to distribute all of its taxable income,
including any net realized gain on investments not offset by loss carryovers, to shareholders.
Therefore, no federal income tax provision is required.
------------------------------------------------------------------------------------------------------
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement plan for the Fund's
independent trustees. Benefits are based on years of service and fees paid to each trustee during the
years of service. During the year ended September 30, 1994, a provision of $23,148 was made for the
Fund's projected benefit obligations, resulting in an accumulated liability of $127,766. No payments
have been made under the plan.
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately for Class
A and
Class B shares from net investment income each day the New York Stock Exchange is open for business
and pay such dividends monthly. Distributions from net realized gains on investments, if any, will be
declared at least once each year.
------------------------------------------------------------------------------------------------------
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October 1,
1993, the Fund adopted
Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the Fund
changed the classification of distributions to shareholders to better disclose the differences between
financial statement amounts and distributions determined in accordance with income tax regulations.
Accordingly, subsequent to September 30, 1993, amounts have been reclassified to reflect a decrease
in
paid-in capital of $2,595,004, an increase in undistributed net investment income of $287,909, and a
decrease in undistributed capital loss on investments of $2,307,095. During the year ended September
30, 1994, in accordance with Statement of Position 93-2, undistributed net investment income was
decreased by $89,281 and undistributed capital gain was increased by $89,281.
------------------------------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments are purchased or sold
(trade date). Original issue discount on securities purchased is amortized over the life of the
respective securities, in accordance with federal income tax requirements. Realized gains and
losses on investments and unrealized appreciation and depreciation are determined on an identified
cost basis, which is the same basis used for federal income tax purposes. For bonds acquired after
April 30, 1993, accrued market discount is recognized at maturity or disposition as taxable ordinary
income. Taxable ordinary income is realized to the extent of the lesser of gain or accrued market
discount.
</TABLE>
13 Oppenheimer New York Tax-Exempt Fund
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<S> <C>
==========================================================
==========================================================
================
2. SHARES OF The Fund has authorized an unlimited number of no par value shares of beneficial interest of each
BENEFICIAL INTEREST class. Transactions in shares of beneficial interest were as follows:
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994 YEAR ENDED SEPTEMBER
30, 1993(1)
----------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 8,954,607 $115,070,127 18,532,060 $238,699,747
Dividends and distributions reinvested 2,804,397 35,919,371 2,235,515 28,846,483
Redeemed (10,201,903) (128,710,513) (6,800,016) (88,310,380)
----------- ------------ ---------- ------------
Net increase 1,557,101 $ 22,278,985 13,967,559 $179,235,850
-----------------------------------------------------------------------------------------------------
Class B:
Sold 3,489,946 $ 44,671,139 3,044,196 $ 39,986,285
Dividends and distributions reinvested 183,542 2,334,544 22,045 292,115
Redeemed (507,286) (6,356,229) (32,860) (436,701)
----------- ------------ ---------- ------------
Net increase 3,166,202 $ 40,649,454 3,033,381 $ 39,841,699
=========== ============
========== ============
</TABLE>
(1) For the year ended September 30, 1993 for
Class A shares and for the period from March 1,
1993 (inception of offering) to September 30,
1993 for Class B shares.
<TABLE>
<S> <C>
==========================================================
==========================================================
================
3. UNREALIZED GAINS AND At September 30, 1994, net unrealized depreciation on investments of $28,326,680 was
composed of gross
LOSSES ON INVESTMENTS appreciation of $18,530,958, and gross depreciation of $46,857,638.
==========================================================
==========================================================
================
4. MANAGEMENT FEES Management fees paid to the Manager were in accordance with the investment advisory
agreement with the
AND OTHER TRANSACTIONS Fund which provides for an annual fee of .60% on the first $200 million of net assets,
.55% on the
WITH AFFILIATES next $100 million, .50% on the next $200 million, .45% on the next $250 million, .40% on
the next
$250 million and .35% on net assets in excess of $1 billion.
