Centennial New York Tax Exempt Trust
3410 South Galena Street, Denver, Colorado 80231
1-800-525-9310
Centennial New York Tax Exempt Trust (the "Trust") is a no-load
"money market" mutual fund with the investment objective of seeking the
maximum current income exempt from Federal, New York State and New York
City income taxes for individual investors that is consistent with
preservation of capital. The Trust seeks to achieve this objective by
investing in municipal obligations meeting specified quality standards,
the income from which is tax-exempt as described above. Normally, the
Trust will invest at least 80% of its assets in U.S. dollar-denominated,
high quality tax-exempt municipal obligations. See "The Trust and Its
Investment Policies."
An investment in the Trust is neither insured nor guaranteed by the
U.S. Government. While the Trust seeks to maintain a stable net asset
value of $1.00 per share, there can be no assurance that the Trust will
be able to do so.
Shares of the Trust may be purchased directly from dealers having
sales agreements with the Trust's Distributor and also are offered to
participants in Automatic Purchase and Redemption Programs (the
"Programs") established by certain brokerage firms with which the Trust's
Distributor has entered into agreements for that purpose. See "How to Buy
Shares" in the Prospectus. Program participants should also read the
description of the Program provided by their broker.
This Prospectus sets forth concisely information about the Trust that
a prospective investor should know before investing. A Statement of
Additional Information about the Trust (the "Additional Statement") dated
November 1, 1995, has been filed with the Securities and Exchange
Commission ("SEC") and is available without charge upon written request
to Shareholder Services, Inc. (the "Transfer Agent"), P.O. Box 5143,
Denver, Colorado 80217-5143 or by calling the toll-free number shown
above. The Additional Statement (which is incorporated by reference in
its entirety in this Prospectus) contains more detailed information about
the Trust and its management.
Investors are advised to read and retain this Prospectus for future
reference.
Shares of the Trust are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is effective November 1, 1995.
<PAGE>
Table of Contents
Page
Trust Expenses
Financial Highlights
Yield Information
The Trust and Its Investment Policies
Investment Restrictions
Management of the Trust
How To Buy Shares
Purchases Through Automatic Purchase and Redemption Programs
Direct Purchases
Payment by Check
Payment by Federal Funds Wire
Guaranteed Payment
Automatic Investment Plans
General
Service Plan
How To Redeem Shares
Program Participants
Shares of the Trust Owned Directly
Regular Redemption Procedure
Expedited Redemption Procedure
Check Writing
Telephone Redemptions
Automatic Withdrawal Plans
General Information on Redemptions
Exchanges of Shares
Dividends, Distributions and Taxes
Additional Information
<PAGE>
Trust Expenses
The following table sets forth the fees that an investor in the Trust
might pay, and the expenses paid by the Trust during its fiscal year ended
June 30, 1995.
Shareholder Transaction Expenses
Maximum Sales Charge on Purchases None
Sales Charge on Reinvested Dividends None
Redemption Fees None
Exchange Fee None
Annual Trust Operating Expenses (as a percentage of average net assets)
Management Fees (after expense assumption) 0.35%
12b-1 (Service Plan) Fees 0.19%
Other Expenses 0.26%
Total Trust Operating Expenses
(after expense assumption) 0.80%
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in the Trust will bear
directly (shareholder transaction expenses) or indirectly (annual trust
operating expenses). "Other Expenses" includes such expenses as custodial
and transfer agent fees, audit, legal and other business operating
expenses, but excludes extraordinary expenses. The Annual Trust Operating
Expenses shown are net of a voluntary expense assumption undertaking by
the Trust's investment manager, Centennial Asset Management Corporation
(the "Manager"). Without such assumption, "Management Fees" and "Total
Trust Operating Expenses" would have been 0.50% and 0.95% of average net
assets, respectively. The expense assumption undertaking is described in
"Investment Management Services" in the Additional Statement and may be
amended or withdrawn at any time. For further details, see the Trust's
Financial Statements included in the Additional Statement.
The following example applies the above-stated expenses (after expense
assumption) to a hypothetical $1,000 investment in shares of the Trust
over the time periods shown below, assuming a 5% annual rate of return on
the investment and also assuming that the shares are redeemed at the end
of each stated period. The amounts shown below are the cumulative costs
of such hypothetical $1,000 investment for the periods shown.
1 year 3 years 5 years 10 years
$8 $26 $44 $99
This example should not be considered a representation of past or
future expenses or performance. Expenses are subject to change and actual
performance and expenses may be less or greater than those illustrated
above.
<PAGE>
Financial Highlights
Selected data for a share of the Trust outstanding throughout each period
The table below presents selected financial information about the Trust,
including per share data and expense ratios and other data based on the
Trust's average net assets. This information has been audited by Deloitte
& Touche LLP, independent auditors, whose report on the financial
statements of the Trust for the fiscal year ended June 30, 1995 is
included in the Additional Statement.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994 1993 1992
------- ------- ------- ------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------
Income from investment operations -
net investment income and net
realized gain on investments .03 .02 .02 .03
Dividends and distributions to
shareholders (.03) (.02) (.02) (.03)
------- ------- ------- -------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
======= ======= ======= =======
TOTAL RETURN, AT NET
ASSET VALUE (2) 2.85% 1.68% 1.83% 3.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $35,846 $26,519 $24,994 $24,103
Average net assets (in
thousands) $29,590 $25,419 $24,257 $23,221
Number of shares
outstanding at end of
period (in thousands) 35,847 26,518 24,994 24,105
Ratios to average net assets:
Net investment income 2.84% 1.67% 1.74% 3.00%
Expenses, before voluntary assumption
by the Manager .95% 1.02% .98% 1.09%
Expenses, net of voluntary assumption
by the Manager .80% .80% .80% .80%
</TABLE>
[FN]
1. For the period from January 4, 1989 (commencement of operations) to
September 30, 1989.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends reinvested in additional
shares on the reinvestment date, and redemption at the net asset value
calculated on the last business day of the fiscal period. Total returns
are not annualized for periods of less than one full year. Total returns
reflect changes in net investment income only.
3. Annualized.
FINANCIAL HIGHLIGHTS
Centennial New York Tax Exempt Trust
<TABLE>
<CAPTION>
NINE
YEAR MONTHS PERIOD
ENDED ENDED ENDED
JUNE 30, JUNE 30, SEPTEMBER 30,
1991 1990 1989(1)
------- ------- -------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $1.00 $1.00 $1.00
------- ------- -------
Income from investment operations -
net investment income and net
realized gain on investments .05 .04 .04
Dividends and distributions to
shareholders (.05) (.04) (.04)
------- ------- -------
Net asset value, end of period $1.00 $1.00 $1.00
======= ======= =======
TOTAL RETURN, AT NET
ASSET VALUE (2) 4.74% 3.87% 3.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $21,439 $9,133 $4,935
Average net assets
(in thousands) $16,766 $7,008 $2,084
Number of shares
outstanding at end of
period (in thousands) 21,443 9,135 4,934
Ratios to average net assets:
Net investment income 4.42% 4.98%(3) 5.41%(3)
Expenses, before voluntary assumption
by the Manager 1.08% 1.48%(3) 2.21%(3)
Expenses, net of voluntary assumption
by the Manager .72% .96%(3) 1.00%(3)
</TABLE>
[FN]
1. For the period from January 4, 1989 (commencement of operations) to
September 30, 1989.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends reinvested in
additional shares on the reinvestment date, and redemption at the net
asset value calculated on the last business day of the fiscal period.
