As filed with the Securities and Exchange
Commission on February 26, 1998.
Registration No. 811-5278
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | X |
Amendment No. 12 | X |
THE NEW YORK TAX-EXEMPT INCOME FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
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(Address of Principal Executive Offices)
303-768-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
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FORM N-2
THE NEW YORK TAX-EXEMPT INCOME FUND, INC.
Cross Reference Sheet
Part A of
Form N-2
Item No. Prospectus Heading
1 *
2 *
3 *
4 *
5 *
6 *
7 *
8 General Description of the Registrant
9 Management
10 Capital Stock, Long-Term Debt, and Other Securities
11 *
12 *
13 See Item 15 of the Statement of Additional Information
Part B of
Form N-2
Item No. Heading In Statement of Additional Information
14 Cover Page
15 Table of Contents
16 *
17 See Item 8 of the Prospectus
18 Management
19 Control Persons and Principal Holders of Securities
20 See Item 9 of the Prospectus
21 Brokerage Allocation and Other Practices
22 See Item 10 of the Prospectus
23 Financial Statements
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* Not applicable or negative answer.
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THE NEW YORK TAX-EXEMPT INCOME FUND, INC.
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Outside Front Cover.
Inapplicable.
Item 2. Inside Front and Outside Back Cover Page.
Inapplicable.
Item 3. Fee Table and Synopsis.
Inapplicable.
Item 4. Financial Highlights.
Inapplicable.
Item 5. Plan of Distribution.
Inapplicable.
Item 6. Selling Shareholders.
Inapplicable.
Item 7. Use of Proceeds.
Inapplicable.
Item 8. General Description of the Fund.
1. The New York Tax-Exempt Income Fund, Inc. (the "Fund") is a diversified
closed-end management investment company incorporated under the laws of
Minnesota on August 10, 1987.
2., 3., and The Fund's primary investment objective is to provide to the
holders of the Fund's Common Stock, through investment in a professionally
managed portfolio of tax-exempt New York Municipal Securities (defined below),
current interest income exempt from both federal
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income tax (although such interest income may be subject to the federal
alternative minimum tax as discussed below) and New York State and New York City
income taxes. It is a secondary objective of the Fund to preserve and enhance
the Fund's net asset value through investments in tax-exempt New York Municipal
Securities that, in the opinion of OppenheimerFunds, Inc., the Fund's investment
adviser (the "Adviser"), are underrated or represent municipal market sectors
that are undervalued.
Underrated Municipal Securities are those whose ratings do not, in the
Adviser's opinion, reflect their true value. Obligations may be underrated
because of the time that has elapsed since their most recent rating, or because
of positive factors that may not have been fully taken into account by the
rating agencies, or for other similar reasons. Undervalued municipal market
sectors, on the other hand, refers to Municipal Securities of particular types
or purposes (e.g., hospital bonds, industrial revenue bonds, or bonds issued by
a particular municipal issuer) that, in the Adviser's opinion, are worth more
than the value assigned to them in the marketplace.
Municipal Securities may be undervalued because there is a temporary
excess of supply in a particular market sector, or because of a general decline
in the market price of Municipal Securities or a market sector for reasons that
do not apply to the particular Municipal Securities that are considered
undervalued. The Fund's investment in underrated or undervalued New York
Municipal Securities will be based on the Adviser's belief that the prices of
such Securities should ultimately reflect their true value. Under certain market
conditions, such underrated or undervalued Municipal Securities may realize
market appreciation, while in a declining market such Municipal Securities may
experience less market depreciation than other Municipal Securities.
Accordingly, "enhancement of net asset value" does not merely refer to
market appreciation of the Fund's portfolio securities, and the Fund does not
suggest that capital appreciation is itself an objective of the Fund. Instead,
the objective of enhancement of net asset value is one of seeking to outperform
the market by prudent selection of Municipal Securities, regardless of which
direction the market may move. A shareholder of the Fund will realize a taxable
gain upon the sale of shares at an appreciated net asset value or in the event
of capital gain distributions by the Fund as discussed below in "Tax Status."
o Portfolio Investments. Except during temporary defensive periods, the
Fund will, as a fundamental policy, invest at least 80% of its net assets in
tax-exempt New York Municipal Securities. As a non-fundamental policy, that 80%
of the Fund's net assets will be securities rated at the time of purchase within
the four highest grades for long-term securities or within the two highest
grades for short-term loans, notes and commercial paper by Moody's Investors
Services, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"), Fitch
Investors Service, Inc. ("Fitch") Duff & Phelps, Inc. ("Duff & Phelps") or
another nationally recognized statistical rating organization or, if unrated,
judged by the Adviser to be of comparable quality to Municipal Securities rated
within such grades. Municipal Securities rated "Baa" or "MIG2" by Moody's, or
"BBB" or "SP-2" by S&P, although investment grade, may be subject to greater
market fluctuations and risks of loss of income and principal than higher-rated
Municipal Securities and may be considered to have speculative characteristics.
A general description of Moody's & S&P's Duff & Phelps, Fitch Investor Services,
Inc. ratings of securities is set forth in Appendix A to this Prospectus. The
Fund intends to emphasize investments in New York Municipal Securities with
long-term maturities, but the degree
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of such emphasis will depend upon market conditions existing at the time of
investment.
The Fund may invest up to 20% of its net assets in unrated New York
Municipal Securities or in New York Municipal Securities rated lower than the
four highest grades for long-term securities, but no more than half of this
amount (10% of the Fund's net assets) will be invested in such lower rated New
York Municipal Securities. To the extent it does so, there may be somewhat
greater risk because such unrated or lower rated Municipal Securities, although
generally offering a higher current yield than higher rated securities, are
generally less liquid and involve a greater risk of non-payment of principal and
interest than higher rated securities. As a non-fundamental policy, the Fund
will invest in only unrated New York Municipal Securities which, in the opinion
of the Adviser, have credit characteristics equivalent to New York Municipal
Securities which have ratings qualifying them for investment by the Fund. Also
as a non-fundamental policy, the Fund will not invest in any rated New York (a)
municipal bonds rated lower than "Ba" by Moody's or "BB" by S&P, Fitch or Duff &
Phelps, (b) municipal notes rated "SP-2" by S&P, "MIG2" by Moody's or "F- 2" by
Fitch, or (c) if unrated municipal securities, judged by the Adviser to be of
comparable quality to municipal securities rated within the grades described in
(a) or (b) above, or within comparable rating grades by another nationally
recognized statistical rating organization.
Interest on certain "private activity" bonds (as defined under the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")) is
treated as a tax preference item under the alternative minimum tax provisions of
federal tax law. Such "private activity" bonds currently constitute a very small
percentage of the market in Municipal Securities (as defined herein). The Fund
will not invest more than 20% of its net assets in such "private activity"
bonds. To the extent the Fund invests in such "private activity" bonds,
investors could be subject to alternative minimum taxation on the income from
such investments. In the case of certain corporations, all tax-exempt income,
including interest on bonds held by the Fund, may be included in computing the
federal alternative minimum and environmental taxes.
o Temporary Investments. As a non-fundamental policy, during temporary
defensive periods (e.g. times when temporary imbalances of supply and demand or
other temporary dislocations in the tax-exempt bond market adversely affect the
price at which New York Municipal Securities are available), the Fund may invest
any percentage of its assets in temporary investments which are U.S. Government
securities or securities rated at the time of purchase within the two highest
grades by Moody's, S&P, Fitch or Duff & Phelps or another nationally recognized
statistical rating organization or, if unrated, judged by the Adviser to be of
comparable quality to Municipal Securities rated within such grades, the income
on which may be subject to either or both of New York State and New York City
income taxes or to both federal and New York income taxes. Temporary investments
of the Fund may also include repurchase agreements as discussed below. The
foregoing restrictions and other limitations discussed herein will apply only at
the time of purchase of securities and will not be considered violated unless an
excess or deficiency occurs or exists immediately after and as a result of an
acquisition of securities.
The foregoing investment objectives and policies are fundamental policies
(unless indicated otherwise) of the Fund and may not be changed without the
approval of the majority of the outstanding shares of the Fund. As used in this
Prospectus, a majority of the Fund's outstanding
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shares means the vote of: (i) 67% or more of the Fund's shares present at a
meeting, if the holders of more than 50% of the Fund's shares are present or
represented by proxy, or (ii) more than 50% of the Fund's shares, whichever is
less.
o Municipal Securities. Municipal securities ("Municipal Securities")
include debt obligations issued by states, cities and local authorities to
obtain funds for various public purposes, including the construction of such
public facilities as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Securities may be issued include the refinancing of
outstanding obligations, the obtaining of funds for general operating expenses
and for loans to other public institutions and facilities. In addition, certain
industrial development bonds and pollution control bonds may be included within
the term "Municipal Securities" if the interest paid thereon qualifies as exempt
from federal income tax. New York Municipal Securities ("New York Municipal
Securities") are Municipal Securities which bear interest that, in the opinion
of bond counsel to the issuer, is exempt from federal and New York State and New
York City income taxes. Neither the Fund nor the Adviser will make any special
review for the Fund of the proceedings relating to the issuance of the New York
Municipal Securities or of the basis for such opinions.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. Industrial
development and pollution control bonds are in most cases revenue bonds and do
not generally constitute the pledge of credit or taxing power of the issuer of
such bonds. There are, of course, variations in the security of Municipal
Securities, both within a particular classification and between classifications,
depending on numerous factors.
Also included within the general category of Municipal Securities are
participations in lease obligations or installment purchase contract obligations
(hereinafter collectively called "lease obligations") of municipal authorities
or entities. Although lease obligations do not constitute general obligations of
the municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non- appropriation" clauses which provide
that the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not yet developed the
depth of marketability associated with more conventional bonds. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove difficult.
The Fund will seek to minimize these risks by investing not more than 5% of its
investment assets in lease obligations that contain "non-appropriation" clauses,
and by investing in only those "non- appropriation" lease obligations where (1)
the nature of the leased equipment or property is such that its ownership or use
is essential to a governmental function of the municipality, (2) the lease
payments will commence amortization of principal at an early date resulting in
an average life of
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seven years or less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriated, (4) the lease obligor
has maintained good market acceptability in the past, (5) the investment is of a
size that will be attractive to institutional investors, and (6) the underlying
leased equipment has elements of portability and/or use that enhance its
marketability in the event foreclosure on the underlying equipment was ever
required. Municipal Securities also include obligations, such as tax-exempt
notes, municipal commercial paper and municipal lease obligations, having
relatively short-term maturities, although, as noted above, the Fund intends to
emphasize investments in Municipal Securities with long-term maturities.
The yields on Municipal Securities are dependent on a variety of factors,
including the condition of the general money market and the Municipal Securities
market, the size of a particular offering, the maturity of the obligations and
the rating of the issue. The ratings of Moody's and S&P represent their opinions
as to the quality of the Municipal Securities which they undertake to rate. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, Municipal Securities with the same maturity,
coupon and rating may have different yields while obligations of the same
maturity and coupon with different ratings may have the same yield. The market
value of outstanding Municipal Securities will vary with changes in prevailing
interest rate levels and as a result of changing evaluations of the ability of
their issuers to meet interest and principal payments. Ratings may be changed,
suspended or withdrawn as a result of changes in information obtained by Moody's
or S&P, or unavailability of such information, or for other circumstances. Such
events may adversely affect the market value of the subject Municipal
Securities.
Securities of issuers of Municipal Securities are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Bankruptcy Reform Act of 1978. In addition,
the obligations of such issuers may become subject to the laws enacted in the
future by Congress, state legislatures or referenda extending the time for
payment of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon municipalities to levy taxes. There is
also the possibility that, as a result of legislation or other conditions, the
power or ability of any issuer to pay, when due, the principal of and interest
on its Municipal Securities may be materially affected.
o Credit Risk and Interest Rate Risk. The values of Municipal Securities
will vary as a result of changing evaluations by rating services and investors
of the ability of the issuers of such securities to meet the interest and
principal payments. These credit risks relates to the ability of the issuer of a
Municipal Security to make interest or principal payments on the security as
they become due. While the Manager may rely to some extent on credit ratings by
nationally recognized rating agencies, such as Standard & Poor's or Moody's, in
evaluating the credit risk of securities selected for the Fund's portfolio, it
may also use its own research and analysis. However, many factors affect an
issuer's ability to make timely payments, and there can be no assurance that the
credit risks of a particular security will not change over time.
Municipal Securities are also subject to interest rate risks whereby
values will also change in response to changes in interest rates. Should
interest rates rise, the values of outstanding Municipal
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Securities will probably decline and (if purchased at principal amount) would
sell at a discount. If interest rates fall, the values of outstanding Municipal
Securities will probably increase and (if purchased at principal amount) would
sell at a premium. Changes in the values of the Fund's Municipal Securities from
these or other factors will not affect interest income derived from these
securities but will affect the Fund's net asset value per share.
o Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest rates
whereby the rate of interest is not fixed but varies with changes in specified
market rates or indexes, such as a bank prime rate or a tax-exempt money market
index. Variable rates are adjustable at stated periodic intervals. Floating
rates are automatically adjusted according to a specified market rate for such
investments, such as the percentage of the prime rate of a bank, or the 90-day
U.S. Treasury Bill rate. Such obligations may be secured by bank letters of
credit or other credit support arrangements.
|X| Inverse Floaters and Other Derivative Investments. The Fund may invest
in certain municipal "derivative investments." The Fund may use some derivative
investments for hedging purposes, and may invest in others because they offer
the potential for increased income and principal value. In general, a
"derivative investment" is a specially-designed investment whose performance is
linked to the performance of another investment or security, such as an option,
future or index. In the broadest sense, derivative investments include
exchange-traded options and futures contracts (please refer to "Financial
Futures and Options Transactions," below).
The Fund may invest in "inverse floater" variable rate bonds, a type of
derivative investment whose yields move in the opposite direction as short-term
interest rates change. As interest rates rise, inverse floaters produce less
current income. Their price may be more volatile than the price of a comparable
fixed-rate security. Some inverse floaters have a "cap" whereby if interest
rates rise above the "cap," the security pays additional interest income. If
rates do not rise above the "cap," the Fund will have paid an additional amount
for a feature that proves worthless. The Fund may also invest in municipal
securities that pay interest that depends on an external pricing mechanism, also
a type of derivative investment. Examples of external pricing mechanisms are
interest rate swaps or caps and municipal bond or swap indices. The Fund
anticipates that under normal circumstances it will invest no more than 10% of
its net assets in inverse floaters.
The risks of investing in derivative investments include not only the
ability of the issuer of the derivative investment to pay the amount due on the
maturity of the investment, but also the risk that the underlying security on
which the derivative is based, and that derivative itself, might not perform the
way the Adviser expected it to perform. That can mean that the Fund will realize
less income than expected. Another risk of investing in derivative investments
is that their market value could be expected to vary to a much greater extent
than the market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions and
maturities.
Special Investment Considerations - New York Municipal Securities. The Fund is
highly sensitive to the fiscal stability of New York State (the "State") and its
subdivisions, agencies, instrumentalities or authorities, including New York
City, which issue the Municipal Securities in which the Trust concentrates its
investments. The following information on risk factors in
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concentrating in New York Municipal Securities is only a summary, based on
publicly available official statements relating to offerings of New York issuers
of Municipal Securities on or prior to September 29, 1997 with respect to
offerings of the State and September 30, 1997 with respect to offerings of New
York City. No representation is made as to the accuracy of such information.
During the mid-1970's the State, some of its agencies, instrumentalities
and public benefit corporations (the "Authorities"), and certain of its
municipalities faced serious financial difficulties. To address many of these
financial problems, the State developed various programs, many of which were
successful in ameliorating the financial crisis. Any further financial problems
experienced by these Authorities or municipalities could have a direct adverse
effect on the New York Municipal Securities in which the Fund invests.
New York City
General. More than any other municipality, the fiscal health of New York
City (the "City") has a significant effect on the fiscal health of the State.