For the year ended September 30, 1994, commissions (sales charges paid by investors) on
sales of Class A shares totaled $2,933,373, of which $551,881 was retained by Oppenheimer Funds
Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated
broker/dealer. During the year ended September 30, 1994, OFDI received contingent deferred sales
charges of $149,477 upon redemption of Class B shares, as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total
costs of providing such services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in connection with the personal service and
maintenance of accounts that hold shares of the Fund, including amounts paid to brokers, dealers,
banks and other financial institutions. In addition, Class B shares are subject to an asset-based
sales charge of .75% of net assets annually, to reimburse OFDI for sales commissions paid from its
own resources at the time of sale and associated financing costs. In the event of termination or
discontinuance of the Class B plan, the Board of Trustees may allow the Fund to continue payment of
the asset-based sales charge to OFDI for distribution expenses incurred on Class B shares sold prior
to termination or discontinuance of the plan. During the year ended September 30, 1994, OFDI paid
$26,802 and $902, respectively to an affiliated broker/dealer as reimbursement for Class A and
Class B personal service and maintenance expenses and retained $582,434 as reimbursement for Class
B
sales commissions and service fee advances, as well as financing costs.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
==========================================================
==========================================================
================
Municipal Bonds and Notes--98.8%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York--78.0% City of New York General Obligation Bonds:
Inverse Floater, 6.395%, 8/1/08(1) Baa1/A- $ 9,250,000 $ 7,839,032
Inverse Floater, 7.194%, 8/1/13(1) Baa1/A- 5,000,000 4,368,629
Inverse Floater, 7.195%, 8/1/14(1) Baa1/A- 8,150,000 7,102,871
Prerefunded, Series F, 8.25%, 11/15/17 Aaa/A- 7,820,000 9,341,294
Series A, 7.75%, 8/15/16 Baa1/A- 2,500,000 2,693,730
Series B, 8.25%, 6/1/07 Baa1/A- 1,750,000 1,990,266
Series B, FSA Insured, Inverse Floater,
5.892%, 10/1/07(1) Aaa/AAA 7,500,000 7,441,522
Series F, 8.25%, 11/15/17 Baa1/A- 680,000 752,134
----------------------------------------------------------------------------------------------------------------
City of New York Health & Hospital Corp. Revenue
Refunding Bonds, Series A, AMBAC Insured,
Inverse Floater, 6.94%, 2/15/23(1) Aaa/AAA/AAA 8,300,000 7,140,074
----------------------------------------------------------------------------------------------------------------
City of New York Housing Development Corp
Multifamily Housing Revenue Bonds:
1985 Fst. Series, FHA Insured, 9.875%, 10/1/17 Aa/AA 500,000 518,943
Glenn Garden Project, 6.50%, 1/15/18 NR/NR 3,022,809 2,848,224
Keith Plaza Project, 6.50%, 2/15/18 NR/NR 1,996,592 1,876,849
----------------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Civil Facility Revenue Bonds, USTA National Tennis
Center Project, FSA Insured, 6.375%, 11/15/14 Aaa/AAA 1,500,000 1,558,572
----------------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Revenue Bonds, Terminal One Group Assn.:
6%, 1/1/15 A/A/A- 5,000,000 4,842,225
6.125%, 1/1/24 A/A/A- 3,000,000 2,897,478
----------------------------------------------------------------------------------------------------------------
City of New York Municipal Water Finance
Authority Water & Sewer System Revenue Bonds:
Prerefunded, Series A, MBIA Insured, 7.25%, 6/15/15 Aaa/AAA 7,000,000 7,825,258
Prerefunded, Series B, 6.375%, 6/15/22 A/A-/A 2,650,000 2,887,400
Prerefunded, Series C, 7.75%, 6/15/20 Aaa/A- 17,250,000 19,982,794
Series B, 6.375%, 6/15/22 A/A-/A 6,100,000 6,226,916
Series B, AMBAC Insured, 5.375%, 6/15/19 Aaa/AAA/AAA 5,000,000
4,582,169
----------------------------------------------------------------------------------------------------------------
Dormitory Authority of the State of New York:
Revenue Bonds:
City University System, Series A, 5.75%, 7/1/18 Baa1/BBB 2,500,000 2,335,952
City University System, Series C, 6%, 7/1/16 Baa1/BBB 9,000,000 8,674,893
City University System, Series V, 5.60%, 7/1/10 Baa1/BBB 10,880,000 10,230,670
Department of Health, Prerefunded, 7.70%, 7/1/20 Aaa/BBB 2,750,000 3,143,626
Judicial Facilities Lease, Escrowed to Maturity,
MBIA-IBC Insured, 7.375%, 7/1/16 Aaa/AAA 2,300,000 2,615,123
Pooled Capital Program, Prerefunded, FGIC
Insured, 7.80%, 12/1/05 Aaa/AAA/AAA 8,145,000 8,963,425
Rockefeller University System, MBIA Insured,
7.375%, 7/1/14 Aaa/AAA 4,000,000 4,305,035
Revenue Refunding Bonds:
City University System, Second Series A, 5.75%, 7/1/18 Baa1/BBB 6,750,000 6,330,521
City University System, Series B, 6%, 7/1/14 Baa1/BBB 10,875,000 10,559,951
Fordham University System, FGIC Insured, 5.75%, 7/1/15 Aaa/AAA/AAA 9,100,000
8,886,467
New York University, Series A, MBIA Insured, 5%, 7/1/09 Aaa/AAA 9,000,000
8,266,491
</TABLE>
6 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York State University Educational Facilities System:
(continued) Prerefunded, Series B, 7.25%, 5/15/15 Aaa/BBB+ $ 15,230,000 $ 17,063,189
Prerefunded, Series B, 7.25%, 5/15/15 NR/AAA 1,735,000 1,943,837
Series A, 5.25%, 5/15/15 Baa1/BBB+ 23,090,000 20,344,550
Series A, 5.25%, 5/15/21 Baa1/BBB+ 5,010,000 4,311,285
Series B, 7%, 5/15/16 Baa1/BBB+ 9,020,000 9,397,974