Total returns are not annualized for periods of less than one full year.
Total returns reflect changes in net investment income only.
3. Annualized.
<PAGE>
Yield Information
From time to time, the "yield," "tax-equivalent yield" and
"compounded effective yield" of an investment in the Trust may be
advertised. All yield figures are based on historical earnings per share
and are not intended to indicate future performance. The "yield" of the
Trust is the income generated by an investment in the Trust over a seven-
day period, which is then "annualized." In annualizing, the amount of
income generated by the investment during that seven days is assumed to
be generated each week over a 52-week period, and is shown as a percentage
of the investment. The "compounded effective yield" is calculated
similarly, but the annualized income earned by an investment in the Trust
is assumed to be reinvested. The "compounded effective yield" will
therefore be slightly higher than the yield because of the effect of the
assumed reinvestment. The Trust's "tax-equivalent yield" is calculated
by dividing that portion of the Trust's "yield" (calculated as described
above) which is tax-exempt by one minus a stated income tax rate and
adding the result to the portion (if any) of the Trust's yield that is not
tax-exempt. The "tax-equivalent yield" is then compounded and annualized
in the same manner as the Trust's yield. See "Yield Information" in the
Additional Statement for further information on the methods of calculating
these yields. From time to time the Manager may voluntarily assume a
portion of the Trust's expenses (which may include the management fee),
thereby lowering the overall expense ratio per share and increasing the
Trust's yield during the time such expenses are assumed.
The Trust and Its Investment Policies
The Trust is a no-load tax-exempt money market fund. It is an open-
end, non-diversified, management investment company organized on July 29,
1988 as a Massachusetts business trust. The Trust's investment objective
is to seek the maximum current income exempt from Federal, New York State
and New York City income taxes for individual investors as is consistent
with preservation of capital. The Trust's shares may be purchased at
their net asset value, which will remain fixed at $1.00 per share except
under extraordinary circumstances (see "Determination of Net Asset Value
Per Share" in the Additional Statement for further information). There
can be no assurance, however, that the Trust's net asset value will not
vary or that the Trust will achieve its investment objective. The value
of Trust shares is not insured or guaranteed by any government agency.
However, shares held in brokerage accounts may be eligible for coverage
by the Securities Investor Protection Corporation for losses arising from
the insolvency of the brokerage firm. In seeking its objective, the Trust
may invest in the types of instruments discussed below. The Trust's
investment policies and practices are not "fundamental" policies (as
defined below) unless a particular policy is identified as fundamental.
The Trust's investment objective is a fundamental policy. The Board may
change non-fundamental investment policies without shareholder approval.
Municipal Securities. Under normal market conditions, the Trust attempts
to invest 100% of its assets, and will invest at least 80% of its assets
in municipal bonds, municipal notes (including tax anticipation notes,
bond anticipation notes, revenue anticipation notes, construction loan
notes and other short-term loans), tax-exempt commercial paper and other
debt obligations issued by or on behalf of the State of New York, and
other states, and the District of Columbia, their political subdivisions,
or any commonwealth or territory of the United States, or their respective
agencies, instrumentalities or authorities, the interest from which is not
subject to federal individual income tax, in the opinion of bond counsel
to the respective issuer (collectively, "Municipal Securities") and will
invest at least 65% of its total assets in obligations of the State of New
York and its political subdivisions, agencies, authorities or
instrumentalities or those of commonwealths or territories of the U.S.,
the interest from which is not subject to New York State and New York City
personal income tax in the opinion of bond counsel to the respective
issuer ("New York Municipal Securities"). The Trust may also purchase
Municipal Securities with demand features that meet the requirements of
Rule 2a-7 (discussed below). All Municipal Securities in which the Trust
invests must have, or, pursuant to regulations adopted by the Securities
and Exchange Commission, be deemed to have, remaining maturities of one
year or less at the date the Trust purchases them.
In seeking its objective, as a matter of fundamental policy,
normally the Trust will make no investment that will reduce the portion
of its total assets which are invested in Municipal Securities to less
than 80%. The balance of the Trust's assets may be invested in
investments the income from which may be taxable, including: (i)
repurchase agreements (described below); (ii) Municipal Securities issued
to benefit a private user ("Private Activity Municipal Securities"), the
interest from which may be subject to Federal alternative minimum tax (see
"Dividends and Taxes" below and "Private Activity Municipal Securities"
in the Additional Statement); and (iii) certain temporary investments
defined below in "Temporary Investments." The Trust may hold Temporary
Investments pending the investment of proceeds from the sale of Trust
shares or portfolio securities, pending settlement of Municipal Securities
purchases or to meet anticipated redemptions. Normally, the Trust will
not invest more than 20% of its total assets in Private Activity Municipal
Securities and other taxable investments described above. No independent
investigation has been made by the Manager as to the users of proceeds of
such offerings or the application of such proceeds. To the extent the
Trust receives income from taxable investments, it may not achieve its
investment objective. Investments in unrated Municipal Securities will
not exceed 20% of the Trust's total assets.
- - Ratings of Securities. Under Rule 2a-7 of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), the Trust uses the
amortized cost method to value its portfolio securities to determine the
Trust's net asset value per share. Rule 2a-7 places restrictions on a
money market fund's investments. Under the Rule, the Trust may purchase
only those securities that the Trust's Board of Trustees has determined
have minimal credit risks and are "Eligible Securities." An "Eligible
Security" is (a) one that has received a rating in one of the two highest
short-term rating categories by any two "nationally-recognized statistical
rating organizations" (as defined in the Rule) ("Rating Organizations"),
or, if only one Rating Organization has rated that security, by that
Rating Organization, or (b) an unrated security that is judged by the
Manager to be of comparable quality to investments that are "Eligible
Securities" rated by Rating Organizations. The Rule permits the Trust to
purchase "First Tier Securities," which are Eligible Securities rated in
the highest rating category for short-term debt obligations by at least
two Rating Organizations, or, if only one Rating Organization has rated
a particular security, by that Rating Organization, or comparable unrated
securities. Under the Rule, the Trust may also invest in "Second Tier
Securities," which are Eligible Securities that are not "First Tier
Securities." Additionally, under Rule 2a-7, the Trust must maintain a
dollar-weighted average portfolio maturity of no more than 90 days; and
the maturity of any single portfolio investment may not exceed 397 days.
Certain of the Trust's fundamental investment restrictions (which may be
changed only by shareholder vote) are more restrictive than the provisions
of Rule 2a-7, and the Trust must restrict the maturity of portfolio
securities to one year or less. The Trust's Board has adopted procedures
under Rule 2a-7 pursuant to which the Board has delegated to the Manager
certain responsibilities, in accordance with that Rule, of conforming the
Trust's investments with the requirements of the Rule and those
procedures.
Appendix A of the Additional Statement contains descriptions of the
rating categories of Rating Organizations. Ratings at the time of
purchase will determine whether securities may be acquired under the above
restrictions. Subsequent downgrades in ratings may require reassessment
of the credit risk presented by a security and may require its sale. The
rating restrictions described in this Prospectus do not apply to banks in
which the Trust's cash is kept. See "Municipal Securities" and "Ratings
of Securities" in "Investment Objective and Policies" in the Additional
Statement for further details.
- - Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Trust may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals of no
more than one year. Floating rates are automatically adjusted according
to a specified market rate for such investments, such as the PSA Municipal
Swap Index or J.J. Kenney Index. The Trust may purchase these obligations
if they have a remaining maturity of one year or less; if their maturity
is greater than one year, they may be purchased if they have a demand
feature that permits the Trust to recover the principal amount of the
underlying security at specified intervals not exceeding one year and on
not more than 30 days' notice. The Manager may determine that an unrated
floating rate or variable rate demand obligation meets the Trust's quality
standards solely by reason of being backed by a letter of credit or
guarantee issued by a bank that meets the Trust's quality standards.
However, the letter of credit or bank guarantee must be rated or meet the
other requirements of Rule 2a-7. See "Floating Rate/Variable Rate
Obligations" in the Additional Statement for more details.
- When-Issued Securities. The Trust may invest in Municipal Securities
on a "when-issued" or "delayed delivery" basis. In those transactions,
the Trust obligates itself to purchase or sell securities, with delivery
and payment to occur at a later date, to secure what is considered to be
an advantageous price and yield at the time the obligation is entered
into. The price, which is generally expressed in yield terms, is fixed
at the time the commitment to purchase is made, but delivery and payment
for when-issued securities take place at a later date (normally within 45
days of purchase). During the period between purchase and settlement, no
payment is made by the Trust to the issuer and no interest accrues to the
Trust from the investment. Although the Trust is subject to the risk of
adverse market fluctuation during that period, the Manager does not
believe that the Trust's net asset value or income will be materially
adversely affected by the Trust's purchase of Municipal Securities on a
"when-issued" or "delayed delivery" basis. See "When-Issued and Delayed
Delivery Transactions" in the Additional Statement for more details.
- - Puts and Stand-By Commitments. For liquidity purposes, the Trust may
purchase Municipal Securities with puts from banks, brokers, dealers or
other institutions. A put gives the Trust the right to sell the
underlying security within a specified time at a stated price. Under a
stand-by commitment, a dealer agrees to purchase, at the Trust's option,
specified Municipal Securities at a stated price on same-day settlement.
The aggregate price of a security subject to a put or a stand-by
commitment may be higher than the price which otherwise would be paid for
the security without such put or stand-by commitment, thereby increasing
the cost of such security and reducing its yield. See "Puts and Stand-By
Commitments" in the Additional Statement for further details.
- Municipal Lease Obligations. The Trust may invest in certificates of
participation, which are tax-exempt obligations that evidence the holder's
right to share in lease, installment loan or other financing payments by
a public entity. Projects financed with certificates of participation
generally are not subject to state constitutional debt limitations or
other statutory requirements that may be applicable to Municipal
Securities. Payments by the public entity on the obligation underlying
the certificates are derived from available revenue sources; such revenue
may be diverted to the funding of other municipal service projects.
Payments of interest and/or principal with respect to the certificates are
not guaranteed and do not constitute an obligation of the state or any of
its political subdivisions. While some municipal lease securities may be
deemed to be "illiquid" securities (the purchase of which would be limited
as described below in "Illiquid and Restricted Securities"), from time to
time the Trust may invest more than 5% of its net assets in municipal
lease obligations that the Manager has determined to be liquid under
guidelines set by the Trust's Board of Trustees.
Illiquid and Restricted Securities. Under the policies and procedures
established by the Trust's Board of Trustees, the Manager determines the
liquidity of certain of the Trust's investments. Investments may be
illiquid because of the absence of an active trading market, making it
difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction
on its resale or which cannot be sold publicly until it is registered
under the Securities Act of 1933. The Trust will not invest more than 10%
of its net assets in illiquid or restricted securities. This policy does
not limit purchases of: (1) restricted securities eligible for resale to
qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933 that are determined to be liquid by the Board of
Trustees or by the Manager under Board-approved guidelines, or (2)
commercial paper that may be sold without registration under Sections
3(a)(3) or 4(2) of the Securities Act of 1933. Such guidelines take into
account trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in particular Rule 144A Securities, the Trust's holdings
of those securities may be illiquid. If due to changes in relative value,
more than 10% of the value of the Trust's net assets consist of illiquid
securities, the Manager would consider appropriate steps to protect the
Trust's maximum flexibility. There may be undesirable delays in selling
illiquid securities at prices representing their fair value.
Non-diversification. The Trust is classified as a "non-diversified"
investment company under the Investment Company Act of 1940 (the
"Investment Company Act"), so that the proportion of the Trust's assets
that may be invested in the securities of a single issuer is not limited
by the Investment Company Act. An investment in the Trust will therefore
entail greater risk than an investment in a diversified investment company
because a higher percentage of investments among fewer issuers may result
in greater fluctuation in the total market value of the Trust's portfolio,
and economic, political or regulatory developments may have a greater
impact on the value of the Trust's portfolio than would be the case if the
portfolio were diversified among more issuers. However, the Trust intends
to conduct its operations so as to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), which will relieve the Trust from liability
for Federal income tax to the extent its earnings are distributed to
shareholders. Among the requirements for such qualification are that: (1)
not more than 25% of the market value of the Trust's total assets will be
invested in the securities of a single issuer, and (2) with respect to 50%
of the market value of its total assets, not more than 5% of the market
value of its total assets may be invested in the securities of a single
issuer and the Trust must not own more than 10% of the outstanding voting
securities of a single issuer.
Repurchase Agreements. The Trust may acquire securities that are subject
to repurchase agreements to generate income while providing liquidity.
The Trust's repurchase agreements must comply with the collateral
requirements of Rule 2a-7. However, if the seller of the securities fails
to pay the agreed-upon repurchase price on the delivery date, the Trust's
risks may include the costs of disposing of the collateral for the
agreement and losses that might result from any delays in foreclosing on
the collateral. The Trust will not enter into a repurchase agreement that
will cause more than 10% of its net assets to be subject to repurchase
agreements maturing in more than seven days and may not enter into
repurchase agreements if the scheduled repurchase date is greater than one
year. Income earned on repurchase transactions is not tax-exempt and
accordingly, under normal market conditions, including the foregoing
restrictions, the Trust will limit its investments in repurchase
transactions to 20% of its total assets. See "Repurchase Agreements" in
the Additional Statement for further details.
Loans of Portfolio Securities. To attempt to increase its income, the
Trust may lend its portfolio securities to qualified borrowers (other than
in repurchase transactions) if the loan is collateralized in accordance
with applicable regulatory requirements and if, after any loan, the value
of the securities loaned does not exceed 25% of the value of its total
assets. The Trust presently does not intend that the value of securities
loaned during the current fiscal year will exceed 5% of the Trust's total
assets. The income from such loans, when distributed by the Trust, will
be taxable. See "Loans of Portfolio Securities" in the Additional
Statement for further information.
Temporary Investments. The Trust may hold the following "Temporary
Investments" that are Eligible Securities: (i) obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities;
(ii) bankers acceptances; (iii) taxable commercial paper rated in the
highest category by a Rating Organization; (iv) short-term taxable debt
obligations rated in one of the two highest rating categories of a Rating
Organization; or (v) certificates of deposit of domestic banks with assets
of $1 billion or more. To the extent the Trust assumes a temporary
defensive position, a significant portion of the Trust's distributions may
be subject to Federal, New York State and local taxes.