The national economic downturn which began in July 1990 adversely affected the
local economy which had been declining since late 1989. As a result, the City
experienced job losses in 1990 and 1991 and real Gross City Product ("GCP") fell
in those two years. Beginning in 1992, the improvement in the national economy
helped stabilize conditions in the City. Employment losses moderated toward
year-end and real GCP increased, boosted by strong wage gains. After noticeable
improvements in the City's economy during 1994, economic growth slowed in 1995,
and thereafter improved commencing in calendar year 1996, reflecting improved
securities industry earnings and employment in other sectors. The City's current
four-year financial plan assumes that moderate economic growth will exist
through calendar year 2001, with moderate job growth and wage increases.
For each of the 1981 through 1996 fiscal years, the City achieved balanced
operating results as reported in accordance with generally accepted accounting
principles ("GAAP"). The City 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
additional tax or other revenue increases or additional reduction in City
services or entitlement programs, which could adversely affect the City's
economic base.
The Mayor is responsible for preparing the City's four-year financial
plan, including the City's current financial plan for the 1998 through 2001
fiscal years (the "1998-2001 Financial Plan", "Financial Plan" or "City Plan").
The City's projections set forth in the City Plan are based on various
assumptions and contingencies which are uncertain and which may not materialize.
Changes in major assumptions could significantly affect the City's ability to
balance its budget as required by State law and to meet its annual cash flow and
financing requirements. Such assumptions and contingencies include the condition
of the regional and local economies, the impact on real estate tax revenues of
the real estate market, wage increases for City employees consistent with those
assumed in the City Plan, employment growth, the ability to implement reductions
in City personnel and other cost reduction
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initiatives, the ability of the New York City Health and Hospitals Corporation
and the Board of Education to take actions to offset potential budget
shortfalls, the ability to complete revenue generating transactions, provision
of State and Federal aid and mandate relief and the impact on City revenues and
expenditures for Federal and State welfare reform and any future legislation
affecting Medicare or other entitlements.
Implementation of the Financial Plan is also dependent upon the City's
ability to market its securities successfully. The City's financing program for
fiscal years 1998 through 2001 contemplates the issuance of $4.9 billion of
general obligation bonds and $7.1 billion of bonds to be issued by the New York
City Transitional Finance Authority (the "Finance Authority") to finance City
capital projects. The Finance Authority was created as part of the City's
efforts to assist in keeping the City's indebtedness within the forecast level
of the constitutional restrictions on the amount of debt the City is authorized
to incur. The City is involved in litigation seeking to have the New York City
Transitional Finance Authority Act declared unconstitutional. 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 and Finance
Authority 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 have issued
reports and make public statements which, among other things, state that
projected revenues and expenditures may be different from those forecasted in
the City Plan. It is reasonable to expect that such reports and statements will
continue to be issued and to engender public comment.
1998-2001 Financial Plan. The most recent quarterly modification the
City's financial plan for the 1997 fiscal year projects a balanced budget in
accordance with GAAP for the 1997 fiscal year, after taking into account an
increase in projected tax revenues of $1.2 billion during the 1997 fiscal year
and a discretionary prepayment in the 1997 fiscal year of $1.3 billion of debt
service due in the 1998 and 1999 fiscal years. The Financial Plan projects
revenues and expenditures for the 1998 fiscal year balanced in accordance with
GAAP. The Financial Plan includes increased tax revenue projections; reduced
debt service costs; the assumed restoration of Federal funding for programs
assisting certain legal aliens; additional expenditure for textbooks, computers,
improved education programs and welfare reform, law enforcement, immigrant
naturalization, initiatives proposed by the City Council and other initiatives;
and a proposed discretionary transfer to the 1998 fiscal year of $300 million of
debt service due in the 1999 fiscal year for budget stabilization purposes. In
addition, the Financial Plan reflects the discretionary transfer to the 1997
fiscal year of $1.3 billion of debt service due in the 1998 and 1999 fiscal
years, and includes actions to eliminate a previously projected budget gap for
the 1998 fiscal year. These gap closing actions include (i) additional agency
actions totaling $621 million; (ii) the proposed sale of various assets; (iii)
additional State aid of $294 million, including a proposal that the State
accelerate a $142 million revenue sharing payment to the City from March 1999;
and (iv) entitlement savings of $128 million
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which would result from certain of the reductions in Medicaid spending proposed
in the Governor's 1997-1998 Executive Budget and the State making available to
the City $77 million of additional Federal block grant aid, as proposed in the
Governor's 1997-1998 Executive Budget. The Financial Plan also sets forth
projections for the 1999 through 2001 fiscal years and projects gaps of $1.8
billion, $2.8 billion and $2.6 billion for the 1999 through 2001 fiscal years,
respectively.
The Financial Plan assumes approval by the State Legislature and the
Governor of (i) a tax reduction program proposed by the City totaling $272
million, $435 million, $465 million and $481 million in the 1998 through 2001
fiscal years, respectively, which includes a proposed elimination of the 4% City
sales tax on clothing items under $500 as of December 1, 1997, and (ii) a
proposed State tax relief program, which would reduce the City property tax and
personal income tax, and which the Financial Plan assumes will be offset by
proposed increased State aid totaling $47 million, $254 million, $472 million
and $722 million in the 1998 through 2001 fiscal years, respectively.
The Financial Plan also assumes (i) approval by the Governor and the State
Legislature of the extension of the 14% personal income tax surcharge, which is
scheduled to expire on December 31, 1999, and of the extension of the 12.5%
personal income tax surcharge, which is scheduled to expire on December 31,
1998; (ii) collection of the projected rent payments for the City's airports;
and (iii) State approval of the cost containment initiatives and State aid
proposed by the City for the 1998 fiscal year, and $115 million in State aid
which is assumed in the Financial Plan but was not provided for in the
Governor's 1997-1998 Executive budget. The Financial Plan reflects the increased
costs which the City is prepared to incur as a result of welfare legislation
recently enacted by Congress. In addition, the economic and financial condition
of the City may be affected by various financial, social, economic and political
factors which could have a material effect on the City.
The City's financial plans have been the subject of extensive public
comment. On September 11, 1997, the New York State Comptroller issued a report
which noted that the ability to deal with future budget gaps could become a
significant issue in the State's 2000-2001 fiscal year, when the cost of tax
cuts increases by $1.9 billion. The report contained projections that, based on
current economic conditions and current law for taxes and spending, showed a gap
in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the
2001-2002 State fiscal year. The report noted that these gaps would be smaller
if recurring spending reductions produce savings in earlier years. The State
Comptroller also stated that if Wall Street earnings moderate and the State
experiences a moderate recession, the gap for the 2001-2002 State fiscal year
could grow to nearly $12 billion.
Various actions proposed in the 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.
The projections for the 1998 through 2001 fiscal years reflect the costs
of the settlements with the United Federation of Teachers ("UFT") and the
coalition of unions headed by District Council 37 of the American Federation of
State, County and Municipal Employees ("District Council 37"), which together
represent approximately two-thirds of the City's workforce, and assume that the
City will reach agreement with its remaining municipal unions under terms which
are
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generally consistent with such settlements. The settlement provides for a wage
freeze in the first two years, followed by a cumulative effective wage increase
of 11% by the end of the five year period covered by the proposed agreements,
ending in fiscal years 2000 and 2001. Additional benefit increases would raise
the total cumulative effective increase to 13% above present costs. Costs
associated with similar settlements for all City-funded employees would total
$49 million, $459 million and $1.2 billion in the 1997, 1998 and 1999 fiscal
years, respectively, and exceed $2 billion in each fiscal year after the 1999
fiscal year. Subsequently, the City reached settlements, through agreements or
statutory impasse procedures, with bargaining units which, together with the UFT
and District Council 37, represent approximately 86% of the City's workforce.
Ratings. On July 10, 1995, Standard & Poor's Ratings Group ("Standard &
Poor's") revised downward its rating on City general obligation bonds from A- to
BBB+ and removed City bonds from CreditWatch. Standard & Poor's stated that
"structural budgetary balance remains elusive because of persistent softness in
the City's economy, highlighted by weak job growth and growing dependence on the
historically volatile financial services sector." Other factors identified by
Standard & Poor's in lowering its rating on City bonds included a trend of using
one-time measures, including debt refinancings, to close projected budget gaps,
dependence on unratified labor savings to help balance the Financial Plan,
optimistic projections of additional Federal and State aid or mandate relief, a
history of cash flow difficulties caused by State budget delays and continued
high debt levels. Fitch Investors Service, Inc. ("Fitch") continues to rate the
City general obligation bonds A-. On February 28, 1996 Fitch placed the City's
general obligation bonds on Fitch Alert with negative implications. Moody's
Investors Service, Inc. ("Moody's") rating for City general obligation bonds is
Baa1. On July 17, 1997 Moody's changed its outlook on City bonds to positive
from stable. Such ratings reflect only the views of these rating agencies, from
which an explanation of the significance of such ratings may be obtained. There
is no assurance that such ratings will continue for any given period of time or
that they will not be revised downward or withdrawn entirely. Any such downward
revision or withdrawal could have an adverse effect on the market prices of
bonds.
Outstanding Net Indebtedness. As of September 30, 1997, the City and the
Municipal Assistance Corporation for the City of New York had, respectively,
$26.180 billion and $3.777 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.
Litigation. The City is a defendant in lawsuits pertaining to material
matters, including claims asserted which are incidental to performing routine
governmental and other functions. This litigation includes, but is not limited
to, actions commenced and claims asserted against the City arising out of
alleged torts, alleged breaches of contracts, alleged violations of law and
condemnation proceedings. As of June 30, 1996 and 1995, claims in excess of $380
billion and $311 billion, respectively, were outstanding against the City for
which the City estimates its potential future
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liability to be $2.8 billion and $2.5 billion, respectively.
New York State
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State economy has grown more slowly than that
of the nation as a whole, resulting in the gradual erosion of its relative
economic affluence. The causes of this relative decline are varied and complex,
in many cases involving national and international developments beyond the
State's control.
Recent Developments. The national economy has resumed a more robust rate
of growth after a "soft landing" in 1995, with over 14 million jobs added
nationally since early 1992. The State economy has continued to expand, but
growth remains somewhat slower than in the nation. Although the State has added
approximately 300,000 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 1997-1998 New York State Financial Plan (the "State Plan") is partly
based on the forecast that the State's economy shows moderate expansion during
the first half of the calendar 1997 with the trend continuing through the year.
Although industries that export goods and services are expected to continue to
do well, growth is expected to be moderated by tight fiscal constraints on the
health care and social services industries. On an average annual basis,
employment growth in the State is expected to be up substantially from the 1996
rate. Personal income is expected to record moderate gains in 1997. Bonus
payments in the securities industry are expected to increase further from last
year's record level.
The State Plan is based upon forecasts of national and State economic
activity developed through both internal analysis and review of State and
national economic forecasts prepared by commercial forecasting services and
other public and private forecasters. Economic forecasts have frequently failed
to predict accurately the timing and magnitude of changes in the national and
the State economies. Many uncertainties exist in forecasts of both the national
and State economies, including consumer attitudes toward spending, the extent of
corporate and governmental restructuring, federal fiscal and monetary policies,
the level of interest rates, and the condition of the world economy, which could
have an adverse effect on the State. There can be no assurance that the State
economy will not experience results in the current fiscal year that are worse
than predicted, with corresponding material and adverse effects on the State's
projections of receipts and disbursements.
The 1997-98 Fiscal Year. The State's General Fund (the major operating
Fund of the State) was projected in the State Plan to be balanced on a cash
basis for the 1997-98 fiscal year. Total receipts and transfers from other funds
at $35.09 billion, an increase of $2.05 billion from the prior fiscal year, and
disbursements and transfers to other funds are projected to be $34.60 billion,
an increase of $1.70 billion from the total disbursed in the prior fiscal year.
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Projections of total State receipts in the State Financial Plan are based
on the State tax structure in effect during the fiscal year and on assumptions
relating to basic economic factors and their historical relationships to State
tax receipts. In preparing projections of State receipts, economic forecasts
relating to personal income, wages, consumption, profits and employment have
been particularly important. The projection of receipts from most tax or revenue
sources is generally made by estimating the change in yield of such tax or
revenue source caused by economic and other factors, rather than by estimating
the total yield of such tax or revenue source from its estimated tax base. The
forecasting methodology, however, ensures that State fiscal year estimates for
taxes that are based on a computation of annual liability, such as the business
and personal income taxes, are consistent with estimates of total liability
under such taxes.
Projections of total State disbursements are based on assumptions relating
to economic and demographic factors, levels of disbursements for various
services provided by local governments (where cost is partially reimbursed by
the State), and the results of various administrative and statutory mechanisms
in controlling disbursements for State operations. Factors that may affect the
level of disbursements in the fiscal year include uncertainties relating to the
economy of the nation and the State, the policies of the federal government, and
changes in the demand for and use of State services.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy, actions
of the federal government and other factors, have created structural gaps for
the State. These gaps resulted from a significant disparity between recurring
revenues and the costs of maintaining or increasing the level of support for
State programs. To address a potential imbalance in any given fiscal year, the
State would be required to take actions to increase receipts and/or reduce
disbursements as it enacts the budget for that year, and under the State
Constitution, the Governor is required to propose a balanced budget each year.
There can be no assurance, however, that the Legislature will enact the
Governor's proposals or that the State's actions will be sufficient to preserve
budgetary balance in a given fiscal year or to align recurring receipts and
disbursements in future fiscal years.
Composition of State Governmental Funds Group. Substantially all State
non-pension financial operations are accounted for in the State's governmental
funds group. Governmental funds include the General Fund, which receives all
income not required by law to be deposited in another fund; Special Revenue
Funds, which receive the preponderance of moneys received by the State from the
Federal government and other income the use of which is legally restricted to
certain purposes; Capital Projects Funds, used to finance the acquisition and
construction of major capital facilities by the State and to aid in certain of
such projects conducted by local governments or public authorities; and Debt
Service Funds, which are used for the accumulation of moneys for the payment of
principal of and interest on long-term debt and to meet lease-purchase and other
contractual- obligation commitments.
Local Government Assistance Corporation ("LGAC"). In 1990, as part of a
State fiscal reform program, legislation was enacted creating LGAC, a public
benefit corporation empowered to issue long-term obligations to fund certain
payments to local governments traditionally funded through the State's annual
seasonal borrowing. The legislation authorized LGAC to issue its bonds
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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 LGAC and bonds issued to provide for
capitalized interest, except in cases where the Governor and the legislative
leaders have certified the need for additional borrowing and provided a schedule
for reducing it to the cap. If borrowing above the cap is thus permitted in any
fiscal year, it is required by law to be reduced to the cap by the fourth fiscal
year after the limit was first exceeded. This provision capping the seasonal
borrowing was included as a covenant with LGAC's bondholders in the resolution
authorizing such bonds.
As of June 1995, LGAC had issued bonds and notes to provide net proceeds
of $4.7 billion completing the program. The impact of LGAC's borrowing is that
the State is able to meet its cash flow needs in the first quarter of the fiscal
year without relying on short-term seasonal borrowings.
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. As of September 30, 1996, the latest available, there were 17
Authorities that had outstanding debt of $100 million or more, and the aggregate
outstanding debt, including refunding bonds, of these 17 Authorities was $75.4
billion, only a portion of which constitutes State-supported or State-related
debt.
Authorities are generally supported by revenues generated by the projects
financed or operated, such as fares, user fees on bridges or tunnels, highway
tolls, rentals for dormitory rooms and housing units and charges for occupancy
at medical care facilities. In addition, State legislation authorizes several
financing techniques for Authorities. Also, there are statutory arrangements
providing for State local assistance payments otherwise payable to localities to
be made under certain circumstances to Authorities. Although the State has no
obligation to provide additional assistance to localities whose local assistance
payments have been paid to Authorities under these arrangements, if local
assistance payments are diverted the affected localities could seek additional
State assistance. Some Authorities also receive moneys from State appropriations
to pay for the operating costs of certain of their programs.
