Oppenheimer
New York Municipal Fund
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Prospectus dated January 21, 2000
Oppenheimer New York Municipal Fund is a
mutual fund. It seeks current income exempt
from Federal, New York State and New York
City personal income taxes by investing in
municipal securities, while attempting to
preserve capital.
This Prospectus contains important
information about the Fund's objective, its
investment policies, strategies and risks.
As with all mutual funds, the It also contains important
Securities and Exchange Commission information about how to buy and
has not approved or disapproved sell shares of the Fund and
the Fund's securities nor has it other account features. Please
determined that this Prospectus is read this Prospectus carefully
accurate or complete. It is a before you invest and keep it
criminal offense to represent for future reference about your
otherwise. account.
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(logo) OppenheimerFunds
The Right Way to Invest
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CONTENTS
A B O U T T H E F U N D
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
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
PhoneLink
OppenheimerFunds Internet Web Site
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends and Taxes
Financial Highlights
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A B O U T T H E F U N D
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks the maximum current
income exempt from federal, New York State and New York City income taxes for
individual investors consistent with preservation of capital.
WHAT DOES THE FUND INVEST IN? The Fund invests mainly in New York municipal
securities that pay interest exempt from federal and New York personal income
taxes. These primarily include municipal bonds (which are long-term
obligations), municipal notes (short-term obligations), and interests in
municipal leases. Most of the securities the Fund buys must be "investment
grade" (the four highest rating categories of national rating organizations,
such as Moody's).
Under normal market conditions the Fund attempts to invest 100% of its
assets in municipal securities exempt from federal personal income taxes, and as
fundamental policies the Fund invests:
o At least 80% of its assets in municipal securities, and o At least 65% of
its assets in New York municipal securities.
The Fund does not limit its investments to securities of a particular
maturity range, and may hold short-, intermediate-, and long-term securities.
However, it currently focuses on longer-term securities to seek higher yields.
The Fund also uses hedging instruments and certain derivative investments to try
to enhance income or to manage investment risks. These investments are more
fully explained in "About the Fund's Investments," below.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the portfolio manager looks primarily
throughout New York for municipal securities, using a variety of factors that
may change over time and may vary in particular cases. The portfolio manager
currently looks for:
o Securities that provide high current triple tax-free income o A wide range
of securities of different issuers within the state,
including different agencies and municipalities to help spread risk o
Securities having favorable or improving credit characteristics o Special
situations that provide opportunities for value.
WHO IS THE FUND DESIGNED FOR? The Fund is designed for individual investors who
are seeking income exempt from federal, New York State and New York City
personal income taxes. It does not seek capital gains or growth. Because it
invests in tax-exempt securities, the Fund is not appropriate for retirement
plan accounts or for investors seeking capital growth. The Fund is intended to
be a long-term investment, but is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments are subject to
changes in their value from a number of factors described below. There is also
the risk that poor security selection by the Fund's investment Manager,
OppenheimerFunds, Inc., will cause the Fund to underperform other funds having a
similar objective.
CREDIT RISK. Municipal securities are subject to credit risk. Credit risk is the
risk that the issuer of a debt security might not make interest and principal
payments on the security as they become due. If the issuer fails to pay
interest, the Fund's income might be reduced, and if the issuer fails to repay
principal, the value of that security and of the Fund's shares might fall.
Because the Fund can invest as much as 25% of its assets in municipal securities
below investment grade to seek higher income, the Fund's credit risks are
greater than those of funds that buy only investment-grade bonds. A downgrade in
an issuer's credit rating or other adverse news about an issuer can reduce the
market value of that issuer's securities.
INTEREST RATE RISKS. Municipal securities are subject to changes in value when
prevailing interest rates change. When interest rates fall, the values of
already-issued municipal securities generally rise. When interest rates rise,
the values of already-issued municipal securities generally fall, and the
securities may sell at a discount from their face amount. The magnitude of these
price changes is generally greater for securities having longer maturities. The
Fund currently focuses on longer-term securities to seek higher income.
Therefore, its share prices may fluctuate more when interest rates change.
RISK OF FOCUSING INVESTMENTS IN NEW YORK MUNICIPAL SECURITIES. While the Fund's
fundamental policies do not allow it to concentrate 25% or more of its assets in
a single industry, municipal securities are not considered an "industry" under
that policy. The Fund is "diversified" as to 75% of its assets, which means
that, as to 75% of its assets, it cannot invest more than 5% of its assets in
the securities of any one issuer. However, the Fund can invest a substantial
percentage of its assets in the obligations of the State of New York or
particular New York municipal governments, authorities or agencies.
Having a high percentage of its assets invested in the municipal
securities of a single state and its municipal subdivisions could result in
fluctuations in the Fund's share prices and income due to economic, regulatory
or political problems in New York.
RISKS OF USING DERIVATIVE INVESTMENTS. The Fund uses derivatives to seek
increased returns or to try to hedge investment and interest rate risks. In
general terms, a derivative investment is an investment contract whose value
depends on (or is derived from) the value of an underlying asset, interest rate
or index. Options, futures, "inverse floaters" and variable rate obligations are
examples of derivatives the Fund uses.
If the issuer of the derivative investment does not pay the amount due,
the Fund can lose money on its investment. Also, the underlying security or
investment on which the derivative is based, and the derivative itself, might
not perform the way the Manager expected it to perform. If that happens, the
Fund will get less income than expected, its hedge might be unsuccessful and its
share prices could fall. Some derivatives may be illiquid, making it difficult
to sell them at an acceptable price. To try to preserve capital, the Fund has
limits on the amount of particular types of derivatives it can hold. However,
using derivatives can cause the Fund to lose money on its investments and/or
increase the volatility of its share prices.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the
overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance, and the prices of its shares.
Particular investments and investment strategies also entail risks. These risks
mean that you can lose money by investing in the Fund. When you redeem your
shares, they may be worth more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment objective. The value of the
Fund's investments and share prices will change over time due to a number of
factors. They include changes in general bond market movements, the change in
value of particular bonds or the income they pay because of an event affecting
the issuer, or changes in interest rates that can affect bond prices overall.
Because the Fund focuses its investments in New York municipal securities,
it will be vulnerable to economic and market events that affect issuers of New
York municipal securities. Those changes can affect the value of the Fund's
investments and its prices per share. The Fund's derivative investments have
additional risks that can cause fluctuations in the Fund's share prices. In the
OppenheimerFunds spectrum, the Fund is more conservative than some types of bond
funds, such as high yield bond funds, but has greater risks than funds that
invest only in investment-grade bonds or that are more diversified
geographically.
An investment in the Fund is not a deposit of any bank, and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares) from
year to year for the past ten calendar years and by showing how the average
annual total returns of the Fund's shares compare to those of a broad-based
market index. The Fund's past investment performance is not necessarily an
indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 7.90% (1 Q `95) and the lowest return (not
annualized) for a calendar quarter was -6.15% 1 Q `94).
5 Years 10 Years
Average Annual Total Returns (or life of (or life of
for the periods ending 1 Year class, class,
December 31, 1999 if less) if less)
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Class A Shares (inception -9.00% 5.19% 5.64%
8/16/84)
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Lehman Brothers Municipal -2.06% 6.91% 6.89%*
Bond Index
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Class B Shares (inception -9.81% 5.07% 3.59%
3/1/93)
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Class C Shares (inception -6.10% 3.84% N/A
8/29/95)
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*From 12/31/89.
The Fund's average annual total returns include the applicable sales charge: for
Class A, the current maximum initial sales charge of 4.75%; for Class B, the
applicable contingent deferred sales charges of 5% (1-year) and 2% (5-years);
for Class C, the 1% contingent deferred sales charge for the 1-year period.
Because Class B shares convert to Class A shares 72 months after purchase, the
Class B life-of-class performance does not include any contingent deferred sales
charge or redemption, and uses Class A performance for the period after
conversion. The returns measure the performance of a hypothetical account and
assume that all dividends and capital gains distributions have been reinvested
in additional shares. The Fund's performance is compared to the Lehman Brothers
Municipal Bond Index, an unmanaged index of a broad range of investment-grade
municipal bonds. Index performance reflects reinvestment of income, but does not
consider transaction costs. The index includes municipal securities from many
states while the Fund focuses on New York municipal securities.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
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
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
September 30, 1999.
Shareholder Fees (charges paid directly from your investment):
Class A Class B Class C
Shares Shares Shares
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Maximum Sales Charge (Load)
on purchases (as % of 4.75% None None
offering price)
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Maximum Deferred Sales
Charge (Load) (as % of the 5%2
lower of the original None1 1%3
offering price or
redemption proceeds)
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1. A 1% contingent deferred sales charge may apply to redemptions of investments
of $1 million or more of Class A shares. See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
Class B Class B
Class A Shares Shares Shares
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Management Fees 0.52% 0.52% 0.52%
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Distribution and/or 0.23% 1.00% 1.00%
Service (12b-1) Fees
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Other Expenses 0.13% 0.13% 0.13%
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Total Annual Operating 0.88% 1.65% 1.65%
Expenses
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Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial fees, and accounting and legal expenses the Fund pays.
EXAMPLES. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated, and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end
of those periods. The second example assumes you keep your shares. Both
examples also assume that your investment has a 5% return each year and that
the class's operating expenses remain the same. Your actual costs may be
higher or lower because expenses will vary over time. Based on these
assumptions your expenses would be as follows:
If shares are
redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $561 $742 $939 $1,508
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Class B Shares $668 $820 $1,097 $1,560
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Class C Shares $268 $520 $897 $1,955
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If shares are not
redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $561 $742 $939 $1,508
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Class B Shares $168 $520 $897 $1,560
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Class C Shares $168 $520 $897 $1,955
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In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include contingent deferred sales charges. 1. Class B
expense for years 7 through 10 are based on Class A expenses, since Class B
shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among different investments will vary over time based on the Manager's
evaluation of economic and market trends. The Fund's portfolio might not always
include all of the different types of investments described below. The Statement
of Additional Information contains more detailed information about the Fund's
investment policies and risks.
The Manager tries to reduce risks by selecting a wide variety of municipal
investments and by carefully researching securities before they are purchased.
However, changes in the overall market prices of municipal securities and the
income they pay can occur at any time. The share prices and yield of the Fund
will change daily based on changes in market prices of securities, interest
rates and market conditions and in response to other economic events.
Municipal Securities. The Fund buys municipal bonds and notes, certificates of
participation in municipal leases and other debt obligations. The Fund invests
mainly in New York municipal securities, which are municipal securities that are
not subject (in the opinion of bond counsel to the issuer at the time they are
issued) to New York State personal income tax. These are debt obligations issued
by the State of New York and its political subdivisions (such as cities, towns,
and counties), and their agencies, instrumentalities and authorities. The term
"New York municipal securities" may also include debt securities of the
governments of certain possessions, territories and commonwealths of the United
States if the interest paid on those securities is not subject to New York
personal income tax.
The Fund can also buy other municipal securities, issued by the governments of
the other states and the District of Columbia, as well as their political
subdivisions, authorities and agencies, and securities issued by any
commonwealths, territories or possessions of the United States, or their
respective agencies, instrumentalities or authorities, if the interest paid on
the security is not subject to federal personal income tax (in the opinion of
bond counsel to the issuer at the time the security is issued).
Municipal securities are issued to raise money for a variety of public or
private purposes, including financing state or local governments, financing
specific projects or public facilities.
The Fund can buy both long-term and short-term municipal securities. Long-term
municipal securities (which are generally referred to as "bonds") have a
maturity of more than one year when issued. The Fund generally focuses on
long-term securities, to seek higher income.
The Fund can buy municipal securities that are "general obligations," secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest. The Fund can also can buy "revenue obligations" whose
interest is payable only from the revenues derived from a particular facility or
class of facilities, or a specific excise tax or other revenue source. Some
revenue obligations are private activity bonds that pay interest that may be a
tax preference item for investors subject to alternative minimum tax.
o Municipal Lease Obligations. Municipal leases are used by state and
local governments to obtain funds to acquire land, equipment or
facilities. The Fund can invest in certificates of participation that
represent a proportionate interest in payments made under municipal
lease obligations. Most municipal leases, while secured by the leased
property, are not general obligations of the issuing municipality. They
often contain "non-appropriation" clauses under which the municipal
government has no obligation to make lease or installment payments in
future years unless money is appropriated on a yearly basis. If the
government stops making payments or transfers its payment obligations to
a private entity, the obligation could lose value or become taxable.
Ratings of Municipal Securities the Fund Buys. Most of the municipal securities
the Fund buys are "investment grade" at the time of purchase. The Fund
limits its investments in municipal securities that at the time of
purchase are not "investment-grade" to not more than 25% of its total
assets. "Investment grade" securities are those rated within the four
highest rating categories of Moody's, Standard & Poor's, Fitch or Duff &
Phelps or another nationally- recognized rating organization, or (if
unrated) judged by the Manager to be comparable to securities rated as
investment grade. Rating definitions of rating organizations are in
Appendix A to the Statement of Additional Information. If a security is
not rated, the Manager will use its judgment to assign a rating to the
security comparable to that of a rating organization.
The Manager relies to some extent on credit ratings by
nationally-recognized rating organization in evaluating the credit risk of
securities selected for the Fund's portfolio. It also uses its own
research and analysis to evaluate risks. Many factors affect an issuer's
ability to make timely payments, and the credit risks of a particular
security might change over time. If the rating of a security is reduced
after the Fund buys it, the Fund is not required automatically to dispose
of that security. However, the Manager will evaluate those securities to
determine whether to keep them in the Fund's portfolio.
o Special Risks of Lower-Grade Securities. Municipal securities that are
below investment grade (these are sometimes called "junk bonds") may be
subject to greater price fluctuations and risks of loss of income and
principal than investment-grade municipal securities. Securities that are
(or that have fallen) below investment grade have a greater risk that the
issuers might not meet their debt obligations.
Floating Rate/Variable Rate Obligations. Some municipal securities 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, such as a percentage of the prime rate of a bank
or the 91-day U.S. Treasury Bill rate.
o Inverse Floaters Have Special Risks. Variable rate bonds known as
"inverse floaters" pay interest at rates that move in the opposite
direction of yields on short-term bonds in response to market changes.
As interest rates rise, inverse floaters produce less current income,
and their market value can become volatile. Inverse floaters are a type
of "derivative security." Some have a "cap," so that 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 will not invest
more than 20% of its total assets in inverse floaters.
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental policies without shareholder approval,
although significant changes will be described in amendments to this Prospectus.
Fundamental policies cannot be changed without the approval of a majority of the
Fund's outstanding voting shares. The Fund's investment objective is a
fundamental policy. Other investment restrictions that are fundamental policies
are listed in the Statement of Additional Information. An investment policy is
not fundamental unless this Prospectus or the Statement of Additional
Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the
investment techniques and strategies described below. The Fund might not always
use all of them. These techniques have risks although some of them are designed
to help reduce overall investment or market risks.
Other Derivatives. The Fund may also invest in other derivative investments that
pay interest that depends on the change in value of an underlying asset,
interest rate or index. Examples are hedging instruments, such as options,
interest rate swaps, and futures based on municipal bond indices or swap
indices.
o Hedging. The Fund can buy and sell certain kinds of futures contracts and
put and call options and can 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. The Fund does not use hedging instruments to a substantial degree
and is not required to use them in seeking its goal.
Some hedging strategies are designed to protect the portfolio against
price fluctuations. Other hedging strategies, such as buying futures and
call options, would tend to increase the Fund's exposure to the securities
market.
Hedging involves risks. If the Manager used a hedging instrument at the
wrong time or judged market conditions incorrectly, the strategy could 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 can increase
portfolio turnover. Interest rate swaps are subject to credit risks and 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. The Fund may
not enter into swaps with respect to more than 25% of its total assets.
Puts and Stand-By Commitments. The Fund can acquire "stand-by commitments" or
"puts" with respect to municipal securities. The Fund obtains the right to
sell the securities at a set price on demand to the issuing broker-dealer
or bank. However, securities having this feature may have a lower interest
rate. The Fund will acquire stand-by commitments or puts solely to enhance
portfolio liquidity.
Illiquid Securities. Investments may be illiquid because they do not have an
active trading market, making it difficult to value them or dispose of
them promptly at an acceptable price. The Fund will not invest more than
15% of its net assets in illiquid securities. The Manager monitors
holdings of illiquid securities on an ongoing basis to determine whether
to sell any holdings to maintain adequate liquidity. The Fund cannot buy
securities that have a restriction on resale.
Temporary Defensive Investments. The Fund can invest up to 100% of its total
assets in temporary defensive investments during periods of volatile or adverse
market conditions. Generally, the Fund's defensive investments would be
short-term municipal securities but could be U.S. government securities or
highly-rated corporate debt securities, commercial paper or bank obligations.
The income from some temporary defensive investments might not be tax-exempt,
and therefore when making those investments the Fund might not achieve its
investment objective. The Fund can also hold cash and cash equivalents for cash
management purposes, pending the investment of proceeds from the sale of Fund
shares or portfolio securities or to meet anticipated redemptions of Fund
shares.
How the Fund is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Trustees, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays 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 advisor since January 1960. The
Manager (including subsidiaries and affiliates) managed more than $120 billion
in assets as of December 31, 1999, including other Oppenheimer funds with more
than 5 million shareholder accounts. The Manager is located at Two World Trade
Center, 34th Floor, New York, New York 10048-0203.
Portfolio Manager. The portfolio manager of the Fund is Robert Patterson, a
Senior Vice President of the Manager. Mr. Patterson is a Vice President
of the Fund and is the person principally responsible for the day-to-day
management of the Fund's portfolio. He has had this responsibility since
November, 1985. Mr. Patterson also serves as an officer and portfolio
manager for other Oppenheimer funds.
Advisory Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines as the Fund's
assets grow: 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 in excess of $1 billion. The Fund's management
fee for its last fiscal year ended September 30, 1999, was 0.52% of
average annual net assets for each class of shares.
A B O U T Y O U R A C C O U N T
How to Buy Shares
HOW DO YOU BUY SHARES? You can buy shares several ways as described below. The
Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing
agents to accept purchase (and redemption) orders. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.
BuyingShares Through Your Dealer. You can buy shares through any dealer, broker
or financial institution that has a sales agreement with the Distributor.
Your dealer will place your order with the Distributor on your behalf.
BuyingShares 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, we recommend that you discuss
your investment with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire, and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
you pay for shares by electronic funds transfers from your bank
account. Shares are purchased for your account by a transfer of money
from your bank account through the Automated Clearing House (ACH)
system. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to
"AccountLink," below for more details.
o Buying Shares Through 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 in the Asset Builder
Application and the Statement of Additional Information.
HOW MUCH MUST YOU INVEST? You can buy Fund shares with a minimum initial
investment of $1,000. You can make additional investments at any time with as
little as $25. There are reduced minimum investments under special investment
plans.
o With Asset Builder Plans, Automatic Exchange Plans and military allotment
plans, you can make initial and subsequent investments for as little as
$25. You can make additional purchases of at least $25 by telephone
through AccountLink.
o The minimum investment requirement does not apply to 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 reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Colorado, or after any agent appointed by the
Distributor receives the order and sends it to the Distributor.
Net Asset Value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the Exchange
is open for trading (referred to in this Prospectus as a "regular business
day"). The Exchange normally closes at 4:00 P.M., New York time, but may close
earlier on some days. All references to time in this Prospectus mean "New York
time".
The net asset value per share is determined 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. To determine net asset value, the Fund's Board of Trustees
has established procedures to value the Fund's securities, in general based on
market value. The Board has adopted special procedures for valuing illiquid
securities and obligations for which market values cannot be readily obtained.
The Offering Price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order by
the time of day The New York Stock Exchange closes that day. If your order is
received on a day when the Exchange is closed or after it has closed, the order
will receive the next offering price that is determined after your order is
received.
Buying through a Dealer. If you buy shares through your dealer, your dealer
must receive the order by the close of The New York Stock Exchange and transmit
it to the Distributor so that it is received before the Distributor's close of
business on a regular business day (normally 5:00 P.M.) to receive that day's
offering price. Otherwise, the order will receive the next offering price that
is determined.
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WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors three
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million). The amount of that sales charge will vary
depending on the amount you invest. The sales charge rates are listed in
"How Can You Buy Class A Shares?" below.
- -------------------------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within six years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
- -------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the
time of purchase, but you will pay an annual asset-based sales charge.
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
"How Can You Buy Class C Shares?" below.
- -------------------------------------------------------------------------------
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some 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.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
You should review these factors with your financial advisor. The discussion
below assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will
also depend on how much you plan to invest. For example, the reduced sales
charges available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your investment,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C.
o Investing for the Shorter Term. While the Fund is meant to be a
long-term investment, if you have a relatively 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. That is because of the effect of the
Class B contingent deferred sales charge if you redeem within six 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 as 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.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend
to hold your shares. For that reason, the Distributor normally will not
accept purchase orders of $500,000 or more of Class B shares or $1 million
or more of Class C shares from a single investor.
o Investing for the Longer Term. If you are investing less than $100,000 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
appropriate.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses projected over time, and do not detail
all of the considerations in selecting a class of shares. You should
analyze your options carefully with your financial advisor before making
that choice.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B or Class C shareholders. Other
features may not be advisable (because of the effect of the contingent
deferred sales charge) for Class B or Class C shareholders. Therefore, you
should carefully review how you plan to use your investment account before
deciding which class of shares to buy. Additionally, the 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 shares, such
as the Class B and Class C asset-based sales charge described below and in
the Statement of Additional Information. Share certificates are not
available for Class B and Class C shares, and if you are considering using
your shares as collateral for a loan, that may be a factor to consider.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B and Class
C contingent deferred sales charges and asset-based sales charges have the
same purpose as the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions and expenses it pays to dealers
and financial institutions for selling shares. The Distributor may pay
additional compensation from its own resources to securities dealers or
financial institutions based upon the value of shares of the Fund owned by
the dealer or financial institution for its own account or for its
customers.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups or in other special types of
transactions. To receive a waiver or special sales charge rate, you must advise
the Distributor when purchasing shares or the Transfer Agent when redeeming
shares that the special conditions apply.