Special Considerations - New York Municipal Securities. Because the Trust
concentrates its investments in New York Municipal Securities, the market
value and marketability of such Municipal Securities and the interest
income and repayment of principal to the Trust from them could be
adversely affected by a default or financial crisis relating to any of
such issuers. Investors should consider these matters and the financial
difficulties experienced in past years by New York State and certain of
its agencies and subdivisions (particularly New York City), as well as
economic trends in New York, summarized in the Additional Statement under
"Special Investment Considerations - New York Municipal Securities." In
addition, the Trust's portfolio securities are affected by general changes
in interest rates, which result in changes in the value of portfolio
securities held by the Trust, which can be expected to vary inversely to
changes in prevailing interest rates.
Investment Restrictions
The Trust has certain investment restrictions which, together with
its investment objective, are fundamental policies, changeable only by the
vote of a "majority of the outstanding voting securities" (as defined in
the Investment Company Act) of the Trust. Under some of those
restrictions, the Trust cannot: (1) make loans, except that the Trust may
purchase debt securities described in "The Trust and Its Investment
Policies" and repurchase agreements, and the Trust may lend its portfolio
securities as described in its investment policy stated above; (2) borrow
money in excess of 10% of the value of its total assets or make any
investment when borrowings exceed 5% of the value of its total assets; it
may borrow only as a temporary measure for extraordinary or emergency
purposes; no assets of the Trust may be pledged, mortgaged or assigned to
secure a debt; (3) invest more than 25% of its total assets in any one
industry; however, for the purposes of this restriction Municipal
Securities and U.S. Government obligations are not considered to be part
of any single industry. The percentage restrictions described in this
Prospectus and in the Additional Statement apply only at the time of
investment and require no action by the Trust as a result of subsequent
changes in value of the investments or the size of the Trust. A
supplementary list of investment restrictions is contained in "Investment
Restrictions" in the Additional Statement.
Management of the Trust
The Trust's Board of Trustees has overall responsibility for the
management of the Trust under the laws of Massachusetts governing the
responsibilities of trustees of business trusts. "Trustees and Officers"
in the Additional Statement identifies the Trust's Trustees and officers
and provides information about them. Subject to the authority of the
Board, the Manager is responsible for the day-to-day management of the
Trust's business, supervises the investment operations of the Trust and
the composition of its portfolio and furnishes the Trust advice and
recommendations with respect to investments, investment policies and the
purchase and sale of securities, pursuant to a management agreement with
the Trust (the "Agreement"). The Trust's management fee, payable monthly
to the Manager under the terms of the Agreement, is computed as a
percentage of the Trust's aggregate net assets as of the close of business
each day at the following annual rates: 0.50% of the first $250 million
of net assets; 0.475% of the next $250 million; 0.45% of the next $250
million; 0.425% of the next $250 million and 0.40% of net assets in excess
of $1 billion.
The Agreement lists examples of expenses paid by the Trust, the
major categories of which relate to interest, taxes, brokerage
commissions, certain insurance premiums, fees to certain Trustees, legal
and audit expenses, transfer agent and custodian expenses, certain
registration expenses and non-recurring expenses, including litigation
costs. For further information about the Agreement, including a
description of expense assumption arrangements by the Manager, exculpation
provisions and portfolio transactions, see "Investment Management
Services" in the Additional Statement.
The Manager, a wholly-owned subsidiary of Oppenheimer Management
Corporation ("OMC"), has operated as an investment adviser since 1978.
The Manager and OMC currently advise U.S. investment companies with assets
aggregating over $38 billion as of September 30, 1995, and having more
than 2.8 million shareholder accounts. OMC is owned by Oppenheimer
Acquisition Corp., a holding company owned in part by senior management
of OMC and the Manager, and ultimately controlled by Massachusetts Mutual
Life Insurance Company, a mutual life insurance company which also advises
pension plans and investment companies.
How To Buy Shares
Shares of the Trust may be purchased at their offering price, which
is the net asset value per share, without sales charge. The net asset
value will remain fixed at $1.00 per share, except under extraordinary
circumstances (see "Determination of Net Asset Value Per Share" in the
Additional Statement for further details). There can be no guarantee that
the Trust will maintain a stable net asset value of $1.00 per share.
Centennial Asset Management Corporation, which also acts as the Trust's
distributor (and in that capacity is referred to as the "Distributor"),
may in its sole discretion accept or reject any order for purchase of the
Trust's shares. Oppenheimer Funds Distributor, Inc., an affiliate of the
Distributor, acts as the Trust's sub-distributor (the "Sub-Distributor").
The minimum initial investment is $500 ($2,500 if by Federal Funds
wire), except as otherwise described in this Prospectus. Subsequent
purchases must be in amounts of $25 or more, and may be made through
authorized dealers or brokers or by forwarding payment to the Distributor
at P.O. Box 5143, Denver, Colorado 80217, with the name(s) of all account
owners, the account number and the name of the Trust. The minimum initial
and subsequent purchase requirements are waived on purchases made by
reinvesting dividends from any of the "Eligible Funds" listed in "Exchange
Privilege" below or by reinvesting distributions from unit investment
trusts for which reinvestment arrangements have been made with the
Distributor. Under an Automatic Investment Plan, military allotment plan,
403(b)(7) custodial plan or payroll deduction plan, initial and subsequent
investments must be at least $25. No share certificates will be issued
unless specifically requested in writing by an investor or the dealer or
broker.
The Trust intends to be as fully invested as practicable to maximize
its yield. Therefore, dividends will accrue on newly-purchased shares
only after the Distributor accepts the purchase order for them at its
address in Denver, Colorado, on a day The New York Stock Exchange is open
(a "regular business day"), under one of the methods of purchasing shares
described below. The purchase will be made at the net asset value next
determined after the Distributor accepts the purchase order.
The Trust's net asset value per share is determined twice each
regular business day, at 12:00 Noon and the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier on some
days (all references to time in this Prospectus mean New York time) by
dividing the net assets of the Trust by the total number of its shares
outstanding. The Trust's Board of Trustees has established procedures for
valuing the Trust's assets, using the amortized cost method as described
in "Determination of Net Asset Value Per Share" in the Additional
Statement.
Purchases Through Automatic Purchase and Redemption Programs. Shares of
the Trust are available under Automatic Purchase and Redemption Programs
("Programs") of broker-dealers that have entered into agreements with the
Distributor for that purpose. Broker-dealers whose clients participate
in such Programs will invest the "free cash balances" of such client's
Program account in shares of the Trust if the Trust has been selected as
the primary Trust by the client for the Program account. Such purchases
will be made by the broker-dealer under the procedures described in
"Guaranteed Payment," below. The Program may have minimum investment
requirements established by the broker-dealer. The description of the
Program provided by the broker-dealer should be consulted for details, and
all questions about investing in, exchanging or redeeming shares of the
Trust through a Program should be directed to the broker-dealer.
Direct Purchases. An investor may directly purchase shares of the Trust
through any dealer which has a sales agreement with the Distributor or the
Sub-Distributor. There are two ways to make a direct initial investment:
either (1) complete a Centennial Funds New Account Application and mail
it with payment to the Distributor at P.O. Box 5143, Denver, Colorado
80217-5143 (if no dealer is named in the Application, the Sub-Distributor
will act as the dealer), or (2) order the shares through your dealer or
broker. Purchases made by Application should have a check enclosed, or
payment may be made by one of the alternative means described below.
