OPPENHEIMER
NEW YORK MUNICIPAL FUND
Prospectus dated January 17, 1997
Oppenheimer New York Municipal 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 Objective and Policies" for more information about the
types of securities the Fund invests in and refer to "Investment Risks" for a
discussion of the risks of investing in the Fund.
This Prospectus explains concisely what you should know before investing in
the Fund. Please read it carefully and keep it for future reference. You can
find more detailed information about the Fund in the January 17, 1997 Statement
of Additional Information. For a free copy, call OppenheimerFunds Services, the
Fund's Transfer Agent, at 1-800-525-7048, or write to the Transfer Agent at the
address on the back cover. The Statement of Additional Information has been
filed with the Securities and Exchange Commission 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 OFTHIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE. Contents
<PAGE>
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
Investment Risks
Investment Techniques and Strategies
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
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix: Special Sales Charge Arrangements
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during its last fiscal year ended September 30,
1996.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," starting on
page____, 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 4.75% None None
on Purchases (as a %
of offering price)
Maximum Deferred Sales None(1) 5% in the first 1% if shares
Charge (as a % of the year, declining are redeemed
lower of the original to 1% in the within 12 months
offering price or sixth year and of purchase(2)
redemption proceeds) eliminated
thereafter(2)
Maximum Sales Charge on None None None
Reinvested Dividends
Exchange Fee None None None
</TABLE>
(1) If you invest $1 million or more in Class A shares, you may
have to pay a sales charge of up to 1% if you sell your shares
within 18 calendar months from the end of the calendar month in
which you purchased those shares. See "How to Buy Shares - Buying
Class A Shares" below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares -
Buying Class C Shares," below, for more information on the contingent deferred
sales charges.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (referred
to in this Prospectus as the "Manager"). The rates of the Manager's fees are set
forth in "How the Fund is Managed," below. The Fund has other regular expenses
for services, such as transfer agent fees, custodial fees paid to the bank that
holds the Fund's portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement of
Additional Information.
Annual Fund Operating Expenses (as a percentage of average net
assets)
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees 0.51% 0.51% 0.51%
12b-1 Plan Fees 0.24% 1.00% 1.00%
Other Expenses 0.16% 0.17% 0.26%
Total Fund Operating 0.91% 1.68% 1.77%
Expenses
</TABLE>
The numbers in the chart above are based upon the Fund's expenses in
its last fiscal year. These amounts are shown as a percentage of the average net
assets of each class of the Fund's shares for that year. The 12b-1 Distribution
Plan Fees for Class A shares are Service Plan Fees (the maximum fee is 0.25% of
average annual net assets of the class); for Class B and for Class C shares the
12b-1 Distribution Plan Fees are the Service Fees (the maximum fee is 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,"
below.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of factors,
including the actual value of the Fund's assets represented by each class of
shares.
o Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown below.
Assume that you make a $1,000 investment in each class of shares of the Fund,
and that the Fund's annual return is 5%, and that its operating expenses for
each class are the ones shown in the Annual Fund Operating Expenses table above.
If you were to redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3, 5 and 10
years:
<TABLE>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years*
- -----------------------------------------------------------------
Class A Shares $56 $75 $96 $154
- -----------------------------------------------------------------
Class B Shares $67 $83 $111 $159
- -----------------------------------------------------------------
Class C Shares $28 $56 $96 $208
If you did not redeem your investment, it would incur the following expenses:
Class A Shares $56 $75 $96 $154
- -----------------------------------------------------------------
Class B Shares $17 $53 $91 $159
- -----------------------------------------------------------------
Class C Shares $18 $56 $96 $208
</TABLE>
* In the first example, expenses include the Class A initial sales charge and
the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not include the contingent deferred sales charge. 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, long-term holders of Class B and Class C
shares could pay the economic equivalent of more than the maximum front-end
sales charge allowed under applicable regulations. For Class B shareholders, the
automatic conversion of Class B shares to Class A Shares is designed to minimize
the likelihood that this will occur. Please refer to "How to Buy Shares" for
more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment returns of
the Fund, all of which may be more or less than those shown below.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o 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.
o 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 ___.
o Who Manages the Fund? The Fund's investment adviser (the "Manager") is
OppenheimerFunds, Inc. The Manager(including a subsidiary) advises investment
company portfolios having over $62 billion in assets. The Manager is paid an
advisory fee by the Fund, based on its net assets. The Fund's portfolio manager,
who is primarily responsible for the selection of the Fund's securities, is
Robert E. Patterson. The Fund's Board of Trustees, elected by shareholders,
oversees the investment adviser and the portfolio manager. Please refer to "How
the Fund is Managed," starting on page ___ for more information about the
Manager and its fees.
o 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 from short-term interest rates.
In the Oppenheimer funds spectrum, the Fund is generally more conservative
than longer term bond funds or high yield bond funds but more aggressive than
short term bond funds or money market funds. While the Manager tries to reduce
risks 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 Risks" starting on page ___ for a more complete discussion of the
Fund's investment risks.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the Fund's
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How To Buy Shares" starting on page ___
for more details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has three classes of
shares. All three classes have the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge, starting at
4.75% and reduced for larger purchases. Class B shares and Class C shares are
offered without a front-end sales charge, but may be subject to a contingent
deferred sales charge if redeemed within 6 years or 12 months, respectively, of
purchase. There are also annual asset-based sales charges on Class B and Class C
shares. Please review "How To Buy Shares" starting on page ___ for more details,
including a discussion about factors you and your financial adviser should
consider in determining which class may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, through your dealer,
or, by writing a check against your Fund account (available for Class A shares
only). Please refer to "How To Sell Shares" on page ___. The Fund also offers
exchange privileges to other Oppenheimer funds, described in "How to Exchange
Shares" on page __.
o How Has the Fund Performed? The Fund measures its performance by
quoting its yield, tax equivalent yield, average annual total return and
cumulative total return, which measure historical performance. Those yields and
returns can be compared to the yields and returns (over similar periods) of
other funds. Of course, other funds may have different objectives, investments,
and levels of risk. The Fund's performance can also be compared to a broad
market index, which we have done on pages ____ and ___. 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, 1996 is included in
the Statement of Additional Information.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
-10-
<PAGE>
Net asset value, beginning of period $ 12.29 $ 11.92 $ 13.50 $ 12.59
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .68 .69 .74 .73
Net realized and unrealized gain (loss) .12 .41 (1.46) 1.01
- -----------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .80 1.10 (.72) 1.74
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.68) (.70) (.72) (.75)
Distributions from net realized gain -- (.03) (.03) (.08)
Distributions in excess of net realized gain -- -- (.11) --
- -----------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.68) (.73) (.86) (.83)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.41 $ 12.29 $ 11.92 $ 13.50
===========================================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 6.65% 9.58% (5.55)%
14.33%
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $667,258 $673,050 $687,233
$756,934
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $684,981 $659,465 $738,747
$652,327
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.50% 5.76% 5.68% 5.66%
Expenses 0.91% 0.90% 0.86% 0.91%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 21.2% 15.2% 9.4% 39.1%
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 12.21 $ 11.61 $ 11.87 $ 11.91
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .79 .81 .83 .84(1)
Net realized and unrealized gain (loss) .47 .64 (.25) .01
- -----------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.26 1.45 .58 .85
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.75) (.81) (.83) (.83)
Distributions from net realized gain (.13) (.04) (.01) (.06)
Distributions in excess of net realized gain -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.88) (.85) (.84) (.89)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.59 $ 12.21 $ 11.61 $ 11.87
===========================================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 10.72% 12.93% 4.95%
6.91%
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $530,260 $349,480 $250,012
$197,321
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $436,876 $292,134 $227,504
$156,572
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.33% 6.81% 6.97% 7.07%
Expenses 0.96% 0.96% 0.99% 0.98%(1)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 30.5% 8.9% 13.3% 11.8%
<CAPTION>
CLASS A CLASS B
--------------------------------- ---------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED
SEPTEMBER 30,
1988 1987 1996 1995
- --------------------------------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 11.60 $ 12.51 $ 12.30 $ 11.93
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .88(1) .90(1) .60 .60
Net realized and unrealized gain (loss) .45 (.79) .10 .42
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.33 .11 .70 1.02
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.94) (.88) (.59) (.62)
Distributions from net realized gain (.08) (.14) -- (.03)
Distributions in excess of net realized gain -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.02) (1.02) (.59) (.65)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.91 $ 11.60 $ 12.41 $ 12.30
===============================================================
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 11.48% 0.29%
5.77% 8.75%
- ---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $116,931 $79,479 $101,302
$91,108
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 95,996 $65,102 $ 98,488
$81,743
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.48% 7.33% 4.73% 4.95%
Expenses 0.90%(1) 0.67%(1) 1.68% 1.67%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 11.7% 22.9% 21.2% 15.2%
<CAPTION>
CLASS B CLASS C
-------------------------------- ------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED
SEPTEMBER 30,
1994 1993(5) 1996 1995(4)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 13.50 $ 13.07 $12.30 $12.22
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .64 .36 .60 .05
Net realized and unrealized gain (loss) (1.45) .44 .09 .08
- -----------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations (.81) .80 .69 .13
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.62) (.37) (.58) (.05)
Distributions from net realized gain (.03) -- -- --
Distributions in excess of net realized gain (.11) -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.76) (.37) (.58) (.05)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.93 $ 13.50 $12.41 $12.30
==========================================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) (6.22)% 6.56% 5.64%
1.10%
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $73,943 $40,958 $2,007 $ 25
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $61,008 $20,454 $ 752 $ 18
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.88% 4.45%(6) 4.60% 3.67%(6)
Expenses 1.65% 1.73%(6) 1.77% 1.37%(6)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 9.4% 39.1% 21.2% 15.2%
</TABLE>
1. Net investment income would have been $0.83, $0.87 and $0.88 absent voluntary
assumption of expenses, resulting in an expense ratio of 1.00%, 1.02% and 0.85%
for 1989, 1988 and 1987, respectively.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
3. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities: with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1996 were $164,934,339 and $189,341,203, respectively.
4. For the period from August 29, 1995 (inception of offering) to September 30,
1995.
5. For the period from March 1, 1993 (inception of offering) to September 30,
1993.
6. Annualized.
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 invested 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. Although exempt interest dividends will not be subject
to federal income tax for Fund shareholders, a portion of such dividend which is
derived from interest on certain "Private Activity" bonds may be an item of tax
preference if you are subject to the federal alternative minimum tax. Any net
interest income on taxable investments will be taxable as ordinary income when
distributed to shareholders (see "Dividends, Capital Gains, and Taxes" below).
o 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.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
percentage of outstanding voting shares (and this term is explained in the
Statement of Additional Information). The Fund's Board of Trustees may change
non-fundamental policies without shareholder approval, although significant
changes will be described in amendments to this Prospectus.
o 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, and may increase the Fund's transaction costs, the Fund incurs little
or no brokerage costs because most of the Fund's portfolio transactions are
principal trades without brokerage commissions.
Investment Risks.
All investments carry risks to some degree, whether they are risks that
market prices of the investment will fluctuate (this is known as "market risk")
or that the underlying issuer will experience financial difficulties and may
default on its obligation under a fixed-income investment to pay interest and
repay principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the investment
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended for investors seeking assured income.
While the Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased, and in some cases by
using hedging techniques, changes in overall market prices can occur at any
time, and because the income earned on securities is subject to change, there is
no assurance that the Fund will achieve its investment objective. When you
redeem your shares, they may be worth more or less than what you paid for them.
o 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.
o 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.
o There are special risks in investing in derivative investments. The risks
of investing in derivative investments include not only the ability of the
issuer of the derivative investment to pay the amount due on the maturity of the
investment, but also the risk that the underlying security or investment might
not perform the way the Manager expected it to perform. That can mean that the
Fund will realize less income than expected. Another risk of investing in
derivative investments is that their market value could be expected to vary to a
much greater extent than the market value of municipal securities that are not
derivative investments but have similar credit quality, redemption provisions
and maturities.
o 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.
o 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.
o Municipal Securities. Municipal Securities consist of municipal bonds,
municipal notes (including tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes and other short-term loans),
tax-exempt commercial paper and other debt obligations issued by or on behalf of
the State of New York or its political subdivisions, 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.
o 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).
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.
|X| 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.
o 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.
|X| Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments." The Fund may use some
derivative investments for hedging purposes, and may invest in others because
they offer the potential for increased income and principal value. In general, a
"derivative investment" is a specially-designed investment whose performance is
linked to the performance of another investment or security, such as an option,
future or index. In the broadest sense, derivative investments include
exchange-traded options and futures contracts.
Please refer to "Hedging," below.
The Fund may invest in "inverse floater" variable rate bonds, a type of
derivative investment whose yields move in the opposite direction from
short-term interest rates. As interest rates rise, inverse floaters produce less
current income. Their price may be more volatile than the price of a comparable
fixed-rate security. Some inverse floaters have a "cap" whereby if interest
rates rise above the "cap," the security pays additional interest income. If
rates do not rise above the "cap," the Fund will have paid an additional amount
for a feature that proves worthless. The Fund may also invest in municipal
securities that pay interest that depends on an external pricing mechanism, also
a type of derivative investment. Examples of external pricing mechanisms are
interest rate swaps or caps and municipal bond or swap indices. The Fund
anticipates that under normal circumstances it will invest no more than 10% of
its net assets in inverse floaters.
o Ratings of Municipal Securities. At least 75% of the total assets of the
Fund must be invested in Municipal Securities 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"), Duff &
Phelps, Inc. or, if unrated, judged by the Manager to be of comparable quality
to Municipal Securities rated within such grades. See Appendix A of the
Statement of Additional Information for a description of 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.
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 is permitted to invest up to 25% of its total assets in Municipal
Securities rated below "investment grade," that is, below the four highest
rating categories of Moody's, S&P, Fitch or Duff & Phelps. Lower-grade Municipal
Securities (sometimes called "municipal junk bonds") may be subject to greater
market fluctuations and are subject to greater risks of loss of income and
principal than higher-rated Municipal Securities, and may be considered to have
some speculative characteristics. Securities that are or that have fallen below
investment grade entail a greater risk that the ability of the issuers of such
securities to meet their debt obligations will be impaired. There may be less of
a market for lower-grade Municipal Securities and therefore they may be harder
to sell at an acceptable price. These risks mean that the Fund may not achieve
the expected income from lower-grade Municipal Securities, and that the Fund's
income and net asset value per share may be affected by declines in value of
these securities. However, the Fund's limitations on investment in
non-investment grade Municipal Securities may reduce some of these risks.
o 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.
o 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.
o 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 securities (the Board may increase that limit to 15%). The
Fund's percentage limitation on these investments does not apply to certain
restricted securities that are eligible for resale to qualified institutional
purchasers. The Manager monitors holdings of illiquid securities on an ongoing
basis and at times the Fund may be required to sell some holdings to maintain
adequate liquidity.
o 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 such 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.
o 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.
o 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.
o 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
(NASDAQ)of The Nasdaq Stock Market, Inc., or traded in the over-the-counter
market; (3) each call the Fund writes must be "covered" while it is outstanding.
That means the Fund owns the investment on which the call was written ; (4) the
Fund may write calls on Futures contracts it owns, but these calls must be
covered by securities or other liquid assets the Fund owns and segregates to
enable it to satisfy its obligations if the call is exercised; (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.
o Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest on a
security. For example, they may swap a right to receive floating rate payments
for fixed rate payments. The Fund enters into swaps only on securities it owns.
The Fund may not enter into swaps with respect to more than 25% of its total
assets. Also, the Fund will segregate liquid assets (such as cash or U.S.
Government securities) to cover any amounts it could owe under swaps that exceed
the amounts it is entitled to receive, and it will adjust that amount daily, as
needed. Income from interest rate swaps may be taxable.
Other Investment Restrictions. The Fund has other investment restrictions which
are fundamental policies. Under these fundamental policies, the Fund cannot do
any of the following:
o The Fund cannot invest in securities or any other investment other
than the types described in "Investment Objective and Policies," above;
o With respect to 75% of its assets, the Fund cannot 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;
o The Fund cannot 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;
o The Fund cannot 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";
o The Fund cannot 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;
o The Fund cannot 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;
o The Fund cannot buy or sell futures contracts other than Interest
Rate Futures or Municipal Bond Index Futures; or
o The Fund cannot underwrite securities or invest in securities subject
to restrictions on resale.
Unless the prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an investment, and the
Fund need not sell securities to meet the percentage items if the value of the
investment increases in proportion to the size of the Fund. Other investment
restrictions are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund 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
provides more information about them and the officers of the Fund. Although the
Fund will not normally hold annual meetings of Fund shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to divide
unissued shares of 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 three classes invest in the same investment portfolio. Each class has its
own dividends and distributions and pays certain expenses which may be different
for the different classes. Each class may have a different net asset value. Each
share has one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a particular class vote as a class on matters
that affect that class alone. Shares are freely transferrable. Please refer to
"How the Fund is Managed" in the Statement of Additional Information on voting
of shares.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out its
duties, subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement which states the Manager's responsibilities. The
Agreement sets forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $62 billion as of
December 31, 1996, with more than 3 million shareholder accounts. The Manager is
owned by Oppenheimer Acquisition Corp., a holding company that is owned in part
by senior officers of the Manager and controlled by Massachusetts Mutual Life
Insurance Company.
o Portfolio Manager. The Portfolio Manager of the Fund (who is also a Vice
President of the Fund) is Robert E. Patterson, who is also 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. Mr.
Patterson also serves as an officer and portfolio manager for other Oppenheimer
funds.
o 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 average annual net assets, 0.55%
of the next $100 million, 0.50% of the next $200 million, 0.45% of the next $250
million, 0.40% of the next $250 million, and 0.35% of average annual net assets
over $1 billion. The Fund's management fee for its last fiscal year ended
September 30, 1996 was 0.51% of average annual net assets for Class A, Class B
and Class C shares.