----------------------------------------------------------------------------------------------------------------
Grand Central District Management Assn., Inc.,
New York Business District Capital Improvement:
Revenue Bonds, Prerefunded, 6.50%, 1/1/22 Aaa/AAA 2,000,000 2,197,338
Revenue Refunding Bonds, 5.125%, 1/1/14 A1/A 1,000,000 894,401
Refunding Bonds, 5.25%, 1/1/22 A1/A 2,500,000 2,200,342
----------------------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority of New York
Revenue Bonds, Commuter Facilities, Series A,
MBIA Insured, 6.125%, 7/1/12 Aaa/AAA 4,090,000 4,159,472
----------------------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority of New York
Revenue Bonds, Transportation Facilities Service
Contracts, 6%, 7/1/21 Baa1/BBB 12,950,000 12,341,311
----------------------------------------------------------------------------------------------------------------
New York State Energy Research and Development
Authority Electric Facilities Revenue Bonds:
Long Island Lighting Co., Series A, 7.15%, 12/1/20 Ba1/BB+ 7,500,000 7,112,197
Long Island Lighting Co., Series C, 6.90%, 8/1/22 Ba1/BB+ 9,200,000 8,451,781
Brooklyn Union Gas Co. Project, Series B, Inverse
Floater, 9.271%, 7/1/26(1) A1/A/A 6,000,000 6,330,294
Brooklyn Union Gas Co. Project, Series D, MBIA
Insured, Inverse Floater, 7.126%, 7/8/26(1) Aaa/AAA/A 2,000,000 1,616,870
----------------------------------------------------------------------------------------------------------------
New York State Environmental Facilities Corp
Pollution Control Revenue Bonds, State Water
Revolving Fund--New York City Municipal Water,
5.875%, 6/15/14 Aa/A-/AA 14,050,000 13,826,196
----------------------------------------------------------------------------------------------------------------
New York State Housing Finance Agency:
Revenue Bonds, Service Contracts, Series D,
5.375%, 3/15/23 Baa1/BBB 9,000,000 7,379,694
Revenue Refunding Bonds, New York City Health
Facility, Series A, 7.90%, 11/1/99 Baa/BBB+ 3,500,000 3,825,643
Revenue Refunding Bonds, New York City Health
Facility, Series A, 8%, 11/1/08 Baa/BBB+ 3,240,000 3,596,458
Revenue Refunding Bonds, State University
Construction, Escrowed to Maturity, Prerefunded,
Series A, 7.90%, 11/1/06 Aaa/AAA 1,750,000 2,058,364
----------------------------------------------------------------------------------------------------------------
New York State Local Government Assistance Corp
Revenue Bonds:
Prerefunded, Series C, 7%, 4/1/21(2) Aaa/AAA/AAA 9,455,000 10,586,403
Prerefunded, Series D, 6.75%, 4/1/21 Aaa/AAA/AAA 4,700,000 5,244,358
Series A, 5.375%, 4/1/14 A/A/A+ 5,500,000 5,069,366
Series C, 5.50%, 4/1/22 A/A/A+ 16,175,000 14,818,401
----------------------------------------------------------------------------------------------------------------
New York State Local Government Assistance Corp
Revenue Refunding Bonds, Series B, 5.50%, 4/1/21 A/A/A+ 13,000,000 11,894,778
</TABLE>
7 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York New York State Local Government Assistance Corp
(continued) Revenue Refunding Bonds, Series C, 5%, 4/1/21 A/A/A+ $ 15,000,000 $
12,707,325
----------------------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance Agency:
Revenue Bonds:
Long-Term Health Care, Series C, CGIC Insured,
6.40%, 11/1/14 Aaa/AAA 3,000,000 3,049,317
Mental Health Services Facilities Improvement Project:
Prerefunded, Series A, 8.875%, 8/15/07 Aaa/AAA 3,000,000 3,337,656
Prerefunded, Series B, 7.875%, 8/15/20 Aaa/AAA 4,235,000 4,885,572
Series A, 7.70%, 2/15/18 Baa1/BBB+ 765,000 813,136
Series A, 8.875%, 8/15/07 Baa1/BBB+ 6,800,000 7,463,517
Series A, FGIC Insured, 6.375%, 8/15/17 Aaa/AAA/AAA 5,000,000 5,080,734
Series B, 7.875%, 8/15/20 Baa1/BBB+ 2,020,000 2,239,172
Saint Luke's Hospital Center Mtg., Prerefunded,
Series B, FHA Insured, 7.45%, 2/15/29 Aaa/AAA 7,500,000 8,434,432
St. Francis Hospital Project, Series 1988A, FGIC
Insured, 7.625%, 11/1/21 Aaa/AAA/AAA 2,690,000 2,930,155
Revenue Refunding Bonds:
Hospital Insured Mtg., Series A, FHA Insured,
5.25%, 8/15/14 Aa/AAA 16,940,000 15,297,428
Mental Health Services Facilities Improvement
Project, Series F, 5.375%, 2/15/14 Baa1/BBB+ 6,600,000 5,821,306
Mental Health Services Facilities Improvement
Project, Series F, FSA Insured, 5.25%, 2/15/21 Aaa/AAA 4,400,000 3,884,940
----------------------------------------------------------------------------------------------------------------
New York State Mtg. Agency Revenue Bonds:
Eighth Series C, Verex Pool Insured, 8.40%, 10/1/17 Aa/NR 1,700,000 1,788,743
Homeowner Mtg.:
Series 1, 7.95%, 10/1/21 Aa/NR 2,270,000 2,356,578
Series GG, 7.60%, 10/1/18 Aa/NR 175,000 179,868
Series UU, FHA Insured, 7.75%, 10/1/23 Aa/NR 2,000,000 2,134,800
Inverse Floater, 5.342%, 10/1/24(1) NR/NR 9,000,000 6,131,816
Ninth Series B, Verex Pool Insured, 8.30%, 10/1/17 Aa/NR 1,720,000 1,785,372
----------------------------------------------------------------------------------------------------------------
New York State Power Authority Revenue Bonds,
Series Y, 6.50%, 1/1/11 Aa/AA- 2,500,000 2,602,970
----------------------------------------------------------------------------------------------------------------
New York State Power Authority Revenue Refunding
Bonds, Series V, 8%, 1/1/17 Aa/AA- 5,580,000 6,067,279
----------------------------------------------------------------------------------------------------------------
New York State Thruway Authority Revenue Bonds,
Service Contract, Series A, 5.75%, 1/1/19 A1/A 10,000,000 9,611,290