Ratings. On January 13, 1992, Standard & Poor's reduced its ratings on the
State's general obligation bonds from A to A- and, in addition, reduced its
ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. Standard & Poor's also continued its negative
rating outlook assessment on State general obligation debt. On April 26, 1993,
Standard & Poor's revised the rating outlook assessment to stable. On February
14, 1994, Standard & Poor's raised its outlook to positive and, on October 3,
1995, confirmed its A-rating. On August 28, 1997, Standard & Poor's revised its
ratings on the State's general obligation bonds from A- to A and, in
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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 on the State's general obligation long-term indebtedness. On
February 10, 1997, Moody's confirmed its A2 rating on the State's general
obligation long-term indebtedness. Ratings reflect only the respective views of
such organizations, and an explanation of the significance of such ratings may
be obtained from the rating agency furnishing the same. There is no assurance
that a particular rating will continue for any given period of time or that any
such rating will not be revised downward or withdrawn entirely, if in the
judgment of the agency originally establishing the rating, circumstances so
warrant. A downward revision or withdrawal of such ratings, or either of them,
may have an effect on the market price of the State Municipal Securities in
which the Fund invests.
General Obligation Debt. As of March 31, 1997, the State had approximately
$5.03 billion in general obligation bonds, including $294 million in bond
anticipation notes outstanding. Principal and interest due on general obligation
bonds and interest due on bond anticipation notes were $749.6 million for the
1996-97 fiscal year and are estimated to be $720.9 million for the State's
1997-98 fiscal year.
Litigation. The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal laws.
These proceedings could affect adversely the financial condition of the State in
the 1997-1998 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 1997-98 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 1997-1998 Financial Plan. The General Purpose Financial Statements for
the 1996-1997 fiscal year report estimated probable awarded and anticipated
unfavorable judgements of $364 million, of which $134 million is expected to be
paid during the 1997-1998 fiscal year.
In addition, the State is party to other claims and litigations which its
counsel has advised are not probable of adverse court decisions. Although, the
amounts of potential losses, if any, are not presently determinable, it is the
State's opinion that its ultimate liability in these cases is not expected to
have a material adverse effect on the State's financial position in the 1997-98
fiscal year or thereafter.
Other Localities. Certain localities in addition to the City could have
financial problems leading to requests for additional State assistance during
the State's 1997-98 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 1997-98 fiscal year.
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Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of Yonkers
(the "Yonkers Board") by the State in 1984. The Yonkers Board is charged with
oversight of the fiscal affairs of Yonkers. Future actions taken by the Governor
or the State Legislature to assist Yonkers could result in increased State
expenditures for extraordinary local assistance.
Other Investment Techniques and Strategies. The Fund may also use the investment
techniques and strategies described below. These techniques involve certain
risks.
o When-Issued and Delayed Delivery Transactions. The Fund may purchase and
sell Municipal Securities (up to 20% of the net assets of the Fund) on a
when-issued or delayed delivery basis. When-issued and delayed delivery
transactions arise when securities are purchased or sold with payment and
delivery beyond the regular settlement date. Normally the settlement date occurs
withing six months of the purchase of municipal bonds and notes. However, the
Fund may, from time to time, purchase municipal securities whose settlement
extends beyond six months and possibly as long as two years or more beyond
settlement. In such transactions, the payment obligation and the interest rate
are fixed at the time the buyer enters into the commitment. The Fund will
maintain, in a segregated account with the custodian of the Fund, liquid assets
of any type, including equity and debt securities of any grade, having an
aggregate value equal to the amount of such payment obligation until payment is
made. The commitment to purchase securities on a when-issued or delayed delivery
basis may involve an element of risk because the value of the securities is
subject to market fluctuation; the value at delivery may be more or less than
the purchase price. Since the Fund relies on the buyer or seller, as the case
may be, to consummate the transaction, failure by the other party to complete
the transaction may result in the Fund missing the opportunity of obtaining a
price or yield considered to be advantageous. No interest accrues to the
purchaser prior to settlement of the transaction, and at the time of delivery
the market value may be less than cost.
o Financial Futures and Options Transactions. The Fund may attempt to
hedge all or a portion of its investment portfolio against market risk by
engaging in transactions in financial futures contracts or options on financial
futures, including options that either are based on an index of long-term
Municipal Securities or relate to debt securities whose prices are anticipated
by the Adviser to correlate with the prices of the Municipal Securities owned by
the Fund. To accomplish such hedging, the Fund may take a position in a futures
contract or in an option which is expected to move in the opposite direction
from the position being hedged. The use of futures and options for hedging
purposes can be expected to result in taxable income to the shareholders of the
Fund.
The sale of financial futures or the purchase of put options on financial
futures or on debt securities or indexes is a means of hedging against the risk
of rising interest rates, whereas the purchase of financial futures or of call
options on financial futures or on debt securities or indexes is a means of
hedging the Fund's portfolio against an increase in the price of securities the
Fund intends to purchase. Writing a call option on a futures contract or on debt
securities or indexes may serve as a hedge against a modest decline in prices of
Municipal Securities held in the Fund's portfolio, and writing a put option on a
futures contract or on debt securities or indexes may serve as a partial hedge
against an increase in the value of Municipal Securities the Fund intends to
acquire.
A futures contract is a contract between a seller and a buyer for the sale
and purchase of specified property at a specified future date for a specified
price. An option is a contract that gives the
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holder of the option the right, but not the obligation, to buy (in the case of a
call option) specified property from, or to sell (in the case of a put option)
specified property to, the writer of the option for a specified price during a
specified period prior to the option's expiration. Financial futures contracts
and options cover specified debt securities (such as U.S. Treasury securities)
or indexes designed to correlate with price movements in certain categories of
debt securities. On at least one exchange, futures contracts trade on an index
designed to correlate with the long-term municipal bond market. Financial
futures contracts and options on financial futures contracts are traded on
exchanges regulated by the Commodity Futures Trading Commission ("CFTC").
Options on certain financial instruments and financial indexes are traded in
securities markets regulated by the Securities and Exchange Commission. Although
futures contracts and options on specified financial instruments call for
settlement by delivery of the financial instruments covered by the contracts, in
most cases positions in these contracts are closed out by entering into
offsetting liquidating or closing transactions. Index futures and options are
designed for cash settlement only.
There are certain risks associated with the use of financial futures and
options to hedge investment portfolios. There may be imperfect correlation
between price movements of the portfolio securities being hedged and the hedging
positions. Losses may be incurred in hedging transactions, which could reduce
the portfolio gains that might have been realized if the hedging transaction had
not been entered into. The ability to close out positions in futures and options
depends upon the existence of a liquid market, which may not exist for all
futures and options at all times. If the Fund engages in futures transactions or
in the writing of options on futures, it will be required to maintain initial
margin and variation margin in accordance with applicable rules of the exchanges
and the CFTC. If the Fund purchases a financial futures contract or a call
option or writes a put option in order to hedge the anticipated purchase of
Municipal Securities, and if the Fund fails to complete the anticipated purchase
transaction, the Fund may experience a loss or a gain on the futures or options
transaction that will not be offset by price movements in the Municipal
Securities that were the subject of the anticipatory hedge. The cost of
purchasing options on debt securities or indexes effectively increases the cost
of the securities subject to them, thereby reducing the yield otherwise
available from such securities.
Although certain risks are involved in futures and options transactions,
because these transactions will be engaged in by the Fund only for hedging
purposes, these futures and options portfolio strategies should not subject the
Fund to those risks frequently associated with speculation in futures or options
transactions. Regulations of the CFTC applicable to the Fund require that
transactions in futures and options on futures be engaged in only for bona-fide
hedging purposes, and that no such transactions may be entered into by the Fund
for other than bona-fide hedging transactions if the aggregate initial margin
deposits and premiums paid by the Fund exceed 5% of the market value of its
assets. With respect to its engaging in transactions involving the purchase or
writing of put and call options on debt securities or indexes, the Fund will not
purchase such options if more than 5% of its assets would be invested such
options, and it will only write "covered" or "secured" options, wherein the
securities or cash required to be delivered upon exercise are held by the Fund,
with such cash being maintained in a segregated account. These requirements and
limitations may limit the Fund's ability to engage in hedging transactions.
o Repurchase Agreements. As temporary investments, the Fund may invest in
repurchase agreements. A repurchase agreement is a contractual agreement whereby
the seller of securities (U.S. Government obligations or Municipal Securities)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed-upon repurchase price determines the
yield during the Fund's holding period. Repurchase agreements are considered to
be loans under the 1940 Act
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collateralized by the underlying security that is the subject of the repurchase
contract. Income generated from transactions in repurchase agreements will be
taxable. The Fund will only enter into repurchase agreements with registered
securities dealers or domestic banks that, under Board approved procedures,
present minimal credit risk. The risk to the Fund is limited to the ability of
the seller to pay the agreed-upon repurchase price on the delivery date. The
value of the underlying collateral must at all times equal or exceed the
agreed-upon repurchase price; however, in the event of default and the sale of
the collateral, the Fund might incur a loss if the value of the collateral
declines, and might incur disposition costs or experience delays in connection
with liquidating the collateral. The Adviser will monitor the value of the
collateral at the time the transaction is entered into and at all times
subsequent during the term of the repurchase agreement in an effort to determine
that the value always equals or exceeds the agreed-upon repurchase price. In the
event the value of the collateral declines below the repurchase price, the
Adviser will demand additional collateral from the seller to increase the value
of the collateral to at least that of the repurchase price.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Directors, the Adviser determines the
liquidity of certain of the Fund's investments. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted security
is one that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund will
not invest more than 10% of its net assets in illiquid or restricted securities
(The Board may increase that limit to to 15%.) The Fund's percentage limitation
on these investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers. The Adviser monitors
holdings of illiquid securities on an ongoing basis to determine whether to sell
any holdings to maintain adequate liquidity. Illiquid securities include
repurchase agreements maturing in more than seven days, or certain participation
interests other than those with puts exercisable within seven days.
Other Investment Restrictions. The Fund has adopted the following investment
restrictions, which together with its investment objectives, are fundamental
policies changeable only with the approval of the holders of a "majority" of the
Fund's outstanding voting securities, defined in the 1940 Act as the affirmative
vote of the lesser of (a) more than 50% of the outstanding Shares of the Fund,
or (b) 67% or more of the Shares present or represented by proxy at a meeting if
more than 50% of the Fund's outstanding Shares are represented at the meeting in
person or by proxy. Under these restrictions, the Fund will not do any of the
following:
1. The Fund will not issue senior securities as defined in the Investment
Company Act of 1940 (the "1940 Act"), except to the extent such issuance might
be involved with respect to borrowings described under subparagraph (3) below or
with respect to transactions involving futures contracts or the writing of
options within the limits described herein;
2. The Fund will not make short sales of securities or purchase any
securities on margin (except for such short-term credits as are necessary for
the clearance of transactions), or write or purchase put or call options, except
to the extent that the purchase of a stand-by commitment may be considered the
purchase of a put, and except for transactions involving options within the
limits described herein;
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3. The Fund will not borrow money, except from banks for temporary or
emergency purposes or for repurchase of its shares, and then only in an amount
not exceeding one-third of the value of the Fund's total assets including the
amount borrowed. While any such borrowings exceed 5% of the Fund's total assets,
no additional purchases of investment securities will be made;
4. The Fund will not underwrite any issue of securities, except to the
extent that the purchase of Municipal Securities in accordance with its
investment objectives, policies and limitations may be deemed to be an
underwriting;
5. The Fund will not invest 25% or more of its total assets in securities
of issuers in any one industry; provided, however, that such limitations shall
not be applicable to Municipal Securities issued by governments or political
subdivisions of governments, and obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
6. The Fund will not purchase or sell real estate, but this shall not
prevent the Fund from investing in Municipal Securities secured by real estate
or interests therein;
7. The Fund will not purchase or sell commodities or commodities
contracts, except for transactions involving futures contracts within the limits
described herein;
8. The Fund will not make loans, other than by entering into repurchase
agreements and through the purchase of Municipal Securities or temporary
investments in accordance with its investment objectives, policies and
limitations;
9. The Fund will not invest in securities other than New York Municipal
Securities and temporary investments, as those terms are defined herein;
10. The Fund will not invest more than 5% of its total assets in
securities of any one issuer, except that this limitation shall not apply to
securities of the U.S. Government, its agencies and instrumentalities or to the
investment of 25% of its total assets;
11. The Fund will not pledge, mortgage or hypothecate its assets, except
that, to secure borrowings permitted by subparagraph (3) above, it may pledge
securities having a market value at the time of pledge not exceeding 20% of the
value of the Fund's total assets;
12. The Fund will not invest more than 10% of its total assets in
repurchase agreements maturing in more than seven days; or
13. The Fund will not purchase or retain the securities of any issuer
other than the securities of the Fund if, to the Fund's knowledge, those
directors of the Fund, or those officers and directors of the Adviser, who
individually own beneficially more than 1/2 of 1% of the outstanding securities
of such issuer, together own beneficially more than 5% of such outstanding
securities.
For the purpose of applying the limitation set forth in subparagraph (10)
above, an issuer shall be deemed a separate issuer when its assets and revenues
are separate from other governmental
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entities and its securities are backed only by its assets and revenues.
Similarly, in the case of a non-governmental user, such as an industrial
corporation or a privately owned or operated hospital, if the security is backed
only by the assets and revenues of the non-governmental user then such
non-governmental user would be deemed to be the sole issuer. Where a security is
also backed by the enforceable obligations of a superior governmental entity, it
shall be included in the computation of securities owned that are issued by such
superior governmental entity. If, however, a security is guaranteed by a
governmental entity or some other entity, such as a bank guarantee or letter of
credit, such a guarantee or letter of credit would be considered a separate
security and would be treated as an issue of such government, other entity or
bank. Unless the prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an investment, and the
Fund need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund.
5. The shares of the Fund's common stock (the "Shares") are listed and
traded on the American Stock Exchange (the "AMEX"). The following table sets
forth for the Shares for the periods indicated: (a) the per Share high sales
price on the AMEX, the net asset value per share as of such day and the premium
or discount (expressed as a percentage of net asset value) represented by the
difference between such high sales price and the corresponding net asset value,
(b) the per Share low sales price on the AMEX, the net asset value per Share as
of such day and the premium or discount (expressed as a percentage of net asset
value) represented by the difference between such low sales price and the
corresponding net asset value.
Market Price High;(1) Market Price Low; (1)
NAV and Premium/ NAV and Premium/
Quarter Ended (Discount) That Day (2) (Discount) That Day (2)
- - ------------- ----------------------- ---------- ------------
1/31/96 Market: $10.50 Market:$9.63
NAV:$9.96 NAV:$9.78
Premium/(Discount): 5.42% Premium/(Discount):(1.53)%
4/30/96 Market: $10.50 Market:$9.38
NAV:$9.96 NAV:$9.54
Premium/(Discount): 5.42% Premium/(Discount):(1.68)%
7/31/96 Market: $10.00 Market:$9.31
NAV:$9.64 NAV:$9.51
Premium/(Discount):3.73% Premium/(Discount):(2.10)%
10/31/96 Market: $10.50 Market:$9.75
NAV:$9.74 NAV:$9.59
Premium/(Discount): 7.80% Premium/(Discount):1.67%
1/31/97 Market: $10.75 Market:$9.75
NAV:$9.76 NAV:$9.64
Premium/(Discount):10.14% %Premium/(Discount):1.14%
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4/30/97 Market: $10.50 Market:$9.75
NAV:$9.75 NAV:$9.54
Premium/(Discount):7.69% Premium/(Discount):2.20%
7/30/97 Market: $10.75 Market:$9.75
NAV:$9.78 NAV:$9.59
Premium/(Discount):9.92% %Premium/(Discount):2.20%
10/31/97 Market: $10.88 Market:$10.25
NAV:$9.75 NAV:$9.72
Premium/(Discount):11.54% %Premium/(Discount):5.45%
1/31/98 Market: $11.44 Market:$10.50
NAV:$9.85 NAV:$9.78
Premium/(Discount):16.12% %Premium/(Discount):7.36%
- - ---------------
1. As reported by the AMEX.
2. The Fund's computation of net asset value (NAV) is as of the close of
trading on the last day of the week immediately preceding the day for
which the high and low market price is reported and the premium or
discount (expressed as a percentage of net asset value) is calculated
based on the difference between the high or low market price and the
corresponding net asset value for that day, divided by the net asset
value.