HOW CAN YOU BUY 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 other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
Front-End Sales
Front-End Sales Charge As a Commission As
Charge As a Percentage of Percentage of
Percentage of Net Offering
Amount of Purchase Offering Price Amount Invested Price
-----------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
-----------------------------------------------------------------
$50,000 or more
but 4.50% 4.71% 4.00%
less than $100,000
-----------------------------------------------------------------
$100,000 or more
but 3.50% 3.63% 3.00%
less than $250,000
-----------------------------------------------------------------
$250,000 or more
but 2.50% 2.56% 2.25%
less than $500,000
-----------------------------------------------------------------
$500,000 or more
but
less than $1 2.00% 2.04% 1.80%
million
-----------------------------------------------------------------
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 in an amount equal to 1.0% of purchases of $1 million or more
(other than purchases by retirement accounts, which are not permitted in
the Fund). That commission will be paid only on purchases that were not
previously subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within an 18-month "holding period"
measured from 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 at the time of redemption (excluding shares
purchased by reinvestment of dividends or capital gain distributions) or
(2) 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
purchases of Class A shares of all Oppenheimer funds you made that were
subject to the Class A contingent deferred sales charge.
CAN YOU REDUCE CLASS A SALES CHARGES? You may be eligible to buy Class A shares
at reduced sales charge rates under the Fund's "Right of Accumulation" or a
Letter of Intent, as described in "Reduced Sales Charges" in the Statement of
Additional Information.
HOW CAN YOU BUY 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. 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.
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 for the Class B contingent deferred sales
charge holding period:
Contingent Deferred Sales
Charge on
Years Since Beginning of Month Redemptions in That Year
in Which (As % of Amount Subject to
Purchase Order was Accepted Charge)
-------------------------------------------------------------------
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
-------------------------------------------------------------------
Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after you purchase them. 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 any
Class B shares you hold convert, any other Class B shares that were
acquired by the reinvesting of dividends and distributions on the
converted shares will also convert to Class A shares. For further
information on the conversion feature and its tax implications, see "Class
B Conversion" in the Statement of Additional Information.
HOW CAN YOU BUY 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 a holding period of 12 months from their purchase, a contingent deferred
sales charge of 1.0% will be deducted from the redemption proceeds. 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.
DISTRIBUTION AND SERVICE (12b-1) PLANS.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred
for services provided to accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate of up to 0.25% of the average annual
net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for its services and costs in distributing
Class B and Class C shares and servicing accounts. Under the plans, the
Fund pays the Distributor an annual "asset-based sales charge" of 0.75%
per year on Class B shares and on Class C shares. The Distributor also
receives a service fee of 0.25% per year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% of the net assets per year of the respective class.
Because these fees are paid out of the Fund's assets on an on-going basis,
over time these fees will increase the cost of your investment and may
cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. The
Distributor pays the 0.25% service fees to dealers in advance for the
first year after the shares are sold by the dealer. After the shares have
been held for a year, the Distributor pays the service fees to dealers on
a quarterly basis.
The Distributor currently pays sales commission of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sales of Class B shares is
therefore 4.00% of the purchase price. The Distributor retains the Class B
asset-based sales charge.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class C shares is
therefore 1.00% of the purchase price. The Distributor pays the
asset-based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account
with an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer
Agent for more information.
You can purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1.800.533.3310.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone,
by calling 1.800.533.3310. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these
purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already established
by calling the special PhoneLink number.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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.
How to Sell Shares
You can sell (redeem) 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 in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter, by using the Fund's checkwriting privilege or
by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on
a regular basis. If you have questions about any of these procedures, and
especially if you are redeeming shares in a special situation, such as due to
the death of the owner, please call the Transfer Agent first, at 1.800.525.7048,
for assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that
also require a signature guarantee):
o You wish to redeem $100,000 or more 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 being redeemed by someone (such as an Executor) other than
the owners
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o A U.S. bank, trust company, credit union or savings association,
o A foreign bank that has a U.S. correspondent bank,
o A U.S. registered dealer or broker in securities, municipal securities
or government securities, or
o 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.
HOW DO YOU SELL 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 documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
Use the following address for Send courier or express mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building
Denver, Colorado 80217-5270 D
Denver, Colorado 80231
HOW DO YOU SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held under a share certificate by telephone.
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 bank
account.
ARE THERE LIMITS ON AMOUNTS REDEEMED BY TELEPHONE?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone
in any 7-day period. The check must be payable to all owners of record of
the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an
account.
Telephone Redemptions Through AccountLink. There are no dollar limits on
telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated
on the business day after the redemption. You do not receive dividends on
the proceeds of the shares you redeemed while they are waiting to be
transferred.
CHECKWRITING. To write checks against your Fund account, request that privilege
on your account Application, or contact the Transfer Agent for signature cards.
They 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 other account.
o Checks can be written to the order of whomever you wish, but may not be
cashed at the bank the checks are payable through or the Fund's custodian
bank.
o Checkwriting privileges are not available for accounts holding 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, until you
receive new checks.
CAN YOU SELL 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. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase shares
subject to a Class A, Class B or Class C contingent deferred sales charge and
redeem any of those shares during the applicable holding period for the class of
shares you own, the contingent deferred sales charge will be deducted from the
redemption proceeds (unless you are eligible for a waiver of that sales charge
based on the categories listed in Appendix C to the Statement of Additional
Information and you advise the Transfer Agent of your eligibility for the waiver
when you place your redemption request).
A 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 net
asset value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether a 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 the holding period that applies to the class, and (3)
shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the Fund whose shares you acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
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. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds on
the same basis. 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 both funds 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 whose shares
you purchase by exchange.
o Before exchanging into a fund, you must 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. In some
cases, sales charges may be imposed on exchange transactions. For tax purposes,
exchanges of shares involve a sale 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. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
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.
HOW DO YOU SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing
or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
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.
ARE THERE LIMITATIONS ON EXCHANGES? 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 conforms to
the policies described above. It must be received 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 exchange. For
example, the receipt of multiple exchange requests from a "market timer"
might require the Fund to sell securities at a disadvantageous time
and/or price.
o Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it
believes 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 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
More information about the Fund's policies and procedures for buying, selling
and exchanging shares is continued in the Statement of Additional Information.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is in
the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless
the Transfer Agent receives cancellation instructions from an owner of the
account.
The Transfer Agent will record any telephone calls to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
Dealers that can perform account transactions for their clients by participating
in NETWORKING through the National Securities Clearing Corporation are
responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of
the Fund if the dealer performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day because the value of
the securities in the Fund's portfolio fluctuates. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or through AccountLink (as elected by the shareholder) within seven days
after the Transfer Agent receives redemption instructions in proper form.
However, under unusual circumstances determined by the Securities and
Exchange Commission, payment may be delayed or suspended. For accounts
registered in the name of a broker-dealer, payment will normally be
forwarded within three business days after redemption.
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 Federal Funds wire or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of
share purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of Federal personal income tax may be applied against
taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund your correct, certified Social
Security or Employer Identification Number when you sign your application,
or if you under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1.800.525.7048 to ask that
copies of those materials be sent personally to that shareholder.
Dividends and Tax Information
DIVIDENDS. The Fund intends to declare dividends separately for each class of
shares from net tax-exempt income and/or net investment income each regular
business day and to pay those dividends to shareholders monthly on a date
selected by the Board of Trustees. Daily dividends will not be declared or paid
on newly-purchased shares until Federal Funds are available to the Fund from the
purchase payment for such shares.
The Fund attempts to pay dividends on Class A shares at a constant level.
There is no assurance that it will be able to do so. The Board of Trustees may
change the targeted dividend level at any time, without prior notice to
shareholders. Dividends and distributions paid on Class A shares will generally
be higher than for Class B and Class C shares, which normally have higher
expenses than Class A. The Fund cannot guarantee that it will pay any dividends
or distributions.
CAPITAL GAINS. Although the Fund does not seek capital gains, it may realize
capital gains on the sale of portfolio securities. If it does, it may make
distributions out of any net short-term or long-term capital gains in December
of each year. The Fund may make supplemental distributions of dividends and
capital gains following the end of its fiscal year. Long-term capital gains will
be separately identified in the tax information the Fund sends you after the end
of the calendar year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and capital gains distributions in additional shares of the
Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. Dividends paid from net investment income earned by the Fund on municipal
securities will be excludable from gross income for federal personal income tax
purposes. A portion of a dividend that is derived from interest paid on certain
"private activity bonds" may be an item of tax preference if you are subject to
the alternative minimum tax. If the Fund earns interest on taxable investments,
any dividends derived from those earnings will be taxable as ordinary income to
shareholders.
Dividends paid by the Fund from interest it receives from New York
municipal securities will be exempt from New York State and New York City
personal income taxes. Dividends paid from municipal securities of other issuers
normally will be treated as taxable ordinary income subject to New York State
and City personal income taxes. Distributions of any net long-term capital gains
distribution will be taxable as ordinary income for New York State and City
personal income tax purposes.
Dividends and capital gains distributions may be subject to state or local
taxes. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you have held your
shares. Dividends paid from short-term capital gains are taxable as ordinary
income. Whether you reinvest your distributions in additional shares or take
them in cash, the tax treatment is the same. Every year the Fund will send you
and the IRS a statement showing the amount of any taxable distribution you
received in the previous year as well as the amount of your tax-exempt income.
Remember, There May be Taxes on Transactions. Even though the Fund seeks to
distribute tax-exempt income to shareholders, you may have a capital gain
or loss when you sell or exchange your shares. A capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them. Any capital gain is subject to capital gains
tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal personal income tax
information about your investment. You should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 fiscal years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, the Fund's independent auditors, whose
report, along with the Fund's financial statements, is included in the Statement
of Additional Information, which is available on request.
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.17 $12.79 $12.41 $12.29 $11.92
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .64 .64 .69 .68 .69
Net realized and unrealized gain (loss) (.94) .40 .37 .12 .41
--------------------------------------------------------------------------
Total income (loss) from
investment operations (.30) 1.04 1.06 .80 1.10
- -------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.63) (.66) (.68) (.68) (.70)
Distributions from net realized gain -- -- -- -- (.03)
--------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.63) (.66) (.68) (.68) (.73)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.24 $13.17 $12.79 $12.41 $12.29
--------------------------------------------------------------------------
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(1) (2.36)% 8.36% 8.78% 6.65% 9.58%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $575,254 $609,183 $634,789 $667,258 $673,050
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $603,604 $621,555 $652,048 $684,981 $659,465
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 5.04% 4.96% 5.49% 5.50% 5.76%
Expenses 0.88% 0.87%(3) 0.86%(3) 0.91%(3) 0.90%(3)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 18% 25% 21% 21% 15%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 4.
The lesser of purchases or sales of portfolio securities for a period, divided
by the monthly average of the market value of portfolio securities owned during
the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1999, were $126,455,653 and $152,129,748, respectively.
25 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $13.18 $12.79 $12.41 $12.30 $11.93
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .54 .55 .59 .60 .60
Net realized and unrealized gain (loss) (.94) .41 .38 .10 .42
-----------------------------------------------------------------------------
Total income (loss) from
investment operations (.40) .96 .97 .70 1.02
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.53) (.57) (.59) (.59) (.62)
Distributions from net realized gain -- -- -- -- (.03)
-----------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.53) (.57) (.59) (.59) (.65)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.25 $13.18 $12.79 $12.41 $12.30
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) (3.11)% 7.62% 7.97% 5.77% 8.75%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $78,526 $107,021 $106,459 $101,302 $91,108
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $98,597 $106,130 $104,183 $98,488 $81,743
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 4.25% 4.21% 4.72% 4.73% 4.95%
Expenses 1.65% 1.63%(3) 1.63%(3) 1.68%(3) 1.67%(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 18% 25% 21% 21% 15%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 4.
The lesser of purchases or sales of portfolio securities for a period, divided
by the monthly average of the market value of portfolio securities owned during
the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1999, were $126,455,653 and $152,129,748, respectively.
26 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
<TABLE>
<CAPTION>
CLASS C YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995(5)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $13.17 $12.79 $12.41 $12.30 $12.22
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 .47 .57 .60 .05
Net realized and unrealized gain (loss) (.96) .48 .39 .09 .08
---------------------------------------------------------------
Total income (loss) from
investment operations (.40) .95 .96 .69 .13
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.53) (.57) (.58) (.58) (.05)
Distributions from net realized gain -- -- -- -- --
---------------------------------------------------------------
Total dividends and distributions
to shareholders (.53) (.57) (.58) (.58) (.05)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.24 $13.17 $12.79 $12.41 $12.30
---------------------------------------------------------------
---------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) (3.11)% 7.54% 7.95% 5.64% 1.10%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $6,450 $6,168 $4,749 $2,007 $25
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $6,622 $5,420 $3,798 $752 $18
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 4.26% 4.30% 4.67% 4.60% 3.67%
Expenses 1.65% 1.63%(3) 1.63%(3) 1.77%(3) 1.37%(3)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 18% 25% 21% 21% 15%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 4.
The lesser of purchases or sales of portfolio securities for a period, divided
by the monthly average of the market value of portfolio securities owned during
the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1999, were $126,455,653 and $152,129,748, respectively. 5.
For the period from August 29, 1995 (inception of offering) to September 30,
1995.
<PAGE>
INFORMATION AND SERVICES
For More Information on Oppenheimer New York Municipal Fund:
The following additional information about the Fund is available without charge
upon request:
STATEMENT OF ADDITIONAL INFORMATION This document includes additional
information about the Fund's investment policies, risks, and operations. It is
incorporated by reference into this Prospectus (which means it is legally part
of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
- ----------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services
toll-free: 1.800.525.7048
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
On the Internet: You can send us a request by
e-mail or can read or down-load
documents on the
OppenheimerFunds web site:
http://www.oppenheimerfunds.com
- ----------------------------------------------------------------------
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected] or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
SEC File No. 811-4054 (logo)OppenheimerFunds Distributor,
Inc.
PR0360.001.012000 Printed on recycled paper.
<PAGE>
APPENDIX TO THE PROSPECTUS OF
OPPENHEIMER NEW YORK MUNICIPAL FUND
Graphic material included in the Prospectus of Oppenheimer New York
Municipal Fund ("the Fund") "Annual Total Returns (Class A)(% as of 12/31 each
year)":
A bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the Fund
for each of the eight most recent calendar years, without deducting sales
charges. Set forth below are the relevant data points that will appear in the
bar chart:
- ----------------------------------------------------------
Calendar Year Ended: Annual Total Returns
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/90 5.60%
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/91 12.48%
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/92 9.64%
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/93 13.15%
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/94 -8.79%
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/95
17.62%
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/96 4.13%
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/97 9.16%
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/98 5.83%
- ----------------------------------------------------------
- ----------------------------------------------------------
12/31/99 -4.46%
- ----------------------------------------------------------
<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 21, 2000
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 25, 1999. 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 or by downloading
it from the OppenheimerFunds Internet web site at www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks 2
The Fund's Investment Policies................................2
Municipal Securities..........................................3
Other Investment Techniques and Strategies...................14
Investment Restrictions......................................25
How the Fund is Managed..........................................27
Organization and History.....................................27
Trustees and Officers of the Fund............................29
The Manager .................................................34
Brokerage Policies of the Fund...................................36
Distribution and Service Plans...................................37
Performance of the Fund..........................................41
About Your Account
How To Buy Shares................................................46
How To Sell Shares...............................................53
How to Exchange Shares...........................................58
Dividends and Taxes..............................................60
Additional Information About the Fund............................63
Financial Information About the Fund
Independent Auditors' Report.....................................64
Financial Statements ............................................65
Appendix A: Municipal Bond Ratings Definitions..................A-1
Appendix B: Industry Classifications............................B-1
Appendix C: Special Sales Charge Arrangements and Waivers.......C-1
- -------------------------------------------------------------------------------
<PAGE>
A B O U T T H E F U N D
- -------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective and the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's investment Manager, OppenheimerFunds,
Inc., can select for the Fund. Additional information is are also provided about
the strategies that the Fund can use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manager can use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below in seeking its goal. It can
use some of the special investment techniques and strategies at some times or
not at all.The Fund does not make investments with the objective of seeking
capital growth. However, the values of the securities held by the Fund may be
affected by changes in general interest rates and other factors prior to their
maturity. Because the current value of debt securities varies inversely with
changes in prevailing interest rates, if interest rates increase after a
security is purchased, that security will normally fall in value. Conversely,
should interest rates decrease after a security is purchased, normally its value
will rise.
However, those fluctuations in value will not generally result in realized
gains or losses to the Fund unless the Fund sells the security prior to the
security's maturity. A debt security held to maturity is redeemable by its
issuer at full principal value plus accrued interest. The Fund does not usually
intend to dispose of securities prior to their maturity, but may do so for
liquidity purposes, or because of other factors affecting the issuer that cause
the Manager to sell the particular security. In that case, the Fund could
realize a capital gain or loss on the sale.
There are variations in the credit quality of municipal securities, both
within a particular rating classification and between classifications. These
variations depend on numerous factors. The yields of municipal securities depend
on a number of factors, including general conditions in the municipal securities
market, the size of a particular offering, the maturity of the obligation and
rating (if any) of the issue. These factors are discussed in greater detail
below.
|X| Portfolio Turnover. A change in the securities held by the Fund from
buying and selling investments is known as "portfolio turnover." Short-term
trading increases the rate of portfolio turnover and could increase the Fund's
transaction costs. However, the Fund ordinarily incurs little or no brokerage
expense because most of the Fund's portfolio transactions are principal trades
that do not require payment of brokerage commissions.
The Fund ordinarily does not trade securities to achieve capital gains,
because they would not be tax-exempt income. To a limited degree, the Fund may
engage in short-term trading to attempt to take advantage of short-term market
variations. It may also do so to dispose of a portfolio security prior to its
maturity. That might be done if, on the basis of a revised credit evaluation of
the issuer or other considerations, the Manager believes such disposition is
advisable or the Fund needs to generate cash to satisfy requests to redeem Fund
shares. In those cases, the Fund may realize a capital gain or loss on its
investments. The Fund's annual portfolio turnover rate normally is not expected
to exceed 50%.
Municipal Securities. The types of municipal securities in which the Fund may
invest are described in the Prospectus under "About the Fund's Investments."
Municipal securities are generally classified as general obligation bonds,
revenue bonds and notes. A discussion of the general characteristics of these
principal types of municipal securities follows below.
|X| Municipal Bonds. We have classified longer term municipal securities
as "municipal bonds." The principal classifications of long-term municipal bonds
are "general obligation" and "revenue" (including "industrial development")
bonds. They may have fixed, variable or floating rates of interest, as described
below.
Some bonds may be "callable," allowing the issuer to redeem them before
their maturity date. To protect bondholders, callable bonds may be issued with
provisions that prevent them from being called for a period of time. Typically,
that is 5 to 10 years from the issuance date. When interest rates decline, if
the call protection on a bond has expired, it is more likely that the issuer may
call the bond. If that occurs, the Fund might have to reinvest the proceeds of
the called bond in bonds that pay a lower rate of return.
|_| General Obligation Bonds. The basic security behind general
obligation bonds is the issuer's pledge of its full faith and credit and taxing,
if any, power for the repayment of principal and the payment of interest.
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 rate of taxes that can be
levied for the payment of debt service on these bonds may be limited or
unlimited. Additionally, there may be limits as to the rate or amount of special
assessments that can be levied to meet these obligations.
|_| 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 tax or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects. Examples include electric, gas, water and sewer systems;
highways, bridges, and tunnels; port and airport facilities; colleges and
universities; and hospitals.
Although the principal security for these types of bonds may vary from
bond to bond, many provide additional security in the form of a debt service
reserve fund that may be used to make principal and interest payments on the
issuer's obligations. Housing finance authorities have a wide range of security,
including partially or fully insured mortgages, rent subsidized and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. Some authorities provide further security in the form of a state's
ability (without obligation) to make up deficiencies in the debt service reserve
fund.
|_| Industrial Development Bonds. Industrial development bonds are
considered municipal bonds if the interest paid is exempt from federal income
tax. They 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 may also be 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 financed by the bond as security
for those payments.
|_| 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 certain types of municipal securities. The Tax Reform
Act generally did not change the tax treatment of bonds issued in order to
finance governmental operations. Thus, interest on general obligation bonds
issued by or on behalf of state or local governments, the proceeds of which are
used to finance the operations of such governments, continues to be tax-exempt.
However, the Tax Reform Act 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 is
taxable under the revised rules. There is an exception for "qualified"
tax-exempt private activity bonds, for example, exempt facility bonds including
certain industrial development bonds, qualified mortgage bonds, qualified
Section 501(c)(3) bonds, and qualified student loan bonds.
In addition, limitations as to the amount of private activity bonds which
each state may issue were revised downward by the Tax Reform Act, which will
reduce the supply of such bonds. The value of the Fund's portfolio could be
affected if there is a reduction in the availability of such bonds.
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. 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 Federal alternative minimum tax is designed to ensure that all persons
who receive income pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference items
that are used to calculate 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 the proportionate relationship the interest the investment company
receives on such bonds bears to all its exempt interest dividends.
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. That could occur in
situations where the "adjusted current earnings" of the corporation exceeds its
alternative minimum taxable income.
To determine whether a municipal security is treated as a taxable private
activity bond, it is subject to 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 the 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 that 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 the
use of the bond-financed facility. The Fund makes no independent investigation
of the users of such bonds or their use of proceeds of the bonds. If the Fund
should hold a bond that loses its tax-exempt status retroactively, there might
be an adjustment to the tax-exempt income previously distributed to
shareholders.
Additionally, a private activity bond that 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 applies primarily to exempt
facility bonds, including industrial development bonds. The Fund may invest in
industrial development bonds and other private activity bonds. Therefore, the
Fund may not be an appropriate investment for entities which are "substantial
users" (or persons related to "substantial users") of such exempt facilities.
Those entities and persons should consult their tax advisers before purchasing
shares of the Fund.
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 individual or the
individual'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.
|X| Municipal Notes. Municipal securities having a maturity (when the
security is 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. Some of the types of municipal notes the Fund can invest in are
described below.
|_| Tax Anticipation Notes. These are issued to finance working capital
needs of municipalities. Generally, they are issued in anticipation of various
seasonal tax revenue, such as income, sales, use or other business taxes, and
are payable from these specific future taxes.
|_| Revenue Anticipation Notes. These are notes issued in
expectation of receipt of other types of revenue, such as Federal revenues
available under Federal revenue-sharing programs.
|_| Bond Anticipation Notes. Bond anticipation notes are issued
to provide interim financing until long-term financing can be arranged. The
long-term bonds that are issued typically also provide the money for the
repayment of the notes.
|_| Construction Loan Notes. These are sold to provide project
construction financing until permanent financing can be secured. After
successful completion and acceptance of the project, it may receive permanent
financing through public agencies, such as the Federal Housing Administration.
|X| Tax-Exempt Commercial Paper. This type of short-term obligation
(usually having a maturity of 270 days or less) is issued by a municipality
to meet current working capital needs.
|X| Municipal Lease Obligations. The Fund's investments in municipal lease
obligations may be through certificates of participation that are offered to
investors by public entities. 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.