- Payment by Check. Orders for shares purchased by check in U.S.
dollars drawn on a U.S. bank will be effected on the regular business day
on which the check (and a purchase application, if the account is new) is
accepted by the Distributor. Dividends will begin to accrue on such
shares the next regular business day after the purchase order is accepted.
For other checks, the shares will not be purchased until the Distributor
is able to convert the purchase payment to Federal Funds, and dividends
will begin to accrue on such shares on the next regular business day.
- - Payment by Federal Funds Wire. Shares of the Trust may be purchased
by Federal Funds wire. The minimum investment by wire is $2,500. The
investor must first call the Distributor's Wire Department at 1-800-852-
8457 to notify the Distributor of the transmittal of the wire and to order
the shares. The investor's bank must wire the Federal Funds to Citibank,
N.A., ABA No. 0210-0008-9 for credit to Concentration Account No. 3737-
5674, for further credit to Centennial New York Tax Exempt Trust Custodian
Account No. 845-766.
The wire must state the investor's name. Shares will be purchased
on the regular business day on which the Federal Funds are received by
Citibank, N.A. prior to the close of The New York Stock Exchange (which
is normally 4:00 P.M.) and the Distributor has received and accepted the
investor's notification of the wire order. Shares will be purchased at
the net asset value next determined after receipt of the Federal Funds and
the order. Dividends on newly purchased shares will begin to accrue on
the purchase date if the Federal Funds and order for the purchase are
received and accepted by 12:00 Noon. Dividends will begin to accrue on
the next regular business day if the Federal Funds and purchase order are
received and accepted between 12:00 Noon and the close of The New York
Stock Exchange, which is normally 4:00 P.M. but may be earlier on some
days. The investor must also send the Distributor a completed Application
when the purchase order is placed to establish a new account.
- Guaranteed Payment. Broker-dealers with sales agreements with the
Distributor (including broker-dealers who have made special arrangements
with the Distributor for purchases for Program accounts) may place
purchase orders with the Distributor for purchases of the Trust's shares
prior to 12:00 Noon on a regular business day, and the order will be
effected at net asset value determined at 12:00 Noon that day if the
broker-dealer guarantees that payment for such shares in Federal Funds
will be received by the Trust's Custodian prior to 2:00 P.M. on the same
day. Dividends will begin to accrue on the purchase date. If an order
is received between 12:00 Noon and the close of The New York Stock
Exchange, which is normally 4:00 P.M., on a regular business day, with the
broker-dealer's guarantee that payment for such shares in Federal Funds
will be received by the Trust's Custodian by the close of the Exchange on
the next regular business day, the order will be effected on the day the
order is received, and dividends on such shares will begin to accrue on
the next regular business day the Federal Funds are received by the
required time. If the broker-dealer guarantees that the Federal Funds
payment will be received by the Trust's Custodian by 2:00 P.M. on a
regular business day on which an order is placed for shares after 12:00
Noon, the order will be effected at the close of the Exchange that day and
dividends will begin to accrue on such shares on the purchase date.
- - Automatic Investment Plans. Direct investors may purchase shares of
the Trust automatically. Automatic Investment Plans may be used to make
regular monthly investments ($25 minimum) from the investor's account at
a bank or other financial institution. To establish an Automatic
Investment Plan from a bank account, a check (minimum $25) for the initial
purchase must accompany the application. Shares purchased by Automatic
Investment Plan payments are subject to the redemption restrictions for
recent purchases described in "How to Redeem Shares." The amount of the
Automatic Investment Plan payment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after
receipt of such instructions to implement them. The Trust reserves the
right to amend, suspend, or discontinue offering such Automatic Investment
Plans at any time without prior notice.
General. Dealers and brokers who process orders for the Trust's shares
on behalf of their customers may charge a fee for this service. That fee
can be avoided by purchasing shares directly from the Trust. The
Distributor, in its sole discretion, may accept or reject any order for
purchases of the Trust's shares. The sale of shares will be suspended
during any period when the determination of net asset value is suspended,
and may be suspended by the Board of Trustees whenever the Board judges
it in the best interest of the Trust to do so.
Service Plan. The Trust has adopted a service plan (the "Plan") under
Rule 12b-1 of the Investment Company Act pursuant to which the Trust will
reimburse the Distributor for a portion of its costs incurred in
connection with the personal service and maintenance of accounts that hold
Trust shares. The Distributor will use all the fees received from the
Trust to reimburse dealers, brokers, banks, or other institutions
("Recipients") each quarter for providing personal service and maintenance
of accounts that hold Trust shares. The services to be provided by
Recipients under the Plan include, but shall not be limited to, the
following: answering routine inquiries from the Recipient's customers
concerning the Trust, providing such customers with information on their
investment in Trust shares, assisting in the establishment and maintenance
of accounts or sub-accounts in the Trust, making the Trust's investment
plans and dividend payment options available, and providing such other
information and customer liaison services and the maintenance of accounts
as the Distributor or the Trust may reasonably request. Plan payments by
the Trust to the Distributor will be made quarterly in the amount of the
lesser of: (i) 0.05% (0.20% annually) of the net asset value of the Trust,
computed as of the close of each business day or (ii) the Distributor's
actual distribution expenses for that quarter of the type approved by the
Board. Any unreimbursed expenses incurred for any quarter by the
Distributor may not be recovered in later periods. The Plan has the
effect of increasing annual expenses of the Trust by up to 0.20% of
average annual net assets from what its expenses would otherwise be. In
addition, the Manager may, under the Plan, from time to time from its own
resources (which may include the profits derived from the advisory fee it
receives from the Trust), make payments to Recipients for distribution,
administrative and accounting services performed by Recipients. For
further details, see "Service Plan" in the Additional Statement.
How to Redeem Shares
Program Participants. A program participant may redeem shares in the
Program by writing checks as described below, or by contacting the dealer
or broker. A program participant may also arrange for "Expedited
Redemptions," as described below, only through their dealer or broker.
Shares of the Trust Owned Directly. Shares of the Trust owned by a
shareholder directly (not through a Program) (a "direct shareholder"), may
be redeemed in the following ways:
- - Regular Redemption Procedure. A direct shareholder who wishes to
redeem some or all shares in an account (whether or not represented by
certificates) under the Trust's regular redemption procedure, must send
the following to the Transfer Agent for the Trust, Shareholder Services,
Inc., P.O. Box 5143, Denver, Colorado 80217 (send courier or express mail
deliveries to 10200 E. Girard Avenue, Building D, Denver, Colorado 80231):
(1) a written request for redemption signed by all registered owners
exactly as the shares are registered, including fiduciary titles, if any,
and specifying the account number and the dollar amount or number of
shares to be redeemed; (2) a guarantee of the signatures of all registered
owners on the redemption request or on the endorsement on the share
certificate or accompanying stock power, by a U.S. bank, trust company,
credit union or savings association, or a foreign bank having a U.S.
correspondent bank, or by a U.S. registered dealer or broker in
securities, municipal securities or government securities, or by a U.S.
national securities exchange, registered securities association or
clearing agency; (3) any share certificates issued for any of the shares
to be redeemed; and (4) any additional documents which may be required by
the Transfer Agent for redemption by corporations, partnerships or other
organizations, executors, administrators, trustees, custodians, or
guardians, or if the redemption is requested by anyone other than the
shareholder(s) of record. Transfers of shares are subject to similar
requirements. A signature guarantee is not required for redemptions of
$50,000 or less, requested by and payable to all shareholders of record,
to be sent to the address of record for that account. To avoid delay in
redemption or transfer, shareholders having questions about these
requirements should contact the Transfer Agent in writing or by calling
1-800-525-9310 before submitting a request. From time to time the
Transfer Agent in its discretion may waive any or certain of the foregoing
requirements in particular cases. Redemption or transfer requests will
not be honored until the Transfer Agent receives all required documents
in proper form.