The Fund pays expenses related to its daily operations, such as custodian
fees, Trustees' fees, transfer agency fees, legal fees and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it therefore
incurs relatively little expense for brokerage. From time to time, however, it
may use brokers when buying portfolio securities. When deciding which brokers to
use, the Manager is permitted by the Investment Advisory Agreement to consider
whether brokers have sold shares of the Fund or any other funds for which the
Manager serves as investment adviser.
o The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with OppenheimerFunds Distributor, Inc., a
subsidiary of the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of other Oppenheimer funds and is sub-distributor
for funds managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for the other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return", "average annual total return", "standardized yield", "dividend yield",
"yield" and "tax-equivalent yield" to illustrate its performance. The
performance of each class of shares is shown separately, because the performance
of each class of shares will usually be different as a result of the different
kinds of expenses each class bears. These returns and yields measure the
performance of a hypothetical account in the Fund over various periods, and do
not show the performance of each shareholder's account (which will vary if
dividends are received in cash, or shares are sold and purchased). The Fund's
performance may help you see how well your Fund has done over time and to
compare it to other funds or to a market index.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions of
future returns or performance. This performance data is described below, but
more detailed information about how total returns and yields are calculated is
contained in the Statement of Additional Information, which also contains
information about indices and other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time, depending on
market conditions, the composition of the portfolio, expenses and which class of
shares you purchase.
o Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted.
However, total returns may also be quoted "at net asset value", without
considering the effect of the sales charge, and those returns would be less if
sales charges were deducted.
|X| Yield. Each class of shares calculates its yield by dividing the
annualized net investment income per share from the portfolio during a 30-day
period by the maximum offering price on the last day of the period.
Tax-equivalent yield is the equivalent yield that would be earned in the absence
of taxes. It is calculated by dividing that portion of the yield that is
tax-exempt by a factor equal to one minus the applicable tax rate. The yield of
each Class will differ because of the different expenses of each Class of
shares. The yield data represents a hypothetical investment return on the
portfolio, and does not measure an investment return based on dividends actually
paid to shareholders. To show that return, a dividend yield may be calculated.
Dividend yield is calculated by dividing the dividends of a Class derived from
net investment income during a stated period by the maximum offering price on
the last day of the period. Yields and dividend yields for Class A shares
reflect the deduction of the maximum initial sales charge, but may also be shown
based on the Fund's net asset value per share. Yields for Class B 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, 1996, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. During the Fund's fiscal year
ended September 30, 1996 the Fund performed well during a tough period of
volatile interest rates. The Fund's return was maintained by managing interest
rate exposure with shorter durations and by seeking income through high coupon
bonds. Holdings in general obligation bonds did not perform as well as expected.
The combination of a smaller tax base and a larger demand for services made it
difficult to obtain a decent yield. For this reason the Fund de-emphasized their
position in general obligation bonds. The Fund's portfolio and its portfolio
manager's strategies are subject to change.
o 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, 1996. In the case
of Class A shares, performance is measured over a ten-year period, in the case
of Class B shares, from the inception of the Class on March 1, 1993, and in the
case of Class C shares, from the inception of the Class on August 29, 1995. In
all cases, all dividends and capital gains distributions were reinvested in
additional shares. The graphs reflect the deduction of the 4.75% current maximum
initial sales charge on Class A shares, the maximum 5% contingent deferred sales
charge on Class B shares and the 1% contingent deferred sales charge on Class C
shares.
The Fund's performance is compared to that of the Lehman Brothers
Municipal Bond Index, an unmanaged index of a broad range of investment grade
municipal bonds that is widely regarded as a measure of the performance of the
general municipal bond market.
Index performance reflects the reinvestment of income but does not
consider the effect of capital gains or transaction costs, and none of the data
below shows the effect of taxes. Also, the Fund's performance data reflects the
effect of Fund business and operating expenses. While index comparisons may be
useful to provide a benchmark for the Fund's performance, it must be noted that
the Fund's investments are not limited to the securities in any one index.
Moreover, the index performance data does not reflect any assessment of the risk
of the investments included in the index.
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Class A, Class B and Class C Shares of
Oppenheimer New York Tax-Exempt Fund and the
Lehman Brothers Municipal Bond Index
[Graph]
Average Annual Total Return of the Fund at 9/30/96
A Shares 1-Year 5-Year 10-Year(1)
1.59% 5.89% 6.69%
B Shares 1-Year Life-of-the-Class:(2)
0.77% 3.16%
C Shares 1-Year Life-of-the-Class:(3)
4.64% 6.25%
- -------------------
Total returns and the ending account values in the graph show change in
share value and include reinvestment of all dividends and capital gains
distributions.
(1) The inception date of the Fund (Class A shares) was 8/16/84. Class A returns
are shown net of the current 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% and 3% 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 3% sales charge.
(3) Class C shares of the Fund were first publicly offered on 8/29/95. The
life-of-the-class is shown net of the applicable 1% contingent deferred sales
charge. Past performance is not predictive of future performance. Graphs are not
drawn to same scale.
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.
o Class A Shares. If you buy Class A shares, you pay an initial sales charge
(on investments up to $1 million). If you purchase Class A shares as part of an
investment of at least $1 million in shares of one or more Oppenheimer funds,
you will not pay an initial sales charge, but if you sell any of those shares
within 18 months of buying them, you may pay a contingent deferred sales charge.
The amount of that sales charge will vary depending on the amount you invested.
Sales charge rates are described below in "Buying Class A Shares."
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares, as described in "Buying
Class B Shares," below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
described in "Buying Class C Shares," below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decisions as to which class of shares is
best suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, and considered the effect of the annual
asset-based sales charge on Class B and Class C expenses (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns and the operating
expenses borne by each class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time, offset the
effect of paying an initial sales charge on your investment (which reduces the
amount of your investment dollars used to buy shares for your account) compared
to the effect over time of higher class-based expenses on Class B or Class C
shares, for which no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than seven years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C shares (as well as Class
B shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C shares (and
Class B shares). If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C shares, respectively, from a single investor.
o Investing for the Longer Term. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or C shares, as discussed above, because of the effect of the expected
lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore you should
analyze your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features, such as checkwriting, may not be available to Class B or
Class C shareholders, or other features (such as Automatic Withdrawal Plans) may
not be advisable (because of the effect of the contingent deferred sales charge)
for Class B or Class C shareholders, you should carefully review how you plan to
use your investment account before deciding which class of shares to buy.
Additionally, dividends payable to Class B and Class C shareholders will be
reduced by the additional expenses borne by those classes that are not borne by
Class A, such as the Class B and Class C asset-based sales charges described
below and in the Statement of Additional Information. 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.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the Class B and Class C contingent deferred sales charge and
asset-based sales charges is the same as the purpose of the front-end sales
charge on sales of Class A shares: that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans.
With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments for as little
as $25; and subsequent purchases of at least $25 can be made by telephone
through AccountLink.
There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other Oppenheimer funds (a list of them
appears in the Statement of Additional Information, or you can ask your dealer
or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o 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. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure it is appropriate for you.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to send redemption
proceeds and to have the Transfer Agent transmit dividends and distributions.
Shares are purchased for your account on the regular business
day the Distributor is instructed by you to initiate the ACH transfer to buy
shares. You can provide those instructions automatically, under an Asset Builder
Plan, described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink privileges on
the application or dealer settlement instructions used to establish your
account. Please refer to "AccountLink" below for more details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to
four other Oppenheimer funds) automatically each month from your account at a
bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of Additional
Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado. In most cases, to enable you to receive that day's offering
price, the Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally 4:00 P.M., New
York time, but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each class of shares is
determined as of that time on each day The New York Stock Exchange is open
(which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your order
by the close of The New York Stock Exchange on a regular business day and
transmit it to the Distributor so that it is received before the Distributor's
close of business that day, which is normally 5:00 P.M. The Distributor may
reject any purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. The Appendix A in this
prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the former Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, purchases are not
subject to an initial sales charge, and the offering price will be the net asset
value. In some cases, reduced sales charges may be available, as described
below. Out of the amount you invest, the Fund receives the net asset value to
invest for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the Distributor and
allocated to your dealer as commission. The current sales charge rates and
commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
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.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more.
The Distributor pays dealers of record commissions on those
non-retirement plan purchases in an amount equal to the sum of
1.0%. That commission will be paid only on the amount of those
purchases that were not previously subject to a front-end sales
charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge (called the
"Class A contingent deferred sales charge") may be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gain distributions) or (2) the original
offering price (which is the original net asset value) of the redeemed shares.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer on all
Class A shares of all Oppenheimer funds you purchased subject to the Class A
contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 months of the end of the
calendar month of the purchase of the exchanged shares, the sales charge will
apply.
o 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:
o Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you and your
spouse can add together Class A and Class B shares you purchase for your
individual accounts, or jointly, or for trusts or custodial accounts on behalf
of your children who are minors. A fiduciary can count all shares purchased for
a trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class B
shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also include Class
A and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds. The value of those shares will be
based on the greater of the amount you paid for the shares or their current
value (at offering price). The Oppenheimer funds are listed in "Reduced Sales
Charges" in the Statement of Additional Information, or a list can be obtained
from the Distributor. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A shares
or Class A and Class B shares of the Fund and other Oppenheimer funds during a
13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. This can include purchases made up
to 90 days before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
o 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:
o the Manager or its affiliates;
o 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;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o 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;
o 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);
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker, bank or advisor for the purchase or sale of Fund shares);
o directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts; or
o any unit investment trust that has entered into an appropriate
agreement with the Distributor.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the past 12 months from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below); or
o if, at the time a purchase order is placed for Class A shares that would
otherwise be subject to the Class A contingent deferred sales charge, the dealer
agrees in writing to accept the dealer's portion of the commission payable on
the sale in installments of 1/18th of the commission per month (and no further
commission will be payable if the shares are redeemed within 18 months of
purchase).
o Service Plan for Class A Shares. The Fund has adopted a Service Plan for
Class A shares to reimburse the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of accounts that hold
Class A shares. Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of the Fund. The
Distributor uses all of those fees to compensate dealers, brokers, banks and
other financial institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer inquiries
about the Fund, assisting in establishing and maintaining accounts in the Fund,
making the Fund's investment plans available and providing other services at the
request of the Fund or the Distributor. Payments are made by the Distributor
quarterly at an annual rate not to exceed 0.25% of the average annual net assets
of Class A shares held in accounts of the service providers or their customers.
The payments under the Plan increase the annual expenses of Class A shares. For
more details, please refer to "Distribution and Service Plans" in the Statement
of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
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>
Years Since Contingent Deferred Sales Charge
Beginning of Month in which On Redemptions in That Year
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.
o 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.
o Waivers of Class B Sales Charges. The Class B contingent deferred sales
charge will not apply to those shares purchased in certain types of
transactions, nor will it apply to shares redeemed in certain circumstances, as
described below under "Buying Class C Shares - Waivers of Class B and Class C
Sales Charges."
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 contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
o Distribution and Service Plan for Class B and Class C Shares. The
Fund has adopted a Distribution and Service Plan for Class B and Class C shares
to compensate the Distributor for distributing Class B and 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 B shares that are
outstanding for 6 years or less and on Class C shares. The Distributor also
receives a service fee of 0.25% per year under each plan.
Under each Plan, both fees are computed on the average annual net
assets of Class B shares, determined as of the close of each regular business
day during the period. The asset-based sales charge and service fees increase
Class B and Class C expenses by up to 1.00% of average net assets per year of
the respective class.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B or Class C shares.
Those services are similar to those provided under the Class A Service Plan,
described above. The Distributor pays the 0.25% service fee to dealers in
advance for the first year after Class B or Class C shares have been sold by the
dealer. After the shares have been held for a year, the Distributor pays the fee
on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the
purchase price of Class B shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an on-going commission to the dealer on Class C shares that have been
outstanding for a year or more.
The Distributor's actual expenses in selling Class B and 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 Plans for Class B and Class C shares. If either Plan is terminated by
the Fund, the Board of Directors may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for distributing shares before the
Plan was terminated.
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to 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 and
Class C contingent deferred sales charges will be waived for redemptions of
shares in the following cases:
o redemptions from accounts following the death or disability of the last
surviving shareholder; including a trustee of a "grantor" trust or revocable
living trust for which the trustee is also the sole beneficiary (the death or
disability must have occurred after the account was established, and for
disability you must provide evidence of a determination of disability by the
Social Security Administration); or
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C shares
sold or issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please refer to the
Application for details or call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can request
AccountLink privileges by sending signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder listed in
the registration on your account as well as to your dealer representative of
record unless and until the Transfer Agent receives written instructions
terminating or changing those privileges. After you establish AccountLink for
your account, any change of bank account information must be made by
signature-guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
o 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.
o 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.
o 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.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer fund account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account. Please refer to
"How to Sell Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis:
o 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.
o 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 Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer fund account is $25. These exchanges are subject to the terms of the
Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C shares. You must be sure to ask
the Distributor for this privilege when you send your payment. Please consult
the Statement of Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming) some
or all of your shares on any regular business day. Your shares will be sold at
the next net asset value calculated after your order is received and accepted by
the Transfer Agent. The Fund offers you a number of ways to sell your shares: in
writing, by using the Fund's checkwriting privilege or by telephone. You can
also set up an Automatic Withdrawal Plans to redeem shares on a regular basis,
as described above. If you have questions about any of these procedures, and
especially if you are redeeming shares in a special situation, such as due to
the death of the owner, please call the Transfer Agent first, at 1-800-525-
7048, for assistance.
o 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):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o The redemption check is not payable to all shareholders
listed on the account statement
o The redemption check is not sent to the address of record on
your account statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are redeemed by someone other than the owners (such
as an Executor)
o 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:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the
account is registered, and
o 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:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds 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.
o To redeem shares through a service representative, call 1-
800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that account.
o 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.
o Telephone Redemptions Through AccountLink. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
Checkwriting. To be able to write checks against your Fund account, you may
request that privilege on your account Application or you can contact the
Transfer Agent for signature cards, which must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If you
previously signed a signature card to establish Checkwriting in another
Oppenheimer fund, simply call 1-800-525-7048 to request Checkwriting for an
account in this Fund with the same registration as the previous checkwriting
account.
o Checks can be written to the order of whomever you wish, but may not
be cashed at the Fund's bank or custodian.
o Checkwriting privileges are not available for accounts holding Class
B Shares or Class C shares, or Class A shares that are subject to a contingent
deferred sales charge.
o Checks must be written for at least $100.
o 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.
o 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.
o Don't use your checks if you changed your Fund account
number.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please call your dealer for more information about this
procedure. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. To
exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available
for sale in your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege.
o 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.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
o Before exchanging into a fund, you should obtain and read
its prospectus.
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of shares,
which are considered to be Class A shares for this purpose. In some cases, sales
charges may be imposed on exchange transactions. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o 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."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852- 8457 or by using
PhoneLink for automated exchanges, by calling 1- 800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that is in proper form by the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to seven days if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy shares. For
example, the receipt of multiple exchange requests from a dealer in a
"market-timing" strategy might require the sale of portfolio securities at a
time or price disadvantageous to the Fund.
o 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.
o 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.
o For tax purposes, exchanges of shares involve a redemption of the
shares of the fund you own and a purchase of the shares of the other fund, which
may result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as of
the close of The New York Stock Exchange, which is normally 4:00 p.m. but may be
earlier on some days on each day the Exchange is open by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are special
procedures for valuing illiquid and restricted securities, and obligations for
which market values cannot be readily obtained. These procedures are described
more completely in the Statement of Additional Information.
o 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.
o 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.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o 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.
o 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.
o 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.
o Payment for redeemed shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within seven days after the Transfer
Agent receives redemption instructions in proper form, except under unusual
circumstances determined by the Securities and Exchange Commission delaying or
suspending such payments. For accounts registered in the name of a
broker-dealer, payment will be forwarded within three business days. The
Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase payment
has cleared. That delay may be as much as 10 days from the date the shares were
purchased. That delay may be avoided if you purchase shares by certified check
or arrange with your bank to provide telephone or written assurance to the
Transfer Agent that your purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o 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.
o "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.
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
o 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.
o Transfer Agent and Shareholder Servicing Agent. The transfer agent
and shareholder servicing agent is OppenheimerFunds Services. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent for former
shareholders of the AMA Family of Funds and clients of AMA Investment Advisers,
L.P. who owned shares of the Former Quest For Value Fund when it merged into the
Fund on November 24, 1995.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net 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, 1996, 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. You have
four options:
o 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.
o 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.
o 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 account on AccountLink.
o Reinvest your distributions in another Oppenheimer Fund account. You
can reinvest all distributions in another Oppenheimer fund account you have
established.
Taxes. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. 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.
o "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.
o 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.
o 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
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class
A, Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value Global
Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment adviser to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was (i) one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
o Purchases by Groups and Associations. The following table sets forth
the initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of securities if
that Association purchased shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but
not more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described on page ___ of this Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of members of an Association
or the sales charge rate that applies under the Rights of Accumulation described
above in the Prospectus. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase shares
for their individual or custodial accounts at these reduced sales charge rates,
upon request to the Fund's Distributor.
o Special Class A Contingent Deferred Sales Charge Rates
The contingent deferred sales charge applicable to Class A shares of the
Fund has been waived with respect to those shares of the Fund issued in the
reorganization on November 24, 1995 for shares of Quest for Value New York
Tax-Exempt Fund. Class A shares of the Fund purchased by exchange of shares of
other Oppenheimer funds that were acquired as a result of the merger of Former
Quest for Value Funds into those Oppenheimer funds, and which shares were
subject to a Class A contingent deferred sales charge prior to November 24, 1995
will be subject to a contingent deferred sales charge at the following rates: if
they are redeemed within 18 months of the end of the calendar month in which
they were purchased, at a rate equal to 1.0% if the redemption occurs within 12
months of their initial purchase and at a rate of 0.50 of 1.0% if the redemption
occurs in the subsequent six months. Class A shares of any of the Former Quest
Fund for Value Funds purchased without an initial sales charge on or before
November 22, 1995 will continue to be subject to the applicable contingent
deferred sales charge in effect as of that date as set forth in the then-current
prospectus for such fund.
o Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not subject
to any Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March
6, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of the Fund
acquired by the merger of a Former Quest for Value Fund into the Fund or by
exchange from an Oppenheimer fund that was a Former Quest for Value Fund or into
which such fund merged, if those shares were purchased prior to March 6, 1995 in
connection with: (i) withdrawals under an automatic withdrawal plan holding only
either Class B or Class C shares if the annual withdrawal does not exceed 10% of
the initial value of the account, and (ii) liquidation of a shareholder's
account if the aggregate net asset value of shares held in the account is less
than the required minimum value of such accounts.
o Waivers for Redemptions of Shares Purchased on or After
March 6, 1995 but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of the Fund
acquired by the merger of a Former Quest for Value Fund into the Fund or by
exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into
which such fund merged, if those shares were purchased on or after March 6,
1995, but prior to November 24, 1995: (1) redemptions following the death or
disability of the shareholder(s) (as evidenced by a determination of total
disability by the U.S. Social Security Administration); (2) withdrawals under an
automatic withdrawal plan (but only for Class B or Class C shares) where the
annual withdrawals do not exceed 10% of the initial value of the account; and
(3) liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum account value. A
shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares in this Fund
or another Oppenheimer fund.