The Board of Directors of the Fund has determined that at times, it may be
in the interests of Fund shareholders for the Fund to take action to attempt to
reduce or eliminate a market value discount from net asset value. To that end,
the Fund may, from time to time, either repurchase Shares in the open market or,
subject to conditions imposed from time to time by the Board, make a tender
offer for a portion of the Fund's Shares at their net asset value per Share.
Subject to the Fund's fundamental policy with respect to borrowings, the Fund
may incur debt to finance repurchases and/or tenders. Interest on any such
borrowings will reduce the Fund's net income. In addition, the acquisition of
Shares by the Fund will decrease the total assets of the Fund and therefore will
have the effect of increasing the Fund's expense ratio. If the Fund must
liquidate portfolio securities to purchase Shares tendered, the Fund may be
required to sell portfolio securities for other than investment purposes and may
realize gains and losses.
In addition to open-market Share purchases and tender offers, the Board
could also seek shareholder approval to convert the Fund to an open-end
investment company if the Fund's Shares trade at a substantial discount. If the
Fund's Shares have traded on the AMEX at an average discount from net asset
value of more than 10%, determined on the basis of the discount as of the end of
the last trading day in each week during the period of 12 calendar weeks ending
October 31 in such year, the Directors will consider recommending to
shareholders a proposal to convert the Fund to an open-end company. If during a
year in which the Fund's Shares trade at the average discount stated, and for
the period described, in the preceding sentence the Fund also receives written
requests from the holders of 10% or more of the Fund's outstanding Shares that a
proposal to convert to an open end company be submitted to the Fund's
shareholders, within six months the Directors will submit a proposal to the
Fund's
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<PAGE>
shareholders, to the extent consistent with the 1940 Act, to amend the Fund's
Articles of Incorporation to convert the Fund from a closed-end to an open-end
investment company. If the Fund converted to an open-end investment company, it
would be able continuously to issue and offer its Shares for sale, and each
Share of the Fund could be tendered to the Fund for redemption at the option of
the shareholder, at a redemption price equal to the current net asset value per
Share. To meet such redemption request, the Fund could be required to liquidate
portfolio securities. Its Shares would no longer be listed on the AMEX. The Fund
cannot predict whether any repurchase of Shares made while the Fund is a
closed-end investment company would decrease the discount from net asset value
at which the Shares trade. To the extent that any such repurchase decreased the
discount from net asset value to an amount below 10% during the measurement
period described above, the Fund would not be required to submit to shareholders
a proposal to convert the Fund to an open-end investment company.
Item 9. Management.
1(a). The Fund is governed by a Board of Directors, which is responsible
under Minnesota law for protecting the interests of shareholders. The Board of
Directors is comprised of three classes of directors which are elected for three
year staggered terms. The Directors meet periodically throughout the year to
oversee the Fund's activities, review its performance, and review the actions of
the Adviser. The Fund is required to hold annual shareholder meetings for the
election of directors and the ratification of its independent auditors. The Fund
may also hold shareholder meetings from time to time for other important
matters, and shareholders have certain rights under Minnesota law to call a
meeting to remove a Director or to take other action described in the Fund's
Articles of Incorporation.
1(b). The Adviser, a Colorado corporation with its principal offices at
Two World Trade Center, New York, New York 10048-0203, acts as investment
manager for the Fund under an investment advisory agreement (the "Advisory
Agreement") under which it provides ongoing investment advice and conducts the
investment operations of the Fund, including purchases and sales of its
portfolio securities, under the general supervision and control of the Directors
of the Fund.
The Adviser has operated as an investment company adviser since April 30,
1959. It and its affiliates currently advise U.S. investment companies with
assets aggregating over $75 billion as of December 31, 1997, and having more
than 3.5 million shareholder accounts. The Adviser is owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company owned in part by senior management
of the Adviser, and ultimately controlled by Massachusetts Mutual Life Insurance
Company, a mutual life insurance company that also advises pension plans and
investment companies.
The Adviser provides office space and investment advisory services for the
Fund and pays all compensation of those Directors and officers of the Fund who
are affiliated persons of the Adviser. Under the Advisory Agreement, the Fund
pays the Adviser monthly an advisory fee at the rate of .50% per annum computed
on the average weekly net assets of the Fund. During the fiscal years ended
October 31, 1995, 1996 and 1997, the Fund paid management fees to the Adviser in
the amounts of $115,784, $119,243 and $120,378, respectively. The Fund incurred
approximately $26,135, $25,635 and $24,231 in expenses for the fiscal years
ended October 31, 1995, 1996 and 1997, respectively for services provided by
Shareholder Financial Services, Inc., the Fund's transfer agent.
Under the Advisory Agreement, the Fund pays certain of its other costs not
paid by the Adviser, including (a) brokerage and commission expenses, (b)
Federal, state, local and foreign taxes, including
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issue and transfer taxes, incurred by or levied on the Fund, (c) interest
charges on borrowings, (d) the organizational and offering expenses of the Fund,
whether or not advanced by the Adviser, (e) fees and expenses of registering the
Shares of the Fund under the appropriate Federal securities laws and of
qualifying Shares of the Fund under applicable state securities laws, (f) fees
and expenses of listing and maintaining the listings of the Fund's Shares on any
national securities exchange, (g) expenses of printing and distributing reports
to shareholders, (h) costs of shareholder meetings and proxy solicitation, (i)
charges and expenses of the Fund's custodian and Registrar, Transfer and
Dividend Disbursing Agent, (j) compensation of the Fund's Directors who are not
affiliated persons of the Adviser, (k) legal and auditing expenses, (l) the cost
of certificates representing the Fund's Shares, (m) costs of stationery and
supplies, and (n) insurance premiums.
Beginning February 16, 1990, the Adviser began performing limited
accounting services for the Fund at an annual fee of $12,000, plus out-of-pocket
costs and expenses reasonably incurred for acting as such accounting agent.
The management services provided to the Fund by the Adviser, and the
services provided by the Transfer Agent to shareholders, depend on the smooth
functioning of their computer systems. Many computer software systems in use
today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. That failure could have a negative impact on
handling securities trades, pricing and account services. The Adviser and
Transfer Agent have been actively working on necessary changes to their computer
systems to deal with the year 2000 and expect that their systems will be adapted
in time for that event, although there cannot be assurance of success
1(c). The Portfolio Manager of the Fund is Robert E. Patterson, who also
serves as Vice President of the Fund and Senior Vice President of the Adviser.
Mr. Patterson has been the person principally responsible for the day-to-day
management of the Fund's portfolio since February, 1992. During the past five
years, Mr. Patterson has served as an officer of other Oppenheimer funds. Other
members of the adviser's Fixed Income Portfolio Department, particularly
portfolio analysts, traders and other portfolio managers having broad experience
with domestic, international government and corporate fixed income securities
provide the Fund's portfolio manager with support in managing the Fund's
portfolio.
1(d). Inapplicable.
1(e). Citibank, N.A., 399 Park Avenue, New York, New York, acts as the
custodian (the "Custodian") for the Fund's assets held in the United States.
Rules adopted under the 1940 Act permit the Fund to maintain its securities and
cash in the custody of certain eligible banks and securities depositories. The
Adviser and its affiliates presently have banking relationships with the
Custodian. The Adviser has represented to the Fund that its banking
relationships with the Custodian have been and will continue to be unrelated to
and unaffected by the relationship between the Fund and the Custodian. It will
be the practice of the Fund to deal with the Custodian in a manner uninfluenced
by any banking relationship the Custodian may have with the Adviser and its
affiliates.
Shareholder Financial Services, Inc. ("SFSI"), a subsidiary of the Adviser,
acts as primary transfer agent, shareholder servicing agent and dividend paying
agent for the Fund. Fees paid to SFSI are based on the number of shareholder
accounts and the number of shareholder transactions, plus out- of-pocket costs
and expenses. United Missouri Trust Company of New York acts as co-transfer
agent
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and co-registrar with SFSI to provide such services as SFSI may request.
1(f). See Item 10. Part 1, below.
1(g). Inapplicable.
2. Inapplicable.
3. As of February 20, 1998, no person owned of record or was known by the
Fund to own beneficially 25% or more of the outstanding Shares.
Item 10. Capital Stock, Long-Term Debt, and Other Securities.
1. The Fund was incorporated in Minnesota on August 10, 1987. Its
authorized capital stock consists of a single class of 250,000,000 shares of
Common Stock, par value $.01 per share. All shares have equal noncumulative
voting rights and equal rights with respect to dividends, assets and
liquidation. Shares are fully paid and non-assessable when issued and have no
pre-emptive, conversion or exchange rights.
Pursuant to the Fund's Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), all dividends and capital gains distributions ("Distributions")
declared by the Fund will be automatically reinvested in additional full and
fractional shares of the Fund ("Shares") unless (i) a shareholder elects to
receive cash or (ii) Shares are held in nominee name, in which event the nominee
should be consulted as to participation in the Plan. Shareholders that
participate in the Plan ("Participants") may, at their option, make additional
cash investments in Shares, semi-annually in amounts of at least $100, through
payment to Shareholder Financial Services, Inc., the agent for the Plan (the
"Agent"), and a service fee of $.75.
Depending upon the circumstances hereinafter described, Plan Shares will
be acquired by the Agent for the Participant's account through receipt of newly
issued Shares or the purchase of outstanding Shares on the open market. If the
market price of Shares on the relevant date (normally the payment date) equals
or exceeds their net asset value, the Agent will ask the Fund for payment of the
Distribution in additional Shares at the greater of the Fund's net asset value
determined as of the date of purchase or 95% of the then-current market price.
If the market price is lower than net asset value, the Distribution will be paid
in cash, which the Agent will use to buy Shares on the American Stock Exchange
(the "AMEX"), or otherwise on the open market to the extent available. If the
market price exceeds the net asset value before the Agent has completed its
purchases, the average purchase price per Share paid by the Agent may exceed the
net asset value, resulting in fewer Shares being acquired than if the
Distribution had been paid in Shares issued by the Fund.
Participants may elect to withdraw from the Plan at any time and thereby
receive cash in lieu of Shares by sending appropriate written instructions to
the Agent. Elections received by the Agent will be effective only if received
more than ten days prior to the record date for any Distribution; otherwise,
such termination will be effective shortly after the investment of such
Distribution with respect to any subsequent Distribution. Upon withdrawal from
or termination of the Plan, all Shares acquired under the Plan will remain in
the Participant's account unless otherwise requested. For full Shares, the
Participant may either: (1) receive without charge a share certificate for such
Shares; or (2) request the Agent (after receipt by the Agent of signature
guaranteed instructions by all registered owners) to sell the Shares acquired
under the Plan and remit the proceeds less any brokerage commissions and a $2.50
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<PAGE>
service fee. Fractional Shares may either remain in the Participant's account or
be reduced to cash by the Agent at the current market price with the proceeds
remitted to the Participant. Shareholders who have previously withdrawn from the
Plan may rejoin at any time by sending written instructions signed by all
registered owners to the Agent.
There is no direct charge for participation in the Plan; all fees of the
Agent are paid by the Fund. There are no brokerage charges for Shares issued
directly by the Fund. However, each Participant will pay a pro rata share of
brokerage commissions incurred with respect to open market purchases of Shares
to be issued under the Plan. Participants will receive tax information annually
for their personal records and to assist in Federal income tax return
preparation. The automatic reinvestment of Distributions does not relieve
Participants of any income tax that may be payable on Distributions.
The Plan may be terminated or amended at any time upon 30 days' prior
written notice to Participants which, with respect to a Plan termination, must
precede the record date of any Distribution by the Fund. Additional information
concerning the Plan may be obtained by shareholders holding Shares registered
directly in their names by writing the Agent, Shareholder Financial Services,
Inc., P.O. Box 173673, Denver, CO, 80217-3673 or by calling 1-800-647-7374.
Shareholders holding Shares in nominee name should contact their brokerage firm
or other nominee for more information.
The Fund presently has provisions in its Articles of Incorporation and
By-Laws (together, the "Charter Documents") which could have the effect of
limiting (i) the ability of other entities or persons to acquire control of the
Fund, (ii) the Fund's freedom to engage in certain transactions or (iii) the
ability of the Fund's Directors or shareholders to amend the Charter Documents
or effect changes in the Fund's management. Those provisions of the Charter
Documents may be regarded as "anti-takeover" provisions. Specifically, under the
Fund's Articles of Incorporation, the affirmative vote of the holders of not
less than two thirds (66-2/3%) of the Fund's Shares outstanding and entitled to
vote is required to authorize the consolidation of the Fund with another entity,
a merger of the Fund with or into another entity, a sale or transfer of all or
substantially all of the Fund's assets, the dissolution of the Fund, the
conversion of the Fund to an open-end company, and any amendment of the Fund's
Articles of Incorporation that would affect any of the other provisions
requiring a two-thirds vote. Reference is made to the Charter Documents of the
Fund, on file with the Securities and Exchange Commission, for the full text of
these provisions.
2. Inapplicable.
3. Inapplicable.
4. The Fund qualified for treatment as, and elected to be, a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code for
its taxable year ended October 31, 1997, and intends to continue to qualify as a
RIC for each subsequent taxable year. However, the Fund reserves the right not
to qualify under Subchapter M as a RIC in any year or years. For each taxable
year that the Fund qualifies for treatment as a RIC, the Fund (but not its
shareholders) will not be required to pay Federal income tax. In addition, the
Fund intends to invest in sufficient Municipal Securities so that it will
qualify to pay "exempt-interest dividends" (as defined in the Code) to
shareholders; the dividends payable from net tax-exempt interest earned from
Municipal Securities will qualify as exempt-interest dividends if, at the close
of each quarter of the taxable year of the Fund, at least 50% of the value of
the Fund's total assets consists of Municipal Securities, the interest on which
is excludible from gross income under Section 103(a) of the Code, and the Fund
designates such dividends as exempt- interest dividends in a written notice
mailed to shareholders within sixty days of the end of the Fund's taxable year.
Exempt-interest dividends distributed to shareholders are not subject to
federal income tax except to the extent such interest is subject to the
alternative minimum tax, as discussed hereinafter. The percentage of income that
is tax-exempt is applied uniformly to all income distributions made during each
fiscal year and thus is an annual average for the Fund rather than a day-by-day
determination for each shareholder whether such distributions are received in
shares or in cash. The percentage of all distributions other than
exempt-interest dividends paid by the Fund, including distributions from
interest on taxable investments and net realized short-term capital gains, will
be taxable to the shareholders as ordinary income. Any distribution of net
realized long-term capital gains will generally be subject to Federal taxation
as long-term capital gains, regardless of the length of time the investor has
held such shares. In the case of distributions received in cash or reinvested in
shares purchased on the open market, the amount of the distribution for tax
purposes will be the amount of cash distributed or allocated to the shareholder,
and the tax basis of any shares purchased will be the price paid by the Plan
Agent. In the case of distributions made in shares issued by the Fund, the
amount of the distribution will be the fair market value of the shares on the
payment date, and the tax basis of the shares received will be the same amount.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during January of the
following year will be treated as having been distributed by the Fund (and
received by the shareholders) on December 31 of the year such dividends are
declared.
For both individuals and corporations, interest paid on certain "private
activity bonds" issued on or after August 8, 1986 shall be treated as an item of
tax preference and may, therefore, be subject to the alternative minimum tax.
Under regulations to be issued by the Secretary of the Treasury, exempt-
interest dividends paid by the Fund will be treated by shareholders as interest
on "private activity bonds" to the extent of the proportionate amount of
interest on private activity bonds received by the Fund. Such exempt-interest
dividends constitute a tax preference for both individual and corporate
taxpayers in computing the alternative minimum tax.
Exempt-interest dividends received by a shareholder which are not with
respect to "private activity bonds" are not treated as a tax preference item.