- - Expedited Redemption Procedure. In addition to the regular redemption
procedure set forth above, direct shareholders whose shares are not
represented by certificates may arrange to have redemption proceeds of
$2,500 or more wired in Federal Funds to a designated commercial bank if
the bank is a member of the Federal Reserve wire system. To place a wire
redemption request, call the Transfer Agent at 1-800-852-8457. The
account number of the designated financial institution, and the Bank ABA
number must be supplied to the Transfer Agent on the Application or dealer
settlement instructions establishing the account or may be added to
existing accounts or changed only by signature-guaranteed instructions to
the Transfer Agent from all shareholders of record. Such redemption
requests may be made by telephone, wire or written instructions to the
Transfer Agent. The wire for the redemption proceeds of shares redeemed
prior to 12:00 Noon, normally will be transmitted by the Transfer Agent
to the shareholder's designated bank account on the day the shares are
redeemed (or, if that day is not a bank business day, on the next bank
business day). No dividends are paid on the proceeds of redeemed shares
awaiting transmittal by wire. Shares redeemed prior to 12:00 Noon do not
earn dividends on the redemption date. The wire for the redemption
proceeds of shares redeemed between 12:00 Noon and the close of The New
York Stock Exchange, which is normally 4:00 P.M., but may be earlier on
some days, normally will be transmitted by the Transfer Agent to the
shareholder's designated bank account on the next bank business day after
the redemption. Shares redeemed between 12:00 Noon and the close of the
Exchange earn dividends on the redemption date. See "Purchase, Redemption
and Pricing of Shares" in the Additional Statement for further details.
- - Check Writing. Upon request, the Transfer Agent will provide any
direct shareholder of the Trust or any Program participant whose shares
are not represented by certificates with forms of drafts ("checks")
payable through a bank selected by the Trust (the "Bank"). Program
participants must arrange for check writing through their brokers or
dealers. The Transfer Agent will arrange for checks written by direct
shareholders to be honored by the Bank after obtaining a specimen
signature card from the shareholder(s). Shareholders of joint accounts
may elect to have checks honored with a single signature. Checks may be
made payable to the order of anyone in any amount not less than $250 and
will be subject to the Bank's rules and regulations governing checks. If
a check is presented for an amount greater than the account value, it will
not be honored. For Program participants, checks will be drawn against
the primary account designated by the Program participant. Checks issued
for one Fund account must not be used if the shareholder's account has
been transferred to a new account or if the account number or registration
has been changed. Shares purchased by check or Automatic Investment Plan
payments within the prior 10 days may not be redeemed by checkwriting.
A check presented to the Bank for payment that would require redemption
of some or all of the shares so purchased is subject to non-payment. The
Bank will present checks to the Trust to redeem shares to cover the amount
of the check. Checks may not be presented for cash payment at the offices
of the Bank or the Trust's Custodian. This limitation does not affect the
use of checks for the payment of bills or to obtain cash at other banks.
The Trust reserves the right to amend, suspend or discontinue check
writing privileges at any time without prior notice.
- Telephone Redemptions. Direct shareholders of the Trust may redeem
their shares by telephone by calling the Transfer Agent at 1-800-852-8457.
This procedure for telephone redemptions is not available to Program
participants. Proceeds of telephone redemptions will be paid by check
payable to the shareholder(s) of record and sent to the address of record
for the account. Telephone redemptions are not available within 30 days
of a change of the address of record. Up to $50,000 may be redeemed by
telephone, once in any seven day period. The Transfer Agent may record
any calls. Telephone redemptions may not be available if all lines are
busy, and shareholders would have to use the Trust's regular redemption
procedure described above. Telephone redemption privileges are not
available for newly-purchased (within the prior 10 days) shares or for
shares represented by certificates. Telephone redemption privileges apply
automatically to each shareholder and the dealer representative of record
unless the Transfer Agent receives cancellation instructions from a
shareholder of record. If an account has multiple owners, the Transfer
Agent may rely on the instructions of any one owner.
- - Automatic Withdrawal Plans. Direct shareholders of the Trust can
authorize the Transfer Agent to redeem shares (minimum $50) automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed as of the close of The New York
Stock Exchange, which is normally 4:00 P.M. (but may be earlier on some
days), three business days prior to the date requested by the shareholder
for receipt of the payment. The Trust cannot guarantee receipt of payment
on the date requested and reserves the right to amend, suspend or
discontinue offering such Plan at any time without prior notice. For
further details, refer to "Automatic Withdrawal Plan Provisions" in the
Additional Statement.
General Information on Redemptions. The redemption price will be the net
asset value per share of the Trust next determined after the receipt by
the Transfer Agent of a request in proper form. Under certain unusual
circumstances, shares of the Trust may be redeemed "in kind" (i.e., by
payment in portfolio securities). Under certain circumstances, the Trust
may involuntarily redeem small accounts if the account has fallen below
$200 in value. For details, see "Purchase, Redemption and Pricing of
Shares - Redemption of Shares" in the Additional Statement. Under the
Internal Revenue Code, the Trust may be required to impose "backup"
withholding of Federal income tax at the rate of 31% from any taxable
dividends and distributions the Trust may make, if the shareholder has not
furnished the Trust a certified taxpayer identification number or has not
complied with provisions of the Internal Revenue Code and regulations
thereunder.
Payment for redeemed shares is made ordinarily in cash and forwarded
within seven days of the Transfer Agent's receipt of redemption
instructions in proper form, except under unusual circumstances as
determined by the SEC. The Transfer Agent may delay forwarding a
redemption check for recently-purchased shares only until the purchase
check has cleared which may take up to 10 days or more. Such delay may
be avoided if the shareholder arranges telephone or written assurance
satisfactory to the Transfer Agent from the bank on which the payment was
drawn or by purchasing shares by Federal Funds wire, as described above.
The Trust makes no charge for redemption. Dealers or brokers may charge
a fee for handling redemption transactions, but such fee can be avoided
by requesting the redemption directly through the Transfer Agent. Under
certain circumstances, the proceeds of redemptions of shares of the Trust
acquired by exchange of Class A shares of "Eligible Funds" (described
below) that were purchased subject to a contingent deferred sales charge
("CDSC") may be subject to the CDSC (see "Exchange Privilege" below).
Exchanges of Shares
Exchange Privilege. Shares of the Trust held under a Program may be
exchanged for shares of Centennial Money Market Trust, Centennial
Government Trust, Centennial Tax Exempt Trust and Centennial California
Tax Exempt Trust (collectively, the "Centennial Trusts") only by
instructions of the broker. Shares of the Trust may, under certain
circumstances, be exchanged by direct shareholders for Class A shares of
the following funds, all collectively referred to as "Eligible Funds": (i)
Oppenheimer Target Fund, Oppenheimer Champion Income Fund, Oppenheimer
Asset Allocation Fund, Oppenheimer Discovery Fund, Oppenheimer U.S.