<PAGE>
APPENDIX A TO PROSPECTUS OF
OPPENHEIMER NEW YORK MUNICIPAL FUND
Graphic material included in Prospectus of Oppenheimer New
York Municipal Fund: "Comparison of Total Return of Oppenheimer New
York Municipal 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, (ii) Class B
shares of the Fund from March 1, 1993 (the date Class B shares were first
publicly-offered) to September 30, 1996, and (iii) Class C shares from August
29, 1995 (the date Class C shares were first publicly offered) to September 30,
1996, and comparing such values with the same investments over the same time
periods in the Lehman Brothers Municipal Bond Index. Set forth below are the
relevant data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description of the Lehman
Brothers Municipal Bond Index, is set forth in the Prospectus under "Fund
Information - Management's Discussion of Performance."
Oppenheimer
New York
Municipal Lehman
Fund Brothers
Fiscal Year Class A Municipal
(Period) Ended Shares Bond Index
- -------------- ----------- ----------
09/30/86 $9,525 $10,000
09/30/87 $9,587 $10,053
09/30/88 $10,737 $11,357
09/30/89 $11,532 $12,343
09/30/90 $12,102 $13,182
09/30/91 $13,661 $14,920
09/30/92 $15,108 $16,480
09/30/93 $17,257 $18,579
09/30/94 $16,294 $18,126
09/30/95 $17,861 $20,156
09/30/96 $19,111 $21,081
<PAGE>
Oppenheimer
New York
Municipal Lehman
Fund Brothers
Fiscal Year Class B Municipal
(Period) Ended Shares(1) Bond Index
- -------------- ---------- ----------
03/01/93 $10,000 $10,000
09/30/93 $10,624 $10,569
09/30/94 $9,967 $10,312
09/30/95 $10,839 $11,466
09/30/96 $11,179 $11,993
Oppenheimer
New York
Municipal Lehman
Fund Brothers
Fiscal Year Class C Municipal
(Period) Ended Shares(2) Bond Index
- -------------- ----------- ----------
08/29/95 $10,000 $10,000
09/30/95 $10,110 $10,063
09/30/96 $10,680 $10,525
(1)For the period from March 1, 1993 (commencement of class) to September 30,
1996. (2)For the period from August 29, 1995 (commencement of class) to
September 30, 1996.
<PAGE>
Oppenheimer New York Municipal Fund
Two World Trade Center
New York, New York 10048-0203
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
One Citicorp Center
New York, New York 10154
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds, Inc., OppenheimerFunds
Distributor, Inc., or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
[OppenheimerFunds Logo]
PR360.001.0296.N * Printed on recycled paper
<PAGE>
Oppenheimer New York Municipal Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated January 17, 1997
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated January 17, 1997. It should be read together
with the Prospectus, which may be obtained by writing to the Fund's Transfer
Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
<TABLE>
<CAPTION>
Contents
Page
<S> <C>
About The Fund
Investment Objective and Policies.......................................................................
Investment Policies and Strategies.................................................................
Special Investment Considerations - New York Municipal Securities..................................
Other Investment Techniques and Strategies.........................................................
Other Investment Restrictions......................................................................
How the Fund is Managed.................................................................................
Organization and History...........................................................................
Trustees and Officers of the Fund..................................................................
The Manager and Its Affiliates.....................................................................
Brokerage Policies of the Fund..........................................................................
Performance of the Fund.................................................................................
Distribution and Service Plans..........................................................................
About Your Account
How To Buy Shares.......................................................................................
How To Sell Shares......................................................................................
How To Exchange Shares..................................................................................
Dividends, Capital Gains and Taxes......................................................................
Additional Information About the Fund...................................................................
Financial Information About the Fund
Independent Auditors' Report............................................................................
Financial Statements....................................................................................
Appendix A: Description of Ratings Categories..........................................................
Appendix B: Tax-Equivalent Yield Chart.................................................................
Appendix C: Industry Classifications...................................................................
</TABLE>
<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
|X| Municipal Bonds. The principal classifications of long-term municipal bonds
are "general obligation" and "revenue" or "industrial development" bonds.
o 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.
o 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.
o 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.
|X| 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:
o 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.
o 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.
o 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.
o 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.
o 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.
|X| 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.
|X| 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 Federal alternative minimum tax on individuals
and corporations. The Fund anticipates that under normal circumstances it will
not purchase any such securities in an amount greater than 20% of the Fund's
total assets.
|X| Ratings of Municipal Securities. Moody's, S&P's, Fitch's and Duff &
Phelps 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
OppenheimerFunds, Inc. (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 official statements relating to offerings
of New York issuers of Municipal Securities on or prior to July 15, 1996 with
respect to offerings of the State and December 18, 1996 with respect to
offerings of New York City, and no representation is made as to the accuracy of
such information.
During the mid-1970's the State, some of its agencies,
instrumentalities and public benefit corporations (the "Authorities"), and
certain of its municipalities faced serious financial difficulties. To address
many of these financial problems, the State developed various programs, many of
which were successful in ameliorating the financial crisis. Any further
financial problems experienced by these Authorities or municipalities could have
a direct adverse effect on the New York Municipal Securities in which the Trust
invests.
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. As a
result, the City experienced job losses in 1990 and 1991 and real Gross City
Product ("GCP") fell in those two years. Beginning in 1992, the improvement in
the national economy helped stabilize conditions in the City. Employment losses
moderated toward year-end and real GCP increased, boosted by strong wage gains.
After noticeable improvements in the City's economy during 1994, economic growth
slowed in 1995, and the City's current four-year financial plan assumes that
moderate economic growth will continue.
For each of the 1981 through 1996 fiscal years, the City achieved
balanced operating results as reported in accordance with generally accepted
accounting principles ("GAAP"). The City was required to close substantial
budget gaps in recent years in order to maintain balanced operating results.
There can be no assurance that the City will continue to maintain a balanced
budget as required by State law, or that it can maintain a balanced budget
without additional tax or other revenue increases or additional reductions in
City services of programs, 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 1997 through 2000
fiscal years (the "1997-2000 Financial Plan", "Financial Plan" or "City Plan").
On November 14, 1996, the City submitted to the Control Board the Financial Plan
for the 1997-2000 fiscal years, which is a modification to a financial plan
submitted to the Control Board on June 21, 1996 (the "June Financial Plan") and
which relates to the City, the Board of Education ("BOE") and the City
University of New York.
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
financing requirements. Such assumptions and contingencies include the condition
of the regional and local economies, the impact on real estate tax revenues of
the real estate market, wage increases for City employees consistent with those
assumed in the City Plan, employment growth, the ability to implement reductions
in City personnel and other cost reduction initiatives, the ability of the New
York City Health and Hospitals Corporation ("HHC") and the BOE to take actions
to offset reduced revenues, the ability to complete revenue generating
transactions, provision of State and Federal aid and mandate relief and the
impact on City revenues of proposals for Federal and State welfare reform and
any future legislation affecting Medicare or other entitlements.
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 1997 through 2000 contemplates the
issuance of $7.7 billion of general obligation bonds and $4.5 billion of bonds
to be issued by the proposed New York City Infrastructure Finance Authority
("IFA") primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make other capital investments. The creation of the IFA
is subject to the enactment of State legislation. 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 and
IFA 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 or bonds of the proposed IFA, it would be
prevented from meeting its planned operating and capital expenditures. Future
developments concerning the City and public discussion of such developments, as
well as prevailing market conditions, may affect the market for outstanding City
general obligation bonds and notes.
The City Comptroller and other agencies and public officials have
issued reports and make public statements which, among other things, state that
projected revenues may be less and future expenditures may be greater than
forecasted in the City Plan. It is reasonable to expect that such reports and
statements will continue to be issued and to engender public comment.
1997-2000 Financial Plan. The June Financial Plan set forth actions to
close a previously projected gap of approximately $2.6 billion in the 1997
fiscal year. The proposed actions in the June Financial Plan for the 1997 fiscal
year included (i) agency actions totaling $1.2 billion; (ii) a revised tax
reduction program which would increase projected tax revenues by $369 million
due to the four year extension of the 12.5% personal income tax surcharge and
other actions; (iii) savings resulting from cost containment in entitlement
programs to reduce City expenditures and additional proposed State aid of $74
million; (iv) the assumed receipt of revenues relating to rent payments for the
City's airports, which are currently the subject of a disputer with the Port
Authority of New York and New Jersey (the "Port Authority"); (v) the sale of the
City's television station for $207 million; and (vi) pension cost savings
totaling $134 million resulting from a proposed increase in the earnings
assumption for pension assets from 8.5% to 8.75%.
The 1997-2000 Financial Plan published on November 14, 1996 reflects actual
receipts and expenditures and changes in forecast revenues and expenditures
since the June Financial Plan. The 1997-2000 Financial Plan projects revenues
and expenditures for the 1997 fiscal year balanced in accordance with GAAP, and
projects gaps of $1.2 billion, $2.1 billion and $3.0 billion for the 1998, 1999
and 2000 fiscal years, respectively. Changes since the June Financial Plan
include (i) an increase in projected tax revenues of $450 million, $120 million,
$50 million and $45 million in fiscal years 1997 through 2000, respectively;
(ii) a delay in the assumed receipt of $304 million relating to projected rent
payments for the City airports from the 1997 fiscal year to the 1998 and 1999
fiscal years, and a $34 million reduction in assumed State and Federal aid for
the 1997 fiscal year ; (iii) an approximately $200 million increase in projected
overtime and other expenditures in each of the fiscal years 1997 through 2000;
(iv) a $70 million increase in expenditures for BOE in the 1997 fiscal year for
school text books; (v) a reduction in projected pension costs of $34 million,
$50 million, $49 million and $47 million in fiscal years 1997 through 2000,
respectively; and (vi) additional agency actions totaling $179 million, $386
million, $473 million and $589 million in fiscal years 1997 through 2000,
including personnel reductions through attrition and early retirement.
The Financial Plan assumes (i) approval by the Governor and the State
Legislature of the extension of the 12.5% personal income tax surcharge, which
is scheduled to expire on December 31, 1996 and is projected to provide revenue
of $170 million, $463 million, $492 million, and $521 million, in the 1997
through 2000 fiscal years, respectively; (ii) collection of the projected rent
payments for the City's airports, totaling $270 million and $180 million in the
1998 and 1999 fiscal years, respectively, which may depend on the successful
completion of negotiations with the Port Authority or the enforcement of the
City's rights under the existing leases thereto through pending legal actions;
(iii) the ability of HHC and BOE to identify actions to offset substantial City
and State revenue reductions and the receipt by BOE of additional State aid;
(iv) State approval of the cost containment initiatives and State aid proposed
by the City; and (v) a reduction in City funding for labor settlements for
certain public authorities or corporations. Legislation extending the 12.5%
personal income tax surcharge beyond December 31, 1996., was not enacted in the
special legislative session held in December 1996. Such legislation may be
enacted in the 1997 State legislative session. The Financial Plan does not
reflect any increased costs which the City might incur as a result of welfare
legislation recently enacted by Congress or legislation proposed by the
Governor, which would, if enacted, implement such Federal welfare legislation.
In addition, the economic and financial condition of the City may be affected by
various financial, social, economic and political factors which could have a
material effect on the City.
The City's financial plans have been the subject of extensive public
comment and criticism. On February 28, 1996, Fitch Investors Service, L.P.
("Fitch") placed the City's general obligation bonds on FitchAlert with negative
implications. On November 5, 1996, Fitch removed the City's general obligation
bonds from FitchAlert, although Fitch stated that the outlook remains the
negative.
Ratings. Moody's has rated the City's general obligation bonds Baa1.
Standard & Poor's has rated the bonds BBB+. Fitch has rated the bonds A-. These
ratings do not reflect any bond insurance relating to any portion of the bonds.
The city expects that ratings on the Financial Guaranty Insured Bonds and the
AMBAC Insured Bonds will be received prior to January 7, 1997. The ratings on
the Financial Guaranty Insured Bonds and the AMBAC Insured Bonds will be based
on the insurance policies to be issued by Financial Guaranty and AMBAC
Indemnity, respectively. Bonds insured to maturity by Financial Guaranty are
rated "AAA" by Standard & Poor's, "Aaa" by Moody's and "AAA" by Fitch. Such
ratings reflect only the views of Moody's, Standard & Poor's and Fitch, from
which an explanation of the significance of 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 the bonds.
Outstanding Net Indebtedness. As of September 30, 1996, the City and
the Municipal Assistance Corporation for the City of New York had, respectively,
$20.099 billion and $3.889 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. There can be no assurance
that there will not be reductions in State aid to the City from amounts
currently projected or that State budgets in future fiscal years will be adopted
by the April 1 statutory deadline or that any such reductions or delays will not
have adverse effects on the City's cash flow or expenditures.
Litigation. The City is a defendant in lawsuits pertaining to material
matters, including claims asserted which are incidental to performing routine
governmental and other functions. This litigation includes, but is not limited
to, actions commenced and claims asserted against the City arising out of
alleged torts, alleged breaches of contracts, alleged violations of law and
condemnation proceedings. As of June 30, 1996 and 1995, claims in excess of $380
billion and $311 billion, respectively, were outstanding against the City for
which the City estimates its potential future liability to be $2.8 billion and
$2.5 billion, respectively.
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.
Recent Developments. The national economy has resumed a more robust
rate of growth after a "soft landing" in 1995, with over 11 million jobs added
nationally since early 1992. The State economy has continued to expand, but
growth remains somewhat slower than in the nation. Although the State has added
approximately 240,000 jobs since late 1992, employment growth in the State has
been hindered during recent years by significant cutbacks in the computer and
instrument manufacturing, utility, defense and banking industries. Government
downsizing has also moderated these job gains.
The 1996-1997 New York State Financial Plan (the "State Plan") is based on
the State's economy showing modest expansion during the first half of 1996, but
that some slowdown is projected during the second half of the year. Although
industries that export goods and services are expected to continue to do well,
growth is expected to be slowed by government cutbacks at all levels and by
tight fiscal constraints on health and social services. On an average annual
basis, employment growth in the State is expected to be up slightly from the
1995 rate. Personal income is expected to record moderate gains in 1996. Bonus
payments in the securities industry are expected to increase further from last
year's record level.
The State Plan is based upon forecasts of national and State economic
activity developed through both internal analysis and review of State and
national economic forecasts prepared by commercial forecasting services and
other public and private forecasters. Economic forecasts have frequently failed
to predict accurately the timing and magnitude of changes in the national and
the State economies. Many uncertainties exist in forecasts of both the national
and State economies, including consumer attitudes toward spending, the extent of
corporate and governmental restructuring, federal fiscal and monetary policies,
the level of interest rates, and the condition of the world economy, which could
have an adverse effect on the State. There can be no assurance that the State
economy will not experience results in the current fiscal year that are worse
than predicted, with corresponding material and adverse effects on the State's
projections of receipts and disbursements.
The 1996-97 Fiscal Year. The State's General Fund (the major operating
Fund of the State) was projected in the State Plan to be balanced on a cash
basis for the 1996-97 fiscal year. The State Plan projected General Fund
receipts and transfers from other funds at $33.17 billion, an increase of $365
million from the prior fiscal year, and disbursements and transfers to other
funds at $33.12 billion, an increase of $444 million from the total disbursed in
the prior fiscal year.
Projections of total State receipts in the State Financial Plan are
based on the State tax structure in effect during the fiscal year and on
assumptions relating to basic economic factors and their historical
relationships to State tax receipts. In preparing projections of State receipts,
economic forecasts relating to personal income, wages, consumption, profits and
employment have been particularly important. The projection of receipts from
most tax or revenue sources is generally made by estimating the change in yield
of such tax or revenue source caused by economic and other factors, rather than
by estimating the total yield of such tax or revenue source from its estimated
tax base. The forecasting methodology, however, ensures that State fiscal year
estimates for taxes that are based on a computation of annual liability, such as
the business and personal income taxes, are consistent with estimates of total
liability under such taxes.
Projections of total State disbursements are based on assumptions
relating to economic and demographic factors, levels of disbursements for
various services provided by local governments (where cost is partially
reimbursed by the State), and the results of various administrative and
statutory mechanisms in controlling disbursements for State operations. Factors
that may affect the level of disbursements in the fiscal year include
uncertainties relating to the economy of the nation and the State, the policies
of the federal government, and changes in the demand for and use of State
services.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy, actions
of the federal government and other factors, have created structural gaps for
the State. These gaps resulted from a significant disparity between recurring
revenues and the costs of maintaining or increasing the level of support for
State programs. To address a potential imbalance in any given fiscal year, the
State would be required to take actions to increase receipts and/or reduce
disbursements as it enacts the budget for that year, and under the State
Constitution, the Governor is required to propose a balanced budget each year.
There can be no assurance, however, that the Legislature will enact the
Governor's proposals or that the State's actions will be sufficient to preserve
budgetary balance in a given fiscal year or to align recurring receipts and
disbursements in future fiscal years.