----------------------------------------------------------------------------------------------------------------
New York State Urban Development Corp.:
Revenue Bonds:
Correctional Facilities Capital Project, Prerefunded,
Series G, 7%, 1/1/17 Aaa/NR 2,000,000 2,206,750
Correctional Facilities Capital Project, Prerefunded,
Series G, 7.25%, 1/1/14 Aaa/NR 3,650,000 4,065,552
Revenue Refunding Bonds:
Correctional Facilities Project, 5.50%, 1/1/15 Baa1/BBB/A 10,000,000 9,018,610
Correctional Facilities Project, 5.50%, 1/1/18 Baa1/BBB/A 17,490,000 15,634,484
</TABLE>
8 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
----------------------------------------------------------------------------------------------------------------
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York Onondaga County, New York Resources Recovery
(continued) Agency Revenue Bonds, Resources Recovery
Facilities Project, 7%, 5/1/15 Baa2/NR/A- $ 15,600,000 $ 15,221,573
----------------------------------------------------------------------------------------------------------------
Port Authority of New York & New Jersey
Consolidated Revenue Bonds:
Sixty Series, 8.25%, 4/1/23 A1/AA-/AA- 8,775,000 8,961,301
Sixty-Second Series, 8%, 12/1/23 A1/AA-/AA- 1,370,000 1,432,515
----------------------------------------------------------------------------------------------------------------
Triborough Bridge & Tunnel Authority of New York
General Purpose Revenue Bonds:
Series A, 5%, 1/1/12 A1/AA-/AA- 9,000,000 9,456,758
Series A, 5%, 1/1/12 Aa/A+ 15,755,000 14,288,885
Series A, 5%, 1/1/15 Aa/A+ 7,500,000 6,693,989
Series B, Zero Coupon, 1/1/09 Aa/A+ 3,925,000 1,766,830
Series B, Zero Coupon, 1/1/16 Aa/A+ 2,540,000 731,502
Series B, Zero Coupon, 1/1/17 Aa/A+ 13,045,000 3,530,667
Series X, 6%, 1/1/14 Aa/A+ 14,510,000 14,556,243
Series Y, 5.50%, 1/1/17 Aa/A+ 15,000,000 14,111,339
------------
585,973,440
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Puerto Rico Commonwealth Aqueduct & Sewer
Possessions--20.8% Authority Revenue Bonds, Escrowed to Maturity,
10.25%, 7/1/09 Aaa/AAA 500,000 674,690
----------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth General Obligation
Refunding Bonds:
5.25%, 7/1/18 Baa1/A 20,000,000 17,741,840
Prerefunded, 7.70%, 7/1/20 NR/AAA 5,000,000 5,715,685
Series A, 6%, 7/1/14 Baa1/A 12,000,000 11,810,434
YCNS, FSA Insured, Inverse Floater, 7.432%, 7/1/20(1) Aaa/AAA 11,500,000
10,661,603
----------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Bonds:
Prerefunded, Series S, 6.50%, 7/1/22 NR/AAA 13,500,000 14,850,418
Prerefunded, Series T, 6.50%, 7/1/22 NR/AAA 2,790,000 3,069,086
Series W, Inverse Floater, 6.406%, 7/1/10(1) Baa1/A 9,000,000 7,920,665
----------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure
Financing Authority Special Tax Revenue Bonds,
Series A, 7.75%, 7/1/08 Baa1/BBB+ 6,000,000 6,558,612
----------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority:
Revenue Bonds:
Prerefunded, Series 0, 7.125%, 7/1/14 Baa1/AAA 6,145,000 6,759,457
Series T, 6%, 7/1/16 Baa1/A- 7,500,000 7,306,042
Revenue Refunding Bonds:
Series N, 5%, 7/1/12 Baa1/A- 6,545,000 5,738,348
Series U, 6%, 7/1/14 Baa1/A- 7,025,000 6,898,487
----------------------------------------------------------------------------------------------------------------
Puerto Rico Housing Bank & Finance Agency Single
Family Mtg. Revenue Bonds, Homeownership--
Fourth Portfolio, Prerefunded, FHA Insured,
8.50%, 12/1/18 Aaa/NR 1,580,000 1,919,510
----------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical & Environmental
Pollution Control Revenue Bonds, American
Airlines, Inc. Project, Series A, 8.75%, 12/1/25 Baa1/BB+ 850,000 886,018
----------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical & Environmental
Pollution Control Revenue Bonds, Warner Lambert
Co. Project, 7.60%, 5/1/14 Aaa/NR 3,000,000 3,261,621
</TABLE>
9 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Possessions Puerto Rico Public Buildings Authority Guaranteed
(continued) Public Education & Health Facilities:
Revenue Bonds, Prerefunded, Series J, 7.25%, 7/1/17 Aaa/AAA $ 6,000,000 $ 6,531,053
Revenue Bonds, Prerefunded, Series L, 6.875%, 7/1/21 Aaa/AAA 5,400,000 6,060,355
Revenue Refunding Bonds, Series M, 5.75%, 7/1/15 Baa1/A 11,500,000 10,893,788
----------------------------------------------------------------------------------------------------------------
Puerto Rico Public Buildings Authority Revenue
Guaranteed Refunding Bonds, Series L, 5.75%, 7/1/16 Baa1/A 12,100,000 11,474,053
----------------------------------------------------------------------------------------------------------------
Puerto Rico Telephone Authority Revenue Bonds,
MBIA Insured, Inverse Floater, 6.51%, 1/16/15(1) Aaa/AAA 11,000,000 9,611,238
------------
156,343,003
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $746,701,277) 98.8% 742,316,443
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.2 9,180,247
------ ------------
Net Assets 100.0% $751,496,690
====== ============
1. Represents the current interest rate for a variable rate bond. Variable rate bonds known as ``inverse
floaters'' pay interest at a rate that varies inversely with short-term interest rates. As interest rates rise,
inverse floaters produce less current income. Their price may be more volatile than the price of a comparable
fixed-rate security. The multiplier for these inverse floaters is 1. Inverse floaters amount to $76,164,614 or
10.1% of the Fund's net assets, at March 31, 1995.