Government Trust, Oppenheimer Global Growth & Income Fund, Oppenheimer
Global Emerging Growth Fund, Oppenheimer Limited-Term Government Fund,
Oppenheimer Intermediate Tax-Exempt Fund, Oppenheimer Fund, Oppenheimer
Global Fund, Oppenheimer Growth Fund, Oppenheimer Equity Income Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Insured Tax-Exempt
Fund, Oppenheimer International Bond Fund, Oppenheimer Main Street Income
& Growth Fund, Oppenheimer Main Street California Tax-Exempt Fund,
Oppenheimer Florida Tax-Exempt Fund, Oppenheimer New Jersey Tax-Exempt
Fund, Oppenheimer Bond Fund, Oppenheimer Value Stock Fund, Oppenheimer
California Tax-Exempt Fund, Oppenheimer Pennsylvania Tax-Exempt Fund,
Oppenheimer High Yield Fund, Oppenheimer Total Return Fund, Inc.,
Oppenheimer Tax-Free Bond Fund, Oppenheimer New York Tax-Exempt Fund,
Oppenheimer Strategic Income Fund and, Oppenheimer Strategic Income &
Growth Fund, and (ii) the following "Money Market Funds": Oppenheimer
Money Market Fund, Inc., Oppenheimer Cash Reserves, any Centennial Trust,
and Daily Cash Accumulation Fund, Inc. There is an initial sales charge
on the purchase of Class A shares of each Eligible Fund except the Money
Market Funds (under certain circumstances described below, redemption
proceeds of Money Market Fund shares may be subject to a CDSC).
Shares of the Trust and of the other Eligible Funds may be exchanged
at net asset value if all of the following conditions are met: (1) shares
of the fund selected for exchange are available for sale in the
shareholder's state of residence; (2) the respective prospectuses of the
funds whose shares are to be exchanged and acquired offer the Exchange
Privilege to the investor; (3) newly-purchased shares (by initial or
subsequent investment) are held in an account for at least seven days
prior to the exchange; and (4) the aggregate net asset value of the shares
surrendered for exchange into a new account is at least equal to the
minimum investment requirements of the fund whose shares are to be
acquired.
In addition to the conditions stated above: shares of Eligible
Funds may be exchanged for shares of any Money Market Fund; shares of any
Money Market Fund (including the Trust) purchased without a sales charge
may be exchanged for shares of Eligible Funds offered with a sales charge
upon payment of the sales charge (or, if applicable, may be used to
purchase shares of Eligible Funds subject to a CDSC); and shares of the
Trust acquired by reinvestment of dividends and distributions from any
Eligible Fund (except Oppenheimer Cash Reserves) or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor or the Sub-Distributor may be exchanged at net asset value
for shares of any Eligible Fund. The redemption proceeds of shares of the
Trust, acquired by exchange of Class A shares of an Eligible Fund
purchased subject to a CDSC, that are redeemed within 18 months of the end
of the calendar month of the initial purchase of the exchanged shares will
be subject to the CDSC as described in the prospectus of that other
Eligible Fund. In determining whether the CDSC is payable, shares of the
Trust not subject to the CDSC are redeemed first, including shares
purchased by reinvestment of dividends and capital gains distributions
from any Eligible Fund or shares of the Trust acquired by exchange of
shares of Eligible Funds on which a front-end sales charge was paid or
credited, and then other shares are redeemed in the order of purchase.
- - How to Exchange Shares. An exchange may be made by a direct
shareholder by submitting an Exchange Authorization Form to the Transfer
Agent, signed by all registered owners. In addition, direct shareholders
of the Trust may exchange shares of the Trust for shares of any Eligible
Fund by telephone exchange instructions to the Transfer Agent by a
shareholder or the dealer representative of record for an account. The
Trust may modify, suspend or discontinue these exchange privileges at any
time. Although the Trust will attempt to provide notice whenever it is
reasonably able to do so, it may impose these changes at any time. The
Trust reserves the right to reject requests submitted in bulk on behalf
of 10 or more accounts. Exchange requests must be received by the
Transfer Agent by the close of the Exchange on a regular business day to
be effected that day. The number of shares exchanged may be less than the
number requested if the number requested would include shares subject to
a restriction cited above or shares covered by a certificate that is not
tendered with such request. Only the shares available for exchange
without restriction will be exchanged.
- - Telephone Exchanges. Direct shareholders may place a telephone
exchange request by calling the Transfer Agent at 1-800-852-8457.
Telephone exchange calls may be recorded by the Transfer Agent. Telephone
exchanges are subject to the rules described above. By exchanging shares
by telephone, the shareholder is acknowledging receipt of a prospectus of
the fund to which the exchange is made and that for full or partial
exchanges, any special account features such as Automatic Investment Plans
and Automatic Withdrawal Plans will be switched to the new account unless
the Transfer Agent is otherwise instructed. Telephone exchange privileges
automatically apply to each direct shareholder of record and the dealer
representative of record unless and until the Transfer Agent receives
written instructions from the shareholder(s) of record cancelling such
privileges. If an account has multiple owners, the Transfer Agent may
rely on the instructions of any one owner.
The Transfer Agent has adopted reasonable procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification number(s) and other account data and by recording calls and
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures, it may be liable for losses due to unauthorized
transactions, but otherwise neither it nor the Trust will be liable for
losses or expenses arising out of telephone instructions reasonably
believed to be genuine. The Transfer Agent reserves the right to require
shareholders to confirm, in writing, telephone exchange privileges for an
account. Shares acquired by telephone exchange must be registered exactly
as the account from which the exchange was made. Certificated shares are
not eligible for telephone exchange. If all telephone exchange lines are
busy (which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request telephone
exchanges and would have to submit written exchange requests.
- - General Information on Exchanges. Shares to be exchanged are redeemed
on the day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date") as of the close of The New York Stock Exchange,
which is normally 4:00 P.M., but may be earlier on some days. Normally,
shares of the fund to be acquired are purchased on the Redemption Date,
but such purchases may be delayed by either fund for up to five business
days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Trust in its discretion reserves
the right to refuse any exchange request that will disadvantage it.
The Eligible Funds have different investment objectives and
policies. Each of those funds imposes a sales charge on purchases of
Class A shares (except the Money Market Funds). For complete information,
including sales charges and expenses, a prospectus of the fund into which
the exchange is being made should be read prior to an exchange. Dealers
and brokers who process exchange orders on behalf of their customers may
charge for their services. Direct shareholders may avoid those charges
by requesting the Trust directly to exchange shares. For Federal tax
purposes, an exchange is treated as a redemption and purchase of shares.
Dividends, Distributions and Taxes
This discussion relates solely to Federal tax laws and New York
income tax laws and is not exhaustive; a qualified tax adviser should be
consulted. A portion of the Trust's dividends and distributions may be
subject to Federal, state and local taxation. The Additional Statement
contains further discussion of tax matters affecting the Trust and its
distributions, and information about the possible applicability of the
Alternative Minimum Tax to the Trust's dividends and distributions (see
"Investment Objective and Policies - Private Activity Municipal
Securities").
Dividends and Distributions. The Trust intends to declare all of its net
income, as defined below, as dividends on each regular business day and
to pay dividends monthly. Dividends will be payable to shareholders as
described in "How to Buy Shares" above.