Composition of State Governmental Funds Group. Substantially all State
non-pension financial operations are accounted for in the State's governmental
funds group. Governmental funds include the General Fund, which receives all
income not required by law to be deposited in another fund; Special Revenue
Funds, which receive the preponderance of moneys received by the State from the
Federal government and other income the use of which is legally restricted to
certain purposes; Capital Projects Funds, used to finance the acquisition and
construction of major capital facilities by the State and to aid in certain of
such projects conducted by local governments or public authorities; and Debt
Service Funds, which are used for the accumulation of moneys for the payment of
principal of and interest on long-term debt and to meet lease-purchase and other
contractualobligation commitments.
Local Government Assistance Corporation ("LGAC"). In 1990, as part of a
State fiscal reform program, legislation was enacted creating LGAC, a public
benefit corporation empowered to issue long-term obligations to fund certain
payments to local governments traditionally funded through the State's annual
seasonal borrowing. The legislation authorized LGAC to issue its bond and notes
in an amount not in excess of $4.7 billion (exclusive of certain refunding
bonds) plus certain other amounts. Over a period of years, the issuance of these
long-term obligations, which are to be amortized over no more than 30 years, was
expected to eliminate the need for continued short-term seasonal borrowing. The
legislation also dedicated revenues equal to one-quarter of the four cent State
sales and use tax to pay debt service on these bonds. The legislation also
imposed a cap on the annual seasonal borrowing of the State at $4.7 billion,
less net proceeds of bonds issued by LGAC and bonds issued to provide for
capitalized interest, except in cases where the Governor and the legislative
leaders have certified the need for additional borrowing and provided a schedule
for reducing it to the cap. If borrowing above the cap is thus permitted in any
fiscal year, it is required by law to be reduced to the cap by the fourth fiscal
year after the limit was first exceeded. This provision capping the seasonal
borrowing was included as a covenant with LGAG's bondholders in the resolution
authorizing such bonds.
As of June 1995, LGAC had issued bonds and notes to provide net proceeds of
$4.7 billion completing the program. The impact of LGAC's borrowing is that the
State is able to meet its cash flow needs in the first quarter of the fiscal
year without relying on short-term seasonal borrowings.
The State Plan includes no seasonal borrowing.
Authorities. The fiscal stability of the State is related to the fiscal
stability of its public authorities ("Authorities"). Authorities have various
responsibilities, including these which finance, construct and/or operate
revenue-producing public facilities. Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the State
itself, and may issue bonds and notes within the amounts, and restrictions set
forth in, their legislative authorization. As of September 30, 1995, there were
17 Authorities that had outstanding debt of $100 million or more. The aggregate
outstanding debt, including refunding bonds, of these 17 Authorities was $73.45
billion as of September 30, 1995.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges or tunnels,
highway tolls, rentals for dormitory rooms and housing units and charges for
occupancy at medical care facilities. In addition, State legislation authorizes
several financing techniques for Authorities. Also, there are statutory
arrangements providing for State local assistance payments otherwise payable to
localities to be made under certain circumstances to Authorities. Although the
State has no obligation to provide additional assistance to localities whose
local assistance payments have been paid to Authorities under these
arrangements, if local assistance payments are diverted the affected localities
could seek additional State assistance. Some Authorities also receive moneys
from State appropriations to pay for the operating costs of certain of their
programs.
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
October 3, 1995, 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 October 2, 1995, Moody's reconfirmed its A rating
on the State's general obligation long-term indebtedness. Ratings reflect only
the respective views of such organizations, and an explanation of the
significance of such ratings may be obtained from the rating agency furnishing
the same. There is no assurance that a particular rating will continue for any
given period of time or that any such rating will not be revised downward or
withdrawn entirely, if in the judgment of the agency originally establishing the
rating, circumstances so warrant. A downward revision or withdrawal of such
ratings, or either of them, may have an effect on the market price of the State
Municipal Securities in which the Trust invests.
General Obligation Debt. As of March 31, 1996, the State had
approximately $5.05 billion in general obligation bonds, including $294 million
in bond anticipation notes outstanding. Principal and interest due on general
obligation bonds and interest due on bond anticipation notes were $735 million
for the 1995-96 fiscal year and are estimated to be $719 million for the State's
1996-97 fiscal year.
Litigation. The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal laws.
These proceedings could affect adversely the financial condition of the State in
the 1996-1997 fiscal year or thereafter.
The State believes that the State Plan includes sufficient reserves for
the payment of judgments that may be required during the 1996-97 fiscal year.
There can be no assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount the State Plan reserves for the payment
of judgments and, therefore, could affect the ability of the State to maintain a
balanced 1996-1997 State Plan. In its audited financial statements for the
fiscal year ended March 31, 1996, the State reported its estimated liability for
awarded and anticipated unfavorable judgments at $474 million.
In addition, the State is party to other claims and litigations which
its counsel has advised are not probable of adverse court decisions. Although,
the amounts of potential losses, if any, are not presently determinable, it is
the State's opinion that its ultimate liability in these cases is not expected
to have a material adverse effect on the State's financial position in the
1996-97 fiscal year or thereafter.
Other Localities. Certain localities in addition to the City could have
financial problems leading to requests for additional State assistance during
the State's 1996-97 fiscal year and thereafter. The potential impact on the
State of such actions by localities is not included in the projections of the
State receipts and disbursements in the State's 1996-97 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of Yonkers
(the "Yonkers Board") by the State in 1984. The Yonkers Board is charged with
oversight of the fiscal affairs of Yonkers. Future actions taken by the Governor
or the State Legislature to assist Yonkers could result in increased State
expenditures for extraordinary local assistance.
Other Investment Techniques and Strategies
|X| 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 identify to its
Custodian 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.
|X| 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, the U.S. branch of a foreign bank or a broker-dealer
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.
|X| Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the market value of
the loaned securities and must consist of cash, bank letters of credit,
securities of the U.S. Government or its agencies or instrumentalities, or other
cash equivalents in which the Fund is permitted to invest. To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. 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.
|X| 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.
o 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.
o 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.
o 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.
o 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.
o 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.
o 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 initial
Futures margin and related option premiums to no more than 5% of the Fund's
total 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.
o 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.
o 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 do any of the
following:
o The Fund cannot invest in real estate, but the Fund may invest in
Municipal Securities or other permitted securities secured by real estate or
interests therein;
o The Fund cannot 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;
o The Fund cannot make short sales of securities;
o The Fund cannot 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
o The Fund cannot invest in other open-end investment companies except
in a merger, consolidation, reorganization or acquisition of assets.
|X| 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, 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 (except Ms. Macaskill, who is not a director of Oppenheimer Money
Market Fund, Inc.) are also trustees or directors of Oppenheimer Fund,
Oppenheimer Growth Fund, Oppenheimer Global Fund, Oppenheimer Money Market Fund,
Inc., Oppenheimer U.S. Government Trust, Oppenheimer Gold & Special Minerals
Fund, Oppenheimer Enterprise Fund, Oppenheimer Discovery Fund, Oppenheimer
Target Fund, Oppenheimer Asset Allocation Fund, Oppenheimer Global Emerging
Growth Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer Municipal Bond
Fund, Oppenheimer California Municipal Fund, Oppenheimer Multi-State Municipal
Trust, Oppenheimer Multi-Sector Income Trust, Oppenheimer World Bond Fund and
Oppenheimer Series Fund, Inc. (collectively, the "New York-based Oppenheimer
funds). Ms. Macaskill, Messrs. Spiro, Donohue, Bowen, Zack, Bishop and Farrar
respectively, hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of December 31, 1996, the Trustees and officers of
the Trust as a group owned of record or beneficially less than 1% of each class
of shares of the Trust and the Fund except Leon Levy, who owns beneficially
1,345,407.308 Class A shares (approximately 2.53% of the outstanding Class A
shares). The foregoing statement does not reflect ownership of shares held of
record by an employee benefit plan for employees of the Manager (for which plan
a Trustee and an officer listed below, Ms. Macaskill, and Mr. Donohue,
respectively, are trustees), 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: 71
31 West 52nd Street, New York, New York, 10019
General Partner of Odyssey Partners, L.P. (investment partnership) and Chairman
of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee,* Age: 63
Vice Chairman of OppenheimerFunds, Inc. (the "Manager"), formerly he held the
following positions: Vice President and Counsel of Oppenheimer Acquisition
Corp., the Manager's parent holding company; Executive Vice President and
General Counsel and a director of the Manager and OppenheimerFunds Distributor,
Inc. (the "Distributor"), Vice President and a director of HarbourView Asset
Management Corporation ("HarbourView") and Centennial Asset Management
Corporation ("Centennial"), investment adviser subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and Shareholder
Services, Inc. ("SSI"), transfer agent subsidiaries of the Manager, and an
officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee, Age: 73
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a Director of Sussex Publishers, Inc.
(Publishers of Psychology Today and Mother Earth News) and of Spy Magazine, L.P.
Bridget A. Macaskill*, President and Trustee; Age 48
President, Chief Executive Officer and a Director of the Manager; Chairman and a
Director of SSI, President and a Director of OAC, HarbourView, and of
Oppenheimer Partnership Holdings, Inc. a holding company subsidiary of the
Manager; a director of Oppenheimer Real Asset Management, Inc.; formerly an
Executive Vice President of the Manager.
Elizabeth B. Moynihan, Trustee, Age: 67
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of Art,
(Smithsonian Institution), the Institute of Fine Arts (New York University) and
the National Building Museum; a member of the Trustees Council, the Preservation
League of New York State; and a member of the Indo-U.S.
Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee, Age: 69
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil and gas producer) Enron-Dominion
Cogen Corp. (cogeneration company), Kemper Corporation (insurance and financial
services company) and Fidelity Life Association (mutual life insurance company);
formerly President and Chief Executive Officer of The Conference Board, Inc.
(international economic and business research) and a director of Lumbermens
Mutual Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee, Age: 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc. (healthcare
provider); formerly New York State Comptroller and a trustee, New York State and
Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age: 64
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship, Inc. (corporate governance consulting); a
director of Professional Staff Limited (U.K.); a trustee of Mystic Seaport
Museum, International House, Greenwich Historical Society.
Donald W. Spiro, Vice Chairman and Trustee,* Age: 70
Chairman Emeritus and a director of the Manager; formerly Chairman of the
Manager and the Distributor.
Pauline Trigere, Trustee, Age: 84
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
Clayton K. Yeutter, Trustee, Age: 65
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T. Industries,
Ltd. (tobacco and financial services), Caterpillar, Inc. (machinery), ConAgra,
Inc. (food and agricultural products), Farmers Insurance Company (insurance),
FMC Corp. (chemicals and machinery), IMC Global Inc. (Chemicals and animal feed)
and Texas Instruments, Inc. (electronics); formerly (in descending chronological
order) Counsellor to the President (Bush) for Domestic Policy, Chairman of the
Republican National Committee, Secretary of the U.S. Department of Agriculture,
and U.S. Trade Representative.
- -------------------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Andrew J. Donohue, Secretary, Age: 46
Executive Vice President and General Counsel of the Manager and the Distributor;
President and a director of Centennial; Executive Vice President, General
Counsel and a director of HarbourView, SSI, SFSI, and Oppenheimer Partnership
Holdings, Inc.; President and a director of Oppenheimer Real Asset Management,
Inc.; General Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of Multisource Services, Inc. (a broker-dealer); an officer of other
Oppenheimer funds; formerly Senior Vice President and Associate General Counsel
of the Manager and the Distributor, 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: 53
Senior Vice President of the Manager; an officer of other Oppenheimer funds.
George C. Bowen, Treasurer, Age: 60
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and Treasurer
of the Distributor and HarbourView; Senior Vice President, Treasurer, Assistant
Secretary and a director of Centennial; Senior Vice President, Treasurer, and
Secretary of SSI; Vice President, Treasurer and Secretary of SFSI; Treasurer of
OAC; Vice President and Treasurer of Oppenheimer Real Asset Management, Inc.;
Chief Executive Officer, Treasurer and a director of Multisource Services, Inc.
(a broker-dealer); an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary, Age: 48
Senior Vice President and Associate General Counsel of the Manager; Assistant
Secretary of SSI and SFSI; an officer of other Oppenheimer funds.
Robert Bishop, Assistant Treasurer, Age: 37
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; previously a Fund Controller for the Manager, prior to which
he was an Accountant for Yale & Seffinger, P.C., an accounting firm, and
previously an Accountant and Commissions Supervisor for Stuart James Company
Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer, Age: 31
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager.
|X| Remuneration of Trustees. The officers of the Fund and certain
Trustees of the Fund (Ms. Macaskill and Messrs. Galli and Spiro) who are
affiliated with the Manager receive no salary or fees from the Fund. The
remaining Trustees of the Fund received the compensation shown below. The
compensation was paid during its fiscal year ended September 30, 1996. The
compensation from all of the New York-based Oppenheimer funds includes the Fund
and is compensation received as a director Trustee, managing general partner or
member of a committee of the Board of those funds during the calendar year 1996:
<TABLE>
<CAPTION>
Retirement
Benefits Total Compensation
Aggregate Accrued as From All
Compensation Part of New York-based
Name and Position From Fund Fund Expenses Oppenheimer Funds1
<S> <C> <C> <C>
Leon Levy $12,678 $21,454 $152,750
Chairman and Trustee
Benjamin Lipstein $ 7,750 $13,117 $ 91,350
Study Committee Chairman,
Audit Committee
Member and Trustee
Elizabeth B. Moynihan $ 7,750 $13,117 $ 91,350
Study Committee
Member2 and Trustee
Kenneth A. Randall $ 7,049 $11,929 $ 83,450
Audit Committee
Chairman and Trustee
Edward V. Regan $ 6,186 $10,468 $ 78,150
Proxy Committee Chairman,
Audit Committee
Member2 and Trustee
Russell S. Reynolds, Jr. $ 4,685 $ 7,927 $ 58,800
Proxy Committee Member
and Trustee
Pauline Trigere, Trustee $ 4,685 $ 7,927 $ 55,300
Clayton K. Yeutter $ 4,685 $ 7,927 $ 58,800
Proxy Committee Member
and Trustee
</TABLE>
- ----------------------
1 For the 1996 calendar year.
2Committee position held during a portion of the period shown. The Study and
Audit Committees meet for all of the New York-based Oppenheimer funds and the
fees are allocated among the funds by the Board.
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was received.
A Trustee must serve in that capacity for any of the New York-based Oppenheimer
funds for at least 15 years to be eligible for the maximum payment. Because each
Trustee's retirement benefits will depend on the amount of the Trustee's future
compensation and length of service, the amount of those benefits cannot be
determined at this time, nor can the Fund estimate the number of years of
credited service that will be used to determine those benefits.
|X| Major Shareholders. As of December 31, 1996, no person owned of record
or is known by the Fund to own beneficially 5% or more of the Fund's outstanding
Class A or Class B shares. The only persons owning of record or know by the Fund
to own beneficially 5% of the Fund's Class C shares were Mrs. Gloria
Fleckenstein, 145 East 15th Street, Apt. 17B, New York, NY 10003, who owned of
record 30,174.473 shares (approximately 9.73% of the Fund's outstanding Class C
shares), Karl W. Bohne & Lillian N. Bohne & Ralph Bohne & Henry L. Bohne, JT TEN
WROS NOT/TC, 2 Rose CT., Commack, NY 11725-3713, who owned beneficially
16,820.076 shares (approximately 6.49% of the Fund's outstanding Class C
shares), and Sally B. Lewis, 48 Surrey Mall, Slingerlands, NY 12159-9650, who
owned of record 13,075.736 shares (approximately 5.04% of the Fund's outstanding
Class C shares).
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom may also serve as officers of the Fund, and
three of whom (Ms. Macaskill and Messrs. Galli and Spiro) serve as Trustees of
the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees, including
portfolio managers, that would compete with or take advantage of the Fund's
portfolio transactions. Compliance with the Code of Ethics is carefully
monitored and strictly enforced by the Manager.
|X| The Investment Advisory Agreement. The Investment Advisory Agreement between
the Manager and the Fund requires the Manager, at its expense, to provide the
Fund with adequate office space, facilities and equipment, and to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective corporate administration for the Fund, including the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and the composition of proxy
materials and registration statements for continuous public sale of shares of
the Fund.
Expenses not expressly assumed by the Manager under the Investment
Advisory Agreement or by the Distributor under the General Distributor's
Agreement are paid by the Fund. The Investment Advisory Agreement lists examples
of expenses paid by the Fund, the major categories of which relate to interest,
taxes, fees to certain Trustees, legal and audit expenses, custodian and
transfer agent expenses, share issuance costs, certain printing and registration
costs, brokerage commissions, and non-recurring expenses, including litigation
costs.
The Investment Advisory Agreement contains no expense limitation.
However, because of state regulations limiting fund expenses that previously
applied, the Manager had voluntarily undertaken that the Fund's total expenses
in any fiscal year (including the investment advisory fee but exclusive of
taxes, interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would not exceed the
most stringent state regulatory limitation applicable to the Fund. Due to
changes in federal securities laws, such state regulations no longer apply and
the Manager's undertaking is therefore inapplicable and has been withdrawn.
During the Fund's last fiscal year, the Fund's expenses did not exceed the most
stringent state regulatory limit and the voluntary undertaking was not invoked.