Some municipal lease securities may be deemed to be "illiquid" securities.
Their purchase by the Fund would be limited as described below in "Illiquid
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.
Those guidelines require the Manager to evaluate: o the frequency of
trades and price quotations for such securities; o the number of dealers
or other potential buyers willing to purchase or sell such securities; o
the availability of market-makers; and o the nature of the trades for such
securities.
Municipal leases have special risk considerations. 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 that purpose on a yearly basis. While the obligation
might be secured by the lease, it might be difficult to dispose of that property
in case of a default.
Projects financed with certificates of participation generally are not
subject to state constitutional debt limitations or other statutory requirements
that may apply to other municipal securities. Payments by the public entity on
the obligation underlying the certificates are derived from available revenue
sources. That revenue might be diverted to the funding of other municipal
service projects. Payments of interest and/or principal with respect to the
certificates are not guaranteed and do not constitute an obligation of a state
or any of its political subdivisions.
In addition to the risk of "non-appropriation," municipal lease securities
do not have as highly liquid a market as conventional municipal bonds. Municipal
leases, like other municipal debt obligations, are subject to the risk of
non-payment of interest or repayment of principal by the issuer. 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. A default in
payment of income would result in a reduction of income to the Fund. It could
also result in a reduction in the value of the municipal lease and that, as well
as a default in repayment of principal, could result in a decrease in the net
asset value of the Fund.
|X| Ratings of Municipal Securities. Ratings by ratings organizations such
as Moody's Investors Service, Standard & Poor's Ratings Service and Fitch IBCA,
Inc. represent the respective rating agency's opinions of the credit quality of
the municipal securities they undertake to rate. However, their ratings are
general opinions and are not guarantees of quality. Municipal securities that
have the same maturity, coupon and rating may have different yields, while other
municipal securities that have the same maturity and coupon but different
ratings may have the same yield.
Subsequent to its purchase by the Fund, a municipal security may cease to
be rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither event requires the Fund to sell the security, but the Manager
will consider such events in determining whether the Fund should continue to
hold the security. To the extent that ratings given by Moody's, Standard &
Poor's, or Fitch change as a result of changes in those rating 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.
The Fund may buy municipal securities that are "pre-refunded." The
issuer's obligation to repay the principal value of the security is generally
collateralized with U.S. government securities placed in an escrow account. This
causes the pre-refunded security to have essentially the same risks of default
as a AAA-rated security.
A list of the rating definitions of Moody's, Standard & Poor's, Duff &
Phelps and Fitch for municipal securities are contained in Appendix A to this
Statement of Additional Information. The Fund can purchase securities that are
unrated by nationally recognized rating organizations. The Manager will make its
own assessment of the credit quality of unrated issues the Fund buys. The
Manager will use criteria similar to those used by the rating agencies, and
assign a rating category to a security that is comparable to what the Manager
believes a rating agency would assign to that security. However, the Manager's
rating does not constitute a guarantee of the quality of a particular issue.
|_| Special Risks of Lower-Grade Securities. Lower grade securities may
have a higher yield than securities rated in the higher rating categories. In
addition to having a greater risk of default than higher-grade, securities,
there may be less of a market for these securities. As a result they may be
harder to sell at an acceptable price. The additional risks mean that the Fund
may not receive the anticipated level of income from these securities, and the
Fund's net asset value may be affected by declines in the value of lower-grade
securities. However, because the added risk of lower quality securities might
not be consistent with the Fund's policy of preservation of capital, the Fund
limits its investments in lower quality securities.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment grade, they may be subject to special risks and
have some speculative characteristics.
Special Investment Considerations - New York Municipal Securities. As explained
in the Prospectus, the Trust's investments are highly sensitive to the fiscal
stability of New York State (referred to in the section as the "State") and its
subdivisions, agencies, instrumentalities or authorities, including New York
City, which issue the municipal securities in which the Trust invests. The
following information on risk factors in concentrating in New York municipal
securities is only a summary, based on publicly-available official statements
relating to offerings by issuers of New York municipal securities on or prior to
June 15, 1999 with respect to offerings of New York State, and on or prior to
June 18, 1999 with respect to offerings by New York City. No representation is
made as to the accuracy of this 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 reducing 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.
|X| Factors Affecting Investments in New York State Securities. The
forecast of the State's economy shows continued expansion during the 1999 and
2000 calendar years, with employment growth gradually slowing from the 1998
calendar year. The financial and business service sectors are expected to
continue to do well, while employment in the manufacturing and government
sectors are expected to post only small, if any, declines. On an average annual
basis, the employment growth rate in the State is expected to be lower than in
1998. Personal income is expected to have recorded moderate gains in 1999. Wage
growth in 1999 and 2000 is expected to have been slower than in the 1998
calendar year, because the recent robust growth in bonus payments has moderated.
The forecast for continued growth, and any resultant impact on the State
Plan, contains some uncertainties. Stronger-than-expected gains in employment
and wages could lead to surprisingly strong growth in consumer spending.
Investments could also remain robust. Conversely, net exports could plunge even
more sharply than expected, with adverse impacts on the growth of both consumer
spending and investment. The inflation rate may differ significantly from
expectations due to the upward pressure of a tight labor market and the downward
pressure of price reductions emanating from the current economic weakness in
Asia. In addition, the State economic forecast could over- or under-estimate the
level of future bonus payments or inflation growth, resulting in forecasted
average wage growth that could differ significantly from actual growth.
Similarly, the State forecast could fail to correctly account for declines in
banking employment and the direction of employment change that is likely to
accompany telecommunications and energy deregulation.
The national economy has maintained a robust rate of growth with over 16.9
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 over 400,000 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 State's General Fund (the major operating Fund of the State) was
projected in the 1999-2000 New York State Financial Plan (referred to in this
section as the "State Plan") to be balanced on a cash basis for the 1999-2000
fiscal year. Total receipts and transfers from other funds are projected to
reach $38.81 billion an increase of over $2.03 billion from the prior fiscal
year, and disbursements and transfers to other funds are projected to be $37.14
billion, an increase of $524 million from the total disbursed in the prior
fiscal year.
Projections of total State receipts in the State 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 collection
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 those 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 the 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, and
actions of the federal government have help to create projected structural
budget gaps for the State. These gaps result 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.
|_| State Governmental Funds Group. Substantially all State
non-pension financial operations are accounted for in the State's
governmental funds group.
Governmental funds include:
o the General Fund, which receives all income not required by law to be
deposited in another fund;
o Special Revenue Funds, which receive most of the money the State gets
from the Federal government and other income the use of which is legally
restricted to certain purposes;
o Capital Projects Funds, used to finance the acquisition and construction
of major capital facilities by the State and to aid in certain projects
conducted by local governments or public authorities; and
o Debt Service Funds, which are used for the accumulation of money for the
payment of principal of and interest on long-term debt and to meet
lease-purchase and other contractual-obligation commitments.
|_| Local Government Assistance Corporation. In 1990, as part of a State
fiscal reform program, legislation was enacted creating Local Government
Assistance Corporation, a public benefit corporation empowered to issue
long-term obligations to fund payments to local governments that had been
traditionally funded through the State's annual seasonal borrowing. The
legislation authorized the corporation to issue its bonds and notes in an amount
not in excess of $4.7 billion (exclusive of certain refunding bonds). 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 the corporation and bonds
issued to provide for capitalized interest. An exception is in cases where the
Governor and the legislative leaders have certified the need for additional
borrowing and have 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
the corporation's bondholders in the resolution authorizing such bonds.
As of June 1995, the corporation had issued bonds and notes to provide net
proceeds of $4.7 billion completing the program. The impact of its borrowing, as
well as other changes in revenue and spending patterns, is that the State has
been able to meet its cash flow needs throughout the fiscal year without relying
on short-term seasonal borrowings.
|X| Authorities. The fiscal stability of the State is related to the
fiscal stability of its public Authorities. Authorities have various
responsibilities, including those 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.
Authorities are generally supported by revenues generated by the projects
financed or operated, such as tolls charged for use of highways, bridges or
tunnels, charges for electric power, electric and gas utility services, rentals
charged for and housing units and charges for occupancy at medical care
facilities. In addition, State legislation authorizes several financing
techniques for Authorities. 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.
|X| Ratings of the State's Securities. 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 its 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 August
28, 1997, Standard & Poor's revised its ratings on the State's general
obligation bonds from A- to A and, in addition, revised its ratings on the
State's moral obligation, lease purchase, guaranteed and contractual obligation
debt.
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 of the State's
general obligation long-term indebtedness. On February 10, 1997, Moody's
confirmed its "A2" rating of the State's general obligation long-term
indebtedness.
Ratings reflect only the views of the ratings organizations, and an
explanation of the significance of a rating may be obtained from the rating
agency furnishing the rating. There is no assurance that a particular rating
will continue for any given period of time or that a rating will not be revised
downward or withdrawn entirely, if, in the judgment of the agency originally
establishing the rating, circumstances warrant. A downward revision or
withdrawal of a ratings, could have an effect on the market price of the State
municipal securities in which the Trust invests.
|X| The State's General Obligation Debt. As of March 31, 1998, the State
had approximately $4.74 billion in general obligation bonds outstanding.
Principal and interest due on general obligation bonds were $742.1 million for
the 1998-99 fiscal year and are estimated to be $695 million for the State's
1999-2000 fiscal year.
|X| Pending Litigation. The State is a defendant in numerous legal
proceedings pertaining to matters incidental to the performance of routine
governmental operations. That 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 1999-2000 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 1999-2000 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 1999-2000 Financial Plan.
In addition, the State is party to other claims and litigations that its
legal counsel has advised are not probable of adverse court decisions or are not
deemed to be materially adverse. 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 1999-2000 fiscal year or thereafter.
|X| Other Functions. Certain localities in addition to the City could have
financial problems leading to requests for additional State assistance during
the State's current 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 1999-2000 fiscal year.
|X| Factors Affecting Investments in New York City Municipal Securities.
The fiscal health of New York City (the "City") has a more significant effect on
the fiscal health of the State than any other municipality. 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 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
Gross City Product increased, boosted by strong wage gains. After noticeable
improvements in the City's economy during 1994, economic growth slowed in 1995.
It improved commencing in calendar year 1996, reflecting improved securities
industry earnings and employment in other sectors. Overall, the City's economic
improvement accelerated significantly in 1997 and 1998. The City's current
financial plan assumes that, after strong growth in 1993-1998 moderate economic
growth will occur through calendar year 2003, with moderating job growth and
wage increases.
For each of the 1981 through 1998 fiscal years, the City had an operating
surplus, before discretionary and other transfers, and achieved balanced
operating results as reported in accordance with generally accepted accounting
principles. The City has been required to close substantial gaps between
forecast revenues and forecast expenditures in order to maintain balanced
operating results. There can be no assurance that the City will continue to
maintain balanced operating results as required by State law without tax or
other revenue increases or reductions in City services or entitlement programs,
which could adversely affect the City's economic base.
The Mayor is responsible for preparing the City's financial plan,
including the City's current financial plan for the 2000 through 2003 fiscal
years (referred to below as the "2000-2003 Financial Plan", or "Financial
Plan").
The City's projections set forth in the Financial Plan are based on
various assumptions and contingencies which are uncertain and which may not
materialize. Implementation of the Financial Plan is dependent upon the City's
ability to market its securities successfully. The City's financing program for
fiscal years 1999 through 2003 contemplates the issuance of $10.091 billion of
general obligation bonds and $5.34 billion of bonds to be issued by the New York
City Transitional Finance Authority (the "Finance Authority") to finance City
capital projects. In addition, it is currently expected that approximately $2.8
billion of bonds will be issued by the Tobacco Settlement Asset Securitization
Corporation ("TSASC") and paid from revenues received from a settlement with
leading tobacco companies. The Finance Authority and TSASC were created to
assist the City in financing its capital program while keeping the City's
indebtedness within the forecast level of the constitutional restrictions on the
amount of debt the City is authorized to incur. If TSASC is unable to issue
bonds in the amount expected, the City will need to find another source of
financing or substantially curtail or halt its capital program.
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, New York City Municipal Water Finance Authority ("Water
Authority") bonds and Finance Authority bonds will be subject to prevailing
market conditions. The City's planned capital and operating expenditures are
dependent upon the sale of its general obligation bonds and notes, and the Water
Authority, Finance Authority and TSASC bonds. 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 issue reports
and make public statements which, among other things, state that projected
revenues and expenditures may be different from those forecasted in the City's
Financial Plan. It is reasonable to expect that such reports and statements will
continue to be issued and to engender public comment.
|X| 1999 Modification and 2000-2003 Financial Plan. The June 14, 1999
quarterly modification to the City's financial plan for fiscal year 1999
(referred to as the "1999 Modification") projects revenues and expenditures for
the 1999 fiscal year balanced in accordance with GAAP. The Financial Plan for
the 2000 through 2003 fiscal years, released on June 14, 1999, also projects
revenues and expenditures for the 2000 fiscal year balanced in accordance with
GAAP. The Financial Plan takes into account a projected decrease in tax revenues
in fiscal years 2000 and 2001 and a projected increase in tax revenues in fiscal
years 2002 and 2003, an increase in planned expenditures for health insurance
and other agency spending increases. In addition, the Financial Plan includes
proposed discretionary transfers in the fiscal year 1999 for debt service due in
fiscal year 2000, in fiscal year 2000 for debt service due in fiscal year 2001,
and in fiscal year 2001 for debt service due in fiscal year 2002. The Financial
Plan also sets forth projections for the 2001 through 2003 fiscal years and
projects gaps of $1.8 billion, $1.9 billion and $1.8 billion for the 2001
through 2003 fiscal years, respectively.
The Financial Plan assumes that the Governor and the State Legislature
approve extension of the 14% personal income tax surcharge, which is scheduled
to expire on December 31, 1999, and which is projected to provide revenue of
$572 million, $585 million, $600 million and $638 million in 2000, 2001, 2002
and 2003 fiscal years, respectively. It assumes collection of the projected rent
payments for the City's airports, totaling $365 million, $185 million and $155
million in the 2001 through 2003 fiscal years, respectively. A substantial
portion of those collections may depend on the successful completion of
negotiations with The Port Authority of New York and New Jersey or on the
enforcement of the City's rights under the existing leases through pending legal
actions. It also assumes State and Federal approval of State and Federal
gap-closing actions proposed by the City and receipt of tobacco settlement funds
providing revenues or expenditure offsets in annual amounts ranging between $250
million and $300 million. The Financial Plan provides no additional wage
increases for City employees after their contracts expire in fiscal years 2000
and 2001. In addition, the economic and financial condition of the City may be
affected by various financial, social, economic and political factors that could
have a material effect on the City.
Various actions proposed in the City's Financial Plan are uncertain. If
these measures cannot be implemented, the City will be required to take other
actions to decrease expenditures or increase revenues to maintain a balanced
financial plan.
|X| Ratings of the City's Bonds. Moody's Investors Service, Inc. has rated
the City's general obligation bonds "A3." Standard & Poor's Ratings Group has
rated those bonds "A-." Fitch IBCA, Inc. has rated these bonds "A." Those
ratings reflect only the views of Moody's, Standard & Poor's and Fitch from
which an explanation of the significance of such ratings may be obtained. There
is no assurance that those ratings will continue for any given period of time or
that they will not be revised downward or withdrawn entirely. Any downward
revision or withdrawal could have an adverse effect on the market prices of the
City's bonds. On July 10, 1995, Standard & Poor's revised its rating of City
bonds downward to "BBB+." On July 16, 1998, Standard & Poor's revised its rating
of City bonds upward to "A-." Moody's rating of City bonds was revised in
February 1998 to "A3" from "Baal." On March 8, 1999, Fitch revised its rating of
City bonds upward to "A."
|X| The City's Outstanding Indebtedness. As of March 31, 1999, the City
and the Municipal Assistance Corporation for the City of New York had,
respectively, $26.817 billion and $3.194 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; that State budgets in future fiscal years will be adopted
by the April 1 statutory deadline, or interim appropriations enacted; or that
any such reductions or delays will not have adverse effects on the City's cash
flow or expenditures.
|X| Pending Litigation. The City is a defendant in lawsuits pertaining to
material matters, including claims asserted that are incidental to performing
routine governmental and other functions. That 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. For the fiscal year ended on June 30, 1998, the City
paid $386 million for judgments and claims. The 1999 Modification and 2000-2003
Financial Plan include provision for the payment of claims of $391 million, $393
million, $407 million, $429 million and $448 million for the 1999 through 2003
fiscal years, respectively. As of June 30, 1998, the City estimates its
potential future liability for outstanding claims against it to be $3.5 billion.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time employ the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times,
and at times may not use them.
|X| Floating Rate and Variable Rate Obligations. Variable rate demand
obligations have a demand feature that allows the Fund to tender the obligation
to the issuer or a third party prior to its maturity. The tender may be at par
value plus accrued interest, according to the terms of the obligations.
The interest rate on a floating rate demand note is based on a stated
prevailing market rate, such as a bank's prime rate, the 91-day U.S. Treasury
Bill rate, or some other standard, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand note is also based
on a stated prevailing market rate but is adjusted automatically at specified
intervals of not less than one year. Generally, the changes in the interest rate
on such securities reduce the fluctuation in their market value. As interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than that for fixed-rate obligations of the same maturity.
The Manager may determine that an unrated floating rate or variable rate demand
obligation meets the Fund's quality standards by reason of being backed by a
letter of credit or guarantee issued by a bank that meets those quality
standards.
Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice. The issuer of that type of note
normally has a corresponding right in its discretion, after a given period, to
prepay the outstanding principal amount of the note plus accrued interest.
Generally the issuer must provide a specified number of days' notice to the
holder.
|X| Inverse Floaters and Other Derivative Investments. The Fund will
invest in inverse floaters to seek higher tax-exempt yields than are available
from fixed-rate bonds that have comparable maturities and credit ratings.
Inverse floaters may offer relatively high current income, reflecting the spread
between short-term and long-term tax-exempt interest rates. As long as the
municipal yield curve remains relatively steep and short term rates remain
relatively low, owners of inverse floaters will have the opportunity to earn
interest at above-market rates because they receive interest at the higher
long-term rates but have paid for bonds with lower short-term rates. If the
yield curve flattens and shifts upward, an inverse floater will lose value more
quickly than a conventional long-term bond. In some cases, the holder of an
inverse floater may have an option to convert the floater to a fixed-rate bond,
pursuant to a "rate-lock" option.
Some inverse floaters have a feature known as an interest rate "cap" as
part of the terms of the investment. Investing in inverse floaters that have
interest rate caps might be part of a portfolio strategy to try to maintain a
high current yield for the Fund when the Fund has invested in inverse floaters
that expose the Fund to the risk of short-term interest rate fluctuations.
"Embedded" caps can be used to hedge a portion of the Fund's exposure to rising
interest rates. When interest rates exceed a pre-determined rate, the cap
generates additional cash flows that offset the decline in interest rates on the
inverse floater, and the hedge is successful. However, the Fund bears the risk
that if interest rates do not rise above the pre-determined rate, the cap (which
is purchased for additional cost) will not provide additional cash flows and
will expire worthless.
Inverse floaters are a form of derivative investment. Certain derivatives,
such as options, futures, indexed securities and entering into swap agreements,
can be used to increase or decrease the Fund's exposure to changing security
prices, interest rates or other factors that affect the value of securities.
However, these techniques could result in losses to the Fund, if the Manager
judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's other investments. These techniques can cause
losses if the counterparty does not perform its promises. An additional risk of
investing in municipal securities that are 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.
|X| When-Issued and Delayed-Delivery Transactions. The Fund can purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed-delivery" or "forward commitment" basis. "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. Delivery
and payment for the securities take place at a later date. Normally the
settlement date is within six months of the purchase of municipal bonds and
notes. However, the Fund may, from time to time, purchase municipal securities
having a settlement date more than six months and possibly as long as two years
or more after the trade date. The securities are subject to change in value from
market fluctuation during the settlement period. The value at delivery may be
less than the purchase price. For example, 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. No income begins to
accrue to the Fund on a when-issued security until the Fund receives the
security at settlement of the trade.
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 complete
the transaction. Its failure to do so may cause the Fund to lose the opportunity
to obtain the security at a price and yield it considers advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies or for delivery pursuant to options contracts
it has entered into, and not for the purposes of investment leverage. Although
the Fund will enter into when-issued or delayed-delivery purchase transactions
to acquire securities, the Fund may dispose of a commitment prior to settlement.
If the Fund chooses to dispose of the right to acquire a when-issued security
prior to its acquisition or to 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 on its
books and reflects the value of the security purchased. In a sale transaction,
it records the proceeds to be received, in determining its net asset value. The
Fund will identify on its books cash, U.S. government securities or other high
grade debt obligations at least equal to the value of purchase commitments until
the Fund pays for the investment.
When-issued transactions and forward commitments can be used by the Fund
as a defensive technique to hedge 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, to obtain the benefit of currently higher cash yields.
|X| Zero-Coupon Securities. The Fund may buy zero-coupon and delayed
interest municipal securities. Zero-coupon securities do not make periodic
interest payments and are sold at a deep discount from their face value. The
buyer recognizes a rate of return determined by the gradual appreciation of the
security, which is redeemed at face value on a specified maturity date. This
discount depends on the time remaining until maturity, as well as prevailing
interest rates, the liquidity of the security and the credit quality of the
issuer. In the absence of threats to the issuer's credit quality, the discount
typically decreases as the maturity date approaches. Some zero-coupon securities
are convertible, in that they are zero-coupon securities until a predetermined
date, at which time they convert to a security with a specified coupon rate.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities. Their value may fall more
dramatically than the value of interest-bearing securities when interest rates
rise. When prevailing interest rates fall, zero-coupon securities tend to rise
more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
|X| Puts and Standby Commitments. When the Fund buys a municipal security
subject to a standby commitment to repurchase the security, the Fund is entitled
to same-day settlement from the purchaser. The Fund receives an exercise price
equal to the amortized cost of the underlying security plus any accrued interest
at the time of exercise. A put purchased in conjunction with a municipal
security enables the Fund to sell the underlying security within a specified
period of time at a fixed exercise price.
The Fund might purchase a standby commitment or put separately in cash or
it might acquire the security subject to the standby commitment or put (at a
price that reflects that additional feature). The Fund will enter into these
transactions only with banks and securities dealers that, in the Manager's
opinion, present minimal credit risks. The Fund's ability to exercise a put or
standby commitment will depend on the ability of the bank or dealer to pay for
the securities if the put or standby commitment is exercised. If the bank or
dealer should default on its obligation, the Fund might not be able to recover
all or a portion of any loss sustained from having to sell the security
elsewhere.