However, for certain corporate shareholders such dividends will be included in
the computation of an adjustment item used in determining such corporation's
alternative minimum tax and the environmental tax (the "Superfund Tax"). The
adjustment item is 75% of the difference between such corporate shareholder's
"adjusted current earnings" and its other alternative minimum taxable income
with certain adjustments. Although exempt-interest dividends received by a
corporate shareholder will not be included in the gross income of such
corporation for Federal income tax purposes, "adjusted current earnings"
includes all tax-exempt interest, including exempt-interest dividends received
from the Fund. Corporate shareholders are advised to consult their tax advisers
with respect to the tax consequences of the alternative minimum tax and the
Superfund Tax.
Sales of shares of the Fund by shareholders will generally be a taxable
transaction for Federal income tax purposes and such shareholders will recognize
gain or loss in an amount equal to the difference between the basis of the
shares and the amount received. Assuming that shareholders hold such shares as a
capital asset, the gain or loss will be a capital gain or loss and will be
long-term if
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shareholders have held such shares for a period of more than one year. The loss
on shares held six months or less will be a long-term capital loss to the extent
any long-term capital gain distribution is made with respect to such shares
during the period the shareholder owns the shares. In the case of shareholders
holding shares of the Fund for six months or less and subsequently selling those
shares at a loss after receiving an exempt-interest dividend, the loss will be
disallowed to the extent of the exempt-interest dividends received. In addition,
no loss will be recognized on the sale or other disposition of shares if the
shareholder acquires (through the reinvestment in shares of the Fund or
otherwise), or enters into a contract or option to acquire, shares within 30
days before or after the disposition. All taxpayers will be required to disclose
to the Internal Revenue Service the amount of tax-exempt interest earned during
the year.
The Fund's hedging activities and transactions in options, futures
contracts and forward contracts will be subject to special tax rules, the effect
of which may be to accelerate income to the Fund, defer Fund losses, cause
adjustments in the holding period of Fund securities and convert short term
capital losses into long term capital losses. These rules could therefore affect
the amount, timing and character of distributions to shareholders. Moreover, the
Fund's hedging activities may produce a difference between its book income and
its taxable income.
Distributions from the Fund will not be eligible for the dividends
received deduction for corporations.
The Fund is required by law to withhold 31% of taxable dividends,
distributions and redemptions paid to investors who do not furnish to the Fund
their correct and properly certified taxpayer identification number (in the case
of individuals, their social security number) and in certain other
circumstances.
Currently, up to 85% of a social security recipient's benefits may be
included in taxable income for a benefit recipient if the sum of his adjusted
gross income, income from tax-exempt sources such as tax-exempt bonds and the
Fund plus 50% of his social security benefits received exceeds certain base
amounts. Income from the Fund is still tax-exempt to the extent described above;
it is only included in the calculation of whether a recipient's income exceeds
certain established amounts.
Interest on indebtedness which is incurred to purchase or carry shares of
the Fund, regardless of whether such borrowing is directly traceable to the
purchase or carrying of shares of the Fund, is not deductible for federal income
tax purposes. Further, the Fund may not be an appropriate investment for persons
who are "substantial users" of facilities financed by industrial development
bonds or private activity bonds held by the Fund or are "related persons" to
such users, as such terms are defined by the Code; such persons should consult
their tax advisers before investing in the Fund.
Ownership of shares of the Fund may result in collateral federal income
tax consequences to certain taxpayers, including, without limitation,
corporations subject to the branch profits tax, financial institutions, certain
insurance companies, and certain S corporations. Prospective purchasers of the
shares should consult their tax advisors as to applicability of any such
collateral consequences.
The foregoing is a general abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive with respect to Fund transactions. Shareholders are advised to
consult with their own tax
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<PAGE>
advisers for more detailed information concerning federal income tax matters.
Individual shareholders of the Fund who are subject to New York State (and
New York City) personal income taxation will not be required to include in
adjusted gross income for New York State (and New York City) purposes that
portion of the Fund's federally tax-exempt dividends which are identified by the
Fund as directly attributable to interest earned on the New York Municipal
Securities. Fund dividends, including the federally tax-exempt portion thereof,
which are attributable to interest on Municipal Securities other than New York
Municipal Securities, including interest on obligations of other states or
federal obligations, if any, would be taxed as dividends to individual
shareholders for purposes of New York State (and New York City) personal income
taxation.
Individual shareholders who are subject to New York State (and New York
City) personal income taxation will also be taxed at rates applicable to other
income on distributions of long or short-term capital gains of the Fund. In
addition, for New York State (and New York City) tax purposes, an individual
shareholder will recognize a taxable long or short-term capital gain or loss in
any year in which such shareholder's shares are sold. Generally, capital losses
are subject to the same limits on deductibility for New York State (and New York
City) purposes as they are for Federal income tax purposes. Thus, for New York
State (and New York City) income tax purposes, as for Federal income tax
purposes, no capital loss will be allowed on the sale or exchange of shares held
for six months or less up to the amount of exempt-interest dividends received
with respect to such shares.
Generally, corporate shareholders of the Fund which are subject to New
York State franchise taxation (and New York City general corporation taxation)
are subject to a tax computed on the basis of entire net income allocated to New
York, business and investment capital allocated to New York, minimum taxable
income allocated to New York (entire net income plus certain salaries for New
York City purposes), or a flat rate minimum, whichever produces the greater tax,
plus a tax based on subsidiary capital. The entire net income and minimum
taxable income of a corporate shareholder will include dividends received from
the Fund and investment capital of such a shareholder will include its stock
interest in the Fund, without any exclusion for dividends attributable to
interest on New York Municipal Securities or for the portion of the Fund's
assets attributable to such New York Municipal Securities. Corporate
shareholders that are subject to the metropolitan commuter transportation
district surcharge will also be required to pay a tax surcharge on the franchise
taxes imposed by New York State with respect to Fund dividends and capital gain
distributions and gain from the sale or exchange of Fund shares.
Although shareholders of the Fund will not be subject to New York City
unincorporated business taxation solely by reason of their ownership of shares
in the Fund, a shareholder who is subject to the New York City unincorporated
business tax must include income and gains derived from the Fund in income
subject to such tax, except exempt-interest that is directly attributable to
interest on New York Municipal Securities.
Shares of the Fund will be exempt from local property taxes in New York
State and New York City.
5. The following information is provided as of February 20, 1998:
(1) (2) (3) (4)
Amount Held Amount Outstanding
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<PAGE>
by Registrant Exclusive of
Amount or for its Amount Shown
Title of Class Authorized Account Under (3)
-------------- ---------- ------- ---------
Shares of Beneficial 250,000,000 None 2,513,779
Interest, $.01 par value
Item 11. Defaults and Arrears on Senior Securities.
Inapplicable.
Item 12. Legal Proceedings.
Inapplicable.
Item 13. Table of Contents of the Statement of Additional Information.
Reference is made to Item 15 of the Statement of Additional Information.
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APPENDIX A
Descriptions of Ratings Categories
Municipal Bonds
o Moody's Investor Services, Inc. The ratings of Moody's Investors Service, Inc.
("Moody's") for Municipal Bonds are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C.
Municipal Bonds rated "Aaa" are judged to be of the "best quality." The rating
of Aa is assigned to bonds which are of "high quality by all standards," but as
to which margins of protection or other elements make long-term risks appear
somewhat larger than "Aaa" rated Municipal Bonds. The "Aaa" and "Aa" rated bonds
comprise what are generally known as "high grade bonds." Municipal Bonds which
are rated "A" by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A rated bonds are considered adequate, but elements
may be present which suggest a susceptibility to impairment at some time in the
future. Municipal Bonds rated "Baa" are considered "medium grade" obligations.
They are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated "Ba" are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Bonds which are rated
"Caa" are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Bonds which
are rated "Ca" represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Bonds which
are rated "C" are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated Aa1,
A1, Baa1, Ba1 and B1 respectively.
In addition to the alphabetic rating system described above, Municipal
Bonds rated by Moody's which have a demand feature that provides the holder with
the ability to periodically tender ("put") the portion of the debt covered by
the demand feature, may also have a short-term rating assigned to such demand
feature. The short-term rating uses the symbol VMIG to distinguish
characteristics which include payment upon periodic demand rather than fund or
scheduled maturity dates and potential reliance upon external liquidity, as well
as other factors. The highest investment quality is designated by the VMIG 1
rating and the lowest by VMIG 4.
o Standard & Poor's Corporation. The ratings of Standard & Poor's Corporation
("S&P") for Municipal Bonds are AAA (Prime), AA (High Grade), A (Good Grade),
BBB (Medium Grade), BB, B, CCC, CC, and C (speculative grade). Bonds rated in
the top four categories (AAA, AA, A, BBB) are commonly referred to as
"investment grade." Municipal Bonds rated AAA are "obligations of
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<PAGE>
the highest quality." The rating of AA is accorded issues with investment
characteristics "only slightly less marked than those of the prime quality
issues." The rating of A describes "the third strongest capacity for payment of
debt service." Principal and interest payments on bonds in this category are
regarded as safe. It differs from the two higher ratings because, with respect
to general obligations bonds, there is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and expenditures,
or in quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date. With respect to revenue bonds, debt service coverage is good, but
not exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate. The BBB rating is the lowest "investment grade"
security rating. The difference between A and BBB ratings is that the latter
shows more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered. With respect to revenue bonds, debt coverage is only fair. Stability
of the pledged revenues could show variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger. Bonds rated "BB" have less
near-term vulnerability to default than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which would lead to inadequate capacity to meet timely
interest and principal payments. Bonds rated "B" have a greater vulnerability to
default, but currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. Bonds rated
"CCC" have a current identifiable vulnerability to default, and is dependent
upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. Bonds noted "CC" typically are
debt subordinated to senior debt which is assigned on actual or implied "CCC"
debt ratiBonds rated "C" typically are debt subordinated to senior debt which is
assigned an actual or implied "CCC-" debt rating. The "C" rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued. Bonds rated "D" are in payment default. The "D" rating
category is used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during the grace period. The "D" rating
also will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
o Fitch. The ratings of Fitch Investors Service, Inc. for Municipal Bonds are
AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, and D. Municipal Bonds rated AAA
are judged to be of the "highest credit quality." The rating of AA is assigned
to bonds of "very high credit quality." Municipal Bonds which are rated A by
Fitch are considered to be of "high credit quality." The rating of BBB is
assigned to bonds of "satisfactory credit quality." The A and BBB rated bonds
are more vulnerable to adverse changes in economic conditions than bonds with
higher ratings. Bonds rated
A-2
<PAGE>
AAA, AA, A and BBB are considered to be of investment grade quality. Bonds rated
below BBB are considered to be of speculative quality. The ratings of "BB" is
assigned to bonds considered by Fitch to be "speculative." The rating of "B" is
assigned to bonds considered by Fitch to be "highly speculative." Bonds rated
"CCC" have certain identifiable characteristics which, if not remedied, may lead
to default. Bonds rated "CC" are minimally protected. Default in payment of
interest and/or principal seems probable over time. Bonds rated "C" are in
imminent default in payment of interest
or principal. Bonds rated "DDD", "DD" and "D" are in default on interest and/or
principal payments. DDD represents the highest potential for recovery on these
bonds, and D represents the lowest potential for recovery.
o Duff & Phelps' The ratings of Duff & Phelps are as follows: AAA which are
judged to be the "highest credit quality". The risk factors are negligible,
being only slightly more than for risk-free US Treasury debt. AA+, AA & AA- High
credit quality protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions. A+, A & A- Protection
factors are average but adequate. However, risk factors are more variable and
greater in periods of economic stress. BBB+, BBB & BBB- Below average protection
factors but still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles. BB+, BB & BB- Below investment grade
but deemed to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the category.
B+, B & B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade. CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal interest or preferred
dividends. Protection factors are narrow and risk can be substantial with
unfavorable economic industry conditions, and/or with unfavorable company
developments. DD Defaulted debt obligations issuer failed to meet scheduled
principal and/or interest payments. DP Preferred stock with dividend arreages.
Municipal Notes
o Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG"). Notes bearing the designation
MIG-1 are of the best quality, enjoying strong protection from established cash
flows of funds for their servicing or from established and broad-based access to
the market for financing. Notes bearing the designation "MIG-2" are of high
quality with ample margins of protection, although not as large as notes rated
"MIG." Such short-term notes which have demand features may also carry a rating
using the symbol VMIG as described above, with the designation MIG-1/VMIG 1
denoting best quality, with superior liquidity support in addition to those
characteristics attributable to the designation MIG-1.
o S&P's rating for Municipal Notes due in three years or less are SP-1,
SP-2, and SP-3. SP- 1 describes issues with a very strong capacity to pay
principal and interest and compares with bonds rated A by S&P; if modified by a
plus sign, it compares with bonds rated AA or AAA by S&P. SP-2
A-3
<PAGE>
describes issues with a satisfactory capacity to pay principal and interest, and
compares with bonds rated BBB by S&P. SP-3 describes issues that have a
speculative capacity to pay principal and interest.
o Fitch's rating for Municipal Notes due in three years or less are F-1+,
F-1, F-2, F-3, F-S and D. F-1+ describes notes with an exceptionally strong
credit quality and the strongest degree of assurance for timely payment. F-1
describes notes with a very strong credit quality and assurance of timely
payment is only slightly less in degree than issues rated F-1+. F-2 describes
notes with a good credit quality and a satisfactory assurance of timely payment,
but the margin of safety is not as great for issues assigned F-1+ or F-1
ratings. F-3 describes notes with a fair credit quality and an adequate
assurance of timely payment, but near-term adverse changes could cause such
securities to be rated below investment grade. F-S describes notes with weak
credit quality. Issues rated D are in actual or imminent payment default.
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations. The
Moody's, S&P and Fitch corporate debt ratings shown do not differ materially
from those set forth above for Municipal Bonds.
Commercial Paper
o Moody's The ratings of commercial paper by Moody's are Prime-1, Prime-2,
Prime-3 and Not Prime. Issuers rated Prime-1 have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 have a
strong capacity for repayment of short-term promissory obligations. Issuers
rated Prime-3 have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime rating
categories.
o S&P The ratings of commercial paper by S&P are A-1, A-2, A-3, B, C, and
D. A-1 indicates that the degree of safety regarding timely payment is strong.
A-2 indicates capacity for timely payment is satisfactory. However, the relative
degree of safety is not as high as for issues designated A-1. A-3 indicates an
adequate capacity for timely payments. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the higher
designations. B indicates only speculative capacity for timely payment. C
indicates a doubtful capacity for payment. D is assigned to issues in default.
o Fitch The ratings of commercial paper by Fitch are similar to its
ratings of Municipal Notes, above.
A-4
<PAGE>
The New York Tax-Exempt Income Fund, Inc.
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated February 26, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 26, 1998. It should be read
together with the Prospectus, and the Registration Statement on Form N-2, of
which the Prospectus and this Statement of Additional Information are a part.
These materials can be inspected and copied at public reference facilities
maintained by the Securities and Exchange Commission (the "SEC") in Washington,
D.C. and certain of its regional offices, and copies of such materials can be
obtained at prescribed rates from the Public Reference Branch, Office of
Consumer Affairs and Information Services, SEC, Washington, D.C., 20549.
TABLE OF CONTENTS
Page
Investment Objective and Policies*
Management...................................................................2
Control Persons and Principal Holders of Securities..........................6
Investment Advisory and Other Services*
Brokerage Allocation and Other Practices.....................................6
Tax Status*
Financial Statements.........................................................7
- - ----------------------
*See Prospectus
-1-
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 14. Cover Page.
Reference is made to the preceding page.
Item 15. Table of Contents.
Reference is made to the preceding page and to Items 16 through 23
of the Statement of Additional Information set forth below.
Item 16. General Information and History.
Inapplicable.
Item 17. Investment Objective and Policies.
Reference is made to Item 8 of the Prospectus.
Item 18. Management.