For the fiscal years ended September 30, 1994, 1995 and 1996, the management
fees paid by the Fund to the Manager were $4,074,417, $3,833,144 and $4,014,768,
respectively.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard for its obligations and duties under the advisory agreement,
the Manager is not liable for any loss sustained by reason of any investment of
Fund assets made with due care and in good faith. The advisory agreement permits
the Manager to act as investment adviser for any other person, firm or
corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment adviser to the
Fund, the right of the Fund to use the name "Oppenheimer" as part of its name
may be withdrawn.
|X| The Distributor. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares, but is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales, excluding payments under the Distribution and Service Plans but including
advertising and the cost of printing and mailing prospectuses (other than those
furnished to existing shareholders), are borne by the Distributor. During the
Fund's fiscal years ended September 30, 1994, 1995 and 1996, the aggregate sales
charges on sales of the Fund's Class A shares were $2,933,373, $1,403,152 and
$1,211,472, respectively, of which the Distributor and an affiliated
broker-dealer retained in the aggregate $551,881, $259,977 and $253,441, in
those respective years. During the Fund's fiscal year ended September 30, 1996,
the contingent deferred sales charge collected on the Fund's Class B shares
totaled $269,168, all of which the Distributor retained. Class C shares had no
contingent deferred sales charge collected for the fiscal year ended September
30, 1996. 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.
|X| The Transfer Agent. The Fund's Transfer Agent, OppenheimerFunds
Services, a division of the Manager, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for shareholder
servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties
of the Manager under the Investment Advisory Agreement is to arrange the
portfolio transactions for the Fund. The Investment Advisory Agreement contains
provisions relating to the employment of broker-dealers ("brokers") to effect
the Fund's portfolio transactions. In doing so, the Manager is authorized by the
Investment Advisory Agreement to employ such broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company Act, as
may, in its best judgment based on all relevant factors, implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such transactions.
The Manager need not seek competitive commission bidding but is expected to
minimize the commissions paid to the extent consistent with the interest and
policies of the Fund as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund and/or the
other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination is made by the
Manager 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 and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's portfolio
traders upon recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and allocate brokerage,
also subject to the provisions of the Investment Advisory Agreement and the
procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. As most purchases
made by the Fund are principal transactions at net prices, the Fund does not
incur substantial brokerage costs. The Fund usually deals directly with the
selling or purchasing principal or market maker without incurring charges for
the services of a broker on its behalf unless it is determined that a better
price or execution may be obtained by utilizing the services of a broker.
Purchases of portfolio securities from underwriters include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
include a spread between the bid and asked price. The Fund seeks to obtain
prompt execution of orders at the most favorable net 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 or for 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 service provided by brokers broadens the scope and supplement
the research activities of the Manager, by making available additional views for
consideration and comparisons, and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the Investment
Advisory Agreement or the Distribution Plans described below) annually reviews
information furnished by the Manager as to the commissions paid to brokers
furnishing such services so that the Board may ascertain whether the amount of
such commissions was reasonably related to the value or benefit of such
services.
Other funds advised by the Manager have investment objectives and
policies similar to those of the Fund. Such other funds may purchase or sell the
same securities at the same time as the Fund, which could affect the supply and
price of such securities. If two or more of such funds purchase the same
security on the same day from the same dealer, the Manager may average the price
of the transactions and allocate the average among such funds.
During the Fund's fiscal years ended September 30, 1994, 1995 and 1996,
total brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $46,217,
$21,875 and $19,390, respectively. During the Fund's fiscal year ended September
30, 1996, no payments were made to brokers as commissions in return for research
services.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "dividend yield," "tax-equivalent yield," "average annual total return",
"cumulative total return," "average annual total return at net asset value" and
"total return at net asset value" of an investment in a class of Fund shares may
be advertised. An explanation of how yields and total returns are calculated for
each class and the components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the average
annual total returns for each advertised class of shares of the Fund for the 1,
5 and 10-year periods (or the life of the class, if less) ending as of the most
recently ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its yield and total
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 returns for any given past period are not a prediction or
representation by the Fund of future yields or rates of return. The yield and
total returns of each class of shares of the Fund are affected by portfolio
quality, portfolio maturity, the type of investments the Fund holds and its
operating expenses allocated to the particular class.
|X| Standardized Yields
o 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, 1996, the
standardized yields for the Fund's Class A, Class B and Class C shares were
4.64%, 4.12% and 4.06%, respectively.
o Tax-Equivalent Yield. The "tax-equivalent yield" of a class of shares
adjusts the Fund's current yield, as calculated above, by a stated combined
Federal, state and city tax rate. The tax equivalent yield is based on a 30-day
period, and is computed by dividing the tax-exempt portion of the Fund's current
yield (as calculated above) by one minus a stated income tax rate and adding the
result to the portion (if any) of the Fund's current yield that is not tax
exempt. The tax equivalent yield may be used to compare the tax effects of
income derived from the Fund with income from taxable investments at the tax
rates stated. Appendix B includes a tax equivalent yield table, based on various
effective tax brackets for individual taxpayers. Such tax brackets are
determined by a taxpayer's Federal, state and city taxable income (the net
amount subject to Federal and state income taxes after deductions and
exemptions). The tax equivalent yield table assumes that the investor is taxed
at the highest bracket, regardless of whether a switch to non-taxable
investments would cause a lower bracket to apply. For taxpayers with income
above certain levels, otherwise allowable itemized deductions are limited. The
Fund's tax-equivalent yields for its Class A, Class B and Class C shares for the
30-day period ended September 30, 1996, for an individual New York City resident
in the 45.96% combined tax bracket were 8.59%, 7.62% and 7.51%, respectively.
o Dividend Yield and Distribution Return. From time to time the Fund may
quote a "dividend yield" or a "distribution return" for each class. Dividend
yield is based on the dividends paid on shares of a class from dividends derived
from net investment income during a stated period. Distribution return includes
dividends derived from net investment income and from realized capital gains
declared during a stated period. Under those calculations, the dividends and/or
distributions for that class declared during a stated period of one year or less
(for example, 30 days) are added together, and the sum is divided by the maximum
offering price per share of that class on the last day of the period. When the
result is annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
-----------------------------------------------------
Max. Offering Price of the Class (last day of period)
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, 1996, were 5.31% and 5.58% when calculated at maximum offering price and at
net asset value, respectively. The dividend yield on Class B shares for the
30-day period ended September 30, 1996, was 4.83%. The dividend yield on Class C
shares for the 30-day period ended September 30, 1996 was 4.78%. Distribution
returns for the 30-day period ended September 30, 1996 are the same as the
above-quoted dividend yields.
|X| Total Return Information
o Average Annual Total Returns. The "average annual total return" of
each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV"),
according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
o Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
discussed below). For Class B shares, 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 for the first 12 months is
applied, as described in the Prospectus. Total returns also assume that all
dividends and capital gains distributions during the period are reinvested to
buy additional shares at net asset value per share, and that the investment is
redeemed at the end of the period.
The "average annual total returns" on an investment in Class A shares of the
Fund for the one, five and ten year periods ended September 30, 1996 were 1.59%,
5.89% and 6.69%, respectively. The cumulative "total return" on Class A shares
for the ten year period ended September 30, 1996 was 91.11%. The average annual
total returns on an investment in Class B shares for the fiscal year ended
September 30, 1996 and for the period March 1, 1993 (the date Class B shares
were first publicly offered) through September 30, 1996 were .77% and 3.41%,
respectively. The cumulative total return on Class B shares for the period March
1, 1993 through September 30, 1996 was 11.79%. The average annual total returns
for Class C shares for the fiscal year ended September 30, 1996 and for the
period from August 29, 1995 (the date the Class C shares were publicly offered)
through September 30, 1996 were 4.64% and 6.25%, respectively. The average
annual total return and the cumulative total return on an investment in Class C
shares for the period of August 29, 1995 (the date class shares were first
publicly offered) through September 30, 1996 was 6.80%.
o 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 deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
The average annual total returns at net asset value for Class A shares
for the one, five and ten-year periods ended September 30, 1996 were 6.65%,
6.93% and 7.21%, respectively. The cumulative total return at net asset value
for Class A shares for the ten-year period ended September 30, 1996 was 100.64%.
The average annual total returns at net asset value for Class B shares for the
fiscal year ended September 30, 1996 and for the period March 1, 1993 (the date
Class B shares were first publicly offered) through September 30, 1996 were
5.77% and 3.89%, respectively. The cumulative total return at net asset value
for Class B shares for the period March 1, 1993 through September 30, 1996 was
14.64%. The average annual total returns at net asset value for Class C shares
for the fiscal year ended September 30, 1996 and for the period from August 29,
1995 (the date the Class C shares were publicly offered) through September 30,
1996 were 5.64% and 6.25%, respectively. The cumulative total return at net
asset value on an investment in Class C shares for the period of August 29, 1995
(the date class shares were first publicly offered) through September 30, 1996
was 6.80%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment in Class A, Class B or Class C shares of
the Fund, a number of factors should be considered before using such information
as a basis for comparison before using such information with other investments.
|X| Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent mutual
fund monitoring service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The performance of the
Fund is ranked against (i) all other bond funds, other than money market funds,
and (ii) all other 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. The
performance of the Fund's Class A, Class B or Class C shares may be compared in
publications to (i) the performance of various market indices or to other
investments for which reliable performance data is available, and (ii) to
averages, performance rankings or other benchmarks prepared by recognized mutual
fund statistical services.
From time to time the Fund may publish the star ranking of the
performance of its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar ranks mutual funds in
broad investment categories (domestic stock, international stock, taxable bond,
municipal bond and hybrid) based on risk-adjusted investment return. The Fund is
ranked among [category] funds. Investment return measures a fund's or class's
one, three, five and ten-year average annual total returns (depending on the
inception of the fund or class) in excess of 90-day U.S. Treasury bill returns
after considering sales charges and expenses. Risk reflects fund performance
below 90-day U.S. Treasury bill monthly returns. Risk and investment return are
combined to produce star rankings reflecting performance relative to the average
fund in a fund's category. Five stars is the "highest" ranking (top 10%), four
stars is "above average" (next 22.5%), three stars is "average" (next 35%), two
stars is "below average" (next 22.5%) and one star is "lowest" (bottom 10%).
Morningstar ranks the Fund in relation to other rated municipal bond funds.
Rankings are subject to change monthly .
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
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 or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return, and Treasury bills
are guaranteed as to principal and interest by the U.S.
government.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or Transfer Agent), or, on the investor services provided by
them to shareholders of the Oppenheimer funds, other than the performance
rankings of the Oppenheimer funds themselves. Those ratings or rankings of
shareholder/investor services by a third party may compare the Oppenheimer funds
services to those of other mutual fund families selected by the rating or
ranking services, and may be based upon the opinions of the rating or ranking
service itself, based on its research or judgment, or based upon surveys of
investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of the
Investment Company Act, pursuant to which the Fund makes payments to the
Distributor in connection with the distribution and/or servicing of the shares
of that class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on that Plan, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class. For the Distribution and
Service Plan for Class C shares, that vote was cast by the Manager as the sole
initial holder of Class C shares.
In addition, under the Plans the Manager and the Distributor, in their
sole discretion, from time to time, may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers, or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. The Distributor and
the Manager may, in their sole discretion, increase or decrease the amount of
payments they make 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 its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
In addition, because Class B shares of the Fund automatically convert into Class
A shares after six years, the Fund is required by a Securities and Exchange
Commission Rule 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 payments under the 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. No Plan may be amended to increase materially the amount of
payments to be made unless such amendment is approved by shareholders of the
class affected by the amendment. All material amendments must be approved by the
Board and the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly for
its review, detailing the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient that
received any such payment. The report for the Class B and Class C Plans shall
also include the Distributor's distribution costs for that quarter, and such
costs for previous fiscal periods that have been carried forward, as explained
in the Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the Independent
Trustees in the exercise of their fiduciary duty. Each Plan further provides
that while it is in effect, the selection and nomination of those Trustees of
the Fund who are not "interested persons" of the Fund is committed to the
discretion of the Independent Trustees. This does not prevent the involvement of
others in such selection and nomination if the final decision as to any such
selection or nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount, if any,
that may be determined from time to time by a majority of the Fund's Independent
Trustees. Initially, the Board of Trustees has set the fee at the maximum rate
allowed under the Plans and set no minimum amount.
For the fiscal year ended September 30, 1996, payments under the Class
A Plan totaled $1,617,263, all of which was paid by the Distributor to
Recipients, including $31,334 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 fiscal years.
Payments received by the Distributor under the Class A Plan will not be used to
pay any interest expense, carrying charges, or other financial costs, or
allocation of overhead by the Distributor.
The Class B and Class C Plans allow the service fee payment to be paid by
the Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of shares sold.
Pursuant to the Plans, 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 and Class C shares are
redeemed during the first year such shares are outstanding, the Recipient will
be obligated to repay a pro rata portion of the advance of the service fee
payment for those shares to the Distributor. For the fiscal year ended September
30, 1996, payments made under the Class B Plan totaled $984,510, of which the
Distributor paid $6,633 to an affiliate of the Distributor and retained $791,306
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. For the fiscal
year ended September 30, 1996, payments made under the Class C Plan totaled
$7,472, of which $7,458 was retained by the Distributor.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fee on such shares, or
to pay Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be established from
time to time under the Class B and Class C Plans by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B Plan are
subject to the limitations imposed by the Conduct Rules of the National
Association of Securities Dealers, Inc. on payments of asset-based sales charges
and service fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. The
Distributor retains the asset-based sales charge on Class B shares. As to Class
C shares, the Distributor retains the asset-based sales charge during the first
year shares are outstanding and pays the asset-based sales charge as an ongoing
commission to the dealer on Class C shares outstanding for more than a year or
more. Such payments are made to the Distributor under the Plans in recognition
that the Distributor (i) pays sales commissions to authorized brokers and
dealers at the time of sale and pays service fees, as described in the
Prospectus, (ii) may finance such commissions and/or the advance of the service
fee payment to Recipients under those Plans, or may provide such financing from
its own resources, or from an affiliate, (iii) employs personnel to support
distribution of shares, and (iv) may bear the costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders), and state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the method
of purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other person entitled
to receive compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other. The Distributor
will not accept any order for $500,000 or more of Class B shares or $1 million
or more of Class C shares on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the same portfolio
investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on such Class B and Class C shares will be
reduced by incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to any
class are allocated pro rata to the shares of each class, based on the
percentage of the net assets of such class to the Fund's net 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 (a) Distribution Plan fees, (b) incremental transfer and shareholder
servicing agent fees and expenses, (c) registration fees and (d) shareholder
meeting expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset 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 on each day that the Exchange is
open, by dividing the value of the Fund's net assets attributable to that Class
by the number of shares of that class that are outstanding. The Exchange
normally closes at 4:00 P.M., New York time, but may close earlier on some days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual announcement (which is subject to
change) states that it will close on New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. Dealers other than Exchange
members may conduct trading in Municipal Securities on certain days on which the
Exchange is closed (including weekends and holidays) or after 4:00 P.M. on a
regular business day. Because the Fund's net asset values will not be calculated
on those days, the Fund's net asset value per share of each class 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) long-term debt securities
having a remaining maturity in excess of 60 days are valued based on the mean
between the "bid" and "ask" prices determined by a portfolio pricing service
approved by the Fund's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable inquiry; (ii)
debt instruments having a maturity of more than 397 days when issued, and
non-money market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are valued at the
mean between the "bid" and "ask" prices determined by a pricing service approved
by the Fund's Board of Trustees or obtained by the Manager from two active
market makers in the security on the basis of reasonable inquiry; (iii) money
market debt securities that had a maturity of less than 397 days when issued
that have a remaining maturity of 60 days or less are valued at cost, adjusted
for amortization of premiums and accretion of discounts; and (iv) securities
(including restricted securities) not having readily-available market quotations
are valued at fair value determined under the Board's procedures. If the Manager
is unable to locate two market makers willing to give quotes (see (i) and (ii)
above), the security may be priced at the mean between the "bid" and "ask"
prices provided by a single active market maker (which in certain cases may be
the "bid" price if no "ask" price is available).
In the case of Municipal Securities, U.S. Government securities and
corporate bonds, when last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity, and other special factors
involved (such as the tax-exempt status of the interest paid by Municipal
Securities). The Manager may use pricing services approved by the Board of
Trustees to price any of the types of securities described above. The Manager
will monitor the accuracy of such pricing services, which may include comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts, calls, Interest Rate Futures and Municipal Bond Index Futures are
valued at the last sales price on the principal exchange on which they are
traded or on NASDAQ, as applicable, as determined by a pricing service approved
by the Board of Trustees or by the Manager. If there were no sales that day,
value shall be the last sale price on the preceding trading day if it is within
the spread of the closing "bid" and "ask" prices on the principal exchange or on
NASDAQ on the valuation date, or, if not, value shall be the closing "bid" price
on the principal exchange or on NASDAQ on the valuation date. If the put, call
or future is not traded on an exchange or on NASDAQ, it shall be valued at the
mean between "bid" and "ask" prices obtained by the Manager from two active
market makers (which in certain cases may be the "bid" price if no "ask" price
is available). When the Fund writes an option, an amount equal to the premium
received is included in the Fund's Statement of Assets and Liabilities as an
asset, and an equivalent credit is included in the liability section. The credit
is adjusted ("marked-to-market") to reflect the current market value of the call
or put. In determining the Fund's gain on investments, if a call or put written
by the Fund is exercised, the proceeds are increased by the premium received. If
a call or put written by the Fund expires, the Fund has a gain in the amount of
the premium; if the Fund enters into a closing purchase transaction, it will
have a gain or loss, depending on whether the premium received was more or less
than the cost of the closing transaction. If the Fund exercises a put it holds,
the amount the Fund receives on its sale of the underlying investment is reduced
by the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House transfer to
buy the shares. Dividends will begin to accrue on shares purchased by the
proceeds of ACH transfers on the business day the Fund receives Federal Funds
for the purchase through the ACH system before the close of The New York Stock
Exchange. The Exchange normally closes at 4:00 p.m. but may close earlier on
certain days. The proceeds of ACH transfers are normally received by the Fund
three days after the transfers are initiated. The Distributor and the Fund are
not responsible for any delays in purchasing shares resulting from delays in ACH
transmissions. If the Federal Funds are received after the close of the
Exchange, the shares will be purchased and dividends will begin to accrue on the
next regular business day after such Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, parents, grandparents, parents-in-law, brothers and sisters,
sons-and daughters-in-law, a spouse's siblings, a sibling's spouse, aunts,
uncles, nieces and nephews.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-Distributor and include
the following:
Oppenheimer Municipal Bond Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Fund Oppenheimer Discovery
Fund Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Multiple Strategies
Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth
Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income 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
Oppenheimer Enterprise Fund
Oppenheimer International Growth Fund
Oppenheimer Developing Markets Fund
Oppenheimer Quest Growth & Income Value
Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Rochester Fund Municipals*
Oppenheimer Bond Fund for Growth
Limited-Term New York Municipal Fund*
and, the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
- ---------------------------
*Shares of the Fund are not presently exchangeable for shares of these funds.