</TABLE>
<TABLE>
<CAPTION>
2. Securities with an aggregate market value of $1,959,408 are held in collateralized accounts to cover initial
margin requirements on open futures sales contracts, as follows:
Type of Contract Number of Contracts Face Amount
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Nts., 6/95 600 $60,000,000
The market value of the open contracts was $62,343,750 at March 31, 1995, with a net unrealized gain of
$1,227,343.
</TABLE>
<TABLE>
<CAPTION>
Distribution of investments by industry, as a percentage of total investments at value, is as follows:
Industry Market Value Percent
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation $135,221,975 18.2%
Education 123,672,603 16.7
General Obligation Bonds 122,418,290 16.4
Utilities 116,210,817 15.6
Lease/Rental 86,570,544 11.7
Special Tax Bonds 72,171,324 9.7
Hospitals 36,851,406 5.0
Pollution Control 23,511,142 3.2
Housing 21,540,703 2.9
Industrial Development 4,147,639 0.6
------------ -----
$742,316,443 100.0%
============ =====
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C> <C>
Assets Investments, at value (cost $746,701,277)--see accompanying statement $742,316,443
----------------------------------------------------------------------------------------------------------------
Cash 101,953
----------------------------------------------------------------------------------------------------------------
Receivables:
Interest 13,075,610
Shares of beneficial interest sold 1,066,221
----------------------------------------------------------------------------------------------------------------
Other 37,032
------------
Total assets 756,597,259
----------------------------------------------------------------------------------------------------------------
Liabilities Payables and other liabilities:
Dividends 2,581,635
Shares of beneficial interest redeemed 1,850,754
Distribution and service plan fees--Note 5 434,000
Transfer and shareholder servicing agent fees--Note 5 28,711
Trustees' fees 5,384
Other 200,085
------------
Total liabilities 5,100,569
==========================================================
==========================================================
================
Net Assets $751,496,690
============
==========================================================
==========================================================
================
Composition of Paid-in capital $761,699,818
Net Assets ----------------------------------------------------------------------------------------------------------------
Undistributed net investment income 1,195,467
----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (5,786,418)
----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (5,612,177)
----------------------------------------------------------------------------------------------------------------
Net assets $751,496,690
============
==========================================================
==========================================================
================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on
net assets of $668,466,673 and 54,841,749 shares of beneficial interest outstanding) $ 12.19
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $ 12.80
----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $83,030,017 and 6,808,905 shares of beneficial interest outstanding) $ 12.19
</TABLE>
See accompanying Notes to Financial Statements
11 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C> <C>
Investment Income Interest $24,891,143
==========================================================
==========================================================
================
Expenses Management fees--Note 5 1,872,377
----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 5 744,433
Class B--Note 5 375,961
----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 5 298,722
----------------------------------------------------------------------------------------------------------------
Shareholder reports 81,829
----------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 40,853
----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 35,359
----------------------------------------------------------------------------------------------------------------
Legal and auditing fees 22,638
----------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 5,777
Class B 2,719
----------------------------------------------------------------------------------------------------------------
Other 39,203
-----------
Total expenses 3,519,871
==========================================================
==========================================================
================
Net Investment Income 21,371,272
==========================================================
==========================================================
================
Realized and Net realized loss on investments (7,330,880)
Unrealized ----------------------------------------------------------------------------------------------------------------
Gain (Loss) Net change in unrealized appreciation or depreciation on investments 22,714,503
on Investments -----------
Net realized and unrealized gain on investments 15,383,623
==========================================================
==========================================================
================
Net Increase in Net Assets Resulting From Operations $ 36,754,895
============
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
----------------------------------------------------------------------------------------------------------------
Six Months Ended
March 31, 1995 Year Ended
(Unaudited) Sept. 30, 1994
==========================================================
==========================================================
================
<S> <C> <C>
Operations Net investment income $ 21,371,272 $ 44,947,364
----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (7,330,880) 1,578,448
----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 22,714,503 (92,939,878)
------------- -------------
Net increase (decrease) in net assets resulting from operations 36,754,895 (46,414,066)
==========================================================
==========================================================
================
Dividends and Dividends from net investment income:
Distributions to Class A ($.3576 and $.7155 per share, respectively) (19,849,704) (41,273,404)
Shareholders Class B ($.3135 and $.6033 per share, respectively) (2,012,035) (2,926,006)
----------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0081 per share) -- (464,748)