Directors and Officers of the Fund. The Fund's Directors and officers and their
principal occupations and business affiliations and occupations during the past
five years are listed below. All of the Directors are also trustees, directors
or managing general partners of Oppenheimer Total Return Fund, Inc., Oppenheimer
Real Asset Fund, Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund,
Oppenheimer Cash Reserves, Oppenheimer Municipal Fund, Oppenheimer Limited-Term
Government Fund, Oppenheimer International Bond Fund, Centennial America Fund,
L.P., Oppenheimer Champion Income Fund, Oppenheimer Main Street Funds, Inc.,
Oppenheimer Strategic Income Fund, Oppenheimer Variable Account Funds,
Oppenheimer Integrity Funds, Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax Exempt
Trust, Centennial California Tax Exempt Trust and Panorama Series Fund, Inc.
(all of the foregoing funds are collectively referred to as the "Denver-based
Oppenheimer funds") except for (i) Ms. Macaskill, who is a Trustee, Director or
Managing General Partner of all the Denver-based Oppenheimer funds except
Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund, Panorama Series
Fund, Inc. and Oppenheimer Variable Account Funds, (ii) Mr. Fossel, who is not a
trustee of Centennial New York Tax-Exempt Trust or a Managing General Partner of
Centennial America Fund, L.P. and (iii) Mr. Bowen, who is not a Trustee,
Director or Managing General Partner of Oppenheimer Integrity Funds, Oppenheimer
Strategic Income Fund, Panorama Series Fund, Inc., Oppenheimer Variable Account
Funds, Centennial New York Tax- Exempt Trust and Centennial America Fund, L.P.
All of the Fund's officers except Mr. Patterson are officers of the Denver-based
Oppenheimer funds. Ms. Macaskill is President and Mr. Swain is Chairman and
Chief Executive Officer of the Denver-based Oppenheimer funds. As of February
20,
-2-
<PAGE>
1998, the Directors and officers of the Fund as a group owned less than 1% of
each class of shares of the Fund. The foregoing statement does not reflect
ownership of shares held of record by an employee benefit plan for employees of
the Adviser (for which plan two officers of the Fund, Bridget A. Macaskill and
Andrew J. Donohue, are directors).
Robert G. Avis, Director*; Age: 66
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G. Edwards,
Inc. (its parent holding company); Chairman of A.G.E. Asset Management and A.G.
Edwards Trust Company (its affiliated investment adviser and trust company,
respectively).
William A. Baker, Director; Age: 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
George C. Bowen, Director, Vice President, Treasurer, and Assistant Secretary*;
Age: 61 6803 South Tucson Way, Englewood, Colorado 80112 Senior Vice President
(since September 1987) and Treasurer (since March 1985) of the Adviser; Vice
President (since June 1983) and Treasurer (since March 1985) of the Distributor;
Vice President (since October 1989) and Treasurer (since April 1986) of
HarbourView; Senior Vice President (since February 1992), Treasurer (since July
1991) and a director (since December 1991) of Centennial; President, Treasurer
and a director of Centennial Capital Corporation (since June 1989); Vice
President and Treasurer (since August 1978) and Secretary (since April 1981) of
SSI; Vice President, Treasurer and Secretary of SFSI (since November 1989);
Treasurer of OAC (since June 1990); Treasurer of Oppenheimer Partnership
Holdings, Inc. (since November 1989); Vice President and Treasurer of
Oppenheimer Real Asset Management, Inc. (since July 1996); Chief Executive
Officer, Treasurer and a director of MultiSource Services, Inc., a broker-dealer
(since December 1995); an officer of other Oppenheimer funds.
Charles Conrad, Jr., Director; Age: 67
1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services management
company); formerly Vice President of McDonnell Douglas Space Systems Co. and
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, Director; Age: 55
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Adviser, President and a director of
Oppenheimer Acquisition Corp. ("OAC"), the Adviser's parent holding company,
and Shareholder Services, Inc. ("SSI") and Shareholder Financial Services, Inc.
("SFSI"), transfer agent subsidiaries of the Adviser.
-3-
<PAGE>
Sam Freedman, Director; Age: 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive and Officer and director of SFSI, Vice President and director of OAC
and a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Director; Age: 68
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products training
company).
C. Howard Kast, Director; Age: 76
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Director; Age: 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President and Director*; Age: 49
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 Adviser; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Adviser; 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 adviser
subsidiary of the Adviser ("OFIL") and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Adviser.
Ned M. Steel, Director; Age: 82
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
James C. Swain, Chairman, Chief Executive Officer and Director*; Age: 64 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Adviser (since
September 1988); formerly President and a director of Centennial Asset
Management Corporation, an investment adviser subsidiary of the Adviser
("Centennial"), and Chairman of the Board of SSI.
Robert E. Patterson, Vice President and Portfolio Manager; Age: 54.
Senior Vice President of the Adviser (since 1993); an officer of other
Oppenheimer funds.
Andrew J. Donohue, Vice President and Secretary; Age: 47
Two World Trade Center, New York, New York 10048-0203
-4-
<PAGE>
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Adviser; Executive Vice
President (since September 1993) and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
a director of OFIL and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Adviser/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Adviser/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Adviser.
Scott T. Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Adviser/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
Adviser/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Adviser.
Robert G. Zack, Assistant Secretary; Age: 49
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 Adviser, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
- - ---------------------
* A Director who is an "interested person" of the Fund.
o Remuneration of Directors. The officers of the Trust and certain Directors
of the Fund (Ms. Macaskill and Messrs. Swain and Bowen) who are affiliated with
the Adviser receive no salary or fee from the Fund. Mr. Fossel did not receive
any salary or fees from the Fund prior to January 1, 1997. The remaining
Directors of the Fund received the compensation shown below. The compensation
from the Fund was paid during its fiscal year ended October 31, 1997. The
compensation from all of the Denver-based Oppenheimer funds includes the Fund
and is compensation received as a Trustee, Director, Managing General Partner or
member of a committee of the Board of those funds during the calendar year 1997.
Total Compensation
Aggregate From All
-5-
<PAGE>
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis $271 $63,501
Director
William A. Baker $331 $77,502
Audit and Review
Committee Member,
Ex Officio Member2
and Director
Charles Conrad, Jr. $308 $72,000
Director3
Jon S. Fossel $270 $63,277
Director
Sam Freedman $284 $66,501
Audit and Review
Committee Member2
and Director
Raymond J. Kalinowski $306 $71,561
Audit and Review Committee
Member2 and Director
C. Howard Kast $327 $76,503
Audit and Review Committee
Chairman2 and Director
Robert M. Kirchner $307 $72,000
Director3
Ned M. Steel $271 $63,501
Director
- - ----------------------
1 For the 1997 calendar year. 2 Committee positions effective July 1, 1997.
3 Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
Deferred Compensation Plan. The Board of Directors has adopted a Deferred
Compensation plan for disinterested directors that enables them to elect to
defer receipt of all or a portion of the annual
-6-
<PAGE>
fees they are entitled to receive from the Fund. None of the Directors currently
participates in the plan. Under the plan, the compensation deferred by a
Director is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Director.
The amount paid to the Director under the plan will be determined based upon the
performance of the selected funds. Deferral of Directors' fees under the plan
will not materially affect the Fund's assets, liabilities and net income per
share. The plan will not obligate the Fund to retain the services of any
Director or to pay any particular level of compensation to any Director.
Pursuant to an Order issued by the Securities and Exchange Commission, the Fund
may invest in the funds selected by the Director under the plan for the limited
purpose of determining the value of the Director's deferred fee account.
Item 19. Control Persons and Principal Holders of Securities.
1. Inapplicable.
2. As of February 20, 1998, the only persons known by the management of the
Fund to own or be the beneficial owner of 5% or more of the outstanding shares
of the Fund were Prudential Securities, Inc., One York Plaza, Floor 8, New York,
New York 10004, which owned 349,072 shares (13.88% of the shares); Advest,
Inc.,90 State House Square, Suite 5, Hartford Connecticut 06103, which owned
188,098 shares for the benefit of its customers (7.48% of the shares); Smith
Barney, Inc., 388 Greenwich Street, 30th Floor, New York, New York 10013-2375,
which owned 161,140 shares for the benefit of its customers (6.41% of the
shares); and Paine Webber Incorporated, 1000 Harbor Boulevard, 6th Floor, Union
City, New Jersey 07087-6727, which owned of record 135,084 shares for the
benefit of its customers (5.37% of the shares).
3. As of February 20, 1998, the directors and officers of the Fund as a
group owned less than 1% of the outstanding Shares.
Item 20. Investment Advisory and Other Services.
Reference is made to Item 9 of the Prospectus.
Item 21. Brokerage Allocation and Other Practices.
1. and 2. The Fund paid no brokerage commissions during the fiscal years
ended October 31, 1995, 1996 and 1997.
The Adviser supplies portfolio management, selects brokers and supplies
investment research in accordance with the Fund's policies. The Fund does not
intend to effect portfolio transactions through any broker which is an
affiliated person of the Fund or its Adviser although the Fund reserves the
right to do so.
As most purchases of portfolio securities made by the Fund are principal
transactions at net prices, the Fund incurs little or no brokerage costs. The
Fund deals directly with the selling or purchasing principal or market maker
without incurring charges for the services of a broker on its behalf unless it
is determined that a better price or execution may be obtained by using the
services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the
-7-
<PAGE>
issuer to the underwriter, and purchases from dealers include a spread between
the bid and asked price. The Fund seeks to obtain prompt execution of orders at
the most favorable net price.
3. The Advisory Agreement between the Fund and the Adviser (the "Advisory
Agreement") contains provisions relating to the selection of brokers, dealers
and futures commission merchants (collectively referred to as "brokers") for the
Fund's portfolio transactions. The Adviser may employ brokers as may, in its
best judgment based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such transactions. The
Adviser has no duty or obligation to seek advance competitive bidding for the
most favorable commission rate or to select any broker-dealer on the basis of
its purported or "posted" commission rates but will, to the best of its ability
endeavor to be aware of the current level of charges of eligible broker-dealers
and to minimize the expense incurred by the Fund to the extent consistent with
the interests and policies of the Fund as established by the Board of Directors
and the provisions of the Agreement.
Certain other investment companies advised by the Adviser and its affiliates
have investment objectives and policies similar to those of the Fund. If
transactions on behalf of more than one fund during the same period increase the
demand for securities being purchased or the supply of securities being sold,
there may be an adverse effect on price or quantity. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transactions in the security to which the option
relates.
If brokers are used for portfolio transactions, brokers may be selected for
their execution and/or research services, on which no dollar value can be
placed. Information received by the Adviser for those other accounts may or may
not be useful to the Fund. The commissions paid to such dealers may be higher
than another qualified dealer would have charged if a good faith determination
is made by the Adviser that the commission is reasonable in relation to the
services provided. Subject to applicable regulations, sales of shares of the
Fund and/or investment companies advised by the Adviser or its affiliates may
also be considered as a factor in directing transactions to brokers, but only in
conformity with the price, execution and other considerations and practices
discussed above.
Such research, which may be provided by a broker through a third party,
includes information on particular companies and industries as well as market,
economic or institutional activity areas. It serves to broaden the scope and
supplement the research activities of the Adviser, to make available additional
views for consideration and comparisons, and to enable the Adviser to obtain
market information for the valuation of securities held in the Fund's portfolio
or being considered for purchase.
4. Inapplicable.
5. Inapplicable.
Item 22. Tax Status.
Reference is made to Item 10 of the Prospectus.
Item 23. Financial Statements.
1. Statement of Investments
-8-
<PAGE>
2. Statement of Assets and Liabilities
3. Statement of Operations
4. Statements of Changes in Net Assets
5. Financial Highlights
6. Notes to Financial Statements
7. Independent Auditors' Report
8. Independent Auditors' Consent
INDEPENDENT AUDITORS' REPORT
The New York Tax-Exempt Income Fund, Inc.
The Board of Directors and Shareholders of
The New York Tax-Exempt Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of The New York Tax-Exempt Income Fund, Inc. as
of October 31, 1997, the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended October 31,
1997 and 1996 and the financial highlights for the period November 1, 1993 to
October 31, 1997. 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 at October
31, 1997 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The New York
Tax-Exempt Income Fund, Inc. at October 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
November 21, 1997
2
<PAGE>
November 21, 1997
<PAGE>
STATEMENT OF INVESTMENTS
The New York Tax-Exempt Income Fund, Inc.
<TABLE>
<CAPTION>
Ratings: Moody's/
S&P/Fitch Market Value
(Unaudited) Face Amount See Note 1
--------------------- ----------- ------------
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- 98.7%
NEW YORK -- 84.5%
Babylon, NY IDA RR RB, Ogden Martin Systems, Inc.,
Prerefunded, Series C, 8.50%, 1/1/19 . . . . . . . . Aaa/AAA $ 985,000 $
1,044,021
NYC GOB, Prerefunded, Series D, 7.50%, 2/1/19 . . . . . Aaa/BBB+/A- 1,195,000
1,362,192
NYC GOB, Prerefunded, Series D, 8%, 8/1/03 . . . . . . Aaa/BBB+/A- 900,000
1,031,859
NYC GOB, Unrefunded Balance, Series D, 7.50%, 2/1/19 . Baa1/BBB+/A- 105,000
117,619
NYC Health & Hospital Corp. RRB, AMBAC Insured,
Inverse Floater, 7.30%, 2/15/23(1) . . . . . . . . . Aaa/AAA/AAA 1,000,000
1,013,750
NYC IDA Civil Facility RB, Community Resources
Development, 7.50%, 8/1/26 . . . . . . . . . . . . . NR/NR 500,000 525,650
NYC IDA RB, Visy Paper, Inc. Project, 7.95%, 1/1/28 . . NR/NR 1,250,000
1,429,137
NYC MTAU RB, Transportation Facilities Service
Contracts, Series 3, 9.25%, 7/1/00 . . . . . . . . . Baa1/BBB+ 1,015,000
1,141,215
NYS DA RB, Judicial Facilities Lease, Escrowed to
Maturity, BIG Insured, 7.375%, 7/1/16 . . . . . . . . Aaa/AAA 250,000
312,428
NYS DA RB, Menorah Campus, Prerefunded, 7.30%,
8/1/16 . . . . . . . . . . . . . . . . . . . . . . . NR/AA 195,000 219,708
NYS DA RRB, CUS, Series B, FGIC Insured, 9%,
7/1/00 . . . . . . . . . . . . . . . . . . . . . . . Aaa/AAA/AAA 900,000 1,010,727
NYS DA RRB, L.I. Medical Center, Series A, 7.75%,
8/15/27 . . . . . . . . . . . . . . . . . . . . . . Aa2/AAA 1,000,000 1,028,380
NYS ERDAUEF RB, L.I. Lighting Co., Series C, 6.90%,
8/1/22 . . . . . . . . . . . . . . . . . . . . . . . Ba1/BB+ 1,000,000 1,083,930
NYS ERDAUPC RB, Rochester Gas & Electric Co.
Project, Series C, 8.375%, 12/1/28 . . . . . . . . . Baa1/BBB+ 250,000
265,055
NYS GORB, 9.875%, 11/15/05 . . . . . . . . . . . . . . A2/A/A+ 400,000
538,296
NYS HFA RB, State University Construction Project,
Prerefunded, Series A, 8.30%, 5/1/18 . . . . . . . . Aaa/AAA 750,000
765,000
NYS HFASC RB, Prerefunded, Series A, 7.375%,
9/15/21 . . . . . . . . . . . . . . . . . . . . . . Aaa/AAA 575,000 656,903
NYS LGAC RB, Prerefunded, Series B, 7.50%,
4/1/20 . . . . . . . . . . . . . . . . . . . . . . . Aaa/AAA/AAA 1,000,000 1,124,900
NYS MAG RB, Inverse Floater, 5.975%, 10/1/24(1) . . . . NR/NR 1,000,000
951,250
NYS MAG RB, Ninth Series E, 8.375%, 4/1/18 . . . . . . Aaa/NR 65,000
66,383
NYS MCFFA RB, Bronx-Lebanon Hospital, Series A,
BIG Insured, 7.10%, 2/15/27 . . . . . . . . . . . . Aaa/AAA 1,000,000
1,022,450
NYS MCFFA RB, MHESF, Prerefunded, Series B, 7.875%,
8/15/20 . . . . . . . . . . . . . . . . . . . . . . Aaa/AAA 350,000 391,150
NYS MCFFA RB, MHESF, Unrefunded Balance, Series B,
7.875%, 8/15/20 . . . . . . . . . . . . . . . . . . Baa1/BBB+ 995,000 1,105,127
NYS MCFFA RRB, MHESF, Unrefunded Balance,
Series A, 8.875%, 8/15/07 . . . . . . . . . . . . . Baa1/BBB+ 145,000 148,522
NYS PAU RB, Prerefunded, Series V, 8%, 1/1/17 . . . . . NR/AA- 500,000
513,395
</TABLE>
3
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
The New York Tax-Exempt Income Fund, Inc.