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund shares
may be subject to a contingent deferred sales charge).
|X| Letters of Intent. A Letter of Intent (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares or Class A and Class B shares of the Fund (and other Oppenheimer
funds) during a 13-month period (the "Letter of Intent period"), which may, at
the investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases of shares which, when added to the investor's holdings of
shares of those funds, will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or distributions of capital gains
and purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to count the
Class A and Class B shares purchased under the Letter to obtain the reduced
sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge) that
applies to a single lump-sum purchase of shares in the amount intended to be
purchased under the letter.
In submitting a Letter, the investor makes no commitment to purchase shares,
but if the investor's purchases of shares within the Letter of Intent period,
when added to the value (at offering price) of the investor's holdings of shares
on the last day of that period, do not equal or exceed the intended purchase
amount, the investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow," below (as those
terms may be amended from time to time). The investor agrees that shares equal
in value to 5% of the intended purchase amount will be held in escrow by the
Transfer Agent subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional Information
and the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those amendments
will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility of the dealer of record and/or
the investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A or B shares acquired in
exchange for either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other Oppenheimer funds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account,
a check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor 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.
|X| Involuntary Redemptions. The Fund's Board of Trustees has the right to
cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the shareholders to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
|X| Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Value Per Share" and that 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 that you
purchase subject to an initial sales charge or Class A contingent deferred sales
charge or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without sales
charge only in Class A shares of the Fund or any of the other Oppenheimer funds
into which shares of the Fund are exchangeable, as described in "How to Exchange
Shares" below, at the net asset value next computed after the Transfer Agent
receives the reinvestment order. This reinvestment privilege does not apply to
Class C shares. The shareholder must ask the Distributor for that privilege at
the time of reinvestment. Any capital gain that was realized when the shares
were redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption, some
or all of the loss may not be tax deductible, depending on the timing and amount
of the reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
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 on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
an order placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the broker or dealer from its customers prior
to the time the Exchange closes (normally that is 4:00 p.m., but may be earlier
on some days) and the order was transmitted to and received by the Distributor
prior to its close of business that day (normally 5:00 P.M.). Ordinarily, for
accounts redeemed by a broker-dealer under this procedure, payment will be made
within three business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents in proper form, with
the signature(s) of the registered owners guaranteed on the redemption document
as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of a payment on the date requested and reserves the right to
amend, suspend or discontinue offering such plans at any time without prior
notice. Because of the sales charge assessed on Class A share purchases,
shareholders should not make regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B and Class C shareholders
should not establish withdrawal plans, because of the imposition of the
contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in the Prospectus under
"Waivers of Class B and Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below and
in the provisions of the OppenheimerFunds Application relating to such Plans, as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed instructions)
to exchange a pre-determined amount of shares of the Fund for shares (of the
same class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus, and below in this Statement of
Additional Information.
|X| 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. It may not be desirable to purchase additional shares of Class
A shares while maintaining automatic withdrawals because of the sales charges
that apply to purchases when made. Accordingly, a shareholder normally may not
maintain an Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal Plan
(the "Plan") as agent for the investor (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the Transfer
Agent upon receiving directions to that effect from the Fund. The Transfer Agent
will also terminate a Plan upon receipt of evidence satisfactory to it of the
death or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend-reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated form.
Upon written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A" shares for
this purpose. All of the Oppenheimer funds offer Class A, B and C shares except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust, Centennial
Tax Exempt Trust, Centennial Government Trust, Centennial New York Tax Exempt
Trust, Centennial California Tax-Exempt Trust, Centennial America Fund, L.P.,
and Daily Cash Accumulation Fund, Inc., which only offer Class A shares, and
Oppenheimer Main Street California Municipal Fund, which only offers Class A and
Class B shares (Class B and Class C shares of Oppenheimer Cash Reserves are
generally available only by exchange from the same class of shares of other
Oppenheimer funds or through OppenheimerFunds sponsored 401(k) plans). A current
list showing which funds offer which class can be obtained by calling the
Distributor at 1-800-525- 7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds, including Rochester Fund Municipals
and Limited Term New York Municipal Fund. Class A shares of Rochester Fund
Municipals or Limited Term New York Municipal Fund acquired on the exchange of
Class M shares of Oppenheimer Bond Fund for Growth may be exchanged for Class M
shares of that fund. For accounts of Oppenheimer Bond Fund for Growth
established after March 8, 1996, Class M shares may be exchanged for Class A
shares of other Oppenheimer funds shares except Rochester Fund Municipals and
Limited Term New York Municipals. Exchanges to Class M shares of Oppenheimer
Bond Fund for Growth are permitted from Class A shares of Oppenheimer Money
Market Fund, Inc. or Oppenheimer Cash Reserves that were acquired by exchange
from Class M shares. Otherwise no exchanges of any class of any Oppenheimer fund
into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value for
shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, 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 shares 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 Oppenheimer funds at net asset value without paying a sales charge.
However, shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds managed by
the Manager or its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds (except Oppenheimer Cash
Reserves) or from any unit investment trust for which reinvestment arrangements
have been made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds. No contingent deferred sales charge is
imposed on exchanges of shares of any class purchased subject to a contingent
deferred sales charge. However, when Class A shares acquired by exchange of
Class A shares of other Oppenheimer funds purchased subject to a Class A
contingent deferred sales charge are redeemed within 18 months of the end of the
calendar month of the initial purchase of the exchanged Class A shares, the
Class A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class B
contingent deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within six years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales charge is
imposed on Class C shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or Class C contingent deferred sales charge will be followed in
determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
Class must specify whether they intend to exchange Class A, Class B or Class C
shares.
The Fund reserves the right to reject telephone or written exchange requests
submitted in bulk by anyone on behalf of more than one account. The Fund may
accept requests for exchanges of up to 50 accounts per day from representatives
of authorized dealers that qualify for this privilege. In connection with any
exchange request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include shares subject
to a restriction cited in the Prospectus or this Statement of Additional
Information or would include shares covered by a share certificate that is not
tendered with the request. In those cases, only the shares available for
exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or have obtained and acknowledged receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial exchanges
of an account made by telephone, any special account features such as Asset
Builder Plans and Automatic Withdrawal Plans will be switched to the new account
unless the Transfer Agent is instructed otherwise. If all telephone lines are
busy (which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value, or as otherwise
described in "How to Buy Shares." Daily dividends 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 shares and Class C
shares are expected to be lower as a result of the asset-based sales charge on
Class B shares 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 shares, Class B shares 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 Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. Not all of the Oppenheimer funds
offer Class B shares and Class C shares. The names of the funds that offer Class
B shares can be obtained by calling the Distributor at 1-800-525-7048. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
either have an existing account in the fund selected for reinvestment or must
obtain a prospectus for that fund and an application from the 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 Oppenheimer
funds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the Manager and
the Custodian have been and will continue to be unrelated to and unaffected by
the relationship between the Fund and the Custodian. It will be the practice of
the Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates. The
Fund's cash balances with the Custodian in excess of $100,000 are not protected
by Federal Deposit Insurance. Such uninsured balances may at times be
substantial.
Independent Auditors. The independent auditors of the Fund audit the 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
Municipal Fund:
We have audited the accompanying statements of investments and assets
and liabilities of Oppenheimer New York Municipal Fund (formerly
Oppenheimer New York Tax-Exempt Fund) as of September 30, 1996, and the
related statement of operations for the year then ended, the statements
of changes in net assets for each of the years in the two year period
then ended and the financial highlights for each of the years in the
five year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30,
1996, 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 Municipal Fund as of
September 30, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the years in the two
year period then ended, and the financial highlights for each of the
years in the five year period then ended, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
October 21, 1996
<PAGE>
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET
VALUE
(UNAUDITED) AMOUNT SEE NOTE
1
=====================================================================
======================================================
MUNICIPAL BONDS AND NOTES--99.2%
- ------------------------------------------------------------------------------------------------------------------
- ---------
NEW YORK--83.8%
<S> <C> <C> <C>
Battery Park City, NY RB, Series A, AMBAC Insured,
5.50%, 11/1/16(1) Aaa/AAA $ 5,000,000 $
4,895,650
- -------------------------------------------------------------------------------------------------------------------
Buffalo, NY GOB, 6.65%, 12/1/13 Aaa/AAA/AAA 500,000
549,890
- -------------------------------------------------------------------------------------------------------------------
Grand Central District Management Assn., Inc.
NY Business District Capital Improvement RRB:
5.125%, 1/1/14 A1/A 1,000,000 917,230
5.25%, 1/1/22 A1/A 2,500,000 2,274,075
- -------------------------------------------------------------------------------------------------------------------
MTA of NY:
RB, Series J, FGIC Insured, 6.375%, 7/1/10 Aaa/AAA/AAA 500,000
534,345
RB, Transportation Facilities Service Contracts,
Series 3, 7.375%, 7/1/08 Baa1/BBB 250,000
285,205
RRB, Commuter Facilities Project, Series B,
MBIA Insured, 6.25%, 7/1/17 Aaa/AAA 350,000
365,340
- -------------------------------------------------------------------------------------------------------------------
Nassau Cnty., NY GOB, Series L, AMBAC Insured,
6.25%, 10/15/09 Aaa/AAA/AAA 500,000
534,530
- -------------------------------------------------------------------------------------------------------------------
NYC GOB:
Inverse Floater, 7.028%, 8/1/08(2) Baa1/BBB+ 9,250,000
8,475,312
Inverse Floater, 8.004%, 8/1/13(2) Baa1/BBB+ 5,000,000
4,743,750
Inverse Floater, 8.004%, 8/1/14(2) Baa1/BBB+ 8,150,000
7,671,187
Prerefunded, Series F, 8.25%, 11/15/17 Aaa/BBB+ 7,820,000
9,196,398
Series B, 8.25%, 6/1/07 Baa1/BBB+ 1,750,000
2,075,815
Series B, FSA Insured, Inverse Floater, 7.149%, 10/1/07(2) Aaa/AAA 7,500,000
7,409,850
Series C-1, 7.50%, 8/1/20 Baa1/BBB+ 200,000
222,274
Unrefunded Balance, Series A, 7.75%, 3/15/03 Baa1/BBB+/A- 150,000
161,767
Unrefunded Balance, Series A, 7.75%, 8/15/16 Baa1/BBB+ 1,120,000
1,255,867
Unrefunded Balance, Series F, 8.25%, 11/15/17 Baa1/BBB+ 680,000
776,247
- -------------------------------------------------------------------------------------------------------------------
NYC GORB:
Series B, MBIA Insured, 6.20%, 8/15/06 Aaa/AAA 3,500,000
3,759,000
Series D, MBIA Insured, 5.75%, 8/1/05 Aaa/AAA 450,000
472,684
Series F, 7.625%, 2/1/14 Baa1/BBB+ 350,000
386,942
- -------------------------------------------------------------------------------------------------------------------
NYC HDC MH RB:
Glenn Garden Project, 6.50%, 1/15/18 NR/NR 2,949,940
2,939,468
Keith Plaza Project, 6.50%, 2/15/18 NR/NR 1,948,840
1,941,961
Series A, 5.625%, 5/1/12 Aa/AA 4,500,000
4,456,035
- -------------------------------------------------------------------------------------------------------------------
NYC Health & Hospital Corp. RRB, AMBAC Insured,
Inverse Floater, 7.45%, 2/15/23(2) Aaa/AAA/AAA 8,300,000
7,521,875
- -------------------------------------------------------------------------------------------------------------------
NYC IDA:
Civic Facility RB, USTA National Tennis Center Project,
FSA Insured, 6.375%, 11/15/14 Aaa/AAA 1,500,000
1,597,740
Civic Facility RB, YMCA of Greater NY, 8%, 8/1/16 NR/NR 3,950,000