Class B ($.0201 per share) -- (32,947)
----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.026 per share) -- (1,480,818)
Class B ($.026 per share) -- (97,630)
----------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments:
Class A ($.1144 per share) -- (6,524,436)
Class B ($.1144 per share) -- (430,153)
==========================================================
==========================================================
================
Beneficial Net increase (decrease) in net assets resulting from
Interest Class A beneficial interest transactions--Note 2 (31,840,644) 22,278,985
Transactions ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
Class B beneficial interest transactions--Note 2 7,267,862 40,649,454
==========================================================
==========================================================
================
Net Assets Total decrease (9,679,626) (36,715,769)
----------------------------------------------------------------------------------------------------------------
Beginning of period 761,176,316 797,892,085
------------ ------------
End of period (including undistributed net investment income
of $1,195,467 and $1,685,934, respectively) $ 751,496,690 $ 761,176,316
=============
=============
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Financial Highlights
----------------------------------------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------------- --------------------------------
Six Months Six Months
Ended Ended Year Ended
March 31, 1995 Year Ended September 30, March 31, 1995 Sept. 30,
(Unaudited) 1994 1993 1992 1991 1990 (Unaudited) 1994 1993(1)
==========================================================
==========================================================
================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value, beginning of period $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 11.87 $ 11.93 $ 13.50 $ 13.07
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 .74 .73 .79 .81 .83 .31 .64 .36
Net realized and unrealized gain
(loss) on investments .27 (1.46) 1.01 .47 .64 (.25) .27 (1.45) .44
------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations .63 (.72) 1.74 1.26 1.45 .58 .58 (.81) .80
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.36) (.71) (.75) (.75) (.81) (.83) (.32) (.60) (.37)
Dividends in excess of net
investment income -- (.01) -- -- -- -- -- (.02) --
Distributions from net realized
gain on investments -- (.03) (.08) (.13) (.04) (.01) -- (.03) --
Distributions in excess of net
realized gain on investments -- (.11) -- -- -- -- -- (.11) --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.36) (.86) (.83) (.88) (.85) (.84) (.32) (.76) (.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.19 $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 12.19 $ 11.93 $ 13.50
====== ====== ====== ====== ====== ======
====== ====== ======
==========================================================
==========================================================
================
Total Return, at Net Asset Value(2) 5.44% (5.55)% 14.33% 10.72% 12.93% 4.95% 4.95% (6.22)%
6.56%
==========================================================
==========================================================
================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $668,467 $687,233 $756,934 $530,260 $349,480 $250,012 $83,030 $73,943
$40,958
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $648,096 $738,747 $652,327 $436,876 $292,134 $227,504 $75,172 $61,008
$20,454
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 54,842 57,644 56,087 42,119 28,617 21,533 6,809 6,200 3,033
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.00%(3) 5.68% 5.66% 6.33% 6.81% 6.97% 5.21%(3) 4.88%
4.45%(3)
Expenses .90%(3) .86% .91% .96% .96% .99% 1.67%(3) 1.65% 1.73%(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 6.3% 9.4% 39.1% 30.5% 8.9% 13.3% 6.3% 9.4% 39.1%
1. For the period from March 1, 1993 (inception of offering) to September 30, 1993.
2. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with
all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one full year.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the
market value of portfolio securities owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the six months ended March 31, 1995 were $45,588,316 and
$72,870,419, respectively. See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
APPENDIX A
Descriptions of Ratings Categories
Municipal Bonds
- - Moody's Investor Services, Inc. The ratings of Moody's Investors
Service, Inc. ("Moody's") for Municipal Bonds are Aaa, Aa, A, Baa, Ba,
B, Caa, Ca and C. Municipal Bonds rated "Aaa" are judged to be of the
"best quality." The rating of Aa is assigned to bonds which are of "high
quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat larger than "Aaa" rated
Municipal Bonds. The "Aaa" and "Aa" rated bonds comprise what are
generally known as "high grade bonds." Municipal Bonds which are rated
"A" by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A rated bonds are considered adequate, but
elements may be present which suggest a susceptibility to impairment at
some time in the future. Municipal Bonds rated "Baa" are considered
"medium grade" obligations. They are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well. Bonds which are rated "Ba" are judged to have
speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this
class. Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small. Bonds which are rated "Caa" are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated "Ca" represent
obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. Bonds which are rated
"C" are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Those bonds in the Aa, A, Baa, Ba and B groups
which Moody's believes possess the strongest investment attributes are
designated Aa1, A1, Baa1, Ba1 and B1 respectively.
In addition to the alphabetic rating system described above,
Municipal Bonds rated by Moody's which have a demand feature that provides
the holder with the ability to periodically tender ("put") the portion of
the debt covered by the demand feature, may also have a short-term rating
assigned to such demand feature. The short-term rating uses the symbol
VMIG to distinguish characteristics which include payment upon periodic
demand rather than fund or scheduled maturity dates and potential reliance
upon external liquidity, as well as other factors. The highest investment
quality is designated by the VMIG 1 rating and the lowest by VMIG 4.