<TABLE>
<CAPTION>
Ratings: Moody's/
S&P/Fitch Market Value
(Unaudited) Face Amount See Note 1
------------------- ----------- ------------
<S> <C> <C> <C>
NEW YORK (CONTINUED)
NYS PAU RRB, Prerefunded, Series V, MBIA Insured,
7.875%, 1/1/13 . . . . . . . . . . . . . . . . . . . Aaa/AAA $ 450,000 $ 462,006
Onondaga Cnty., NY RR Agency RB, RR Facilities
Project, 7%, 5/1/15 . . . . . . . . . . . . . . . . Baa/NR/A- 900,000 968,508
Suffolk Cnty., NY GORB, AMBAC Insured, 10%,
11/1/02 . . . . . . . . . . . . . . . . . . . . . . Aaa/AAA/AAA 250,000 312,480
-----------
20,612,041
-----------
U.S. POSSESSIONS -- 14.2%
PR CMWLTH Aqueduct & Sewer Authority RB,
Escrowed to Maturity, 10.25%, 7/1/09 . . . . . . . . Aaa/AAA 800,000
1,122,888
PR CMWLTH GORB, Prerefunded, 7.70%, 7/1/20 . . . . . . NR/AAA 1,000,000
1,112,110
PR CMWLTH Special Infrastructure FAU RRB,
Series A, 7.90%, 7/1/07 . . . . . . . . . . . . . . Baa1/BBB+ 425,000 445,081
PR Industrial, Medical & Environmental PC Facilities
FAU RB, American Airlines, Inc. Project, Series A,
6.45%, 12/1/25 . . . . . . . . . . . . . . . . . . . Baa1/BB+ 435,000 479,118
PR Public Buildings Authority RB, Series B, 5.25%,
7/1/21 . . . . . . . . . . . . . . . . . . . . . . . Baa1/A 300,000 294,792
-----------
3,453,989
-----------
Total Investments, at Value (Cost $23,166,804) . . . . . . . . . . . . . 98.7% 24,066,030
Other Assets Net of Liabilities . . . . . . . . . . . . . . . . . . . . . 1.3 326,142
----------- -----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $24,392,172
=========== ===========
</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 $1,965,000 or
8.06% of the Fund's net assets at October 31, 1997.
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
The New York Tax-Exempt Income Fund, Inc.
As of October 31, 1997, securities subject to the alternative minimum tax
amounted to $3,813,013 or 15.63% of the Fund's net assets.
Distribution of investments by industry, as a percentage of total investments
at value, is as follows:
<TABLE>
<CAPTION>
Industry Market Value Percent
-------- ------------ -------
<S> <C> <C>
Hospital/Healthcare $ 4,780,564 19.8%
General Obligation 4,474,556 18.6
Resource Recovery 2,012,529 8.4
Lease Rental 1,896,957 7.9
Higher Education 1,775,727 7.4
Sales Tax 1,569,981 6.5
Manufacturing, Durable Goods 1,429,138 5.9
Pollution Control 1,348,985 5.6
Water Utilities 1,122,888 4.7
Single Family Housing 1,017,633 4.2
Electric Utilities 975,401 4.1
Adult Living Facilities 656,903 2.7
Not-for-Profit Organization 525,650 2.2
Corporate Backed 479,118 2.0
----------- -----
$24,066,030 100.0%
=========== =====
</TABLE>
To simplify the listing of securities, abbreviations are used per the table
below:
CMWLTH Commonwealth
CUS City University System
DA Dormitory Authority
ERDAUEF Energy Research & Development
Authority Electric Facilities
ERDAUPC Energy Research & Development
Authority Pollution Control
FAU Finance Authority
GOB General Obligation Bonds
GORB General Obligation Refunding Bonds
HFA Housing Finance Agency
HFASC Housing Finance Agency Service Contract
IDA Industrial Development Agency
LGAC Local Government Assistance Corp.
L.I. Long Island
MAG Mtg. Agency
MCFFA Medical Care Facilities Finance Agency
MHESF Mental Health Services Facilities
MTAU Metropolitan Transportation Authority
NYC New York City
NYS New York State
PAU Power Authority
PC Pollution Control
RB Revenue Bonds
RR Resource Recovery
RRB Revenue Refunding Bonds
See accompanying Notes to Financial Statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1997
The New York Tax-Exempt Income Fund, Inc.
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $23,166,804) -- see accompanying statement . . . . . . . . .
$24,066,030
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487,551
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,711
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,558,292
-----------
LIABILITIES:
ank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348
Payables and other liabilities:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,505
Shareholder reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,625
Management and administrative fees . . . . . . . . . . . . . . . . . . . . . . . . . 10,321
Directors' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,138
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,183
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,120
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,392,172
===========
COMPOSITION OF NET ASSETS:
Par value of shares of capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,001
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,129,580
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,752
Accumulated net realized gain on investment transactions . . . . . . . . . . . . . . . . 268,613
Net unrealized appreciation on investments -- Note 3 . . . . . . . . . . . . . . . . . . 899,226
-----------
NET ASSETS -- applicable to 2,500,098 shares of capital stock outstanding . . . . . . . .
$24,392,172
===========
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9.76
=====
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1997
The New York Tax-Exempt Income Fund, Inc.
<TABLE>
<S> <C>
INVESTMENT INCOME -- Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,733,281
----------
EXPENSES:
Management fees -- Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,378
Shareholder reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,590
Transfer agent and accounting service fees -- Note 4 . . . . . . . . . . . . . . . . . . 24,231
Legal and auditing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,673
Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,443
Custodian fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,202
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,675
Insurance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,734
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,830
----------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,756
Less expenses paid indirectly -- Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . (7,797)
----------
Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,959
----------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,537,322
----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,554
Net change in unrealized appreciation or depreciation on investments . . . . . . . . . .
(82,854)
----------
NET REALIZED AND UNREALIZED GAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . .
204,700
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . .
. $1,742,022
==========
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
The New York Tax-Exempt Income Fund, Inc.
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,537,322 $ 1,568,849
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 287,554 (30,729)
Net change in unrealized appreciation or depreciation . . . . . . . . . (82,854) (221,504)
----------- -----------
Net increase in net assets resulting from operations . . . . . 1,742,022 1,316,616
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM INVESTMENT INCOME . . . . . . . . . . .
(1,581,763) (1,562,020)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Proceeds from shares issued to shareholders in
reinvestment of dividends and distributions -- Note 2 . . . . . . . . 289,815 308,225
----------- -----------
NET ASSETS:
Total increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,074 62,821
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 23,942,098 23,879,277
----------- -----------
End of period (including undistributed net investment
income of $69,752 and $59,636, respectively) . . . . . . . . . . . . $24,392,172
$23,942,098
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
he New York Tax-Exempt Income Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period . . . $ 9.69 $ 9.79 $ 9.33 $ 10.77 $ 10.37
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income . . . . . . . . . .62 .64 .63 .65 .66
Net realized and unrealized gain (loss) . .09 (.10) .47 (1.18) .55
------- ------- ------- ------- -------
Total income (loss) from
investment operations . . . . . . . . .71 .54 1.10 (.53) 1.21
------- ------- ------- ------- -------
Dividends and distributions to
shareholders:
Dividends from net investment
income . . . . . . . . . . . . . . . (.64) (.64) (.64) (.66) (.74)
Distributions from net realized gain . -- -- -- -- (.07)
Distributions in excess of net realized
gain. . . . . . . . . . . . . . . . . -- -- -- (.25) --
------- ------- ------- ------- -------
Total dividends and distributions to
shareholders . . . . . . . . . . . (.64) (.64) (.64) (.91) (.81)
------- ------- ------- ------- -------
Net asset value, end of period . . . . . . $ 9.76 $ 9.69 $ 9.79 $ 9.33 $ 10.77
======= ======= ======= ======= =======
Market value, end of period . . . . . . . . $ 10.25 $ 10.00 $ 9.63 $ 9.50 $ 12.63
TOTAL RETURN, AT MARKET VALUE(1) 9.40% 10.82% 8.32%
(17.70)% 25.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) . $24,392 $23,942 $23,879 $22,468
$25,516
Average net assets (in thousands) . . . . . $24,088 $23,840 $23,143 $23,852
$24,936
Ratios to average net assets:
Net investment income . . . . . . . . . . 6.35% 6.58% 6.62% 6.53% 6.26%
Expenses(2) . . . . . . . . . . . . . . . 0.85% 0.85% 0.88% 0.87% 0.84%
Portfolio turnover rate(3) . . . . . . . . 33.2% 13% 12% 6% 28%
</TABLE>
(1) Assumes a hypothetical purchase at the current market price on the business
day before the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
a sale at the current market price on the last business day of the period.
(2) Beginning in fiscal 1995, the expense ratio reflects the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not
been adjusted.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended October 31, 1997 were
$8,150,197 and $7,866,736, respectively.
See accompanying Notes to Financial Statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The New York Tax-Exempt Income Fund, Inc.
1. SIGNIFICANT ACCOUNTING POLICIES
The New York Tax-Exempt Income Fund, Inc. (the Fund) is registered
under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company. The Fund seeks
to provide high current income which is exempt from federal, New York
State and New York City income taxes for individual investors as is
available from municipal securities. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The following is a summary of
significant accounting policies consistently followed by the Fund.
Investment Valuation -- Portfolio securities are valued at the close
of the American Stock Exchange on the last day of each week on which
day the American Stock Exchange is open. Listed and unlisted
securities for which such information is regularly reported are valued
at the last sale price of the day or, in the absence of sales, at
values based on the closing bid or 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 Directors. 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 Directors 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.
Federal Taxes -- The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income,
including any net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal income or excise
tax provision is required.
Distributions to Shareholders -- The Fund intends to declare and pay
dividends from net investment income monthly. Distributions from net
realized gains on investments, if any, will be declared at least once
each year.
Classification of Distributions to Shareholders -- Net investment
income (loss) and net realized gain (loss) may differ for financial
statement and tax purposes primarily because of premium amortization
for tax purposes. The character of the distributions made during the
year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the fiscal year in which the
income or realized gain was recorded by the Fund.
The Fund adjusted the classification of distributions to shareholders
to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the period ended October 31, 1997, amounts have
been reclassified to reflect an increase in undistributed net
investment income of $54,557, an increase in accumulated net realized
gain on investments of $18,133, and a decrease in paid-in capital of
$72,690.
Other -- Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Original issue
discount on securities purchased is amortized over the life of the
respective securities, in accordance with federal income tax
requirements. For bonds acquired after April 30, 1993, on disposition
or maturity, taxable ordinary income is recognized to the extent of
the lesser of gain or market dis-
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
The New York Tax-Exempt Income Fund, Inc.
count that would have accrued over the holding period. Realized gains
and losses on investments and unrealized appreciation and depreciation
are determined on an identified cost basis, which is the same basis
used for federal income tax purposes. The Fund concentrates its
investments in New York and, therefore, may have more credit risks
related to the economic conditions of New York than a portfolio with a
broader geographical diversification.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ
from those estimates.
2. CAPITAL STOCK
The Fund has authorized 250 million shares of $.01 par value capital
stock. Of these shares, 174,902 shares were reserved for issuance
under a Dividend Reinvestment and Cash Purchase Plan. Transactions in
shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------
1997 1996
----------------- -----------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net increase from dividends
reinvested 29,677 $289,815 31,639 $308,225
====== ======== ====== ========
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1997, net unrealized appreciation on investments of
$899,226 was composed of gross appreciation of $1,057,621, and gross
depreciation of $158,395.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee
of 0.50% on the Fund's average annual net assets.
The Manager acts as the accounting agent for the Fund at an annual fee
of $12,000, plus out-of-pocket costs and expenses reasonably incurred.
Shareholder Financial Services, Inc. (SFSI), a wholly owned subsidiary
of the Manager, is the transfer agent and registrar for the Fund. Fees
paid to SFSI are based on the number of accounts and the number of
shareholder transactions, plus out-of-pocket costs and expenses.
Expenses paid indirectly represent a reduction of custodian fees for
earnings on cash balances maintained by the Fund.
11
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
1. Financial Statements.
(a) Statement of Investments - (See Part B,
Statement of Additional
Information): Filed herewith.
(b) Statement of Assets and Liabilities - (See Part B,
Statement of
Additional Information): Filed herewith.
(c) Statement of Operations - (See Part B, Statement of
Additional Information): Filed herewith.
(d) Statements of Changes in Net Assets - (See Part B,
Statement of Additional Information): Filed herewith.
(e) Financial Highlights - (See Part B, Statement of
Additional Information): Filed herewith.
(f) Notes to Financial Statements - (See Part B, Statement
of Additional Information): Filed herewith.
(g) Independent Auditors' Report - (See Part B, Statement
of Additional Information): Filed herewith.
(h) Independent Auditors' Consent - (See Part B, Statement
of Additional Information): Filed herewith.
2. Exhibits:
C-1
<PAGE>
(a) Articles of Incorporation of the Registrant:
Previously filed as Exhibit 1 to Fund's Registration
Statement on Form N-2 (Investment Company Act File No.
811-5278), filed with the Securities and Exchange
Commission on August 11, 1987, and refiled pursuant to
Item 102 of Regulation S-T with Registrant's Amendment
No. 11, 2/28/95, and incorporated herein by reference.
(b) By-Laws of the Registrant: Previously filed as Exhibit
2 to Amendment No. 1 to the Fund's Registration
Statement on Form N-2 (Investment Company Act File No.
811-5278), filed with the Securities and Exchange
Commission on September 14, 1987, and refiled pursuant
to Item 102 of Regulation S-T with Registrant's
Amendment No. 11, 2/28/95, and incorporated herein by
reference.
(c) Not applicable.
(d) Specimen certificate for Shares of Capital Stock of
the Registrant: Previously filed with Registrant's
Amendment No. 7, 2/28/91, and refiled with
Registrant's Amendment No. 11, 2/28/95, and refiled
pursuant to Item 102 of Regulation S-T with
Registrant's Amendment No. 11, 2/28/95, and
incorporated herein by reference.
(e) See (j)(2) and (j)(3) below.
(f) Not applicable.
(g) Investment Advisory Agreement with OppenheimerFunds,
Inc. dated 10/22/90 - Previously filed with
Registrant's Amendment No. 7, 2/28/91, and
incorporated herein by reference.
(h) Not applicable.
(i) Not applicable.
(j) (1) Custodian Agreement between Registrant and
Citibank, N.A.: previously filed with Registrant's
Amendment No. 11, 2/28/95, and incorporated herein
by reference.
(2) Registrar, Transfer Agency and Service Agreement
between Registrant and Shareholder Financial
Services, Inc.: previously filed with Registrant's
Amendment No. 11, 2/28/95, and incorporated herein
by reference.
(3) Co-Transfer Agency Agreement between Registrant
and United Missouri Trust Company of New York:
previously filed with Registrant's Amendment
No. 11, 2/28/95, and incorporated herein by
reference.
C-2
<PAGE>
(k) Not applicable.
(l) Not applicable.
(m) Not applicable.
(n) Not applicable.
(o) Not applicable.
(p) Not applicable.