4,238,034
RB, VISY Paper, Inc. Project, 7.80%, 1/1/16 NR/NR 6,800,000
7,144,148
RB, VISY Paper, Inc. Project, 7.95%, 1/1/28 NR/NR 6,250,000
6,613,125
Special Facilities RB, Terminal One Group
Assn. Project, 6%, 1/1/15 A/A/A- 6,000,000
5,924,040
Special Facilities RB, Terminal One Group
Assn. Project, 6.125%, 1/1/24 A/A/A- 3,000,000
2,979,990
- -------------------------------------------------------------------------------------------------------------------
NYC MWFA WSS:
RB, Prerefunded, Series A, MBIA Insured, 7.25%, 6/15/15 Aaa/AAA
5,000,000 5,532,450
RB, Prerefunded, Series C, 7.75%, 6/15/20 Aaa/A- 17,250,000
19,737,967
RB, Unrefunded Balance, Series B, 6.375%, 6/15/22 A/A-/A 6,625,000
6,859,856
RRB, Series A, 6%, 6/15/25 A/A-/A 7,235,000
7,282,534
RRB, Series A-1994, 7.10%, 6/15/12 A/A- 275,000
303,361
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET
VALUE
(UNAUDITED) AMOUNT SEE NOTE
1
- ------------------------------------------------------------------------------------------------------------------
- ---------
NEW YORK (CONTINUED)
<S> <C> <C> <C>
NYS DA:
RB, City University--Third General Resolution,
Series 2, 6.875%, 7/1/14 Aaa/AAA/A- $ 500,000 $
554,625
RB, Courts Facilities Lease, Series A, 5.50%, 5/15/10 Baa1/BBB+ 2,115,000
2,042,138
RB, CUS, Prerefunded, Series A, 7.625%, 7/1/20 Aaa/BBB 14,500,000
16,305,975
RB, CUS, Prerefunded, Series F, 7.875%, 7/1/07 Aaa/BBB 7,000,000
7,929,040
RB, CUS, Series V, 5.60%, 7/1/10 Baa1/BBB 10,880,000
10,604,301
RB, Department of Health, Series 1996, 5.75%, 7/1/17 Baa1/BBB/A 8,190,000
7,886,888
RB, Judicial Facilities Lease, Escrowed to Maturity,
MBIA Insured, 7.375%, 7/1/16 Aaa/AAA 2,300,000
2,719,359
RB, Menorah Campus, 7.30%, 8/1/16 NR/AA 195,000
215,467
RB, Pooled Capital Program, Partially Prerefunded,
FGIC Insured, 7.80%, 12/1/05 Aaa/AAA/AAA 6,835,000
7,406,679
RB, Rockefeller University, MBIA Insured, 7.375%, 7/1/14 Aaa/AAA
4,000,000 4,281,880
RRB, Columbia University, 5.75%, 7/1/15 Aaa/AA+ 750,000
749,498
RRB, CUS, Second Series A, 5.75%, 7/1/18 Baa1/BBB 6,750,000
6,613,988
RRB, CUS, Series B, 6%, 7/1/14 Baa1/BBB 10,875,000
11,046,499
RRB, CUS, Series E, 5.75%, 7/1/11 Baa1/BBB 5,955,000
5,925,165
RRB, Episcopal Health, 5.85%, 8/1/13 NR/AAA 500,000
508,680
RRB, Fordham University, FGIC Insured, 5.75%, 7/1/15 Aaa/AAA/AAA
9,100,000 9,093,903
RRB, NY University, Series A, MBIA Insured,
5%, 7/1/09 Aaa/AAA 9,000,000 8,642,430
RRB, St. Vincent's Hospital, 7.375%, 8/1/11 Aa/AAA 150,000
167,519
RRB, SUEFS, Prerefunded, Series A, 7.70%, 5/15/12 Aaa/BBB+/A
9,000,000 10,114,020
RRB, SUEFS, Prerefunded, Series B, 7.25%, 5/15/15 Aaa/BBB+
15,230,000 16,888,242
RRB, SUEFS, Series A, 5.25%, 5/15/15 Baa1/BBB+ 23,090,000
21,393,578
RRB, SUEFS, Series A, 5.25%, 5/15/21 Baa1/BBB+ 5,010,000
4,562,357
RRB, SUEFS, Series B, 5.25%, 5/15/13 Baa1/BBB+/A 1,000,000
935,180
RRB, SUEFS, Series B, 7%, 5/15/16 Baa1/BBB+ 9,020,000
9,614,328
- -------------------------------------------------------------------------------------------------------------------
NYS EFCPC RB, State Revolving Fund:
Series A, 6.60%, 9/15/12 Aaa/AAA/AAA 250,000
273,028
Series C, 7.20%, 3/15/11 Aa/A+/AA 350,000
382,228
Series E, 6.50%, 6/15/14 Aa/A/AA 500,000
533,625
- -------------------------------------------------------------------------------------------------------------------
NYS ERDAEF RB:
Consolidated Edison Co., Series A, 7.50%, 1/1/26 Aa3/A+ 280,000
302,123
Consolidated Edison Co., Series A, 7.75%, 1/1/24 A1/A+ 620,000
650,560
Consolidated Edison Co., Series B, 7.375%, 7/1/24 Aa3/A+ 200,000
210,326
L.I. Lighting Co., Series A, 7.15%, 12/1/20 Ba1/BB+ 7,500,000
7,605,975
L.I. Lighting Co., Series C, 6.90%, 8/1/22 Ba1/BB+ 9,200,000
9,230,360
- -------------------------------------------------------------------------------------------------------------------
NYS ERDAGF RB, Brooklyn Union Gas Co.:
Series B, Inverse Floater, 10.30%, 7/1/26(2) A1/A/A 6,000,000
7,072,500
Series D, MBIA Insured, Inverse Floater, 7.386%, 7/8/26(2) Aaa/AAA/A
2,000,000 1,755,000
- -------------------------------------------------------------------------------------------------------------------
NYS GOB:
6.875%, 3/1/12 A/A- 500,000 543,070
7%, 2/1/09 A/A- 300,000 327,432
- -------------------------------------------------------------------------------------------------------------------
NYS GORB, 7.50%, 11/15/00 A/A- 500,000
554,475
- -------------------------------------------------------------------------------------------------------------------
NYS HFA MH RB, Secured Mtg.:
Program-A, 7.05%, 8/15/24 Aa/NR 350,000
369,173
Program-C, 6.95%, 8/15/24 Aa/NR 235,000
245,977
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET
VALUE
(UNAUDITED) AMOUNT SEE NOTE
1
- ------------------------------------------------------------------------------------------------------------------
- ---------
NEW YORK (CONTINUED)
<S> <C> <C> <C>
NYS HFA:
RB, Prerefunded, 8%, 11/1/08 Aaa/BBB+ $ 2,690,000 $
3,078,732
RB, Unrefunded Balance, 8%, 11/1/08 Baa/BBB+ 550,000
615,676
RRB, Unrefunded Balance, 7.90%, 11/1/99 Baa2/BBB+ 2,720,000
2,950,112
RRB, Housing Mtg., Series A, 6.10%, 11/1/15 Aaa/AAA 12,375,000
12,559,140
RRB, State University Construction,
Escrowed to Maturity, Series A, 7.90%, 11/1/06 Aaa/AAA 1,750,000
2,086,998
- -------------------------------------------------------------------------------------------------------------------
NYS HFASC:
Obligation RB, Series A, 6%, 3/15/26 Baa1/BBB 10,000,000
9,816,700
RB, Prerefunded, Series A, 7.375%, 9/15/21 Aaa/AAA 9,050,000
10,346,141
RB, Prerefunded, Series A, 7.80%, 9/15/20 Aaa/AAA 3,840,000
4,356,211
RB, Series D, 5.375%, 3/15/23 Baa1/BBB 9,000,000
8,024,220
- -------------------------------------------------------------------------------------------------------------------
NYS Local GAC:
GORB, Series A, 6%, 4/1/16 A/A/A+ 5,875,000
5,950,318
RB, Prerefunded, Series C, 7%, 4/1/21(3) Aaa/AAA/AAA 9,455,000
10,532,775
RB, Series A, 5.375%, 4/1/14 A/A/A+ 5,500,000
5,309,535
RB, Series A, 7%, 4/1/12 A/A/A+ 700,000
785,029
RRB, Series B, 5.50%, 4/1/21 A/A/A+ 10,000,000
9,578,700
RRB, Series C, 5%, 4/1/21 A/A/A+ 15,000,000
13,413,750
RRB, Series E, 5%, 4/1/21 A/A/A+ 500,000
454,395
- -------------------------------------------------------------------------------------------------------------------
NYS MCFFA:
RB, Hospital & Nursing Home Project,
Series D, 6.45%, 2/15/09 Aa/AAA 355,000
381,401
RB, Long-Term Health Care, Series C,
FSA Insured, 6.40%, 11/1/14 Aaa/AAA 2,800,000
2,949,996
RB, Mental Health Services Facilities, Prerefunded,
Series B, 7.875%, 8/15/20 Aaa/AAA 5,445,000
6,177,843
RB, Mental Health Services Facilities,
Series A, 7.70%, 2/15/18 Baa1/BBB+ 765,000
811,145
RB, Mental Health Services Facilities,
Series A, AMBAC Insured, 5.70%, 8/15/14 Aaa/AAA/AAA 500,000
500,290
RB, Mental Health Services Facilities, Series A,
FGIC Insured, 6.375%, 8/15/17 Aaa/AAA/AAA 5,000,000
5,241,850
RB, Mental Health Services Facilities,
Series B, 7.875%, 8/15/20 Baa1/BBB+ 8,145,000
9,102,119
RB, Mental Health Services Facilities,
Unrefunded Balance, Series A, 8.875%, 8/15/07 Baa1/BBB+ 6,800,000
7,202,424
RB, NY Hospital, Series A,
AMBAC Insured, 6.75%, 8/15/14 Aaa/AAA/AAA 500,000
547,625
RB, St. Francis Hospital, Series 1998A,
FGIC Insured, 7.625%, 11/1/21 Aaa/AAA/AAA 2,690,000
2,914,319
RB, St. Luke's Hospital Center Mtg., Prerefunded,
Series B, 7.45%, 2/15/29 Aaa/AAA 7,500,000
8,312,925
RRB, Mental Health Services Facilities, Series F,
MBIA Insured, 5.375%, 2/15/14 Aaa/AAA 6,600,000
6,371,970
RRB, North Shore University Hospital,
MBIA Insured, 7.20%, 11/1/20 Aaa/AAA 250,000
275,980
RRB, Presbyterian Hospital, Series A, 5.25%, 8/15/14 Aa/AA 17,440,000
16,463,534
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET
VALUE
(UNAUDITED) AMOUNT SEE NOTE
1
- ------------------------------------------------------------------------------------------------------------------
- ---------
NEW YORK (CONTINUED)
<S> <C> <C> <C>
NYS Mtg. Agency RB:
Homeowner Mtg., Series 1, 7.95%, 10/1/21 Aa/NR $ 2,270,000
$ 2,416,279
Homeowner Mtg., Series UU, 7.75%, 10/1/23 Aa/NR 1,990,000
2,102,833
Homeowner Mtg., Series VV, 7.375%, 10/1/11 Aa/NR 345,000
367,660
Inverse Floater, 6.865%, 10/1/24(2) NR/NR 9,000,000
7,458,750
Series 40-B, 6.40%, 10/1/12 Aa/NR 500,000
513,525
Series B, 8.30%, 10/1/17 Aa/NR 1,720,000
1,771,428
Series C, 8.40%, 10/1/17 Aa/NR 1,700,000
1,744,438
- -------------------------------------------------------------------------------------------------------------------
NYS PAU:
General Purpose RB, Series Z, 6.625%, 1/1/12 Aa/AA- 315,000
339,652
RB, Prerefunded, Series V, 8%, 1/1/17 NR/AA 5,680,000
6,066,694
- -------------------------------------------------------------------------------------------------------------------
NYS Thruway Authority:
General RB, Series A, 5.75%, 1/1/19 A1/A 10,000,000
9,772,100
Service Contract RB, Local Highway & Bridge,
5.125%, 4/1/07 Baa1/BBB 500,000 478,465
- -------------------------------------------------------------------------------------------------------------------
NYS UDC:
RB, Correctional Facilities Project, Prerefunded,
Series G, 7.25%, 1/1/14 Aaa/NR 3,650,000
4,020,986
RB, Series A, MBIA Insured, 5.50%, 4/1/16 Aaa/AAA/AAA 7,500,000
7,381,125
RRB, Correctional Facilities Project,
FSA Insured, 5.50%, 1/1/15 Aaa/AAA/A 10,000,000
9,680,300
RRB, Correctional Facilities Project, Series A,
FSA Insured, 5.50%, 1/1/16 Aaa/AAA/A 500,000
488,070
- -------------------------------------------------------------------------------------------------------------------
Onondaga Cnty., NY Resources Recovery Agency RB,
Resources Recovery Facilities Project, 7%, 5/1/15 Baa/NR/A- 15,600,000
15,966,444
- -------------------------------------------------------------------------------------------------------------------
PANYNJ:
Consolidated RB, 69th Series, 7.125%, 6/1/25 A1/AA-/AA- 4,155,000
4,508,840
Consolidated RRB, 78th Series, 6.50%, 4/15/11 A1/AA-/AA- 250,000
266,788
Consolidated RRB, 89th Series, 5%, 10/1/13 A1/AA-/AA- 500,000
467,115
Special Obligation RRB, KIAC-4 Project,
5th Installment, 6.75%, 10/1/19 NR/NR 12,600,000
12,740,364
- -------------------------------------------------------------------------------------------------------------------
TBTA of NY:
General Purpose RB, Series A, 5%, 1/1/12 Aa/A+ 15,755,000
14,846,567
General Purpose RB, Series A, 5%, 1/1/15 Aa/A+ 7,500,000
6,928,500
General Purpose RB, Series X, 6%, 1/1/14 Aa/A+ 14,510,000
14,707,046
General Purpose RB, Series Y, 5.50%, 1/1/17 Aa/A+ 15,000,000
14,917,050
General Purpose RRB, Series B, 5%, 1/1/20 Aa/A+ 500,000
460,910
Special Obligation RRB, Series A,
MBIA Insured, 6.625%, 1/1/17 Aaa/AAA 500,000
537,740
------------
646,355,055
- ------------------------------------------------------------------------------------------------------------------
- ---------
U.S. POSSESSIONS--15.4%
PR Commonwealth:
Aqueduct & Sewer Authority RB,
Escrowed to Maturity, 10.25%, 7/1/09 Aaa/AAA 500,000
695,820
GORB, 5.25%, 7/1/18 Baa1/A 20,000,000
18,451,200
GORB, 7.625%, 7/1/10 NR/AAA 3,000,000
3,387,000
GORB, FSA Insured, Inverse Floater, 7.962%, 7/1/20(2) Aaa/AAA
11,500,000 11,428,125
GORB, Prerefunded, 7.70%, 7/1/20 NR/AAA 5,000,000
5,657,850
HTA RB, Prerefunded, Series S, 6.50%, 7/1/22 NR/AAA 13,500,000
14,963,535
HTA RB, Series W, Inverse Floater, 6.645%, 7/1/10(2) Baa1/A 9,000,000
8,403,750
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET
VALUE
(UNAUDITED) AMOUNT SEE NOTE
1
- ------------------------------------------------------------------------------------------------------------------
- ---------
U.S. POSSESSIONS (CONTINUED)
<S> <C> <C> <C>
Infrastructure Financing Authority Special Tax RB,
Series A, 7.75%, 7/1/08 Baa1/BBB+ $ 6,000,000 $
6,456,180
- -------------------------------------------------------------------------------------------------------------------
PR EPA:
RB, Series O, 5%, 7/1/12 Baa1/BBB+ 500,000
454,920
RRB, Series N, 5%, 7/1/12 Baa1/BBB+ 7,045,000
6,409,823
- -------------------------------------------------------------------------------------------------------------------
PR Housing Bank & Finance Agency Single Family
Mtg. RB, Homeownership-Fourth Portfolio,
Prerefunded, 8.50%, 12/1/18 Aaa/NR 1,580,000
1,894,941
- -------------------------------------------------------------------------------------------------------------------
PR Industrial, Medical & Environmental PC:
Facilities Financing Authority RB, American Airlines, Inc.
Project, Series A, 6.45%, 12/1/25 Baa1/BB+ 850,000
873,146
Facilities Financing Authority RB,
Warner Lambert Co. Project, 7.60%, 5/1/14 A1/NR 3,000,000
3,274,110
RB, American Home Products, 5.10%, 12/1/18 Aaa/NR 500,000
455,155
- -------------------------------------------------------------------------------------------------------------------
PR Port Authority RB, American Airlines Special
Facilities Project, Series A, 6.25%, 6/1/26 Baa3/BBB+ 8,000,000
8,062,400
- -------------------------------------------------------------------------------------------------------------------
PR Public Buildings Authority Guaranteed Public
Education & Health Facilities RB:
Prerefunded, Series L, 6.875%, 7/1/21 Aaa/AAA 5,400,000
6,083,910
Series M, 5.75%, 7/1/15 Baa1/A 11,500,000
11,298,290
- -------------------------------------------------------------------------------------------------------------------
PR Telephone Authority RB, MBIA Insured,
Inverse Floater, 7.065%, 1/16/15(2) Aaa/AAA 11,000,000
10,271,250
------------
118,521,405
------------
Total Municipal Bonds and Notes (Cost $752,471,413)
764,876,460
=====================================================================
======================================================
Short-Term Tax-Exempt Obligations--0.1%
- ------------------------------------------------------------------------------------------------------------------
- ---------
NYS Energy Research & Development Authority PC RRB,
Orange/Rockland Utility Project, Series A,
FGIC Insured, 3.60%, 10/1/96 (Cost $600,000)(4) 600,000
600,000
- ------------------------------------------------------------------------------------------------------------------
- ---------
TOTAL INVESTMENTS, AT VALUE (COST $753,071,413)
99.3% 765,476,460
- ------------------------------------------------------------------------------------------------------------------
- ---------
OTHER ASSETS NET OF LIABILITIES 0.7
5,089,471
------------ ------------
NET ASSETS 100.0% $770,565,931
============ ============
</TABLE>
1. When-issued security to be delivered and settled after September 30,
1996. 2. Represents the current interest rate for a variable rate bond.
These bonds known as "inverse floaters" pay interest at a rate that
varies inversely with short-term interest rates. As interest rates rise,
inverse floaters produce less current income. Their price may be more
volatile than the price of a comparable fixed-rate security. Inverse
floaters amount to $82,211,349 or 10.67% of the Fund's net assets at
September 30, 1996. 3. Securities with an aggregate market value of
$2,534,327 are held in collateralized accounts to cover initial margin
requirements on open futures sales contracts. See Note 5 of Notes to
Financial Statements. 4. Floating or variable rate obligation maturing
in more than one year. The interest rate, which is based on specific, or
an index of, market interest rates, is subject to change periodically
and is the effective rate on September 30, 1996. This instrument may
also have a demand feature which allows the recovery of principal at any
time, or at specified intervals not exceeding one year, on up to 30
days' notice. Maturity date shown represents effective maturity based on
variable rate and, if applicable, demand feature.
<PAGE>
- --------------------------------------------------------------------------------
As of September 30, 1996, securities subject to the alternative minimum
tax amounted to $92,289,229 or 12% of the Fund's net assets.