- - Standard & Poor's Corporation. The ratings of Standard & Poor's
Corporation ("S&P") for Municipal Bonds are AAA (Prime), AA (High Grade),
A (Good Grade), BBB (Medium Grade), BB, B, CCC, CC, and C (speculative
grade). Bonds rated in the top four categories (AAA, AA, A, BBB) are
commonly referred to as "investment grade." Municipal Bonds rated AAA are
"obligations of the highest quality." The rating of AA is accorded
issues with investment characteristics "only slightly less marked than
those of the prime quality issues." The rating of A describes "the third
strongest capacity for payment of debt service." Principal and interest
payments on bonds in this category are regarded as safe. It differs from
the two higher ratings because, with respect to general obligations bonds,
there is some weakness, either in the local economic base, in debt burden,
in the balance between revenues and expenditures, or in quality of
management. Under certain adverse circumstances, any one such weakness
might impair the ability of the issuer to meet debt obligations at some
future date. With respect to revenue bonds, debt service coverage is
good, but not exceptional. Stability of the pledged revenues could show
some variations because of increased competition or economic influences
on revenues. Basic security provisions, while satisfactory, are less
stringent. Management performance appears adequate. The BBB rating is
the lowest "investment grade" security rating. The difference between A
and BBB ratings is that the latter shows more than one fundamental
weakness, or one very substantial fundamental weakness, whereas the former
shows only one deficiency among the factors considered. With respect to
revenue bonds, debt coverage is only fair. Stability of the pledged
revenues could show variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger. Bonds rated "BB"
have less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which would lead to
inadequate capacity to meet timely interest and principal payments. Bonds
rated "B" have a greater vulnerability to default, but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. Bonds rated "CCC"
have a current identifiable vulnerability to default, and is dependent
upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. Bonds noted "CC" typically
are debt subordinated to senior debt which is assigned on actual or
implied "CCC" debt rating.
Bonds rated "C" typically are debt subordinated to senior debt which
is assigned an actual or implied "CCC-" debt rating. The "C" rating may
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued. Bonds rated "D" are in payment
default. The "D" rating category is used when interest payments or
principal payments are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will
be made during the grace period. The "D" rating also will be used upon
the filing of a bankruptcy petition if debt service payments are
jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
- - Fitch. The ratings of Fitch Investors Service, Inc. for Municipal Bonds
are AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, and D. Municipal Bonds
rated AAA are judged to be of the "highest credit quality." The rating
of AA is assigned to bonds of "very high credit quality." Municipal Bonds
which are rated A by Fitch are considered to be of "high credit quality."
The rating of BBB is assigned to bonds of "satisfactory credit quality."
The A and BBB rated bonds are more vulnerable to adverse changes in
economic conditions than bonds with higher ratings. Bonds rated AAA, AA,
A and BBB are considered to be of investment grade quality. Bonds rated
below BBB are considered to be of speculative quality. The ratings of
"BB" is assigned to bonds considered by Fitch to be "speculative." The
rating of "B" is assigned to bonds considered by Fitch to be "highly
speculative." Bonds rated "CCC" have certain identifiable characteristics
which, if not remedied, may lead to default. Bonds rated "CC" are
minimally protected. Default in payment of interest and/or principal
seems probable over time. Bonds rated "C" are in imminent default in
payment of interest or principal. Bonds rated "DDD", "DD" and "D" are in
default on interest and/or principal payments. DDD represents the highest
potential for recovery on these bonds, and D represents the lowest
potential for recovery.
Municipal Notes
- Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG"). Notes bearing the
designation MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established
and broad-based access to the market for financing. Notes bearing the
designation "MIG-2" are of high quality with ample margins of protection,
although not as large as notes rated "MIG." Such short-term notes which
have demand features may also carry a rating using the symbol VMIG as
described above, with the designation MIG-1/VMIG 1 denoting best quality,
with superior liquidity support in addition to those characteristics
attributable to the designation MIG-1.
- S&P's rating for Municipal Notes due in three years or less are SP-
1, SP-2, and SP-3. SP-1 describes issues with a very strong capacity to
pay principal and interest and compares with bonds rated A by S&P; if
modified by a plus sign, it compares with bonds rated AA or AAA by S&P.
SP-2 describes issues with a satisfactory capacity to pay principal and
interest, and compares with bonds rated BBB by S&P. SP-3 describes issues
that have a speculative capacity to pay principal and interest.
- Fitch's rating for Municipal Notes due in three years or less are
F-1+, F-1, F-2, F-3, F-S and D. F-1+ describes notes with an
exceptionally strong credit quality and the strongest degree of assurance
for timely payment. F-1 describes notes with a very strong credit quality
and assurance of timely payment is only slightly less in degree than
issues rated F-1+. F-2 describes notes with a good credit quality and a
satisfactory assurance of timely payment, but the margin of safety is not
as great for issues assigned F-1+ or F-1 ratings. F-3 describes notes
with a fair credit quality and an adequate assurance of timely payment,
but near-term adverse changes could cause such securities to be rated
below investment grade. F-S describes notes with weak credit quality.
Issues rated D are in actual or imminent payment default.
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations. The
Moody's, S&P and Fitch corporate debt ratings shown do not differ
materially from those set forth above for Municipal Bonds.
Commercial Paper
- Moody's The ratings of commercial paper by Moody's are Prime-1,
Prime-2, Prime-3 and Not Prime. Issuers rated Prime-1 have a superior
capacity for repayment of short-term promissory obligations. Issuers
rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. Issuers rated Prime-3 have an acceptable capacity
for repayment of short-term promissory obligations. Issuers rated Not
Prime do not fall within any of the Prime rating categories.