Puts and standby commitments are not transferable by the Fund. They
terminate if the Fund sells the underlying security to a third party. The Fund
intends to enter into these arrangements to facilitate portfolio liquidity,
although such arrangements might enable the Fund to sell a security at a
pre-arranged price that may be higher than the prevailing market price at the
time the put or standby commitment is exercised. However, the Fund might refrain
from exercising a put or standby commitment if the exercise price is
significantly higher than the prevailing market price, to avoid imposing a loss
on the seller that could jeopardize the Fund's business relationships with the
seller.
A put or standby commitment increases the cost of the security and reduces
the yield otherwise available from the security. Any consideration paid by the
Fund for the put or standby commitment will be reflected on the Fund's books as
unrealized depreciation while the put or standby commitment is held, and a
realized gain or loss when the put or commitment is exercised or expires.
Interest income received by the Fund from municipal securities subject to puts
or stand-by commitments may not qualify as tax exempt in its hands if the terms
of the put or stand-by commitment cause the Fund not to be treated as the tax
owner of the underlying municipal securities.
|X| Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements. It may do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to an approved vendor for delivery on an agreed upon
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. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks or broker-dealers that have been
designated a primary dealer in government securities, which meet the credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day. Delivery pursuant
to resale typically will occur within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. 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, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price to
fully collateralize the repayment obligation. Additionally, the Manager will
impose creditworthiness requirements to confirm that the vendor is financially
sound and will continuously monitor the collateral's value. 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.
|X| Illiquid Securities. The Fund has percentage limitations that apply to
purchases of illiquid securities, as stated in the Prospectus. As a matter of
fundamental policy, the Fund cannot purchase any securities that are subject to
restrictions on resale.
|X| Loans of Portfolio Securities. To attempt to raise income or raise
cash for liquidity purposes, the Fund may lend its portfolio securities to
brokers, dealers and other financial institutions. These loans are limited to
not more than 25% of the value of the Fund's total assets. There are risks in
connection with securities lending. The Fund might experience a delay in
receiving additional collateral to secure a loan, or a delay in recovery of the
loaned securities. The Fund presently does not intend to lend securities, but if
it does, the value of loaned securities is not expected to exceed 5% of the
value of the Fund's total assets. Income from securities loans does not
constitute exempt-interest income for the purpose of paying tax-exempt
dividends.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the value of the loaned securities. It
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. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on the loaned securities. It also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and (c)
interest on short-term debt securities purchased with the loan collateral.
Either type of interest may be shared with the borrower. The Fund may pay
reasonable finder's, administrative or other fees in connection with these
loans. The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned securities on
five days' notice or in time to vote on any important matter.
|X| Hedging. The Fund can use hedging to attempt to protect against
declines in the market value of its portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities that have appreciated, or
to facilitate selling securities for investment reasons. To do so the Fund
could:
o sell interest rate futures or municipal bond index futures, o buy puts
on such futures or securities, or o write covered calls on securities,
interest rate futures or municipal
bond index futures. Covered calls can also be written on debt securities
to attempt to increase the Fund's income, but that income would not be
tax-exempt. Therefore it is unlikely that the Fund would write covered
calls for that purpose.
The Fund can also use hedging to establish a position in the debt
securities market as a temporary substitute for purchasing individual debt
securities. In that case the Fund would normally seek to purchase the
securities, and then terminate that hedging position. For this type of hedging,
the Fund could:
o buy interest rate futures or municipal bond index futures, or o buy
calls on such futures or on securities.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. The
Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's investment activities in the underlying cash market.
The particular hedging instruments the Fund can use are described below. The
Fund may employ new hedging instruments and strategies when they are developed,
if those investment methods are consistent with the Fund's investment objective
and are permissible under applicable regulations governing the Fund.
|_| Futures. The Fund can buy and sell futures contracts relating to
interest rates (these are called "interest rate futures") and broadly-based
municipal bond indices (these are referred to as "municipal bond index
futures"). As a fundamental policy, these are the only futures contracts the
Fund can buy and sell.
An interest rate future obligates the seller to deliver (and the purchaser
to take) cash or a specific type of debt security to settle the futures
transaction. Either party could also enter into an offsetting contract to close
out the futures position.
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 only in cash. The obligation under the contract
may also be satisfied by entering into an offsetting contract. The strategies
which the Fund employs in using municipal bond index futures are similar to
those with regard to interest rate futures.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment in cash or U.S. government securities with the
futures commission merchant (the "futures broker"). Initial margin payments will
be deposited with the Fund's Custodian in an account registered in the futures
broker's name. However, the futures broker can gain access to that account only
under certain specified conditions. As the future is marked to market (that is,
its value on the Fund's books is changed) to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or
by the futures broker daily.
At any time prior to the expiration of the future, the Fund can 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 by the Fund
on the future for tax purposes. Although interest rate futures by their terms
call for settlement by the delivery of debt securities, in most cases the
obligation is fulfilled without such delivery by entering into an offsetting
transaction. All futures transactions are effected through a clearing house
associated with the exchange on which the contracts are traded.
The Fund may concurrently buy and sell futures contracts in a strategy
anticipating that the future the Fund purchased will perform better than the
future the Fund sold. For example, the Fund might buy municipal bond futures and
concurrently sell U.S. Treasury Bond futures (a type of interest rate future).
The Fund would benefit if municipal bonds outperform U.S. Treasury Bonds on a
duration-adjusted basis.
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 value of the bond to
decline about 3%. There are risks that this type of futures strategy will not be
successful. U.S. Treasury bonds might perform better on a duration-adjusted
basis than municipal bonds, and the assumptions about duration that were used
might be incorrect (in this case, the duration of municipal bonds relative to
U.S. Treasury Bonds might have been greater than anticipated).
|_| Put and Call Options. The Fund can buy and sell certain kinds
of put options (puts) and call options (calls). These strategies are
described below.
|_| Writing Covered Call Options. The Fund can write (that is,
sell) call options. The Fund's call writing is subject to a number of
restrictions:
(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 sells must be listed on a securities or commodities
exchange or quoted on NASDAQ, the automated quotation system of The
Nasdaq Stock Market, Inc. or traded in the over-the-counter market.
(3) Each call the Fund writes must be "covered" while it is outstanding.
That means the Fund must own the investment on which the call was
written.
(4) The Fund may write calls on futures contracts that it owns, but these
calls must be covered by securities or other liquid assets that the Fund
owns and segregates to enable it to satisfy its obligations if the call
is exercised.
When the Fund writes a call on a security, it receives cash (a premium).
The Fund agrees to sell the underlying investment to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has retained the risk
of loss that the price of the underlying security may decline during the call
period. That risk may be offset to some extent by the premium the Fund receives.
If the value of the investment does not rise above the call price, it is likely
that the call will lapse without being exercised. In that case the Fund would
keep the cash premium and the investment.
When the Fund writes a call or an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will settle the transaction by
paying an amount of cash equal to the difference between the closing price of
the call and the exercise price, multiplied by a specified multiple that
determines the total value of the call for each point of difference. If the
value of the underlying investment does not rise above the call price, it is
likely that the call will lapse without being exercised. In that case the Fund
would keep the cash premium.
The Fund's custodian bank, or a securities depository acting for the
custodian bank, 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. In that way, 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.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. government securities dealer which will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The 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 (that
is, the option is "in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on illiquid securities) the
mark-to-market value of any OTC option held by it, unless the option is subject
to a buy-back agreement by the executing broker. The Securities and Exchange
Commission is evaluating whether OTC options should be considered liquid
securities. The procedure described above could be affected by the outcome of
that evaluation.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
was more or less than the price of the call the Fund purchased to close out the
transaction. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium received. Any
such profits are considered short-term capital gains for federal tax purposes,
as are premiums on lapsed calls. When distributed by the Fund they are taxable
as ordinary income.
The Fund may also write calls on futures contracts without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by segregating in escrow
an equivalent dollar value of liquid assets. The Fund will identify additional
liquid assets on its books if the value of the escrowed assets drops below 100%
of the current value of the future. Because of this escrow requirement, in no
circumstances would the Fund's receipt of an exercise notice as to that future
put the Fund in a "short" futures position.
|_| Purchasing Calls and Puts. The Fund may buy calls only on
securities, broadly-based municipal bond indices, municipal bond index futures
and interest rate futures. It may also buy calls to close out a call it has
written, as discussed above. Calls the Fund buys must be listed on a securities
or commodities exchange, or quoted on NASDAQ, or traded in the over-the-counter
market. A call or put option may not be purchased if the purchase would cause
the value of all the Fund's put and call options to exceed 5% of its total
assets.
When the Fund purchases a call (other than in a closing purchase
transaction), it pays a premium. For calls on securities that the Fund buys, it
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 (1) the call is sold at a profit or (2) the call is
exercised when 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. If
the call is not either exercised or sold (whether or not at a profit), it will
become worthless at its expiration date. In that case the Fund will lose its
premium payment and the right to purchase the underlying investment.
The Fund may buy only those puts that relate to securities that the Fund
owns, broadly-based municipal bond indices, municipal bond index futures or
interest rate futures (whether or not the Fund owns the futures). The Fund may
not sell puts other than puts it has previously purchased.
When the Fund purchases a put, it pays a premium. The Fund then 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. Puts on
municipal bond indices are settled in cash. Buying a put on a debt security,
interest rate future or municipal bond index future the Fund owns enables it to
protect itself during the put period against a decline in the value of the
underlying investment below the exercise price. 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. In that case the Fund will lose its premium payment and the
right to sell the underlying investment. A put may be sold prior to expiration
(whether or not at a profit).
|_| Risks of Hedging with Options and Futures. 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 returns.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put.
The Fund could 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 might be higher on a relative basis
than the commissions for direct purchases or sales of the underlying
investments. Premiums paid for options are small in relation to the market value
of the underlying investments. 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.
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. It will not be able to realize any profit if the investment has
increased in value above the call price.
There is a risk in using short hedging by selling interest rate futures
and municipal bond index futures or purchasing puts on municipal bond indices or
futures to attempt to protect against declines in the value of the Fund's
securities. The risk is that the prices of such futures or the applicable index
will correlate imperfectly with the behavior of the cash (that is, market)
prices of the Fund's securities. It is possible for example, that while the Fund
has used hedging instruments in a short hedge, the market might advance and the
value of debt securities held in the Fund's portfolio might decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value of its debt securities. However, while this could
occur over a 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.
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 might use hedging instruments in a greater dollar amount than the
dollar amount of debt securities being hedged. It might do so if the historical
volatility of the prices of the debt securities being hedged is greater than the
historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions due to differences in the natures of those markets. All
participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. From the point of view of speculators, the deposit requirements
in the futures markets are less onerous than margin requirements in the
securities markets. Therefore, increased participation by speculators in the
futures markets may cause temporary price distortions.
The Fund may use hedging instruments to establish a position in the
municipal securities markets as a temporary substitute for the purchase of
individual securities (long hedging). It is possible that the market might
decline. If the Fund then concludes not to invest in such securities because of
concerns that there might be 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 purchase price of the securities.
An option position may be closed out only on a market that provides
secondary trading for options of the same series. There is no assurance that a
liquid secondary market will exist for a particular option. If the Fund could
not effect a closing purchase transaction due to a lack of a market, it would
have to hold the callable investment until the call lapsed or was exercised, and
could experience losses.
|_| Interest Rate Swap Transactions. 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 might swap a right to receive floating
rate payments for fixed rate payments. The Fund can enter 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 identify liquid assets on its books
(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.
Swap agreements entail both interest rate risk and credit risk. There is a
risk that, based on movements of interest rates in the future, the payments made
by the Fund under a swap agreement will have been greater than those received by
it. Credit risk arises from the possibility that the counterparty will default.
If the counterparty to an interest rate swap defaults, the Fund's loss will
consist of the net amount of contractual interest payments that the Fund has not
yet received. The Manager will monitor the creditworthiness of counterparties to
the Fund's interest rate swap transactions on an ongoing basis.
The Fund can enter into swap transactions with appropriate counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty under the master agreement
shall be regarded as parts of an integral agreement. If on any date amounts are
payable under one or more swap transactions, the net amount payable on that date
shall be paid. In addition, the master netting agreement may provide that if one
party defaults generally or on one swap, the counterparty can terminate the
swaps with that party. Under master netting agreements, if there is a default
resulting in a loss to one party, that party's damages are calculated by
reference to the average cost of a replacement swap with respect to each swap.
The gains and losses on all swaps are then netted, and the result is the
counterparty's gain or loss on termination. The termination of all swaps and the
netting of gains and losses on termination is generally referred to as
"aggregation."
|_| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions established by the Commodity Futures Trading Commission (the
"CFTC"). In particular, the Fund is exempted from registration with the CFTC as
a "commodity pool operator" if the Fund complies with the requirements of Rule
4.5 adopted by the CFTC. That 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 options premiums to no more than 5%
of the Fund's net assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule. Under the Rule, the Fund also must use
short futures and options on futures positions solely for bona fide hedging
purposes within the meaning and intent of the applicable provisions of the
Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply 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 that the Fund may write or hold may be
affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser that is
an affiliate of the Fund's adviser). The exchanges also impose position limits
on futures transactions. An exchange may order the liquidation of positions
found to be in violation of those limits and may impose certain other sanctions.
Under the Investment Company Act, when the Fund purchases an interest rate
future or municipal bond index future, it must maintain cash or readily
marketable short-term debt instruments in an amount equal to the market value of
the investments underlying the future, less the margin deposit applicable to it.
|X| Temporary Defensive Investments. The securities the Fund can
invest in for temporary defensive purposes include the following:
o short-term municipal securities;
o obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities;
o corporate debt securities rated within the three highest grades by a
nationally recognized rating agency;
o commercial paper rated "A-1" by Standard & Poor's, or having a
comparable rating by another nationally-recognized rating agency; and
o certificates of deposit of domestic banks with assets of $1 billion or
more.
|X| Taxable Investments. While the Fund can invest up to 20% of its total
assets in investments that generate income subject to income taxes, it does not
anticipate investing substantial amounts of its assets in taxable investments
under normal market conditions or as part of its normal trading strategies and
policies. To the extent it invests in taxable securities, the Fund would not be
able to meet its objective of providing tax exempt income to its shareholders.
Taxable investments include, for example, hedging instruments, repurchase
agreements, and some of the types of securities it would buy for temporary
defensive purposes.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that 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:
o 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or
o more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|_| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund:
o The Fund cannot invest in securities or other investments other than
municipal securities, the temporary investments described in its Prospectus,
repurchase agreements, covered calls, private activity municipal securities and
hedging instruments described in "About the Fund" in the Prospectus or this
Statement of Additional Information.
o The Fund cannot make loans. However, the Fund can enter into repurchase
agreements and purchase debt securities in accordance with the Fund's other
investment policies and restrictions. The Fund may also 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. It cannot buy any additional investments when borrowings exceed 5% of
the value of its total assets. The Fund 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. However, the use of collateral
arrangements for premium and margin payments in connection with hedging
instruments is permitted.
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 25% or more of its total assets in any industry.
However, municipal securities and U.S. government obligations are not considered
to be part of any single industry.
o The Fund cannot invest in real estate. The Fund can invest in municipal
securities or other permitted securities that are secured by real estate or
interests in real estate.
o The Fund cannot purchase securities other than hedging instruments on
margin. However, the Fund may obtain such short-term credits that may be
necessary for the clearance of purchases and sales of securities.
o The Fund cannot sell securities short.
o The Fund cannot underwrite securities or invest in securities that are
subject to restrictions on resale.
o The Fund cannot invest in or hold securities of any issuer if officers
and Trustees of the Fund or the Manager individually beneficially own more than
1/2 of 1% of the securities of that issuer and together own more than 5% of the
securities of that issuer.
o The Fund cannot invest in securities of any other open-end investment
company, except in connection with a merger, consolidation, reorganization or
acquisition of assets.
o The Fund cannot buy or sell futures contracts other than interest rate
futures and municipal bond index futures.
o The Fund cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Fund are designated as
segregated, or margin, collateral or escrow arrangements are established, to
cover the related obligations. Examples of those activities include borrowing
money, reverse repurchase agreements, delayed-delivery and when-issued
arrangements for portfolio securities transactions and contracts to buy or sell
derivatives, hedging instruments, options or futures.
Unless the Prospectus or Statement of Additional Information states that a
percentage restriction applies on an ongoing basis, it applies only at the time
the Fund makes an investment. In that case the Fund need not sell securities to
meet the percentage limits if the value of the investment increases in
proportion to the size of the Fund.
Diversification. The Fund intends to be "diversified" as defined in the
Investment Company Act and to satisfy the restrictions against investing too
much of its assets in any "issuer" as set forth in the restrictions above. In
implementing this policy, 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 it and the
security is backed only by the assets and revenues of the subdivision, agency,
authority or instrumentality, the latter would be deemed to be the sole issuer.
Similarly, if an industrial development bond is backed only by the assets and
revenues of the non-governmental user, then that user would be deemed to be the
sole issuer. However, if in either case the creating government or some other
entity guarantees a security, the guarantee would be considered a separate
security and would be treated as an issue of that government or other entity.
In implementing the Fund's policy not to concentrate its investments, the
Manager will consider a non-governmental user of facilities financed by
industrial development bonds as being in a particular industry. That is done
even though the bonds are municipal securities, as to which the Fund has no
concentration limitation. Although this application of the concentration
restriction is not a fundamental policy of the Fund, it will not be changed
without shareholder approval.
How the Fund Is Managed
Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund was organized as a Massachusetts business trust in 1984.
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. Although the Fund will
not normally hold annual meetings of its shareholders, it may hold shareholder
meetings from time to time on important matters, and shareholders have the right
to call a meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
|X| Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three classes of
shares, Class A, Class B and Class C. All classes invest in the same investment
portfolio. Shares are freely transferable. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each class of shares: o has its own
dividends and distributions, o pays certain expenses which may be different for
the different classes, o may have a different net asset value, o may have
separate voting rights on matters in which the interests of one
class are different from the interests of another class, and o votes as
a class on matters that affect that class alone.
|X| Meetings of Shareholders. 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. It will also do so 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.
If the Trustees receive a request from at least 10 shareholders 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. The shareholders making the request
must have been shareholders for at least six months and must hold shares of the
Fund valued at $25,000 or more or constituting at least 1% of the Fund's
outstanding shares, whichever is less. The Trustees may also take other action
as permitted by the Investment Company Act.
|X| Shareholder and Trustee Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under its Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. Additionally, 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 and occupations during the past
five years are listed below. Trustees denoted with an asterisk (*) below are
deemed to be "interested persons" of the Fund under the Investment Company Act.
All of the Trustees are trustees or directors of the following New York-based
Oppenheimer funds:1
Oppenheimer California Municipal
Fund Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation
Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Capital Preservation Oppenheimer Multiple Strategies
Fund Fund
Oppenheimer Developing Markets Oppenheimer Multi-Sector Income
Fund Trust
Oppenheimer Multi-State Municipal
Oppenheimer Discovery Fund Trust
Oppenheimer Enterprise Fund Oppenheimer Municipal Bond Fund
Oppenheimer Europe Fund Oppenheimer New York Municipal Fund
Oppenheimer Global Fund Oppenheimer Series Fund, Inc.
Oppenheimer Global Growth &
Income Fund Oppenheimer U.S. Government Trust
Oppenheimer Gold & Special
Minerals Fund Oppenheimer Trinity Core Fund
Oppenheimer Growth Fund Oppenheimer Trinity Growth Fund
Oppenheimer International Growth
Fund Oppenheimer Trinity Value Fund
Oppenheimer International Small
Company Fund Oppenheimer World Bond Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Wixted, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of January 11, 2000, the Trustees and officers of the
Fund as a group owned of record or beneficially 3.07% of Class A shares and less
than 1% of Class B and Class C shares of the Fund. The foregoing statement does
not reflect ownership of shares of the Fund held of record by an employee
benefit plan for employees of the Manager, other than the shares beneficially
owned under the plan by the officers of the Fund listed above. Ms. Macaskill and
Mr. Donohue are trustees of that plan.
Leon Levy, Chairman of the Board of Trustees, Age: 74.
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since
1982) and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee, Age: 66.
19750 Beach Road, Jupiter, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Phillip A. Griffiths, Trustee+, Age 61.
97 Olden Lane, Princeton, N. J. 08540
The Director of the Institute for Advanced Study, Princeton, N.J. (since 1991)
and a member of the National Academy of Sciences (since 1979); formerly a
director of Bankers Trust Corporation (1994 through June, 1999), Provost and
Professor of Mathematics at Duke University (1983 - 1991), a director of
Research Triangle Institute, Raleigh, N.C. (1983 - 1991), and a Professor of
Mathematics at Harvard University (1972 - 1983).
Benjamin Lipstein, Trustee, Age: 76.
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill, President and Trustee, Age:51.2#
Two World Trade Center, New York, New York 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation, an investment adviser
subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), transfer agent subsidiaries of the Manager; President (since September
1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the
Manager's parent holding company; President (since September 1995) and a
director (since November 1989) of Oppenheimer Partnership Holdings, Inc., a
holding company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund management
subsidiary of the Manager and of Oppenheimer Millennium Funds plc; President and
a director of other Oppenheimer funds; a director of Prudential Corporation plc
(a U.K. financial service company).
Elizabeth B. Moynihan, Trustee, Age:70.
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institute), Executive Committee of Board of Trustees of the
National Building Museum; a member of the Trustees Council, Preservation League
of New York State.
Kenneth A. Randall, Trustee, Age:72.
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), and Prime Retail,
Inc. (real estate investment trust); 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:69
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 director of RBAsset
(real estate manager); a director of OffitBank; Trustee, Financial Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age: 68.
8 Sound Shore Drive, Greenwich, Connecticut 06830
Chairman of The Directorship Group, Inc. (corporate governance consulting and
executive recruiting); a director of Professional Staff Limited (a U.K.
temporary staffing company); a life trustee of International House
(non-profit educational organization), and a trustee of the Greenwich
Historical Society.
Donald W. Spiro, Vice Chairman and Trustee, Age: 74.
399 Ski Trail, Smoke Rise, New Jersey 07405
Formerly he held the following positions: Chairman Emeritus (August 1991 August
1999), Chairman (November 1987 - January 1991) and a director (January 1969 -
August 1999) of the Manager; President and Director of the Distributor (July
1978 - January 1992).
Clayton K. Yeutter, Trustee, Age: 69.