Distribution of investments by industry, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
INDUSTRY MARKET VALUE PERCENT
----------------------------------------------------------------------
<S> <C> <C>
Education $155,257,364 20.3%
Lease/Rental 128,618,308 16.8
Transportation 100,583,655 13.1
General Obligation Bonds 93,990,986 12.3
Utilities 79,920,772 10.4
Housing 53,677,040 7.0
Special Tax Bonds 49,721,669 6.5
Hospitals 39,535,174 5.2
Pollution Control 28,615,724 3.7
Corporate-Backed Municipals 26,422,084 3.5
Revenue Bonds 4,895,650 0.6
Industrial Development 4,238,034 0.6
------------ -----
$765,476,460 100.0%
============ =====
</TABLE>
To simplify the listings of the Oppenheimer New York Municipal Fund
holdings in the Statement of Investments, we have abbreviated the
descriptions of many of the securities per the table below:
<TABLE>
<S> <C> <C>
BOE --Board of Education HFASC --Housing Finance Agency
Service Contract
CDA --Communities Development Authority HFAU --Health Facilities Authority
CDC --Community Development Corporation HFDC --Health Facilities
Development
Corporation
COP --Certificates of Participation HTA --Highway & Transportation
Authority
CUS --City University System IDA --Industrial Development
Authority
DA --Dormitory Authority LMC --Loan Marketing Corporation
EFCPC --Environmental Facilities Corporation MCFFA --Medical Care Facilities
Finance Agency
Pollution Control MH --Multifamily Housing
EPA --Electric Power Authority MTA --Metropolitan Transportation
Authority
ERDAEF --Energy Research & Development MWFA --Municipal Water Finance
Authority
Authority Electric Facilities NYC --New York City
ERDAGF --Energy Research & Development NYS --New York State
Authority Gas Facilities PANYNJ --Port Authority of New York
& New Jersey
FA --Facilities Authority PAU --Power Authority
GAC --Government Assistance Corporation PC --Pollution Control
GOB --General Obligation Bonds RB --Revenue Bonds
GORB --General Obligation Refunding Bonds RR --Resource Recovery
HA --Hospital Authority RRB --Revenue Refunding Bonds
HDA --Hospital Development Authority SAC --Student Assistance
Corporation
HDC --Housing Development Corporation SUEFS --State University Educational
Facilities System
HEAA --Higher Education Assistance Agency SWD --Solid Waste Disposal
HEFA --Higher Educational Facilities Authority TBTA --Triborough Bridge & Tunnel
Authority
HF --Health Facilities UDC --Urban Development Corporation
HFA --Housing Finance Agency WSS --Water & Sewer System
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
=====================================================================
======================================================
<S> <C>
ASSETS
Investments, at value (cost $753,071,413)--see accompanying statement
$765,476,460
- -------------------------------------------------------------------------------------------------------------------
Cash 327,357
- -------------------------------------------------------------------------------------------------------------------
Receivables:
Interest 13,172,801
Shares of beneficial interest sold 2,011,500
Daily variation on futures contracts--Note 5 140,625
- -------------------------------------------------------------------------------------------------------------------
Other 18,527
------------
Total assets 781,147,270
=====================================================================
======================================================
LIABILITIES
Payables and other liabilities:
Investments purchased 4,899,483
Dividends 2,528,846
Shares of beneficial interest redeemed 2,149,260
Distribution and service plan fees 465,569
Trustees' fees 301,846
Transfer and shareholder servicing agent fees 81,309
Other 155,026
------------
Total liabilities 10,581,339
=====================================================================
======================================================
NET ASSETS $770,565,931
============
=====================================================================
======================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $763,238,702
- -------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 620,943
- -------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions
(5,355,011)
- -------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5
12,061,297
------------
Net assets $770,565,931
============
=====================================================================
======================================================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $667,257,677 and 53,767,908 shares of beneficial interest outstanding)
$12.41
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $13.03
- -------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $101,301,593 and 8,160,381 shares of beneficial interest outstanding)
$12.41
- -------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $2,006,661 and 161,657 shares of beneficial interest outstanding)
$12.41
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
=====================================================================
======================================================
<S> <C>
INVESTMENT INCOME
Interest $50,277,244
=====================================================================
======================================================
EXPENSES
Management fees--Note 4 4,014,768
- -------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 1,617,263
Class B 984,510
Class C 7,472
- -------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4
608,275
- -------------------------------------------------------------------------------------------------------------------
Shareholder reports 233,985
- -------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 208,938
- -------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 100,488
- -------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 59,539
- -------------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class B 3,277
Class C 700
- -------------------------------------------------------------------------------------------------------------------
Other 57,514
-----------
Total expenses 7,896,729
=====================================================================
======================================================
NET INVESTMENT INCOME
42,380,515
=====================================================================
======================================================
REALIZED AND
UNREALIZED GAIN
Net realized gain on:
Investments 4,288,943
Closing of futures contracts 1,656,867
-----------
Net realized gain 5,945,810
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
425,530
-----------
Net realized and unrealized gain 6,371,340
=====================================================================
======================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$48,751,855
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1996 1995
=====================================================================
======================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 42,380,515 $ 42,025,406
- -------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 5,945,810 (14,337,688)
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 425,530
38,448,536
------------ ------------
Net increase in net assets resulting from operations 48,751,855
66,136,254
=====================================================================
======================================================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (37,568,731) (38,964,531)
Class B (4,655,633) (4,185,973)
Class C (34,664) (60)
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (1,474,250)
Class B -- (195,772)
=====================================================================
======================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial interest
transactions--Note 2:
Class A (11,537,144) (32,998,922)
Class B 9,460,309 14,665,131
Class C 1,966,687 25,059
=====================================================================
======================================================
NET ASSETS
Total increase 6,382,679 3,006,936
- -------------------------------------------------------------------------------------------------------------------
Beginning of period 764,183,252 761,176,316
------------ ------------
End of period [including undistributed (overdistributed) net
investment income of $620,943 and $(2,195,669), respectively] $770,565,931
$764,183,252
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
=====================================================================
================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.29 $11.92 $13.50 $12.59 $12.21
- -------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .68 .69 .74 .73 .79
Net realized and unrealized
gain (loss) .12 .41 (1.46) 1.01 .47
------ ------ ------ ------ ------
Total income (loss) from
investment operations .80 1.10 (.72) 1.74 1.26
- -------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment
income (.68) (.70) (.72) (.75) (.75)
Distributions from net realized gain -- (.03) (.03) (.08) (.13)
Distributions in excess of net
realized gain -- -- (.11) -- --
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.68) (.73) (.86) (.83) (.88)
- -------------------------------------------------------------------------------------
Net asset value, end of period $12.41 $12.29 $11.92 $13.50 $12.59
====== ====== ====== ====== ======
=====================================================================
================
TOTAL RETURN, AT NET ASSET VALUE(3) 6.65% 9.58% (5.55)% 14.33% 10.72%
=====================================================================
================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $667,258 $673,050 $687,233 $756,934 $530,260
- -------------------------------------------------------------------------------------
Average net assets (in thousands) $684,981 $659,465 $738,747 $652,327 $436,876
- -------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.50% 5.76% 5.68% 5.66% 6.33%
Expenses 0.91% 0.90% 0.86% 0.91% 0.96%
- -------------------------------------------------------------------------------------
Portfolio turnover rate(5) 21.2% 15.2% 9.4% 39.1% 30.5%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------ ----------------
YEAR ENDED
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1994 1993(2) 1996 1995(1)
=====================================================================
=============================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.30 $11.93 $13.50 $13.07 $12.30 $12.22
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .60 .60 .64 .36 .60 .05
Net realized and unrealized
gain (loss) .10 .42 (1.45) .44 .09 .08
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations .70 1.02 (.81) .80 .69 .13
- --------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment
income (.59) (.62) (.62) (.37) (.58) (.05)
Distributions from net realized gain -- (.03) (.03) -- -- --
Distributions in excess of net
realized gain -- -- (.11) -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.59) (.65) (.76) (.37) (.58) (.05)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $12.41 $12.30 $11.93 $13.50 $12.41 $12.30
====== ====== ====== ====== ====== ======
=====================================================================
=============================
TOTAL RETURN, AT NET ASSET VALUE(3) 5.77% 8.75% (6.22)% 6.56% 5.64%
1.10%
=====================================================================
=============================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $101,302 $91,108 $73,943 $40,958 $2,007 $25
- --------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 98,488 $81,743 $61,008 $20,454 $ 752 $18
- --------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.73% 4.95% 4.88% 4.45%(4) 4.60% 3.67%(4)
Expenses 1.68% 1.67% 1.65% 1.73%(4) 1.77% 1.37%(4)
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 21.2% 15.2% 9.4% 39.1% 21.2% 15.2%
</TABLE>
1. For the period from August 29, 1995 (inception of offering) to September 30,
1995. 2. For the period from March 1, 1993 (inception of offering) to September
30, 1993. 3. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year. 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 period ended September 30, 1996 were $164,934,339 and
$189,341,203, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
=====================================================================
===========
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer New York Municipal Fund (the Fund) operating under the name
Oppenheimer New York Tax-Exempt Fund through October 9, 1996, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund's
investment objective is to seek maximum current income exempt from
Federal, New York State & New York City income taxes for individual
investors that is consistent with the preservation of capital. The
Fund's investment adviser is OppenheimerFunds, Inc. (the Manager). The
Fund offers Class A, Class B and Class C shares. Class A shares are
sold with a front-end sales charge. Class B and Class C shares may be
subject to a contingent deferred sales charge. All three classes of
shares have identical rights to earnings, assets and voting privileges,
except that each class has its own distribution and/or service plan,
expenses directly attributable to a particular class and exclusive
voting rights with respect to matters affecting a single class. Class B
shares will automatically convert to Class A shares six years after the
date of purchase. The following is a summary of significant accounting
policies consistently followed by the Fund.
------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued
at the last sale price of the day or, in the absence of sales, at
values based on the closing bid or the last sale price on the prior
trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established
by the Board of Trustees to determine fair value in good faith.
Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to maturity of any
premium or discount.
------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any
net realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income or excise tax provision is
required. At September 30, 1996, the Fund had available for federal
income tax purposes an unused capital loss carryover of approximately
$5,752,000, expiring in 2003 and 2004.
------------------------------------------------------------------------
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, 1996, a provision of $131,331 was
made for the Fund's projected benefit obligations and payments of $6,672
were made to retired trustees, resulting in an accumulated liability of
$284,853 at September 30, 1996.
------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment
income each day the New York Stock Exchange is open for business and pay
such dividends monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement
and tax purposes primarily because of premium amortization for tax
purposes. The character of the distributions made during the year from
net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gain
(loss) was recorded by the Fund.
During the year ended September 30, 1996, the Fund
adjusted the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly,
during the year ended September 30, 1996, amounts have been reclassified
to reflect a decrease in paid-in capital of $3,101,107, a decrease in
overdistributed net investment income of $2,695,125, and a decrease in
accumulated net realized loss on investments of $405,982.
=====================================================================
===========
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Original issue discount
on securities purchased is amortized over the life of the respective
securities, in accordance with federal income tax requirements. For
bonds acquired after April 30, 1993, on disposition or maturity, taxable
ordinary income is recognized to the extent of the lesser of gain or
market discount that would have accrued over the holding period.
Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the
same basis used for federal income tax purposes. The Fund concentrates
its investments in New York and, therefore, may have more credit risks
related to the economic conditions of New York than a portfolio with a
broader geographical diversification.
The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
=====================================================================
===========
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996 YEAR ENDED
SEPTEMBER 30, 1995(1)
----------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 4,043,999 $ 50,569,882 6,112,332 $ 73,644,378
Issued in connection with the
acquisition of Quest for Value
New York Tax-Exempt Fund--Note 6 2,350,157 29,517,976 --
--
Dividends and distributions reinvested 2,105,244 26,158,018 2,407,670
28,865,634
Redeemed (9,480,179) (117,783,020) (11,415,065)
(135,508,934)
---------- ------------ ----------- ------------
Net decrease (980,779) $(11,537,144) (2,895,063)
$(32,998,922)
========== ============ ===========
============
-----------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,631,788 $ 20,375,193 1,966,120 $ 23,621,179
Dividends and distributions reinvested 244,423 3,035,829 240,583
2,892,411
Redeemed (1,123,717) (13,950,713) (998,399)
(11,848,459)
---------- ------------ ----------- ------------
Net increase 752,494 $ 9,460,309 1,208,304 $ 14,665,131
========== ============ ===========
============
-----------------------------------------------------------------------------------------------------------------
Class C:
Sold 170,206 $ 2,101,116 2,032 $25,059
Dividends and distributions reinvested 2,083 25,651 -- --
Redeemed (12,664) (160,080) -- --
---------- ------------ ----------- ------------
Net increase 159,625 $ 1,966,687 2,032 $ 25,059
========== ============ ===========
============
</TABLE>
1. For the year ended September 30, 1995 for Class A and Class B shares
and for the period from August 29, 1995 (inception of offering) to
September 30, 1995 for Class C shares.
=====================================================================
===========
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments of
$12,405,047 was composed of gross appreciation of $23,943,925, and gross
depreciation of $11,538,878.
<PAGE>
Notes to Financial Statements (Continued)
=====================================================================
===========
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of
0.60% on the first $200 million of average annual net assets, 0.55% on
the next $100 million, 0.50% on the next $200 million, 0.45% on the next
$250 million, 0.40% on the next $250 million and 0.35% on net assets in
excess of $1 billion. The Manager has agreed to assume Fund expenses
(with specified exceptions) in excess of the most stringent applicable
regulatory limit on Fund expenses.
For the year ended September 30, 1996, commissions
(sales charges paid by investors) on sales of Class A shares totaled
$1,211,472, of which $253,441 was retained by OppenheimerFunds
Distributor, Inc. (OFDI), a subsidiary of the Manager, as general
distributor, and by an affiliated broker/dealer. Sales charges advanced
to broker/dealers by OFDI on sales of the Fund's Class B and Class C
shares totaled $741,328 and $18,148, of which $15,725 was paid to an
affiliated broker/dealer for Class B. During the year ended September
30, 1996, OFDI received contingent deferred sales charges of $269,168
upon redemption of Class B shares, as reimbursement for sales
commissions advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the
Manager, is the transfer and shareholder servicing agent for the Fund,
and for other registered investment companies. OFS's total costs of
providing such services are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares
to reimburse OFDI for a portion of its costs incurred in connection with
the personal service and maintenance of accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of the
Fund. OFDI uses the service fee to reimburse brokers, dealers, banks and
other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares.
During the year ended September 30, 1996, OFDI paid $31,334 to an
affiliated broker/dealer as reimbursement for Class A personal service
and maintenance expenses.
The Fund has adopted compensation type Distribution and
Service Plans for Class B and Class C shares to compensate OFDI for its
services and costs in distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B shares and on
Class C shares, as compensation for sales commissions paid from its own
resources at the time of sale and associated financing costs. If the
Plans are terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge to OFDI for
certain expenses it incurred before the Plans were terminated. OFDI also
receives a service fee of 0.25% per year as compensation for costs
incurred in connection with the personal service and maintenance of
accounts that hold shares of the Fund, including amounts paid to
brokers, dealers, banks and other financial institutions. Both fees are
computed on the average annual net assets of Class B and Class C shares,
determined as of the close of each regular business day. During
the year ended September 30, 1996, OFDI paid $6,633 to an affiliated
broker/dealer as compensation for Class B personal service and
maintenance expenses and retained $791,306 and $7,458, respectively, as
compensation for Class B and Class C sales commissions and service fee
advances, as well as financing costs. At September 30, 1996, OFDI had
incurred unreimbursed expenses of $3,195,951 for Class B and $23,950 for
Class C.
=====================================================================
===========
5. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to
gain exposure to or protect against changes in interest rates. The Fund
may also buy or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge
against increases in interest rates and the resulting negative effect on
the value of fixed rate portfolio securities. The Fund may also purchase
futures contracts to gain exposure to changes in interest rates as it
may be more efficient or cost effective than actually buying fixed
income securities.
Upon entering into a futures contract, the Fund is
required to deposit either cash or securities in an amount (initial
margin) equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Fund each day.
The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains and losses. The Fund
recognizes a realized gain or loss when the contract is closed or
expires.
Securities held in collateralized accounts to cover
initial margin requirements on open futures contracts are noted in the
Statement of Investments. The Statement of Assets and Liabilities
reflects a receivable or payable for the daily mark to market for
variation margin.
Risks of entering into futures contracts (and related
options) include the possibility that there may be an illiquid market
and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
At September 30, 1996, the Fund had outstanding futures contracts to
sell debt securities as follows:
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF VALUATION AS OF
UNREALIZED
DATE FUTURES CONTRACTS SEPTEMBER 30, 1996
DEPRECIATION
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds 12/96 500 $54,593,750 $343,750
</TABLE>
=====================================================================
===========
6. ACQUISITION OF QUEST FOR
VALUE NEW YORK
TAX-EXEMPT FUND
On November 24, 1995, Oppenheimer New York Municipal Fund acquired all
of the net assets of Quest for Value New York Tax-Exempt Fund, pursuant
to an Agreement and Plan of Reorganization approved by the Quest for
Value New York Tax-Exempt Fund shareholders on November 16, 1995. The
Fund issued 2,350,157 Class A shares of beneficial interest, valued at
$29,517,976, in exchange for the net assets, resulting in combined Class
A net assets of $698,806,316 on November 24, 1995. The net assets
acquired included net unrealized appreciation of $1,513,911. The
exchange qualifies as a tax-free reorganization for federal income tax
purposes.
<PAGE>
APPENDIX A
Descriptions of Ratings Categories
Municipal Bonds
|X| 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.
|X| 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.
|X| 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.
o Duff & Phelps. The ratings of Duff & Phelps are as follows: AAA which are
judged to be the "highest credit quality". The risk factors are negligible,
being only slightly more than for risk-free US Treasury debt. AA+, AA & AA- High
credit quality protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions. A+, A & A-Protection
factors are average but adequate. However, risk factors are more variable and
greater in periods of economic stress. BBB+, BBB & BBB- Below average protection
factors but still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles. BB+, BB & BB- Below investment grade
but deemed to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the category.
B+, B & B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade. CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal interest or preferred
dividends. Protection factors are narrow and risk can be substantial with
unfavorable economic industry conditions, and/or with unfavorable company
developments. DD Defaulted debt obligations issuer failed to meet scheduled
principal and/or interest payments. DP Preferred stock with dividend averages.
Municipal Notes
|X| 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.
|X| 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.
|X| 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
|X| 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.
|X| 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.
|X| 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
September 30, 1996. 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.
<TABLE>
<CAPTION>
New York State Residents
Combined Taxable Income
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 $ 16,000 19.25% 4.33% 4.95% 5.57%
$ 16,000 $ 26,000 20.10% 4.38% 5.01% 5.63%
$ 13,000 $ 24,000 $ 26,000 $ 40,100 21.06% 4.43% 5.07%
5.70%
$ 24,000 $ 58,150 $ 40,100 $ 96,900 33.13% 5.23% 5.98%
6.73%
$ 58,150 $121,300 $ 96,900 $147,700 35.92% 5.46% 6.24%
7.02%
$121,300 $263,700 $147,700 $263,750 40.56% 5.89% 6.73%
7.57%
$263,700 $263,750 43.90% 6.24% 7.13% 8.02%
</TABLE>
<TABLE>
<CAPTION>
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:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13,000 $ 16,000 19.25% 6.19% 6.81% 7.43%
$ 16,000 $ 26,000 20.10% 6.26% 6.88% 7.51%
$ 13,000 $ 24,000 $ 26,000 $ 40,100 21.06% 6.33% 6.97%
7.60%
$ 24,000 $ 58,150 $ 40,100 $ 96,900 33.13% 7.48% 8.22%
8.97%
$ 58,150 $121,300 $ 96,900 $147,700 35.92% 7.80% 8.58%
9.36%
$121,300 $263,700 $147,700 $263,750 40.56% 8.41% 9.25%
10.09%
$263,700 $263,750 43.90% 8.91% 9.80%
10.70%
</TABLE>
<TABLE>
<CAPTION>
New York City Residents
Combined Taxable Income
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>
$ 16,000 $ 26,000 22.65% 4.52% 5.17% 5.82%
$ 26,000 $ 27,000 23.61% 4.58% 5.24% 5.89%
$ 16,000 $ 24,000 $ 27,000 $ 40,100 23.86% 4.60% 5.25%
5.91%
$ 24,000 $ 25,000 $ 40,100 $ 45,000 35.51% 5.43% 6.20%
6.98%
$ 25,000 $ 58,150 $ 45,000 $ 96,900 35.54% 5.43% 6.21%
6.98%
$ 58,150 $ 60,000 $ 96,900 $108,000 38.23% 5.67% 6.48%
7.28%
$ 60,000 $121,300 $108,000 $147,700 38.26% 5.67% 6.48%
7.29%
$121,300 $263,750 $147,700 $263,750 42.74% 6.11% 6.99%
7.86%
$263,750 $263,750 45.96% 6.48% 7.40% 8.33%
</TABLE>
<TABLE>
<CAPTION>
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:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 16,000 $ 26,000 22.65% 6.46% 7.11% 7.76%
$ 26,000 $ 27,000 23.61% 6.55% 7.20% 7.85%
$ 16,000 $ 24,000 $ 27,000 $ 40,100 23.86% 6.57% 7.22%
7.88%
$ 24,000 $ 25,000 $ 40,100 $ 45,000 35.51% 7.75% 8.53%
9.30%
$ 25,000 $ 58,150 $ 45,000 $ 96,900 35.54% 7.76% 8.53%
9.31%
$ 58,150 $ 60,000 $ 96,900 $108,000 38.23% 8.09% 8.90%
9.71%
$ 60,000 $121,300 $108,000 $147,700 38.26% 8.10% 8.91%
9.72%
$121,300 $263,750 $147,700 $263,750 42.74% 8.73% 9.60%
10.48%
$263,750 $263,750 45.96% 9.25% 10.18%
11.10%
</TABLE>
<PAGE>
Appendix C
Municipal Bond Industry Classifications
Electric
Gas
Water
Sewer
Telephone
Adult Living Facilities
Hospital
General Obligation
Special Assessment
Sales Tax
Manufacturing, Non Durables
Manufacturing, Durables
Pollution Control
Resource Recovery
Higher Education
Education
Lease Rental
Non Profit Organization
Highways
Marine/Aviation Facilities
Multi Family Housing
Single Family Housing
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
360SAI