(q) Not applicable.
(r) Financial data schedule: Filed herewith.
Item 25. Marketing Arrangements.
Inapplicable.
Item 26. Other Expenses of Issuance and Distribution.
Inapplicable.
Item 27. Persons Controlled by or under Common Control with Registrant.
None.
Item 28. Number of Holders of Securities.
(2)
Number of
(1) Record Holders at
Title of Class February 20, 1998
Shares of Common Stock 790
Item 29. Indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of
C-3
<PAGE>
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the final
adjudication of such issue.
Registrant, in conjunction with the Registrant's Directors, and other
registered management investment companies managed by the Adviser, generally
maintains insurance on behalf of any person who is or was a Director, officer,
employee, or agent of Registrant.
Item 30. Business and Other Connections of Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other registered
investment companies as described in Parts A and B hereof and listed in Item
28(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Current Position with Other Business and Connections
OppenheimerFunds, Inc.("OFI") During the Past Two Years
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset
Management, Inc. ("ORAMI"); formerly Vice
President of Equity Derivatives at
Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Senior Vice President
of HarbourView Asset Management
Corporation ("HarbourView"); prior to
March, 1996 he was the senior equity
portfolio manager for the Panorama Series
Fund, Inc. (the "Company") and other
mutual funds and pension funds managed by
G.R. Phelps & Co. Inc. ("G.R. Phelps"),
the Company's former investment adviser,
which was a subsidiary of Connecticut
Mutual Life Insurance Company; was also
responsible for managing the common stock
department and common stock investments of
Connecticut Mutual Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Formerly a Vice President and Senior
Portfolio Manager at First of America
Investment Corp.
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Beichert, Kathleen
Vice President None.
Rajeev Bhaman,
Vice President Formerly Vice President (January
1992 - February, 1996) of Asian Equities
for Barclays de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund
Accounting (since May 1996); an officer of
other Oppenheimer funds; formerly an
Assistant Vice President of OFI/Mutual
Fund Accounting (April 1994- May 1996),
and a Fund Controller for OFI.
George C. Bowen,
Senior Vice President & Treasurer Vice President (since June 1983) and
Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. (the
"Distributor"); Vice President (since
October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice
President (since February 1992), Treasurer
(since July 1991)and a director (since
December 1991) of Centennial; President,
Treasurer and a director of Centennial
Capital Corporation (since June 1989);
Vice President and Treasurer (since August
1978) and Secretary (since April 1981) of
Shareholder Services, Inc. ("SSI"); Vice
President, Treasurer and Secretary of
Shareholder Financial Services, Inc.
("SFSI") (since November 1989); Treasurer
of Oppenheimer Acquisition Corp. ("OAC")
(since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc.
(since November 1989); Vice President and
Treasurer of ORAMI (since July
1996); Chief Executive Officer, Treasurer
and a director of MultiSource Services,
Inc., a broker-dealer (since December
1995); an officer of other Oppenheimer
funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly Assistant Vice President of
Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
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Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia
College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President & Director An officer
and/or portfolio manager of certain
Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September
1993), and a director (since January
1992) of the Distributor; Executive
Vice President, General Counsel and a
director of HarbourView, SSI, SFSI and
Oppenheimer Partnership Holdings, Inc.
since (September 1995) and MultiSource
Services, Inc. (a broker-dealer) (since
December 1995); President and a director
of Centennial (since September 1995);
President and a director of ORAMI (since
July 1996); General Counsel (since May
1996) and Secretary (since April 1997) of
OAC; Vice President of OppenheimerFunds
International, Ltd. ("OFIL") and
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds; formerly an Assistant
Vice President of OFI/Mutual Fund
Accounting (April 1994-May 1996), and a
Fund Controller for
OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor; Secretary of HarbourView,
MultiSource and Centennial; Secretary,
Vice
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President and Director of Centennial
Capital Corporation; Vice President and
Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds;
Presently he holds the following other
positions: Director (since 1995) of ICI
Mutual Insurance Company; Governor (since
1994) of St. John's College; Director
(since 1994 - present) of International
Museum of Photography at George Eastman
House; Director (since 1986) of GeVa
Theatre. Formerly he held the following
positions: formerly, Chairman of the Board
and Director of Rochester Fund
Distributors, Inc. ("RFD"); President and
Director of Fielding Management Company,
Inc. ("FMC"); President and Director of
Rochester Capital Advisors, Inc. ("RCAI");
Managing Partner of Rochester Capital
Advisors, L.P., President and Director of
Rochester Fund Services, Inc. ("RFS");
President and Director of Rochester Tax
Managed Fund, Inc.; Director (1993 - 1997)
of VehiCare Corp.; Director (1993 - 1996)
of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following positions:
An officer of
certain former Rochester funds (May, 1993
- January, 1996); Secretary of Rochester
Capital Advisors, Inc. and General
Counsel (June, 1993 - January 1996)
of Rochester Capital Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-1996)
for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based Oppenheimer
Funds. Formerly Vice President and General
Counsel of Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly Vice President for Schroder
Capital Management International.
Jill Glazerman,
Assistant Vice President None.
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<PAGE>
Jeremy Griffiths,
Chief Financial Officer Currently a Member and Fellow of the
Institute of Chartered Accountants;
formerly an accountant for Arthur Young
(London, U.K.).
Robert Grill,
Vice President Formerly Marketing Vice President for
Bankers Trust Company (1993-1996);
Steering Committee Member, Subcommittee
Chairman for American Savings Education
Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Vice President of Fixed Income
Portfolio
Management at Bankers Trust.
Elaine T. Hamann,
Vice President Formerly Vice President (September, 1989 -
January, 1997) of Bankers Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President (1994-1997) of
Retirement Plans Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Adviser President and
Director of SFSI; President and Chief
executive Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly a Senior Vice President and
Portfolio Manager for Warburg, Pincus
Counselors, Inc. (1993-1997), Co-manager
of Warburg, Pincus Emerging Markets Fund
(12/94 - 10/97), Co-manager Warburg,
Pincus Institutional Emerging Markets
Fund - Emerging Markets Portfolio (8/96 -
10/97), Warburg Pincus Japan OTC Fund,
Associate Portfolio Manager of
Warburg Pincus International Equity Fund,
Warburg Pincus Institutional Fund -
Intermediate Equity Portfolio, and
Warburg Pincus EAFE Fund.
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<PAGE>
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and Associate
General Counsel at Prudential Securities,
Inc.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Managing Director of Global
Equities at Paine Webber's Mitchell
Hutchins division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director (1994 -
1996) of Van Eck
Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President Director of Board (since 2/96),
Chinese Finance Society; formerly,
Chairman (11/94-2/96), Chinese Finance
Society; and Director (6/94-6/95), Greater
China Business Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March 1996, the
senior bond portfolio manager for Panorama
Series Fund Inc., other mutual funds
and pension accounts managed by G.R.
Phelps; also responsible for managing the
public fixed-income securities
department at Connecticut Mutual Life
Insurance Co.
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<PAGE>
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September
1995); President and director (since June
1991) of HarbourView; Chairman and a
director of SSI (since August 1994), and
SFSI September 1995); President (since
September 1995) and a director (since
October 1990) of OAC; President (since
September 1995) and a director (since
November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company
subsidiary of OFI; a director of ORAMI
(since July 1996) ; President and a
director (since October 1997) of OFIL, an
offshore fund manager subsidiary of OFI
and Oppenheimer Millennium Funds plc
(since October 1997); President and a
director of other Oppenheimer funds; a
director of the NASDAQ Stock Market, Inc.
and of Hillsdown Holdings plc a U.K. food
company); formerly an Executive Vice
President of OFI.
Wesley Mayer,
Vice President Formerly Vice President (January, 1995 -
June, 1996) of Manufacturers Life
Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Tanya Mrva,
Assistant Vice President None.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly a Portfolio Manager (August, 1989
- August, 1995) with Phoenix Securities
Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995-
November 1996) for Chase Investment
Services Corp.
Tanya Mrva,
Assistant Vice President None.
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<PAGE>
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with Cohane
Rafferty Securities, Inc.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset
Management, Inc. (since March, 1995);
formerly director of Quantitative
Research for the Adviser. Prior to that
he was a lecturer at Stamford University,
an investment manager for The Prudential,
and Associate Economist for the First
National Bank of Chicago.
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for the
Adviser.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President None.
Michael S. Rosen
Vice President; President,
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<PAGE>
Rochester Division An officer and/or portfolio manager of
certain Oppenheimer
funds; Formerly, Vice President (June,
1983 - January, 1996) of RFS, President
and Director of RFD; Vice President and
Director of FMC; Vice President and
director of RCAI; General Partner of RCA;
Vice President and Director of
Rochester Tax Managed Fund Inc.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Vice President and Portfolio
Manager/Security Analyst for Oppenheimer
Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of Citicorp
Investment Services.
Richard Soper,
Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New
York-based Oppenheimer Funds; formerly
Chairman of the Adviser and the
Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of
Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Stoma,
Senior Vice President, Director
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<PAGE>
Retirement Plans Formerly Vice President of U.S. Group
Pension Strategy and Marketing for
Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView; prior to March
1996, an equity portfolio manager for
Panorama Series Fund, Inc. and other
mutual funds and pension accounts managed
by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or
Managing Partner of the Denver-based
Oppenheimer Funds; President and a
Director of Centennial; formerly President
and Director of OAMC, and Chairman of the
Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Managing Director of Buckingham
Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor and
SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New York-based
tax-exempt fixed income Oppenheimer funds;
Formerly, Managing Director and Chief
Fixed Income Strategist at Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; Vice
President of HarbourView; prior to March
1996, an equity portfolio manager for
Panorama Series Fund, Inc. and other
mutual funds and pension funds managed by
G.R. Phelps.
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William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial; Vice President, Finance
and Accounting and member of the Board of
Directors of the Junior League of Denver,
Inc.; Point of Contact: Finance Supporters
of Children; Member of the Oncology
Advisory Board of the Childrens Hospital;
Member of the Board of Directors of the
Colorado Museum of Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since
May 1985), and SFSI (since November 1989);
Assistant Secretary of Oppenheimer
Millennium Funds plc (since October 1997);
an officer of
other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as set
forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
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<PAGE>
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, the Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset
Management Corp., Oppenheimer
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<PAGE>
Partnership Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World Trade
Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of MultiSource Services, Inc. is 1700 Lincoln Street, Denver,
Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester,
New York 14625- 2807.
Item 29. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
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<PAGE>
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer funds.
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1215 W. 10th Street
Apt. 510
Cleveland, OH 44113
Birmingham, MI 48009
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
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<PAGE>
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
C. Webb Heidinger(2) Vice President None
Byron Ingram(2) Assistant Vice President None
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022
Ilene Kutno(2) Assistant Vice President None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
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<PAGE>
Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
60 Myrtle Beach Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Steve Puckett Vice President None
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<PAGE>
2555 N. Clark, #209
Chicago, IL 60614
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI 48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
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<PAGE>
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd. #123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
201 Summerfield
Northbrook, IL 60062
Sarah Turpin Vice President None
2735 Dover Road
Atlanta, GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
Item 31. Not Applicable
Item 32.Location of Accounts and Records.
All accounts, books and other documents, required to be maintained by the
Registrant under Section 31(a) of the Investment Company Act of 1940 and the
Rule thereunder are maintained by OppenheimerFunds, Inc. at its offices at 6803
South Tucson Way, Englewood, Colorado 80112.
Item 33. Management Services.
The Registrant is not a party to any management-related service
contract not discussed in Part A of this Registration Statement.
Item 34. Undertakings.
1. The Registrant undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus if (1) subsequent to the effective
date of this Registration Statement, its net asset value per share declines more
than 10 percent from its net asset value per share as of the effective date of
this Registration Statement, or (2) its net asset value increases to an amount
greater than its net proceeds as stated in the prospectus.
2. Inapplicable
C-21
<PAGE>
3. Inapplicable
4. Inapplicable
5. Inapplicable
6. Inapplicable
C-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Arapahoe and State of Colorado on the 26th day of February, 1998.
THE NEW YORK TAX-EXEMPT INCOME FUND
By: /s/ James C. Swain
----------------------------
James C. Swain
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures Title Date
/s/ James C. Swain* Chairman of the February 26, 1998
- - ---------------------- Board of Directors
James C. Swain
/s/ Jon S. Fossel* Director February 26, 1998
- - ----------------------
Jon S. Fossel
/s/ George C. Bowen* Chief Financial February 26, 1998
- - ---------------------- and Accounting
George C. Bowen Officer and Director
/s/ Robert G. Avis* Director February 26, 1998
- - ----------------------
Robert G. Avis
/s/ William A. Baker* Director February 26, 1998
- - ----------------------
William A. Baker
/s/ Charles Conrad Jr.* Director February 26, 1998
- - ----------------------
Charles Conrad, Jr.
/s/ Sam Freedman Director February 26, 1998
- - ----------------------
Sam Freedman
C-23
<PAGE>
/s/ Raymond J. Kalinowski* Director February 26, 1998
- - -------------------------
Raymond J. Kalinowski
/s/ Howard Kast* Director February 26, 1998
- - ------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Director February 26, 1998
- - ------------------------
Robert M. Kirchner
/s/ Bridget A. Macaskill President & Director February 26, 1998
- - ------------------------
Bridget A. Macaskill
/s/ Ned M. Steel* Director February 26, 1998
- - ------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
- - --------------------------------
Robert G. Zack, Attorney-in-Fact
C-24
<PAGE>
THE NEW YORK TAX-EXEMPT INCOME FUND, INC.
Registration No. 811-5278
Post-Effective Amendment No. 12
Index to Exhibits
Exhibit No. Description
24(1)(h) Independent Auditor's Consent
24(2)(r) Financial Data Schedule
Power of Attorney for George C. Bowen
Consent of Independent Auditors
The Board of Directors
The New York Tax-Exempt Income Fund, Inc.
We consent to the use of our report dated November 21, 1997 included herein.
- - -------------------------
Deloitte & Touche LLP
Denver, Colorado
February 26, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 820090
<NAME> THE NEW YORK TAX-EXEMPT INCOME FUND, INC.
<S> <C> <PERIOD-TYPE>
12-MOS <FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996 <PERIOD-END>
OCT-31-1997 <INVESTMENTS-AT-COST>
23,166,804 <INVESTMENTS-AT-VALUE>
24,066,030 <RECEIVABLES>
487,551 <ASSETS-OTHER> 4,711
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,558,292
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166,120
<TOTAL-LIABILITIES> 166,120
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,154,581
<SHARES-COMMON-STOCK> 2,500,098
<SHARES-COMMON-PRIOR> 2,470,421
<ACCUMULATED-NII-CURRENT> 69,752
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 268,613
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 899,226
<NET-ASSETS> 24,392,172
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,733,281
<OTHER-INCOME> 0
<EXPENSES-NET> 195,959
<NET-INVESTMENT-INCOME> 1,537,322
<REALIZED-GAINS-CURRENT> 287,554
<APPREC-INCREASE-CURRENT> (82,854)
<NET-CHANGE-FROM-OPS> 1,742,022
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,581,763
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 29,677
<NET-CHANGE-IN-ASSETS> 450,074
<ACCUMULATED-NII-PRIOR> 59,636
<ACCUMULATED-GAINS-PRIOR> (37,074)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 120,378
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 203,756
<AVERAGE-NET-ASSETS> 24,087,889
<PER-SHARE-NAV-BEGIN> 9.69
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> 0.64
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Andrew J. Donohue or Robert G. Zack, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his capacity as Director and/or as Treasurer
(Principal Financial and Accounting Officer) of THE NEW YORK TAX-EXEMPT INCOME
FUND, INC., a Minnesota corporation (the "Fund"), to sign on his behalf any and
all Registration Statements (including any post-effective amendments to
Registration Statements) under the Securities Act of 1933, the Investment
Company Act of 1940 and any amendments and supplements thereto, and other
documents in connection thereunder, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, may
lawfully do or cause to be done by virtue hereof.
Dated this 16th day of December, 1997.
/s/ George C. Bowen
-------------------------------
George C. Bowen