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan & Hartson (a law firm); a director of Zurich Financial
Services (financial services), Zurich Allied AG and Allied Zurich p.l.c.
(insurance investment management); Caterpillar, Inc. (machinery), ConAgra,
Inc. (food and agricultural products), Farmers Insurance Company (insurance),
FMC Corp. (chemicals and machinery) 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, U.S. Trade
Representative.
Robert E. Patterson, Vice President and Portfolio Manager, Age: 56
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since February 1993); an officer of
other Oppenheimer funds.
Andrew J. Donohue, Secretary, Age: 49.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
and a director of Oppenheimer Real Asset Management, Inc. (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
O. Leonard Darling, Executive Vice President and Chief Investment Officer,
Age: 57.
Two World Trade Center, New York, New York 10048-0203
Chief Investment Officer of the Manager (since 6/99); Chief Executive Officer
and Senior Manager of HarbourView Asset Management Corporation; Trustee (1993 -
present) of Awhtolia College - Greece; formerly Chief Executive Officer
(1993-June 1999).
Robert J. Bishop, Assistant Treasurer, Age: 61.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund
Controller for the Manager.
Scott T. Farrar, Assistant Treasurer, Age: 34.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer Funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund Controller
for the Manager.
Brian W. Wixted, Treasurer, Age: 40
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age: 51.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager, Assistant Secretary of Shareholder Services, Inc.
(since May 1985), and Shareholder Financial Services, Inc. (since November
1989); Assistant Secretary of OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer of other
Oppenheimer funds.
|X| Remuneration of Trustees. The officers of the Fund and one Trustee of
the Fund (Ms. Macaskill) who are affiliated with the Manager receive no salary
or fee from the Fund. The remaining Trustees of the Fund received the
compensation shown below. Mr. Spiro was affiliated with the Manager until July
31, 1999. The compensation from the Fund was paid during its fiscal year ended
September 30, 1999. The compensation from all of the New York-based Oppenheimer
funds (including the Fund) was received as a director, trustee or member of a
committee of the boards of those funds during the calendar year 1999.
<PAGE>
- ----------------------------------------------------------------------
Total
Retirement Compensation
Benefits from all
Accrued as New York based
Aggregate Part Oppenheimer
Trustee's Name Compensation of Fund Funds (24
and Other Positions from Fund1 Expenses Funds)2
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Leon Levy $166,700
Chairman $12,233 $1,278
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Robert G. Galli3
Study Committee $ None $176,2153
Member 5,425
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Phillip A. Griffiths
Study Committee
Chairman, None
Audit Committee $ 824 $ 17,835
Member
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Elizabeth B. Moynihan
Study Committee $ $
Member 6,778 108 $101,500
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Kenneth A. Randall
Audit Committee $ $
Member 6,906 788 $ 93,100
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Edward V. Regan
Proxy Committee $
Chairman, Audit 6,051 None $ 92,100
Committee Member
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Russell S. Reynolds,
Jr. $ $
Proxy Committee 4,766 239 $ 68,900
Member
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Donald W. Spiro4 None None $ 10,250
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Clayton K. Yeutter
Proxy Committee
Member $ 4,5275 None $ 68,900
- ----------------------------------------------------------------------
1. Aggregate compensation includes fees, deferred compensation, in any, and
retirement plan benefits accrued for a trustee.
2. For the 1999 calendar year.
3. Total compensation for the 1999 calendar year includes compensation received
for serving as Trustee or Director of 10 other Oppenheimer funds.
4. Prior to August 1, 1999, Mr. Spiro was not an independent Trustee. 5.
Includes $ 1,277 deferred under Deferred Compensation Plan described
below.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan
that provides for payments to retired Trustees. Payments are up to 80% of the
average compensation paid during a Trustee's five years of service in which the
highest compensation was received. A Trustee must serve as trustee for any of
the New York-based Oppenheimer funds for at least 15 years to be eligible for
the maximum payment. Each Trustee's retirement benefits will depend on the
amount of the Trustee's future compensation and length of service. Therefore the
amount of those benefits cannot be determined at this time, nor can we estimate
the number of years of credited service that will be used to determine those
benefits.
|X| Deferred Compensation Plan for Trustees. The Board of Trustees has
adopted a Deferred Compensation Plan for disinterested trustees that enables
them to elect to defer receipt of all or a portion of the annual fees they are
entitled to receive from the Fund. Under the plan, the compensation deferred by
a Trustee is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Trustee. The
amount paid to the Trustee under the plan will be determined based upon the
performance of the selected funds.
Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities or net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
|X| Major Shareholders. As of January 11, 2000, the only persons who owned
of record or who were known by the Fund to own beneficially 5% or more of the
Fund's outstanding Class A, Class B or Class C shares were:
Merrill Lynch Pierce Fenner & Smith Inc. (which advised the Fund that such
shares were held beneficially for its customers) 4800 Deer Lake Drive
East, Floor 3, Jacksonville, Florida 32246 467,447.287 Class B shares
(approximately 8.24% of the Class B shares then outstanding) and
85,613.309 Class C shares (approximately 14.89% of the Class C shares then
outstanding) and Rose M. Nurnberger 228 Lincoln Avenue Island Park, N.Y.
1558-1322 35,201.013 Class C shares (approximately 6.12% of the Class C
shares then outstanding).
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
The portfolio manager of the Fund is principally responsible for the day-to-day
management of the Fund's investment portfolio. Other members of the Manager's
fixed-income portfolio department, provide the Fund's portfolio manager with
research and support in managing the Fund's portfolio.
|X| Code of Ethics. The Fund, the Manager and the Distributor 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. Covered persons include
persons with knowledge of the investments and investment intentions of the
Fund and other funds advised by the Manager. The Code of Ethics does permit
personnel subject to the Code to invest in securities, including securities
that may be purchased or held by the Fund, subject to a number of restrictions
and controls. Compliance with the Code of Ethics is carefully monitored and
enforced by the Manager.
The Code of Ethics is an exhibit to the Fund's registration statement
filed with the Securities and Exchange Commission and can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. You can obtain
information about the hours of operation of the Public Reference Room by
calling the SEC at 1-202-942-8090. The Code of Ethics can also be viewed as
part of the Fund's registration statement on the SEC's EDGAR database at the
SEC's Internet web site at http://www.sec.gov. Copies may be obtained, after
paying a duplicating fee, by electronic request at the following E-mail
address: [email protected]., or by writing to the SEC's Public Reference
Section, Washington, D.C. 20549-0102.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to day business. That agreement
requires the Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment. It also requires the Manager to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective corporate administration for the Fund. Those
responsibilities include the compilation and maintenance of records with respect
to the Fund's 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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The investment advisory agreement lists examples of expenses
paid by the Fund. The major categories relate to interest, taxes, fees to
disinterested Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs,
brokerage commissions, and non-recurring expenses, including litigation cost.
The management fees paid by the Fund to the Manager are calculated at the rates
described in the Prospectus, which are applied to the assets of the Fund as a
whole. The fees are allocated to each class of shares based upon the relative
proportion of the Fund's net assets represented by that class. The management
fees paid by the Fund to the Manager during its last three fiscal years are
listed below.
- -----------------------------------------------------------------
Fiscal Year Ended Management Fee Paid to OppenheimerFunds,
9/30 Inc.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
1997 $3,912,050
- -----------------------------------------------------------------
- -----------------------------------------------------------------
1998 $3,799,175
- -----------------------------------------------------------------
- -----------------------------------------------------------------
1999 $3,690,468
- -----------------------------------------------------------------
The investment advisory agreement, states 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 investment advisory
agreement, the Manager is not liable for any loss the Fund sustains for any
investment, adoption of any investment policy, or the purchase, sale or
retention of any security. The 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 Manager may withdraw the Fund's right to
use the name "Oppenheimer" as part of its name.
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 buy and sell portfolio
securities for the Fund. The investment advisory agreement allows the Manager to
use broker-dealers to effect the Fund's portfolio transactions. Under the
agreement, the Manager may employ those broker-dealers (including "affiliated"
brokers, as that term is defined in the Investment Company Act) that, the
Manager thinks in its best judgment based on all relevant factors, will
implement the Fund's policy to obtain, at reasonable expense, the "best
execution" of portfolio transactions. "Best execution" refers to prompt and
reliable execution at the most favorable price obtainable. The Manager need not
seek competitive commission bidding. However, the Manager 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 investment advisory agreement, the Manager may 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 charge, if the Manager makes a good faith determination that the
commission is fair and reasonable in relation to the services provided. Subject
to those other considerations, as a factor in selecting brokers for the Fund's
portfolio transactions, the Manager may also consider sales of shares of the
Fund and other investment companies managed by the Manager or its affiliates.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally the Manager's portfolio traders
allocate brokerage upon recommendations from the Manager's portfolio managers.
In certain instances, portfolio managers may directly place trades and allocate
brokerage. In either case, the Manager's executive officers supervise the
allocation of brokerage.
Most securities purchases made by the Fund are in principal transactions
at net prices. 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 the Manager determines that a better price or execution may
be obtained by using the services of a broker. Therefore, the Fund does not
incur substantial brokerage costs. Portfolio securities purchased from
underwriters include a commission or concession paid by the issuer to the
underwriter in the price of the security. Portfolio securities purchased from
dealers include a spread between the bid and asked price.
The Fund seeks to obtain prompt execution of orders at the most favorable
net prices. In an option transaction, the Fund ordinarily uses the same broker
for the purchase or sale of the option and any transaction in the investment to
which the option relates.
Other funds advised by the Manager have investment objectives and policies
similar to those of the Fund. Those other funds may purchase or sell the same
securities as the Fund at the same time as the Fund, which could affect the
supply and price of the securities. When possible, the Manager tries to combine
concurrent orders to purchase or sell the same security by more than one of the
accounts managed by the Manager or its affiliates. The transactions under those
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. The research services provided by a particular
broker may be useful only to one or more of the advisory accounts of the Manager
and its affiliates. Investment research received by the Manager for the
commissions paid by those other accounts may be useful both to the Fund and one
or more of the Manager's other accounts. Investment research services may be
supplied to the Manager by a third party at the instance of a broker through
which trades are placed. Investment research services include information and
analysis on particular companies and industries as well as market or economic
trends and portfolio strategy, 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 permits the Manager to use stated commissions on secondary
fixed-income agency trades to obtain research if the broker represents to the
Manager that: (i) the trade is not from or for the broker's own inventory, (ii)
the trade was executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal transaction. The
Board of Trustees permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager. That research provides additional views
and comparisons for consideration and helps the Manager to obtain market
information for the valuation of securities that are either held in the Fund's
portfolio or are being considered for purchase. The Manager provides information
to the Board of the Fund about the commissions paid to brokers furnishing
research services, together with the Manager's representation that the amount of
such commissions was reasonably related to the value or benefit of such
services.
Distribution and Service Plans
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 different classes of shares of the Fund. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is discussed in the table below:
-------------------------------------------------------------------
Class A
Aggregate Front-End CommissionsCommissions
Front-End Sales Commissions on Class on Class C
Fiscal Sales Charges on Class A B Shares Shares
Year Charges on Retained Shares Advanced Advanced
Ended Class A by Advanced by by by
9/30: Shares DistributorDistributor1 DistributorDistributor1
-------------------------------------------------------------------
-------------------------------------------------------------------
1997 $ 835,127 $161,226 $20,757 $558,605 $35,328
-------------------------------------------------------------------
-------------------------------------------------------------------
1998 $ 685,776 $133,537 $24,640 $424,646 $22,130
-------------------------------------------------------------------
-------------------------------------------------------------------
1999 $ 572,576 $116,793 $38,094 $351,127 $22,047
-------------------------------------------------------------------
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
-------------------------------------------------------------------
Class A Class B Class C
Contingent Contingent Contingent
Deferred Sales Deferred Sales Deferred Sales
Charges Charges Charges
Fiscal Year Retained by Retained by Retained by
Ended 9/30: Distributor Distributor Distributor
-------------------------------------------------------------------
-------------------------------------------------------------------
1999 $44,962 $210,111 $11,886
-------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for its
Class A shares and Distribution and Service Plans for its Class B and Class C
shares under Rule 12b-1 of the Investment Company Act. Under those plans, the
Fund makes payments to the Distributor in connection with the distribution
and/or servicing of the shares of the particular class.
Under the plans the Manager and the Distributor, in their sole discretion,
from time to time may use their own resources (at no direct cost to the Fund) to
make payments to brokers, dealers or other financial institutions for
distribution and administrative services they perform. The Manager may use
profits from the advisory fee it receives from the Fund. The Distributor and the
Manager may, in their sole discretion, increase or decrease the amount of
payments they make to plan recipients from their own resources.
Unless a plan is terminated as described below, the plan continues in
effect from year to year, but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A 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.
The Board and the Independent Trustees must approve all material
amendments to a plan. An amendment to increase materially the amount of payments
to be made under the plan must be approved by shareholders of the class affected
by the amendment. Because Class B shares automatically convert into Class A
shares after six years, the Fund must obtain the approval of both Class A and
Class B shareholders for an amendment to the Class A plan that would materially
increase the amount to be paid under that plan.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Fund's Board of Trustees at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan, the purpose for which the payments were made and the identity
of each recipient of a payment. The report on the Class B and Class C plans
shall also include the Distributor's distribution costs for the quarter. Those
reports are subject to the review and approval of the Independent Trustees in
the exercise of their fiduciary duty.
Each plan states that while it is in effect, the selection or replacement
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
provision does not prevent the involvement of others in the selection and
nomination process as long as the final decision as to selection or nomination
is approved by a majority of the Independent Trustees.
Under the plans for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the fees
at the maximum rate allowed under the plans and has set no minimum asset amount
needed to qualify for payments.
|X| Class A Service Plan. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions (they are referred to as "recipients") for personal
services and account maintenance services they provide for their customers who
hold Class A shares. The services 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. The Distributor makes
payments to plan recipients 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.
For the fiscal year ended September 30, 1999 payments under the Plan for
Class A shares totaled $1,389,307 which was paid by the Distributor to
recipients. That included $24,352 to an affiliate of the Distributor. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares for
any fiscal year may not be recovered in subsequent years. The Distributor may
not use payments received under the Class A plan to pay any of its interest
expenses, carrying charges, other financial costs, or allocation of overhead.
|X| Class B and Class C Service and Distribution Plan Fees. Under each
plan, service fees and distribution fees are computed on the average of the net
asset value of shares in the respective class, determined as of the close of
each regular business day during the period. The 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 under the plans during that period. The types of services that
recipients provide are similar to the services provided under the Class A
service plan described above.
The Class B and Class C plans permit the Distributor to retain both the
asset-based sales charges and the service fee on shares or to pay recipients the
service fee on a quarterly basis, without payment in advance. However, the
Distributor presently intends to pay recipients the service fee on Class B and
Class C shares in advance for the first year the shares are outstanding. After
the first year shares are outstanding, the Distributor makes service fee
payments quarterly on those shares. The advance payment is based on the net
asset value of shares sold. Shares purchased by exchange do not qualify for an
advance service fee payment. If Class B or Class C shares are redeemed during
the first year after their purchase, the recipient of the service fees on those
shares will be obligated to repay the Distributor a pro rata portion of the
advance payment made on those shares.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing commission to the dealer on Class C shares outstanding for a year
or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fees and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commission and
service fee in advance at the time of purchase.
The asset-based sales charge on Class B and Class C shares allows
investors to buy shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. 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 plans. The Fund pays the asset-based
sales charge to the Distributor for its services rendered in distributing Class
B and Class C shares. The payments are made to the Distributor in recognition
that the Distributor:
o pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described in the Prospectus,
o may finance payment of sales commissions and/or the advance of the
service fee payment to recipients under the plans, or may provide such financing
from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of shares, and o bears 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.
--------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended
9/30/99
--------------------------------------------------------------------
--------------------------------------------------------------------
Distributor's Distributor's
Aggregate Unreimbursed
Total Amount Unreimbursed Expenses as %
Payments Retained by Expenses of Net Assets
Class: Under Plan Distributor Under Plan of Class
--------------------------------------------------------------------
--------------------------------------------------------------------
Class B $986,743 $767,626 $1,999,796 2.55%
Plan
--------------------------------------------------------------------
--------------------------------------------------------------------
Class C $ 66,209 $ 33,245 $ 71,519 1.11%
Plan
--------------------------------------------------------------------
All payments under the Class B and Class C plans 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 to.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield,"
"tax-equivalent yield," "dividend yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset value" and
"total return at net asset value." An explanation of how yields and total
returns are calculated is set forth below. The charts below show the Fund's
performance as of its most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1.800.525.7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication). Certain types of yields may also be shown, provided that they are
accompanied by standardized average annual total returns.
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
o Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model.
o The Fund's performance returns do not reflect the effect of taxes on
distributions.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o The principal value of the Fund's shares, and its yields and total
returns are not guaranteed and normally will fluctuate on a daily basis.
o When an investor's shares are redeemed, they may be worth more or less
than their original cost.
o Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a prediction
of future yields or returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The yields and total
returns of each class of shares of the Fund are affected by market conditions,
the quality of the Fund's investments, the maturity of those investments, the
types of investments the Fund holds, and its operating expenses that are
allocated to the particular class.
|X| Yields. The Fund uses a variety of different yields to illustrate its
current returns. Each class of shares calculates its yield separately because of
the different expenses that affect each class.
|_| Standardized Yield. The "standardized yield" (sometimes referred to
just as "yield") is shown for a class of shares for a stated 30-day period. It
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 for that period. It may therefore differ
from the "dividend yield" for the same class of shares, described below.
Standardized yield is calculated using the following formula set forth in
rules adopted by the Securities and Exchange Commission, designed to assure
uniformity in the way that all funds calculate their yields:
- -------------------------------------------------------------------------------
[OBJECT OMITTED]
- -------------------------------------------------------------------------------
The symbols above represent the following factors:
a =dividends and interest earned during the 30-day period.
b =expenses accrued for the period (net of any expense assumptions).
c =the average daily number of shares of that class outstanding during
the 30-day period that were entitled to receive dividends.
d =the maximum offering price per share of that class on the last day of
the period, adjusted for undistributed net investment income.
The standardized yield for a particular 30-day period may differ from the
yield for other periods. 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. 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 any 30-day period.
|_| Dividend Yield. The Fund may quote a "dividend yield" for each class
of its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and the
sum is multiplied by 12 (to annualize the yield) and divided by the maximum
offering price on the last day of the dividend period. The formula is shown
below:
Dividend Yield = dividends paid x 12/maximum offering price
(payment date)
The maximum offering price for Class A shares includes the current maximum
initial sales charge. The maximum offering price for Class B and Class C shares
is the net asset value per share, without considering the effect of contingent
deferred sales charges. The Class A dividend yield may also be quoted without
deducting the maximum initial sales charge.
|_| Tax-Equivalent Yield. The "tax-equivalent yield" of a class of
shares is the equivalent yield that would have to be earned on a taxable
investment to achieve the after-tax results represented by the Fund's
tax-equivalent yield. It adjusts the Fund's standardized yield, as calculated
above, by a stated Federal tax rate. Using different tax rates to show different
tax equivalent yields shows investors in different tax brackets the tax
equivalent yield of the Fund based on their own tax bracket.
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. The result is added 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. Your tax bracket is determined by your Federal and state taxable income
(the net amount subject to Federal and state income tax after deductions and
exemptions). The tax-equivalent yield table assumes that the investor is taxed
at the highest bracket, regardless of whether a switch to non-taxable
investments would cause a lower bracket to apply.
- ----------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 9/30/99
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Tax-Equivalent
Yield (43.74%
Class of Standardized Yield Dividend Yield Combined
Shares Federal/New York
Tax Bracket)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Without After Without After Without After
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Class A 5.02% 4.78% 5.22% 4.97% 8.92% 8.50%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Class B 4.24% N/A 4.39% N/A 7.54% N/A
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Class C 4.25% N/A 4.39% N/A 7.55% N/A
- ----------------------------------------------------------------------
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
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 without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period.
|_| Average Annual Total Return. 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" in the
formula) of that investment, according to the following formula:
- -------------------------------------------------------------------------------
[OBJECT OMITTED]
- -------------------------------------------------------------------------------
|_| Cumulative Total Return. 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:
- -------------------------------------------------------------------------------
[OBJECT OMITTED]
- -------------------------------------------------------------------------------
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) 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 Fund's Total Returns for the Periods Ended 9/30/99
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Cumulative
Class Total Returns
of (10 years or
Shares life of class) Average Annual Total Returns
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
5-Years 10-Years
(or life of (or life of
1-Year class) class)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
After Without After WithoutAfter Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Class A 81.60% 90.67% -7.00% -2.36% 5.08% 6.11% 6.15% 6.67%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Class B 29.55%2 -7.76% -3.11% 4.98% 5.31% 4.01% 4.01%2
29.55%2
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Class C 20.13%3 -4.04% -3.11% 4.59%3 4.59%3 N/A N/A
20.13%3
- ----------------------------------------------------------------------
1. Inception of Class A: 8/16/84
2.Inception of Class B: 3/1/93. Because Class B shares convert to Class A
shares 12 months after purchase, the life of class return for Class B uses
Class A performance for the period after conversion.
3. Inception of Class C: 8/29/95
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
("Lipper"). Lipper is 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 in
categories-based investment styles. The performance of the Fund is ranked by
Lipper against all other New York municipal debt funds. The Lipper performance
rankings are based on total returns that include the reinvestment of capital
gain distributions and income dividends but do not take sales charges or taxes
into consideration. Lipper also publishes "peer-group" indices of the
performance of all mutual funds in a category that it monitors and averages of
the performance of the funds in particular categories.
|X| Morningstar Rankings. From time to time the Fund may publish the star
ranking of the performance of its classes of shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar ranks mutual funds in
broad investment categories: domestic stock funds, international stock funds,
taxable bond funds and municipal bond funds. The Fund is ranked among municipal
bond funds.
Morningstar star rankings are based on risk-adjusted total investment
return. 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 the
fund's sales charges and expenses. Risk measures a fund's (or class's)
performance below 90-day U.S. Treasury bill 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%
of funds in a category), 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%). The current star ranking is the fund's (or class's)
3-year ranking or its combined 3- and 5-year ranking (weighted 60%/40%
respectively), or its combined 3-, 5-, and 10-year ranking (weighted 40%, 30%
and 30%, respectively), depending on the inception date of the fund (or class).
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.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information 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 the
performance of various market indices or other investments, and averages,
performance rankings or other benchmarks prepared by recognized mutual fund
statistical services.
Investors may also wish to compare the Fund's Class A, Class B or Class C
returns to the return on fixed-income investments available from banks and
thrift institutions. Those include 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.