- S&P The ratings of commercial paper by S&P are A-1, A-2, A-3, B,
C, and D. A-1 indicates that the degree of safety regarding timely
payment is strong. A-2 indicates capacity for timely payment is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1. A-3 indicates an adequate capacity for timely
payments. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations. B indicates only speculative capacity for timely payment.
C indicates a doubtful capacity for payment. D is assigned to issues in
default.
- Fitch The ratings of commercial paper by Fitch are similar to its
ratings of Municipal Notes, above.
<PAGE>
APPENDIX B
TAX EQUIVALENT YIELD TABLES
The equivalent yield tables below compare tax-free income with taxable
income under Federal, New York State and New York City income tax rates
effective January 1, 1995. Combined taxable income refers to the net
amount subject to Federal, New York State and New York City income tax
after deductions and exemptions. The tables assume that an investor's
highest tax bracket applies to the change in taxable income resulting from
a switch between taxable and non-taxable investments, that the investor
is not subject to the Alternative Minimum Tax and that New York State and
local income tax payments are fully deductible for Federal income tax
purposes. They do not reflect the phaseout of itemized deductions and
personal exemptions at higher income levels, resulting in higher effective
tax rates and tax equivalent yields.
New York State Residents
Combined Taxable Income
<TABLE>
<CAPTION>
An Oppenheimer New York
Tax-Exempt Fund Yield
Single Return Joint Return of:
Combined 3.5% 4.0% 4.5%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13,000 $ 19,000 19.72% 4.36% 4.98% 5.61%
$ 19,000 $ 25,000 20.57% 4.41% 5.04% 5.67%
$ 13,000 $ 23,350 $ 25,000 $ 39,000 21.45% 4.46% 5.09% 5.73%
$ 23,350 $ 56,550 $ 39,000 $ 94,250 33.47% 5.26% 6.01% 6.76%
$ 56,550 $117,950 $ 94,250 $143,600 36.24% 5.49% 6.27% 7.06%
$117,950 $256,500 $143,600 $256,500 40.86% 5.92% 6.76% 7.61%
$256,500 $256,500 44.19% 6.27% 7.17% 8.06%
New York State Residents
Combined Taxable Income
An Oppenheimer New York
Tax-Exempt Fund Yield
Single Return Joint Return of:
Combined 5.0% 5.5% 6.0%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
$ 13,000 $ 19,000 19.72% 6.23% 6.85% 7.47%
$ 19,000 $ 25,000 20.57% 6.29% 6.92% 7.55%
$ 13,000 $ 23,350 $ 25,000 $ 39,000 21.45% 6.37% 7.00% 7.64%
$ 23,350 $ 56,550 $ 39,000 $ 94,250 33.47% 7.52% 8.27% 9.02%
$ 56,550 $117,950 $ 94,250 $143,600 36.24% 7.84% 8.63% 9.41%
$117,950 $256,500 $143,600 $256,500 40.86% 8.45% 9.30% 10.15%
$256,500 $256,500 44.19% 8.96% 9.85% 10.75%
</TABLE>
<PAGE>
New York City Residents
Combined Taxable Income
<TABLE>
<CAPTION>
An Oppenheimer New York
Tax-Exempt Fund Yield
Single Return Joint Return of:
Combined 3.5% 4.0% 4.5%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 15,000 $ 19,000 22.14% 4.50% 5.14% 5.78%
$ 19,000 $ 25,000 22.99% 4.54% 5.19% 5.84%
$ 25,000 $ 27,000 23.88% 4.60% 5.25% 5.91%
$ 15,000 $ 23,350 $ 27,000 $ 39,000 24.26% 4.62% 5.28% 5.94%
$ 23,350 $ 25,000 $ 39,000 $ 45,000 35.84% 5.46% 6.23% 7.01%
$ 25,000 $ 56,550 $ 45,000 $ 94,250 35.88% 5.46% 6.24% 7.02%
$ 56,550 $ 60,000 $ 94,250 $108,000 38.55% 5.70% 6.51% 7.32%
$ 60,000 $117,950 $108,000 $143,600 38.59% 5.70% 6.51% 7.33%
$117,950 $256,500 $143,600 $256,500 43.04% 6.14% 7.02% 7.90%
$256,500 $256,500 46.24% 6.51% 7.44% 8.37%
New York City Residents
Combined Taxable Income
An Oppenheimer New York
Tax-Exempt Fund Yield
Single Return Joint Return of:
Combined 5.0% 5.5% 6.0%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
$ 15,000 $ 19,000 22.14% 6.42% 7.06% 7.71%
$ 19,000 $ 25,000 22.99% 6.49% 7.14% 7.79%
$ 25,000 $ 27,000 23.88% 6.57% 7.23% 7.88%
$ 15,000 $ 23,350 $ 27,000 $ 39,000 24.26% 6.60% 7.26% 7.92%
$ 23,350 $ 25,000 $ 39,000 $ 45,000 35.84% 7.79% 8.57% 9.35%
$ 25,000 $ 56,550 $ 45,000 $ 94,250 35.88% 7.80% 8.58% 9.36%
$ 56,550 $ 60,000 $ 94,250 $108,000 38.55% 8.14% 8.95% 9.76%
$ 60,000 $117,950 $108,000 $143,600 38.59% 8.14% 8.96% 9.77%
$117,950 $256,500 $143,600 $256,500 43.04% 8.78% 9.66% 10.53%
$256,500 $256,500 46.24% 9.30% 10.23% 11.16%
</TABLE>
<PAGE>
Appendix C
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