Repayment of principal and payment of interest on Treasury securities is backed
by the full faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to shareholders
of the Oppenheimer funds, other than performance rankings of the Oppenheimer
funds themselves. Those ratings or rankings of shareholder and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
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A B O U T Y O U R A C C O U N T
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How to Buy Shares
Additional information is presented below about the methods that can be used to
buy shares of the Fund. Appendix C contains more information about the special
sales charge arrangements offered by the Fund, and the circumstances in which
sales charges may be reduced or waived for certain classes of investors.
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 ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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:
o Class A and Class B shares you purchase for your individual accounts, or
for your joint accounts, or for trust or custodial accounts on behalf of
your children who are minors, and
o 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, and
o 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.
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. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own
to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual
funds for which the Distributor acts as the distributor or the
sub-distributor and currently include the following:
Oppenheimer Bond Fund Oppenheimer Main Street
California Municipal Fund
Oppenheimer Capital Appreciation Oppenheimer Main Street Growth &
Fund Income Fund
Oppenheimer Capital Preservation Oppenheimer Main Street Small Cap
Fund Fund
Oppenheimer California Municipal Oppenheimer MidCap Fund
Fund
Oppenheimer Champion Income Fund Oppenheimer Multiple Strategies
Fund
Oppenheimer Convertible Securities Oppenheimer Municipal Bond Fund
Fund
Oppenheimer Developing Markets Fund Oppenheimer New York Municipal
Fund
Oppenheimer Disciplined Allocation Oppenheimer New Jersey Municipal
Fund Fund
Oppenheimer Disciplined Value Fund Oppenheimer Pennsylvania
Municipal Fund
Oppenheimer Discovery Fund Oppenheimer Quest Balanced Value
Fund
Oppenheimer Enterprise Fund Oppenheimer Quest Capital Value
Fund, Inc.
Oppenheimer Capital Income Fund Oppenheimer Quest Global Value
Fund, Inc.
Oppenheimer Europe Fund Oppenheimer Quest Opportunity
Value Fund
Oppenheimer Florida Municipal Fund Oppenheimer Quest Small Cap Value
Fund
Oppenheimer Global Fund Oppenheimer Quest Value Fund,
Inc.
Oppenheimer Global Growth & Income Oppenheimer Real Asset Fund
Fund
Oppenheimer Gold & Special Oppenheimer Senior Floating Rate
Minerals Fund Fund
Oppenheimer Growth Fund Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund Oppenheimer Total Return Fund,
Inc.
Oppenheimer Insured Municipal Fund Oppenheimer Trinity Core Fund
Oppenheimer Intermediate Municipal Oppenheimer Trinity Growth Fund
Fund
Oppenheimer International Bond Fund Oppenheimer Trinity Value Fund
Oppenheimer International Growth Oppenheimer U.S. Government Trust
Fund
Oppenheimer International Small Oppenheimer World Bond Fund
Company Fund
Oppenheimer Large Cap Growth Fund Limited-Term New York Municipal
Fund
Oppenheimer Limited-Term Rochester Fund Municipals
Government Fund
And the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt
Trust
Centennial California Tax Exempt Centennial Tax Exempt Trust
Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund,
Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
Letters 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. You can include purchases made up
to 90 days before the date of the Letter.
A Letter of Intent 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"). At the investor's request, this may 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 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and 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 Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
|X| 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 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. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of which
may be counted toward completion of a Letter) include: (a) Class A shares sold
with a front-end sales charge or subject to a Class
A contingent deferred sales charge,
(b) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) 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
(2) 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 to buy shares directly
from a bank account, you must enclose a check (the minimum is $25) for the
initial purchase with your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employer-sponsored qualified retirements accounts.
Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make monthly automatic purchases of shares of up to four
other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit will
be made two business days prior to the investment dates selected on your
Application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder 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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C are subject.
The availability of three classes of shares permits an investor to choose
the method of purchasing shares that is more appropriate for the investor. That
may depend on the amount of the purchase, the length of time the investor
expects to hold shares, and other relevant circumstances. Class A shares
normally are sold subject to an initial sales charge. While Class B and Class C
shares have no initial sales charge, the purpose of the deferred sales charge
and asset-based sales charge on Class B and Class C shares is the same as that
of the initial sales charge on Class A shares to compensate the Distributor and
brokers, dealers and financial institutions that sell shares of the Fund. A
salesperson who is entitled to receive compensation from his or her firm for
selling Fund shares may receive different levels of compensation for selling one
class of shares than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable federal
income tax law by the Internal Revenue Service, the conversion of Class B shares
to Class A shares after six years is not treated as a taxable event for the
shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that 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
shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
|X| Allocation of Expenses. 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.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Trustees, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of 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. It is done 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 other 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, Martin Luther King, Jr.
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 days on which the Exchange is closed (including weekends and
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the values of some of the
Fund's portfolio securities may change significantly on those days when
shareholders may not purchase or redeem shares.
|X| Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
o Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
o The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry: (1) debt instruments that have a
maturity of more than 397 days when issued, (2) debt instruments that had a
maturity of 397 days or less when issued and
have a remaining maturity of more than 60 days, and (3) non-money
market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or
less.
o The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts: (1) money market debt securities held by
a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
o 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, a security may be priced at the mean between the "bid" and "asked"
prices provided by a single active market maker (which in certain cases may be
the "bid" price if no "asked" price is available).
In the case of municipal securities, when last sale information is not
generally available, the Manager may use pricing services approved by the Board
of Trustees. The pricing service may use "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, and maturity. Other
special factors may be involved (such as the tax-exempt status of the interest
paid by municipal securities). The Manager will monitor the accuracy of the
pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
Puts, calls, interest rate futures and municipal bond index futures are
valued at the last sale 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, they shall
be valued at the last sale price on the preceding trading day if it is within
the spread of the closing "bid" and "asked" prices on the principal exchange or
on NASDAQ on the valuation date. If not, the value shall be the closing bid
price on the principal exchange or on NASDAQ on the valuation date. If the put,
call or future is not traded on an exchange or on NASDAQ, it shall be valued by
the mean between "bid" and "asked" prices obtained by the Manager from two
active market makers. In certain cases that may be at the "bid" price if no
"asked" price is available.
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium. If the Fund enters into a closing purchase transaction, it will have a
gain or loss, depending on whether the premium received was more or less than
the cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
How to Sell Shares
The information below supplements the terms and conditions for redeeming shares
set forth in the Prospectus.
CHECKWRITING. When a check is presented to the Fund's 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 to receive 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 listed on the check or at the Fund's custodian bank.
That 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.
In choosing to take advantage of the Checkwriting privilege by signing the
Account Application or by completing a Checkwriting card, each individual who
signs: (1) for individual accounts, represents that they are the registered
owner(s) of the shares of the Fund in that account;
(2) for accounts for corporations, partnerships, trusts and other entities,
represents that they are an officer, general partner, trustee or other
fiduciary or agent, as applicable, duly authorized to act on behalf of
such registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through which the
Fund's drafts (checks) are payable to pay all checks drawn on the Fund
account of such person(s) and to redeem a sufficient amount of shares
from that account to cover payment of each check;
(4) specifically acknowledges that if they choose to permit checks to be
honored if there is a single signature on checks drawn against joint
accounts, or accounts for corporations, partnerships, trusts or other
entities, the signature of any one signatory on a check will be
sufficient to authorize payment of that check and redemption from the
account, even if that account is registered in the names of more than
one person or more than one authorized signature appears on the
Checkwriting card or the Application, as applicable;
(5) understands that the Checkwriting privilege may be terminated or amended
at any time by the Fund and/or the Fund's bank; and
(6) acknowledges and agrees that neither the Fund nor its bank shall incur
any liability for that amendment or termination of checkwriting
privileges or for redeeming shares to pay checks reasonably believed by
them to be genuine, or for returning or not paying checks that have not
been accepted for any reason.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of :
o Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
o 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. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
shares. 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.
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.
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.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $200 or such lesser amount as the Board
may fix. The Board of Trustees will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of such shares has fallen
below the stated minimum solely as a result of market fluctuations. If the Board
exercises this right, it may also fix the requirements for any notice to be
given to the shareholders in question (not less than 30 days). The Board may
alternatively set requirements for the shareholder to increase the investment,
or set other terms and conditions so that the shares would not be involuntarily
redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. Shareholders should contact their
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. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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. The signature(s) of the registered owners on the redemption
documents must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal date you select in the Account
Application. If a contingent deferred sales charge applies to the redemption,
the amount of the check or payment will be reduced accordingly.
The Fund cannot guarantee receipt of a payment on the date requested. The
Fund reserves the right to amend, suspend or discontinue offering these 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 Appendix C, below).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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. 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
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (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 not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another 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. 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 Oppenheimer funds that have a
single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1.800.525.7048.
o All of the Oppenheimer funds currently 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, and
Centennial America Fund, L.P., which only offer Class A
shares.
o Oppenheimer Main Street California Municipal Fund currently offers only
Class A and Class B shares.
o 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.
o Only certain Oppenheimer funds currently offer Class Y shares. Class Y
shares of Oppenheimer Real Asset Fund may not be exchanged for shares of
any other fund.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be
acquired by exchange of shares of any class of any other Oppenheimer funds
except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash
Reserves acquired by exchange of Class M shares.
o Class A shares of Senior Floating Rate Fund are not available by exchange
of Class A shares of other Oppenheimer funds. Class A shares of Senior
Floating Rate Fund that are exchanged for shares of the other Oppenheimer
funds may not be exchanged back for Class A shares of Senior Floating Rate
Fund.
o Class X shares of Limited Term New York Municipal Fund can be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges may be
made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves
or Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. 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. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
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 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or contingent deferred sales
charge. 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. If requested, they
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 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.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by applicable
law. It may be required to provide 60 days notice prior to materially amending
or terminating the exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. 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. The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within 6 years of the
initial purchase of the exchanged Class B shares. The Class C contingent
deferred sales charge is imposed on Class C shares acquired by exchange if they
are redeemed within 12 months of the initial purchase of the exchanged Class C
shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect 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 which class of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investor must obtain a Prospectus of that fund before
the exchange request may be submitted. 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.
|X| Processing 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 Fund may refuse the
request. When you exchange some or all of your shares from one fund to another,
any special account feature such as an Asset Builder Plan or Automatic
Withdrawal Plan, will be switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption and exchange features
such as Automatic Exchange Plans and Automatic Withdrawal Plans cannot be
switched to an account in Oppenheimer Senior Floating Rate Fund.
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.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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 and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value, or as otherwise
described in "How to Buy Shares." Daily dividends will not be declared or paid
on newly purchased shares until such time as Federal Funds (funds credited to a
member bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Shares
purchased through dealers or brokers normally are paid for by the third business
day following the placement of the purchase order.
Shares redeemed through the regular redemption procedure will be paid
dividends through and including the day on which the redemption request is
received by the Transfer Agent in proper form. Dividends will be declared on
shares repurchased by a dealer or broker for three business days following the
trade date (that is, up 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.
The Fund's practice of attempting to pay dividends on Class A shares at a
constant level requires the Manager to monitor the Fund's portfolio and, if
necessary, to select higher-yielding securities when it is deemed appropriate to
seek income at the level needed to meet the target. Those securities must be
within the Fund's investment parameters, however. The Fund expects to pay
dividends at a targeted level from its net investment income and other
distributable income without any impact on the net asset values per share.
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.
Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
The amount of a distribution paid on a class of shares 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. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B and Class C shares are expected to
be lower than dividends on Class A shares. That is due to the effect of the
asset-based sales charge on Class B and Class C shares. Those dividends will
also differ in amount as a consequence of any difference in net asset value
among the different classes of shares.
Tax Status of the Fund's Dividends and Distributions. The Fund intends to
qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest dividends that
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 that are free from Federal
income taxes. This allocation will be made by the use of one designated
percentage applied uniformly to all income dividends paid during the Fund's tax
year. That designation will normally be made following the end of each fiscal
year as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of the
Fund's income that was tax-exempt for a given period.
A portion of the exempt-interest dividends paid by the Fund may be an item
of tax preference for shareholders subject to the alternative minimum tax. 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.
A shareholder receiving a dividend from income earned by the Fund from one
or more of the following sources 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:
(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.
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. That qualification enables the Fund
to "pass through" its income and realized capital gains to shareholders without
having to pay tax on them. 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 qualifies. The Fund might not meet those
tests in a particular year. If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction for
payments of dividends and distributions made to shareholders.
In any year in which the Fund qualifies as a regulated investment company
under the Internal Revenue Code, the Fund will also be exempt from New York
corporate income and franchise taxes. It will also be qualified under New York
law to pay exempt interest dividends that will be exempt from New York State and
New York City personal income tax. That exemption applies to the extent that the
Fund's distributions are attributable to interest on New York municipal
securities. Distributions from the Fund attributable to income from sources
other than New York municipal securities and U.S. government obligations will
generally be subject to New York income tax as ordinary income.
Distributions by the Fund from investment income and long- and short-term
capital gains will generally not be excludable from taxable net investment
income in determining New York corporate franchise tax and New York City general
corporation tax for corporate shareholders of the Fund. Additionally, certain
distributions paid to corporate shareholders of the Fund may be includable in
income subject to the New York alternative minimum tax.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Fund's Board of Trustees and the Manager might determine in a particular year
that it would be in the best interest of shareholders 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.
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 above. Reinvestment will be
made at net asset value without sales charge. To elect this option, the
shareholder must notify the Transfer Agent in writing and must have an existing
account in the fund selected for reinvestment. Otherwise the shareholder must
first obtain a prospectus for that fund and an application from the Transfer
Agent to establish an account. The investment will be made at the net asset
value per share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or distributions from certain of the
other Oppenheimer funds may be invested in shares of this Fund on the same
basis.
Additional Information About the Fund
The Transfer Agent. The Fund's Transfer Agent, OppenheimerFunds Services, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders of the Fund. It also handles
shareholder servicing and administrative functions. It is paid on an "at-cost"
basis.
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, and handling the delivery of such securities to and from
the Fund. 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. Those
uninsured balances may at times be substantial.
Independent Auditors. KPMG LLP are the independent auditors of the Fund. They
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER NEW YORK MUNICIPAL
FUND:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer New York Municipal Fund as of
September 30, 1999, 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, 1999, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer New York Municipal Fund as of September 30, 1999, 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 LLP
- ------------
KPMG LLP
Denver, Colorado
October 21, 1999
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ MARKET
S&P/FITCH FACE VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--99.3%
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK--85.2%
Allegany Cnty., NY IDA RB, Houghton College Civic Facility,
5.25%, 1/15/18 NR/BBB $1,500,000 $1,382,985
- ---------------------------------------------------------------------------------------------------------------------------
Allegany Cnty., NY IDA RB, Houghton College Civic Facility,
5.25%, 1/15/24 NR/BBB 1,500,000 1,352,535
- ---------------------------------------------------------------------------------------------------------------------------
Battery Park City, NY RB, Series A, AMBAC Insured,
5.50%, 11/1/16 Aaa/AAA 5,000,000 4,926,300
- ---------------------------------------------------------------------------------------------------------------------------
Erie Cnty., NY IDA Life Care Community RB, Episcopal
Church Home, Series A, 6%, 2/1/28 NR/NR 6,700,000 6,227,248
- ---------------------------------------------------------------------------------------------------------------------------
Monroe Cnty., NY IDA RB, DePaul Community Facilities,
Series A, 5.875%, 2/1/28 NR/NR 1,800,000 1,647,198
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Inverse Floater, 7.494%, 8/1/08(1) A3/A- 8,250,000 8,765,625
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Inverse Floater, 8.057%, 8/1/13(1) A3/A-/A 5,000,000 5,381,250
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Inverse Floater, 8.057%, 8/1/14(1) A3/A- 8,150,000 8,720,500
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Prerefunded, Series A, 7.75%, 8/15/16 Aaa/AAA/A 157,500 170,005
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Prerefunded, Series D, 7.50%, 2/1/19 Aaa/A-/A- 1,295,000 1,406,525
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Prerefunded, Series F, 8.25%, 11/15/17 Aaa/A-/A- 8,500,000 9,323,225
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Series B, 8.25%, 6/1/07 A3/A-/A- 1,750,000 2,097,322
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Series B, FSA Insured, Inverse Floater,
6.942%, 10/1/07(1) Aaa/AAA/AAA 7,500,000 7,778,100
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Series H, 6.125%, 8/1/25 A3/A-/A 6,000,000 6,110,280
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Unrefunded Balance, Series A, 7.75%, 3/15/03 A3/A-/A- 10,000 10,316
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOB, Unrefunded Balance, Series D, 7.50%, 2/1/19 A3/A-/A- 5,000 5,369
- ---------------------------------------------------------------------------------------------------------------------------
NYC GORB, Series D, 5.25%, 8/1/21 A3/A-/A 1,000,000 917,830
- ---------------------------------------------------------------------------------------------------------------------------
NYC GORB, Unrefunded Balance, Series F, 7.625%, 2/1/14 A3/A-/A 5,000 5,383
- ---------------------------------------------------------------------------------------------------------------------------
NYC GOUN, Prerefunded, Series C, Subseries C-1,
7.50%, 8/1/20 Aaa/A-/A- 5,000 5,499
- ---------------------------------------------------------------------------------------------------------------------------
NYC HDC MH RB, Glenn Gardens Project, 6.50%, 1/15/18 NR/NR 2,778,242 2,801,608
- ---------------------------------------------------------------------------------------------------------------------------
NYC HDC MH RB, Keith Plaza Project, 6.50%, 2/15/18 NR/NR 1,827,998 1,843,866
- ---------------------------------------------------------------------------------------------------------------------------
NYC HDC MH RB, Series A, 5.625%, 5/1/12 Aa2/AA 4,355,000 4,475,590
- ---------------------------------------------------------------------------------------------------------------------------
NYC Health & Hospital Corp. RRB, AMBAC Insured,
Inverse Floater, 7.719%, 2/15/23(1) Aaa/AAA/AAA 9,300,000 8,672,250
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDA Civic Facility RB, Community Resources
Development, 7.50%, 8/1/26 NR/NR 4,000,000 4,179,920
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDA Civic Facility RB, USTA National Tennis
Center Project, FSA Insured, 6.375%, 11/15/14 Aaa/AAA/AAA 1,500,000 1,607,670
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDA RRB, Brooklyn Navy Yard Cogen Partners,
5.75%, 10/1/36 Baa3/BBB-/BBB- 3,500,000 3,279,675
</TABLE>
14 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ MARKET
S&P/FITCH FACE VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK CONTINUED
NYC IDA RRB, Brooklyn Navy Yard Cogen Partners,
6.20%, 10/1/22 Baa3/BBB-/BBB- $ 5,000,000 $ 5,089,350
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDA SPF RB, Northwest Airlines, Inc.,
6%, 6/1/27 Ba2/BB 14,000,000 13,302,660
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDA SPF RB, United Air Lines, Inc. Project,
5.65%, 10/1/32 Baa3/BB+ 6,585,000 6,135,244
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDAU Civil Facility RB, YMCA Greater NY Project,
5.80%, 8/1/16 Baa3/NR/BBB 2,470,000 2,421,711
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDAU RB, Visy Paper, Inc. Project,
7.80%, 1/1/16 NR/NR 6,800,000 7,272,124
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDAU RB, Visy Paper, Inc. Project,
7.95%, 1/1/28 NR/NR 13,500,000 14,467,815
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDAU SPF RB, Terminal One Group Assn. Project,
6%, 1/1/15 A3/A/A- 6,000,000 6,107,160
- ---------------------------------------------------------------------------------------------------------------------------
NYC IDAU SPF RB, Terminal One Group Assn. Project,
6.125%, 1/1/24 A3/A/A- 3,000,000 3,046,290
- ---------------------------------------------------------------------------------------------------------------------------
NYC MCFFA RB, Series D, 6.45%, 2/15/09 Aa2/AAA 145,000 154,553
- ---------------------------------------------------------------------------------------------------------------------------
NYC MWFAU WSS RB, Series A, FGIC Insured,
5.50%, 6/15/32 Aaa/AAA/AAA 9,175,000 9,175,000
- ---------------------------------------------------------------------------------------------------------------------------
NYC MWFAU WSS RB, Unrefunded Balance, Series B,
6.375%, 6/15/22 Aaa/AAA/A- 6,625,000 7,044,561
- ---------------------------------------------------------------------------------------------------------------------------
NYC MWFAU WSS RRB, Prerefunded, Series A,
7.10%, 6/15/12 NR/AAA/AAA 180,000 190,562
- ---------------------------------------------------------------------------------------------------------------------------
NYC MWFAU WSS RRB, Series C, FGIC Insured,
5%, 6/15/21 Aaa/AAA/AAA 11,000,000 9,889,000
- ---------------------------------------------------------------------------------------------------------------------------
NYC MWFAU WSS RRB, Unrefunded Balance,
6.75%, 6/15/17 A2/A/AA- 2,480,000 2,582,796
- ---------------------------------------------------------------------------------------------------------------------------
NYC MWFAU WSS RRB, Unrefunded Balance,
Series A-1994, 7.10%, 6/15/12 A2/A/AA- 95,000 99,876
- ---------------------------------------------------------------------------------------------------------------------------
NYC Niagara Falls SDI COP, High School Facility,
5.375%, 6/15/28 Baa3/BBB- 7,645,000 6,969,564
- ---------------------------------------------------------------------------------------------------------------------------
NYC Transitional FAU RB, Future Tax Secured,
Series B, 4.75%, 11/1/23 Aa3/AA/AA+ 19,750,000 16,702,772
- ---------------------------------------------------------------------------------------------------------------------------
NYC Transitional FAU RB, Future Tax Secured,
Series C, 5%, 5/1/29 Aa3/AA/AA+ 5,400,000 4,740,498
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RB, City University, Series 1, 5.375%, 7/1/24 Baa1/BBB+/A- 11,500,000 10,640,835
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RB, Ithaca College, AMBAC Insured,
5.25%, 7/1/26 Aaa /AAA 5,750,000 5,304,030
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RB, Judicial Facilities Lease, Escrowed to
Maturity, BIG Insured, 7.375%, 7/1/16 Aaa/AAA 250,000 296,900
</TABLE>
15 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ MARKET
S&P/FITCH FACE VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK CONTINUED
NYS DA RB, Judicial Facilities Lease, Escrowed to
Maturity, MBIA Insured, 7.375%, 7/1/16 Aaa/AAA $ 2,300,000 $ 2,731,480
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RB, Office General Services, 5%, 4/1/28 Baa1/BBB+ 5,260,000 4,587,772
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RB, Pooled Capital Program, Partially
Prerefunded, FGIC Insured, 7.80%, 12/1/05 Aaa/AAA/AAA 1,290,000 1,316,974
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RB, Rosalind & Joseph Gurwin Geriatric
Home, AMBAC Insured, 5.70%, 2/1/37 Aaa/AAA 2,000,000 1,935,080
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RB, Upstate Community Colleges,
Series A, 5%, 7/1/28 NR/BBB+/A 10,000,000 8,729,200
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, CUS, Second Series A, 5.75%, 7/1/18 Baa1/BBB+ 6,750,000 6,768,563
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, CUS, Series B, 6%, 7/1/14 Baa1/BBB+ 10,875,000 11,372,531
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, Episcopal Health Services, Inc.,
5.85%, 8/1/13 NR/AAA 500,000 513,230
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, Fordham University, FGIC Insured,
5.75%, 7/1/15 Aaa/AAA/AAA 9,100,000 9,182,628
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, St. Joseph's Hospital Health Center,
- ---------------------------------------------------------------------------------------------------------------------------
MBIA Insured, 5.25%, 7/1/18 Aaa/AAA 5,035,000 4,690,556
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, St. Thomas Aquinas, 5.25%, 7/1/28 NR /AA 1,500,000 1,355,130
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, St. Vincent's Hospital, 7.375%, 8/1/11 Aa2/AAA 135,000 143,884
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, SUEFS, Series A, 5.25%, 5/15/15 A3/A/A 23,090,000 22,289,008
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, SUEFS, Series A, 5.25%, 5/15/21 A3/A/A 5,010,000 4,698,929
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA RRB, SUEFS, Series B, 7%, 5/15/16 A2/A/A 9,020,000 9,343,006
- ---------------------------------------------------------------------------------------------------------------------------
NYS DA SPO Bonds, CUS, Series E, FSA Insured,
5.75%, 7/1/11 Aaa/AAA/AAA 5,955,000 6,269,245
- ---------------------------------------------------------------------------------------------------------------------------
NYS EFCPC RB, State Water Revolving Fund, Series A,
6.60%, 9/15/12 Aaa/AAA/AAA 250,000 268,155
- ---------------------------------------------------------------------------------------------------------------------------
NYS EFCPC RB, State Water Revolving Fund, Series C,
7.20%, 3/15/11 Aa2/A+/AA 350,000 360,910
- ---------------------------------------------------------------------------------------------------------------------------
NYS ERDAUEF RB, Consolidated Edison Co., Series A,
7.50%, 1/1/26 A1/A+/NR 280,000 284,950
- ---------------------------------------------------------------------------------------------------------------------------
NYS ERDAUEF RB, L.I. Lighting Co., Series C,
6.90%, 8/1/22 Baa3/A-/BBB+ 10,200,000 11,129,118
- ---------------------------------------------------------------------------------------------------------------------------
NYS ERDAUEF RB, Prerefunded, Series A,
7.15%, 12/1/20 Ba1/A- 5,510,000 5,992,566
- ---------------------------------------------------------------------------------------------------------------------------
NYS ERDAUEF RB, Unrefunded Balance, Series A,
7.15%, 12/1/20 Aaa/A- 1,990,000 2,106,495
- ---------------------------------------------------------------------------------------------------------------------------
NYS ERDAUGF RB, Brooklyn Union Gas Co., Series B,
Inverse Floater, 9.564%, 7/1/26(1) A1/A/A 6,000,000 7,282,500
</TABLE>
16 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ MARKET
S&P/FITCH FACE VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK CONTINUED
NYS ERDAUGF RB, Brooklyn Union Gas Co.,
Series D, MBIA Insured, Inverse Floater, 7.69%, 7/8/26(1) Aaa/AAA/A $ 3,000,000 $ 2,767,500
- ---------------------------------------------------------------------------------------------------------------------------
NYS ERDAUPC RB, NYS Electric & Gas Project,
Series A, MBIA Insured, 6.15%, 7/1/26 Aaa/AAA 4,000,000 4,049,880
- ---------------------------------------------------------------------------------------------------------------------------
NYS GORB, 7.50%, 11/15/00 A2/A 500,000 519,650
- ---------------------------------------------------------------------------------------------------------------------------
NYS GORB, 9.875%, 11/15/05 A2/A/A+ 400,000 507,000
- ---------------------------------------------------------------------------------------------------------------------------
NYS HFA RB, MH Secured Mtg. Program-A,
7.05%, 8/15/24 Aa1/NR 350,000 369,152
- ---------------------------------------------------------------------------------------------------------------------------
NYS HFA RB, MH Secured Mtg. Program-C,
6.95%, 8/15/24 Aa1/NR 220,000 227,482
- ---------------------------------------------------------------------------------------------------------------------------
NYS HFA RB, Prerefunded, 8%, 11/1/08 Aaa/A- 2,690,000 2,860,223
- ---------------------------------------------------------------------------------------------------------------------------
NYS HFA RB, Unrefunded Balance, 8%, 11/1/08 Baa/A- 550,000 576,153
- ---------------------------------------------------------------------------------------------------------------------------
NYS HFA RRB, Housing Mtg., Series A, 6.10%, 11/1/15 Aaa/AAA/AAA 12,170,000 12,655,218
- ---------------------------------------------------------------------------------------------------------------------------
NYS HFA RRB, State University Construction,
Escrowed to Maturity, Series A, 7.90%, 11/1/06 Aaa/AAA 1,750,000 1,991,938
- ---------------------------------------------------------------------------------------------------------------------------
NYS HFA RRB, Unrefunded Balance, 7.90%, 11/1/99 Baa1/A- 1,490,000 1,493,487
- ---------------------------------------------------------------------------------------------------------------------------
NYS HFASC Obligation RB, Series A, 6%, 3/15/26 Baa1/BBB+ 10,000,000 10,044,300
- ---------------------------------------------------------------------------------------------------------------------------
NYS LGAC RRB, Series B, 5.50%, 4/1/21 A3/A+/A+ 3,000,000 2,860,110
- ---------------------------------------------------------------------------------------------------------------------------
NYS LGAC RRB, Series E, 5%, 4/1/21 A3/A+/A+ 500,000 450,920
- ---------------------------------------------------------------------------------------------------------------------------
NYS MAG RB, Homeowner Mtg. Project, Series 69,
5.50%, 10/1/28 Aa2/NR 6,400,000 5,913,344
- ---------------------------------------------------------------------------------------------------------------------------
NYS MAG RB, Homeowner Mtg., Series 71,
5.40%, 4/1/29(2) Aa2/NR 20,465,000 18,619,057
- ---------------------------------------------------------------------------------------------------------------------------
NYS MAG RB, Homeowner Mtg., Series UU,
7.75%, 10/1/23 Aa2/NR 1,590,000 1,644,187
- ---------------------------------------------------------------------------------------------------------------------------
NYS MAG RB, Homeowner Mtg., Series VV,
7.375%, 10/1/11 Aa2/NR 125,000 130,226
- ---------------------------------------------------------------------------------------------------------------------------
NYS MAG RB, Inverse Floater, 6.588%, 10/1/24(1) NR/NR 10,000,000 8,367,800
- ---------------------------------------------------------------------------------------------------------------------------
NYS MAG RB, Series 40-B, 6.40%, 10/1/12 Aa2/NR 500,000 520,110
- ---------------------------------------------------------------------------------------------------------------------------
NYS MCFFA RB, Long-Term Health Care, Series C,
FSA Insured, 6.40%, 11/1/14 Aaa/AAA/AAA 2,800,000 2,963,324
- ---------------------------------------------------------------------------------------------------------------------------
NYS MCFFA RB, MHESF, Prerefunded, FGIC
Insured, Series A, 6.375%, 8/15/17 Aaa/NR/AAA 4,920,000 5,240,243
- ---------------------------------------------------------------------------------------------------------------------------
NYS MCFFA RB, MHESF, Unrefunded Balance,
Series A, FGIC Insured, 6.375%, 8/15/17 Aaa/AAA/AAA 80,000 83,940
- ---------------------------------------------------------------------------------------------------------------------------
NYS MCFFA RB, MHESF, Unrefunded Balance,
Series B, 7.875%, 8/15/20 A3/BBB+ 365,000 382,666
- ---------------------------------------------------------------------------------------------------------------------------
NYS MCFFA RB, Prerefunded, Series D,
6.45%, 2/15/09 Aa2/AAA 185,000 199,835
</TABLE>
17 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ MARKET
S&P/FITCH FACE VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK CONTINUED
NYS MCFFA RB, St. Francis Hospital, Project A,
FGIC Insured, 7.625%, 11/1/21 Aaa/AAA/AAA $ 2,690,000 $ 2,751,520
- ---------------------------------------------------------------------------------------------------------------------------
NYS MCFFA RB, St. Luke's Hospital Center Mtg.,
Prerefunded, Series B, 7.45%, 2/15/29 Aaa/AAA 7,500,000 7,752,450
- ---------------------------------------------------------------------------------------------------------------------------
NYS MCFFA RB, Unrefunded Balance, 7.70%, 2/15/18 NR/A- 350,000 354,060
- ---------------------------------------------------------------------------------------------------------------------------
NYS MCFFA RRB, MHESF, Unrefunded Balance,
Series A, 8.875%, 8/15/07 A3/A- 2,930,000 2,941,193
- ---------------------------------------------------------------------------------------------------------------------------
NYS MTAU RB, Transportation Facilities Service
Contracts, Series 3, 7.375%, 7/1/08 Baa1/BBB+ 250,000 280,638
- ---------------------------------------------------------------------------------------------------------------------------
NYS TBTAU GP RB, Series X, 6%, 1/1/14 Aa3/A+ 14,510,000 14,871,734
- ---------------------------------------------------------------------------------------------------------------------------
NYS TBTAU GP RRB, Series A, 5%, 1/1/15 Aa3/A+ 3,500,000 3,267,460
- ---------------------------------------------------------------------------------------------------------------------------
NYS TBTAU GP RRB, Series B, 5%, 1/1/20 Aa3/A+ 500,000 455,150
- ---------------------------------------------------------------------------------------------------------------------------
NYS TBTAU GP RRB, Series Y, 5.50%, 1/1/17 Aa3/A+ 15,000,000 14,973,750
- ---------------------------------------------------------------------------------------------------------------------------
NYS TBTAU SPO RRB, Series A, MBIA Insured,
6.625%, 1/1/17 Aaa/AAA 500,000 522,620
- ---------------------------------------------------------------------------------------------------------------------------
NYS Thruway Authority General RB, Prerefunded,
Series A, 5.75%, 1/1/19 Aa3/AA- 5,000,000 5,252,850
- ---------------------------------------------------------------------------------------------------------------------------
NYS UDC RB, Series A, MBIA Insured, 5.50%, 4/1/16 Aaa/AAA/AAA 7,500,000 7,376,325
- ---------------------------------------------------------------------------------------------------------------------------
NYS UDC RRB, Correctional Capital Facilities,
Series A, 5.25%, 1/1/21 Baa1/BBB+/A 1,000,000 915,530
- ---------------------------------------------------------------------------------------------------------------------------
NYS United Nations Development Corp. RRB,
Sr. Lien, Series B, 5.60%, 7/1/26 A2/NR/A 1,295,000 1,243,757
- ---------------------------------------------------------------------------------------------------------------------------
NYS United Nations Development Corp. RRB,
Sub. Lien, Series C, 5.60%, 7/1/26 A3/NR/A- 3,000,000 2,881,290
- ---------------------------------------------------------------------------------------------------------------------------
Onondaga Cnty., NY IDA SWD Facility RRB,
Solvay Paperboard LLC Project, 7%, 11/1/30 NR/NR 16,300,000 16,555,910
- ---------------------------------------------------------------------------------------------------------------------------
Onondaga Cnty., NY RR Agency RB,
RR Facilities Project, 7%, 5/1/15 Baa1/NR/A- 16,500,000 17,213,460
- ---------------------------------------------------------------------------------------------------------------------------
PAUNYNJ Consolidated RRB, 78th Series,
6.50%, 4/15/11(2) A1/AA-/AA- 250,000 263,738
- ---------------------------------------------------------------------------------------------------------------------------
PAUNYNJ SPO RB, JFK International Air Terminal
Project, Series 6, 5.75%, 12/1/22 Aaa/AAA/AAA 11,150,000 11,238,643
- ---------------------------------------------------------------------------------------------------------------------------
PAUNYNJ SPO RRB, KIAC-4 Project, Fifth
Installment, 6.75%, 10/1/19 NR/NR 12,600,000 13,482,252
- ---------------------------------------------------------------------------------------------------------------------------
Suffolk Cnty., NY GORB, AMBAC Insured,
10%, 11/1/02 Aaa/AAA/AAA 250,000 290,168
- ---------------------------------------------------------------------------------------------------------------------------
Suffolk Cnty., NY IDA RRB, Nissequogue Cogen
Partners Facility, 5.50%, 1/1/23 NR/NR 3,500,000 3,183,215
- ---------------------------------------------------------------------------------------------------------------------------
Syracuse, NY IDA Civic Facilities RB, Crouse Health
Hospital, Inc. Project, Series A, 5.375%, 1/1/23 NR/BBB 1,000,000 870,230
----------------
562,454,973
</TABLE>
18 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ MARKET
S&P/FITCH FACE VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--14.1%
Guam PAU RB, Series A, 5.125%, 10/1/29 Baa3/BBB/BBB $ 7,750,000 $ 6,797,060
- ---------------------------------------------------------------------------------------------------------------------------
Guam PAU RB, Series A, 5.25%, 10/1/34 Baa3/BBB/BBB 10,000,000 8,835,300
- ---------------------------------------------------------------------------------------------------------------------------
PR CMWLTH Aqueduct & Sewer Authority RB,
Escrowed to Maturity, 10.25%, 7/1/09 Aaa/AAA 1,300,000 1,677,702
- ---------------------------------------------------------------------------------------------------------------------------
PR CMWLTH GOB, 5%, 7/1/27 Baa1/A 7,000,000 6,174,490
- ---------------------------------------------------------------------------------------------------------------------------
PR CMWLTH GORB, FSA Insured, Inverse Floater,
8.392%, 7/1/20(1) Aaa/AAA/AAA 11,500,000 11,744,375
- ---------------------------------------------------------------------------------------------------------------------------
PR CMWLTH HTAU RB, Prerefunded, Series S,
6.50%, 7/1/22 NR/AAA 7,000,000 7,552,160
- ---------------------------------------------------------------------------------------------------------------------------
PR CMWLTH HTAU RB, Series W, Inverse Floater,
6.872%, 7/1/10(1) Baa1/A 9,000,000 9,202,500
- ---------------------------------------------------------------------------------------------------------------------------
PR CMWLTH Infrastructure FAU RRB, Unrefunded
Balance, Series A, 7.75%, 7/1/08 Baa1/BBB+ 1,355,000 1,372,439
- ---------------------------------------------------------------------------------------------------------------------------
PR CMWLTH Infrastructure FAU Special RRB,
Unrefunded Balance, Series A, 7.90%, 7/1/07 Baa1/BBB+ 95,000 96,234
- ---------------------------------------------------------------------------------------------------------------------------
PR EPAU CAP RRB, Series N, MBIA Insured,
Zero Coupon, 5.69%, 7/1/17(3) Aaa/AAA 24,000,000 9,065,520
- ---------------------------------------------------------------------------------------------------------------------------
PR EPAU RB, Series DD, 5%, 7/1/28 Baa1/BBB+/NR 3,000,000 2,633,700
- ---------------------------------------------------------------------------------------------------------------------------
PR Housing Bank & Finance Agency SFM RB,
Homeownership-Fourth Portfolio, Escrowed to
Maturity, 8.50%, 12/1/18 Aaa/NR 1,580,000 1,791,910
- ---------------------------------------------------------------------------------------------------------------------------
PR Industrial Tourist Educational, Medical &
Environmental Control Facilities RRB, Ana G. Mendez
University Project, 5.375%, 2/1/19 NR/BBB 1,000,000 938,200
- ---------------------------------------------------------------------------------------------------------------------------
PR Industrial Tourist Educational, Medical &
Environmental Control Facilities RRB, Ana G. Mendez
University Project, 5.375%, 2/1/29 NR/BBB 2,000,000 1,845,060
- ---------------------------------------------------------------------------------------------------------------------------
PR Industrial, Medical & Environmental PC Facilities
FAU RB, American Airlines, Inc. Project, 6.45%, 12/1/25(2) Baa1/BBB- 1,285,000 1,330,810
- ---------------------------------------------------------------------------------------------------------------------------
PR Industrial, Medical & Environmental PC Facilities
FAU RB, Warner Lambert Co. Project, 7.60%, 5/1/14 A1/NR 3,000,000 3,098,010
- ---------------------------------------------------------------------------------------------------------------------------
PR POAU RB, American Airlines SPF Project, Series A,
6.25%, 6/1/26 Baa2/BBB- 8,000,000 8,151,200
- ---------------------------------------------------------------------------------------------------------------------------
PR Telephone Authority RB, MBIA Insured, Inverse
Floater, 7.422%, 1/16/15(1) Aaa/AAA 10,000,000 10,825,000
----------------
93,131,670
----------------
Total Municipal Bonds and Notes (Cost $649,165,606) 655,586,643
</TABLE>
19 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM TAX-EXEMPT OBLIGATIONS--0.1%
NYS HFA RB, Saxony Housing, Series A, 3.75%, 10/1/99(4) (Cost $600,000) $600,000 $ 600,000
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $649,765,606) 99.4% 656,186,643
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.6 4,043,839
------------------------------
NET ASSETS 100.0% $660,230,482
------------------------------
------------------------------
</TABLE>
FOOTNOTES TO STATEMENT OF INVESTMENTS
<TABLE>
<S><C>
To simplify the listings of securities, abbreviations are used per the table below:
CAP Capital Appreciation L.I. Long Island
CMWLTH Commonwealth MAG Mtg. Agency
COP Certificates of Participation MCFFA Medical Care Facilities Finance Agency
CUS City University System MH Multifamily Housing
DA Dormitory Authority MHESF Mental Health Services Facilities
EFCPC Environmental Facilities Corp. Pollution Control MTAU Metropolitan Transportation Authority
EPAU Electric Power Authority MWFAU Municipal Water Finance Authority
ERDAUEF Energy Research & Development Authority NYC New York City
Electric Facilities NYS New York State
ERDAUGF Energy Research & Development Authority PAUNYNJ Port Authority of New York & New Jersey
Gas Facilities PAU Power Authority
ERDAUPC Energy Research & Development Authority PC Pollution Control
Pollution Control POAU Port Authority
FAU Finance Authority RB Revenue Bonds
GP General Purpose RR Resource Recovery
GOB General Obligation Bonds RRB Revenue Refunding Bonds
GORB General Obligation Refunding Bonds SDI School District
GOUN General Obligation Unlimited Nts. SFM Single Family Mtg.
HDC Housing Development Corp. SPF Special Facilities
HFA Housing Finance Agency SPO Special Obligations
HFASC Housing Finance Agency Service Contract SUEFS State University Educational Facilities System
HTAU Highway & Transportation Authority SWD Solid Waste Disposal
IDA Industrial Development Agency TBTAU Triborough Bridge & Tunnel Authority
IDAU Industrial Development Authority UDC Urban Development Corp.
LGAC Local Government Assistance Corp. WSS Water & Sewer System
</TABLE>
1. Represents the current interest rate for a variable rate bond known as an
"inverse floater" which pays 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 $89,507,400 or 13.56% of the
Fund's net assets as of September 30, 1999. 2. Securities with an aggregate
market value of $4,106,263 are held in collateralized accounts to cover initial
margin requirements on open futures sales contracts. See Note 5 of Notes to
Financial Statements. 3. For zero coupon bonds, the interest rate shown is the
effective yield on the date of purchase. 4. Represents the current interest rate
for a variable-rate security.
AS OF SEPTEMBER 30, 1999, SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX
AMOUNT TO $190,161,565 OR 28.80% OF THE FUND'S NET ASSETS.
DISTRIBUTION OF INVESTMENTS BY INDUSTRY OF ISSUE, AS A PERCENTAGE OF TOTAL
INVESTMENTS AT VALUE, IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDUSTRY MARKET VALUE PERCENT
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Higher Education $ 103,463,823 15.9%
General Obligation 69,932,913 10.7
Highways 56,098,224 8.5
Electric Utilities 52,366,072 8.0
Single Family Housing 37,586,634 5.7
Municipal Leases 37,090,172 5.7
Corporate Backed 35,271,175 5.4
Marine/Aviation Facilities 33,958,490 5.2
Multifamily Housing 32,417,215 4.9
Water Utilities 31,020,408 4.7
Hospital/Healthcare 29,515,576 4.5
Pollution Control 26,330,509 4.0
Sales Tax 26,222,973 4.0
Manufacturing, Non-Durable Goods 21,739,939 3.3
Resource Recovery 17,213,460 2.6
Not-for-Profit Organization 11,090,592 1.7
Telephone Utilities 10,825,000 1.6
Adult Living Facilities 10,322,756 1.6
Gas Utilities 7,282,500 1.1
Special Assessment 6,170,057 0.9
Sewer Utilities 268,155 0.0
----------------------------------
Total $656,186,643 100.0%
----------------------------------
----------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
21 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $649,765,606)--see accompanying statement $ 656,186,643
- -----------------------------------------------------------------------------------------------
Cash 514,573
- -----------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 21,132,696
Interest 12,107,103
Shares of beneficial interest sold 49,082
- -----------------------------------------------------------------------------------------------
Other 5,322
----------------
Total assets 689,995,419
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
LIABILITIES
Payables and other liabilities:
Investments purchased 25,925,883
Dividends 1,832,956
Shares of beneficial interest redeemed 756,234
Daily variation on futures contracts--Note 5 406,250
Distribution and service plan fees 402,848
Trustees' compensation--Note 1 247,054
Transfer and shareholder servicing agent fees 60,995
Other 132,717
----------------
Total liabilities 29,764,937
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET ASSETS $660,230,482
----------------
----------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital $ 654,598,958
- -----------------------------------------------------------------------------------------------
Overdistributed net investment income (818,678)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 60,415
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 6,389,787
----------------
Net assets $660,230,482
----------------
----------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$575,254,083 and 46,980,126 shares of beneficial interest outstanding) $12.24
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $12.85
- -----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $78,526,494
and 6,412,091 shares of beneficial interest outstanding) $12.25
- -----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $6,449,905
and 526,815 shares of beneficial interest outstanding) $12.24
</TABLE>
See accompanying Notes to Financial Statements.
22 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Year Ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest $ 41,949,507
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
EXPENSES
Management fees--Note 4 3,690,468
- -----------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 1,389,307
Class B 986,743
Class C 66,209
- -----------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 553,719
- -----------------------------------------------------------------------------------------------
Shareholder reports 142,138
- -----------------------------------------------------------------------------------------------
Custodian fees and expenses 77,679
- -----------------------------------------------------------------------------------------------
Trustees' compensation--Note 1 62,862
- -----------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 61,046
- -----------------------------------------------------------------------------------------------
Other 61,744
----------------
Total expenses 7,091,915
Less expenses paid indirectly--Note 1 (22,748)
----------------
Net expenses 7,069,167
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 34,880,340
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments 1,136,737
Closing of futures contracts 4,311,870
----------------
Net realized gain 5,448,607
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (56,154,817)
----------------
Net realized and unrealized loss (50,706,210)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(15,825,870)
----------------
----------------
</TABLE>
See accompanying Notes to Financial Statements.
23 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 1998
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 34,880,340 $ 35,535,861
- -------------------------------------------------------------------------------------------------------------
Net realized gain 5,448,607 2,676,806
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (56,154,817) 19,959,087
----------------------------------
Net increase (decrease) in net assets resulting from operations (15,825,870) 58,171,754
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (29,719,227) (31,874,990)
Class B (4,077,657) (4,618,825)
Class C (276,008) (234,931)
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial interest
transactions--Note 2:
Class A 8,969,591 (43,774,682)
Class B (21,968,327) (2,555,074)
Class C 756,432 1,261,316
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NET ASSETS
Total decrease (62,141,066) (23,625,432)
- -------------------------------------------------------------------------------------------------------------
Beginning of period 722,371,548 745,996,980
----------------------------------
End of period (including overdistributed net investment
income of $818,678 and $1,648,412, respectively) $660,230,482 $722,371,548
----------------------------------
----------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
24 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.17 $12.79 $12.41 $12.29 $11.92
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .64 .64 .69 .68 .69
Net realized and unrealized gain (loss) (.94) .40 .37 .12 .41
--------------------------------------------------------------------------
Total income (loss) from
investment operations (.30) 1.04 1.06 .80 1.10
- -------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.63) (.66) (.68) (.68) (.70)
Distributions from net realized gain -- -- -- -- (.03)
--------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.63) (.66) (.68) (.68) (.73)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.24 $13.17 $12.79 $12.41 $12.29
--------------------------------------------------------------------------
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(1) (2.36)% 8.36% 8.78% 6.65% 9.58%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $575,254 $609,183 $634,789 $667,258 $673,050
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $603,604 $621,555 $652,048 $684,981 $659,465
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 5.04% 4.96% 5.49% 5.50% 5.76%
Expenses 0.88% 0.87%(3) 0.86%(3) 0.91%(3) 0.90%(3)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 18% 25% 21% 21% 15%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 4.
The lesser of purchases or sales of portfolio securities for a period, divided
by the monthly average of the market value of portfolio securities owned during
the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1999, were $126,455,653 and $152,129,748, respectively.
See accompanying Notes to Financial Statements.
25 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $13.18 $12.79 $12.41 $12.30 $11.93
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .54 .55 .59 .60 .60
Net realized and unrealized gain (loss) (.94) .41 .38 .10 .42
-----------------------------------------------------------------------------
Total income (loss) from
investment operations (.40) .96 .97 .70 1.02
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.53) (.57) (.59) (.59) (.62)
Distributions from net realized gain -- -- -- -- (.03)
-----------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.53) (.57) (.59) (.59) (.65)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.25 $13.18 $12.79 $12.41 $12.30
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) (3.11)% 7.62% 7.97% 5.77% 8.75%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $78,526 $107,021 $106,459 $101,302 $91,108
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $98,597 $106,130 $104,183 $98,488 $81,743
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 4.25% 4.21% 4.72% 4.73% 4.95%
Expenses 1.65% 1.63%(3) 1.63%(3) 1.68%(3) 1.67%(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 18% 25% 21% 21% 15%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 4.
The lesser of purchases or sales of portfolio securities for a period, divided
by the monthly average of the market value of portfolio securities owned during
the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1999, were $126,455,653 and $152,129,748, respectively.
See accompanying Notes to Financial Statements.
26 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
<TABLE>
<CAPTION>
CLASS C YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995(5)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $13.17 $12.79 $12.41 $12.30 $12.22
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 .47 .57 .60 .05
Net realized and unrealized gain (loss) (.96) .48 .39 .09 .08
---------------------------------------------------------------
Total income (loss) from
investment operations (.40) .95 .96 .69 .13
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.53) (.57) (.58) (.58) (.05)
Distributions from net realized gain -- -- -- -- --
---------------------------------------------------------------
Total dividends and distributions
to shareholders (.53) (.57) (.58) (.58) (.05)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.24 $13.17 $12.79 $12.41 $12.30
---------------------------------------------------------------
---------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) (3.11)% 7.54% 7.95% 5.64% 1.10%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $6,450 $6,168 $4,749 $2,007 $25
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $6,622 $5,420 $3,798 $752 $18
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 4.26% 4.30% 4.67% 4.60% 3.67%
Expenses 1.65% 1.63%(3) 1.63%(3) 1.77%(3) 1.37%(3)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 18% 25% 21% 21% 15%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 4.
The lesser of purchases or sales of portfolio securities for a period, divided
by the monthly average of the market value of portfolio securities owned during
the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1999, were $126,455,653 and $152,129,748, respectively. 5.
For the period from August 29, 1995 (inception of offering) to September 30,
1995.
See accompanying Notes to Financial Statements.
27 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer New York Municipal Fund (the Fund) 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 and New York City
income taxes for individual investors consistent with preservation of capital.
The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund
offers Class A, Class B and Class C shares. Class A shares are sold with a
front-end sales charge on investments up to $1 million. Class B and Class C
shares may be subject to a contingent deferred sales charge (CDSC). All classes
of shares have identical rights to earnings, assets and voting privileges,
except that each class has its own expenses directly attributable to that class
and exclusive voting rights with respect to matters affecting that class.
Classes A, B and C have separate distribution and/or service plans. 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.
- --------------------------------------------------------------------------------
SECURITIES 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 an
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. Options are valued based upon the last sale price on the
principal exchange on which the option is traded or, in the absence of any
transactions that day, the value is based upon the last sale price on the prior
trading date if it is within the spread between the closing bid and asked
prices. If the last sale price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), 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.
28 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. 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, 1999, a provision of $4,254 was made for the Fund's projected
benefit obligations and payments of $14,569 were made to retired trustees,
resulting in an accumulated liability of $239,511 as of September 30, 1999.
The Board of Trustees has adopted a deferred compensation plan for
independent Trustees that enables Trustees to elect to defer receipt of all or a
portion of annual compensation they are entitled to receive from the Fund. Under
the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Trustees in shares of one or more
Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under
the plan will be determined based upon the performance of the selected funds.
Deferral of Trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
income per share.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from its 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 fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund adjusts 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, 1999, amounts have been reclassified to reflect an
increase in paid-in capital of $34,359, a decrease in overdistributed net
investment income of $22,286, and a decrease in accumulated net realized gain on
investments of $56,645.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
29 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
OTHER. Investment transactions are accounted for as of trade date. Original
issue discount is accreted and premium is amortized in accordance with federal
income tax requirements. For municipal 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.
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
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, 1999 YEAR ENDED SEPTEMBER 30, 1998
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Sold 5,656,270 $ 72,055,946 3,928,958 $ 50,847,551
Dividends and/or
distributions reinvested 1,573,355 20,244,395 1,692,174 21,877,187
Redeemed (6,493,894) (83,330,750) (8,997,338) (116,499,420)
--------------------------------------------------------------
Net increase (decrease) 735,731 $ 8,969,591 (3,376,206) $ (43,774,682)
--------------------------------------------------------------
--------------------------------------------------------------
- --------------------------------------------------------------------------------------------
CLASS B
Sold 870,104 $ 11,062,376 925,113 $ 11,973,080
Dividends and/or
distributions reinvested 205,324 2,647,249 233,067 3,013,390
Redeemed (2,785,915) (35,677,952) (1,356,282) (17,541,544)
--------------------------------------------------------------
Net decrease (1,710,487) $ (21,968,327) (198,102) $ (2,555,074)
--------------------------------------------------------------
--------------------------------------------------------------
- --------------------------------------------------------------------------------------------
CLASS C
Sold 206,146 $ 2,644,751 187,441 $ 2,433,192
Dividends and/or
distributions reinvested 16,196 208,516 14,729 190,501
Redeemed (163,755) (2,096,835) (105,189) (1,362,377)
--------------------------------------------------------------
Net increase 58,587 $ 756,432 96,981 $ 1,261,316
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
30 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of September 30, 1999, net unrealized appreciation on securities of
$6,421,037 was composed of gross appreciation of $22,938,380, and gross
depreciation of $16,517,343.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. 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% 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 in excess of $1
billion. The Fund's management fee for the year ended September 30, 1999, was
0.52% of average annual net assets for each class of shares.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
September 30, 1999 $572,576 $116,793 $38,094 $351,127 $22,047
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 30, 1999 $44,962 $210,111 $11,886
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
31 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements
to the Distributor at a rate of up to 0.25% of average annual net assets of
Class A shares. The Distributor makes payments to plan recipients quarterly at
an annual rate not to exceed 0.25% of the average annual net assets consisting
of Class A shares of the Fund. For the fiscal year ended September 30, 1999,
payments under the Class A Plan totaled $1,389,307, all of which was paid by
the Distributor to recipients. That included $24,352 paid to an affiliate of
the Distributor's parent company. Any unreimbursed expenses the Distributor
incurs with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years.
- --------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close of each regular
business day during the period. The 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 under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended September 30, 1999,
were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $986,743 $767,626 $1,999,796 2.55%
Class C Plan 66,209 33,245 71,519 1.11
</TABLE>
32 OPPENHEIMER NEW YORK MUNICIPAL FUND
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to 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 (initial margin) in an amount 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 may recognize 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
and/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.
As of September 30, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATE CONTRACTS SEPT. 30, 1999 DEPRECIATION
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO SELL
U.S. Long Bond 12/20/99 500 $56,968,750 $31,250
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended September 30,
1999.
Appendix A
- -------------------------------------------------------------------------------
MUNICIPAL BOND RATINGS DEFINITIONS
- -------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below for municipal securities. Those ratings represent
the opinion of the agency as to the credit quality of issues that they rate. The
summaries below are based upon publicly-available information provided by the
rating organizations.
Moody's Investors Service, Inc.
- -------------------------------------------------------------------------------
Long-Term Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, 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 have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of 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.
Caa: Bonds rated Caa are of poor standing and may be in default or there may
be present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high
degree and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These bonds are
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals that begin when facilities are
completed, or (d) payments to which some other limitation attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition. Moody's applies numerical
modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa.
The modifier "1" indicates that the obligation ranks in the higher end of its
category; the modifier "2" indicates a mid-range ranking and the modifier "3"
indicates a ranking in the lower end of the category. Advanced refunded issues
that are secured by certain assets are identified with a # symbol.
Short-Term Ratings - U.S. Tax-Exempt Municipals
There are four ratings below for short-term obligations that are investment
grade. Short-term speculative obligations are designated SG. For variable rate
demand obligations, a two-component rating is assigned. The first (MIG) element
represents an evaluation by Moody's of the degree of risk associated with
scheduled principal and interest payments, and the other (VMIG) represents an
evaluation of the degree of risk associated with the demand feature.
MIG 1/VMIG 1: Denotes best quality. There is strong protection by established
cash flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing..
MIG 2/VMIG 2: Denotes high quality. Margins of protection are ample although not
as large as in the preceding group.
MIG 3/VMIG 3: Denotes favorable quality. All security elements are accounted for
but there is lacking the undeniable strength of the preceding grades. Liquidity
and cash flow protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4: Denotes adequate quality. Protection commonly regarded as required
of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
SG: Denotes speculative quality. Debt instruments in this category lack
margins of protection.
Standard & Poor's Rating Services
- -------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being
made on the date due.
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. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the
due date. The rating may also be used if a bankruptcy petition has been filed
or similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- -------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and
are extremely speculative. "DDD" designates the highest potential for
recovery of amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
- -------------------------------------------------------------------------------
International Short-Term Credit Ratings
- -------------------------------------------------------------------------------
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for
meeting financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Long-Term Debt and Preferred Stock
- -------------------------------------------------------------------------------
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. 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 in periods of greater 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 likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. 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 arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free
U.S. Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
B-1
Appendix B
Municipal Bond Industry Classifications
Adult Living Facilities
Bond Anticipation Notes
Education
Electric Utilities
Gas Utilities
General Obligation
Higher Education
Highways/Railways
Hospital/Healthcare
Manufacturing, Durable Goods
Manufacturing, Non Durable Goods Marine/Aviation Facilities Multi-Family Housing
Municipal Leases Non Profit Organization Parking Fee Revenue Pollution Control
Resource Recovery Revenue Anticipation Notes Sales Tax Revenue Sewer Utilities
Single Family Housing Special Assessment Special Tax Sports Facility Revenue
Student Loans Tax Anticipation Notes Tax & Revenue Anticipation Notes Telephone
Utilities Water Utilities
<PAGE>
C-11
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (1) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(2) non-qualified deferred compensation plans, (3) employee benefit plans3 (4)
Group Retirement Plans4 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs,
Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager"). Waivers that apply at the time shares are redeemed must be requested
by the shareholder and/or dealer in the redemption request.
- --------------
1. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
4. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."1 This waiver provision applies to: |_|
Purchases of Class A shares aggregating $1 million or more. |_| Purchases by a
Retirement Plan (other than an IRA or 403(b)(7)
custodial plan) that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or
total plan assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(1) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for those
purchases, or
(2) by a direct rollover of a distribution from a qualified Retirement
Plan if the administrator of that Plan has made special arrangements
with the Distributor for those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the
record-keeping service agreement with Merrill Lynch, the Plan must
have $3 million or more of its assets invested in (a) mutual
funds, other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM"), that are made available under a Service
Agreement between Merrill Lynch and the mutual fund's principal
underwriter or distributor, and (b) funds advised or managed by
MLAM (the funds described in (a) and (b) are referred to as
"Applicable Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and
Merrill Lynch. On the date the plan sponsor signs the record
keeping service agreement with Merrill Lynch, the Plan must have
$3 million or more of its assets (excluding assets invested in
money market funds) invested in Applicable Investments.
(3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs
that agreement, the Plan has 500 or more eligible employees (as
determined by the Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a cost-allocation
agreement with the Transfer Agent on or before May 1, 1999.
<PAGE>
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases): |_| The Manager or its affiliates. |_| Present or former officers,
directors, trustees and employees (and their
"immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, a sibling's spouse, a spouse's siblings, aunts,
uncles, nieces and nephews; relatives by virtue of a remarriage
(step-children, step-parents, etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees.
|_| Employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are
identified as such to the Distributor) or with the Distributor. The
purchaser must certify to the Distributor at the time of purchase that
the purchase is for the purchaser's own account (or for the benefit of
such employee's spouse or minor children).
|_| Dealers, brokers, banks or registered investment advisors 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.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares for
their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have entered
into an agreement for this purpose with the Distributor) who buy
shares for their own accounts may also purchase shares without sales
charge but only if their accounts are linked to a master account of
their investment advisor or financial planner on the books and records
of the broker, agent or financial intermediary with which the
Distributor has made such special arrangements . Each of these
investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares.
|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing
or other benefit plan which beneficially owns shares for those persons.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administration services.
|-|
<PAGE>
Retirement Plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under
sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code), in
each case if those purchases are made through a broker, agent or other
financial intermediary that has made special arrangements with the
Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value
Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and Class C TRAC-2000 program on November 24,
1995.
|_| A qualified Retirement Plan that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value
Funds at net asset value, with such shares to be held through DCXchange,
a sub-transfer agency mutual fund clearinghouse, if that arrangement was
consummated and share purchases commenced by December 31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases): |_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor.
|_| Shares purchased through a broker-dealer that has entered into a special
agreement with the Distributor to allow the broker's customers to
purchase and pay for shares of Oppenheimer funds using the proceeds of
shares redeemed in the prior 30 days 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 shares of the Fund, and the Distributor may require
evidence of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a participant
in a Retirement Plan for which the Manager or an affiliate acts as
sponsor.
C. Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions.
The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases: |_| To make Automatic Withdrawal Plan payments that are limited
annually to
no more than 12% of the account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established.
(2) To return excess contributions.
(3)
<PAGE>
To return contributions made due to a mistake of fact. (4) Hardship
withdrawals, as defined in the plan.2 (5) Under a Qualified Domestic Relations
Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal
Revenue Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries. (9) Separation from service.3
(10)Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) if the plan has made special arrangements with the
Distributor.
(11)Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this
waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases: |_| Shares redeemed involuntarily,
as described in "Shareholder Account
Rules and Policies," in the applicable Prospectus.
|_| Redemptions from accounts other than Retirement Plans 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records are
maintained on a daily valuation basis by Merrill Lynch or an independent
record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class C
shares of an Oppenheimer fund in amounts of $1 million or more held by
the Retirement Plan for more than one year, if the redemption proceeds
are invested in Class A shares of one or more Oppenheimer funds.
|-|
<PAGE>
Distributions from Retirement Plans or other employee benefit plans for
any of the following purposes:
(1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established in an Oppenheimer fund.
(2) To return excess contributions made to a participant's account. (3) To
return contributions made due to a mistake of fact. (4) To make hardship
withdrawals, as defined in the plan.4 (5) To make distributions required under a
Qualified Domestic Relations
Order or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal
Revenue Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.5 (9) On account of the
participant's separation from service.6 (10) Participant-directed redemptions to
purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the
Manager) offered as an investment option in a Retirement Plan if the
plan has made special arrangements with the Distributor.
(11) Distributions made on account of a plan termination or "in-service"
distributions," if the redemption proceeds are rolled over directly
to an OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the
Oppenheimer funds that had been offered.
(13) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2, as long
as the aggregate value of the distributions does not exceed 10% of
the account's value, adjusted annually.
(14) Redemptions of Class B shares under an Automatic Withdrawal Plan for
an account other than a Retirement Plan, if the aggregate value of
the redeemed shares does not exceed 10% of the account's value,
adjusted annually.
|_| Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in Section
I.A.) of the Fund, the Manager and its affiliates and retirement plans
established by them for their employees.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former
Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Oppenheimer Quest Small Cap
Inc. Value Fund
Oppenheimer Quest Balanced Oppenheimer Quest Global
Value Fund Value Fund
Oppenheimer Quest Opportunity
Value Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Quest for Value New York
Income Fund Tax-Exempt Fund
Quest for Value Investment Quest for Value National
Quality Income Fund Tax-Exempt Fund
Quest for Value Global Income Quest for Value California
Fund Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either: |_| acquired by such shareholder pursuant to an exchange of
shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of the
Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former
Quest for Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply 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.
- ---------------------------------------------------------------------
Number of Initial Sales Initial Sales
Eligible Charge as a % Charge as a % Commission as %
Employees or of Offering of Net Amount of Offering
Members Price Invested Price
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
At least 10 but 2.00% 2.04% 1.60%
not more than 49
- ---------------------------------------------------------------------
<PAGE>
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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either 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 Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
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
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders who were shareholders of the AMA Family of Funds on
February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
|_| Shareholders who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| 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 purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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 an Oppenheimer fund. The
shares must have been 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. Those shares must have been
purchased prior to March 6, 1995 in connection with: |_| 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 value, adjusted annually, and
|_| 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.
|X| 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 an Oppenheimer fund. The shares must have been 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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995: |_| 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);
|_| 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 value; adjusted annually, and
|_| 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 Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Connecticut Mutual Investment
Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section): o Oppenheimer U. S. Government Trust, o Oppenheimer Bond Fund, o
Oppenheimer Disciplined Value Fund and o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total
Return Account
Connecticut Mutual Government CMIA LifeSpan Capital
Securities Account Appreciation Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (1)
persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a
result of direct purchases or purchases pursuant to the Fund's policies
on Combined Purchases or Rights of Accumulation, who still hold those
shares in that Fund or other Former Connecticut Mutual Funds, and
(2) persons whose intended purchases under a Statement of Intention entered
into prior to March 18, 1996, with the former general distributor of
the Former Connecticut Mutual Funds to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to
purchase shares at net asset value without being subject to the Class A
initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares: (1) any purchaser, provided the total initial amount
invested in the Fund or
any one or more of the Former Connecticut Mutual Funds totaled
$500,000 or more, including investments made pursuant to the
Combined Purchases, Statement of Intention and Rights of
Accumulation features available at the time of the initial purchase
and such investment is still held in one or more of the Former
Connecticut Mutual Funds or a Fund into which such Fund merged;
(2) any participant in a qualified plan, provided that the total initial
amount invested by the plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other
activity, and the spouses and minor dependent children of such
persons, pursuant to a marketing program between CMFS and such
group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the
Fund or any one or more of the Former Connecticut Mutual Funds,
provided the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996: (1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
the Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase of
shares of any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of
Oppenheimer Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and their
"immediate families" as defined in the Fund's Statement of Additional
Information) of the Fund, the Manager and its affiliates, and retirement
plans established by them or the prior investment advisor of the Fund
for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund in
specific investment products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered into
an agreement with the Distributor or prior distributor of the Fund's
shares to sell shares to defined contribution employee retirement plans
for which the dealer, broker, or investment advisor provides
administrative services.
<PAGE>
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Oppenheimer New York Municipal Fund
- -------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian Bank
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019-5820
PX0360.001.012000
1 Ms. Macaskill and Mr. Griffiths are not Directors of Oppenheimer Money Market
Fund, Inc. Mr. Griffiths is not a Trustee of Oppenheimer Discovery Fund. +Not a
Trustee of Oppenheimer Money Market Fund, Inc. or Oppenheimer Discovery Fund
2Trustee who is an Ainterested person@ of the Fund and of the Manager. # Not a
Director of Oppenheimer Money Market Fund, Inc. 1 However, that commission will
not be paid on purchases of shares in amounts of $1 million or more (including
any right of accumulation) by a Retirement Plan that pays for the purchase with
the redemption proceeds of Class C shares of one or more Oppenheimer funds held
by the Plan for more than one year. 2 This provision does not apply to IRAs. 3
This provision does not apply to 403(b)(7) custodial plans if the participant is
less than age 55, nor to IRAs. 4 This provision does not apply to IRAs. 5 This
provision does not apply to loans from 403(b)(7) custodial plans. 6 This
provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.