All dividends and capital gains distributions for the accounts of
Program participants are automatically reinvested in additional shares of
the Trust. Dividends accumulated since the prior payment will be
reinvested in full and fractional shares of the Trust (or paid in cash)
at net asset value on the third Thursday of each calendar month. Program
participants may receive cash payments by asking the broker to redeem
shares. Dividends and distributions payable to direct shareholders will
also be automatically reinvested in shares of the Trust at net asset
value, unless the shareholder asks the Transfer Agent in writing to pay
dividends in cash, or to reinvest them in another Eligible Fund, as
described in "Dividend Reinvestment in Another Fund" in the Additional
Statement. That notice must be received prior to a dividend record date
to be effective as to that dividend. If a shareholder redeems all shares
at any time during a month, the redemption proceeds include all dividends
accrued up to the redemption date for shares redeemed prior to 12:00 Noon,
and include all dividends accrued through the redemption date for shares
redeemed between 12:00 Noon and the close of The New York Stock Exchange.
Dividends, distributions and the proceeds of redemptions of Trust shares
represented by checks returned to the Transfer Agent by the Postal Service
as undeliverable will be reinvested in shares of the Trust, as promptly
as possible after the return of such checks to the Transfer Agent, to
enable the investor to earn a return on otherwise idle funds.
Under the terms of a Program, a broker-dealer may pay out the value
of some or all of a Program participant's Trust shares prior to redemption
of such shares by the Trust. In such cases, the shareholder will be
entitled to dividends on such shares only up to and including the date of
such payment. Dividends on such shares accruing between the date of
payment and the date such shares are redeemed by the Trust will be paid
to the broker-dealer. Program participants should discuss these
arrangements with their broker-dealer.
The Trust's net investment income for dividend purposes consists of
all interest accrued on portfolio assets, less all expenses of the Trust
for such period. Distributions from net realized gains on securities, if
any, will be paid at least once each year, and may be made more frequently
in compliance with the Internal Revenue Code and the Investment Company
Act. Any net realized capital loss is carried forward to offset against
capital gains in later years. The Trust will not make any distributions
from net realized securities gains unless capital loss carry forwards, if
any, have been used or have expired. Long-term capital gains, if any,
will be identified separately when tax information for the Trust is
distributed to shareholders. Receipt of tax-exempt income must be
reported on the taxpayer's Federal income tax return. The Additional
Statement describes how dividends and distributions received by direct
shareholders of the Trust may be reinvested in shares of any Eligible Fund
at net asset value. To effect its policy of maintaining a net asset value
of $1.00 per share, the Trust, under certain circumstances, may withhold
dividends or make distributions from capital or capital gains.
Tax Status of the Trust's Dividends. The Trust intends to qualify under
the Internal Revenue Code during each fiscal year to pay "exempt-interest
dividends" to its shareholders, and so qualified during its last fiscal
year. Exempt-interest dividends which are derived from net investment
income earned by the Trust on Municipal Securities will be excludable from
gross income of shareholders for Federal income tax purposes. This
allocation will be made by uniformly applying a designated percentage to
all income dividends made during the Trust's calendar year. Such
designation will normally be made following the end of such fiscal year
as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may differ substantially from the percentage of
the Trust's income that was tax-exempt for a given period. A shareholder
treats a dividend as a receipt of ordinary income (whether paid in cash
or reinvested in additional shares) if derived from net interest income
earned by the Trust from one or more of: (i) certain taxable temporary
investments (such as certificates of deposit, commercial paper and
obligations of the U.S. government, its agencies or instrumentalities and
repurchase agreements), (ii) income from securities loans or repurchase
agreements, (iii) an excess of net short-term capital gains over net long-
term capital losses. Losses realized by shareholders on the redemption
or other disposition of Trust shares within six months of purchase (which
period may be shortened by regulation and may be extended in certain
circumstances) will be disallowed for Federal income tax purposes to the
extent of exempt-interest dividends received on such shares. For
corporate shareholders, all of the Trust's dividends will be a component
of adjusted current earnings for determining Federal corporate alternative
minimum tax. Shareholders receiving Social Security benefits should be
aware that exempt-interest dividends are a factor in determining whether
such benefits are subject to Federal income tax. Interest on loans used
to purchase shares of the Trust may not be deducted for Federal tax
purposes. Under rules used by the Internal Revenue Service to determine
when borrowed funds are deemed used for the purpose of purchasing or
carrying particular assets, the purchase of Trust shares may be considered
to have been made with borrowed funds even though the borrowed funds are
not directly traceable to the purchase of shares. The Trust also intends
to qualify during each fiscal year to pay "exempt-interest dividends" that
will be exempt from New York State and New York City personal income taxes
to the extent the Trust's income is derived from New York state municipal
securities. Distributions, including "exempt-interest dividends", may be
subject to New York state franchise taxes if received by a corporation.
Dividends paid by the Trust derived from net short-term capital
gains are taxable to shareholders as ordinary income whether received in
cash or reinvested. Any distribution of long-term capital gain, when
designated by the Trust as a capital gain dividend, is taxable to
shareholders as long-term capital gain, whether received in cash or
reinvested and regardless of how long Trust shares have been held. The
Trust will report annually to its shareholders the percentage of interest
income it received during the preceding year on Municipal Securities.
It will also report the net amount of its income that is subject to
alternative minimum tax. Receipt of tax-exempt income must be reported
on a taxpayer's Federal income tax return.
Tax Status of the Trust. If the Trust qualifies as a "regulated
investment company" under the Internal Revenue Code, it will not be liable
for Federal income taxes on amounts paid by it as dividends and
distributions. The Trust so qualified during its last fiscal year and
intends to qualify in the current and future fiscal years, while reserving
the right not to so qualify. However, the Internal Revenue Code contains
a number of complex tests relating to qualification which the Trust might
not meet in any particular year. If the Trust does not qualify, it would
be treated for Federal tax purposes as an ordinary corporation, would
receive no tax deduction for payments made to shareholders and would be
unable to pay "exempt-interest dividends" as discussed above.
Additional Information
Description of the Trust and its Shares. The Trust's shares are of one
class, are transferrable without restriction and have equal rights and
privileges. Each share of the Trust represents an interest in the Trust
equal to the interest of each other share in the Trust and entitles the
holder to one vote per share (and a fractional vote for a fractional
share) on matters submitted to a shareholder vote, and to participate pro-
rata in dividends and distributions and in the net distributable assets
of the Trust on liquidation. The Trustees may divide or combine shares
into a greater or lesser number of shares without thereby changing the
proportionate beneficial interest in the Trust. Shares do not have
preemptive, subscription or cumulative voting rights. The Trust's Board
of Trustees is empowered to issue additional "series" of shares of the
Trust, which may have separate assets and liabilities. The Trust does not
anticipate holding annual meetings. Under certain circumstances,
shareholders have the right to remove a Trustee. See "Additional
Information" in the Additional Statement for details.
The Custodian and the Transfer Agent. The Custodian of the assets of the
Trust is Citibank, N.A. The Manager and its affiliates presently have
banking relationships with the Custodian. See "Additional Information"
in the Additional Statement for further information. The Trust's cash
balances in excess of $100,000 held by the Custodian are not protected by
Federal deposit insurance. Such uninsured balances may at times be
substantial. The rating restrictions under Rule 2a-7 (see "Ratings of
Securities," above) do not apply to banks in which the Trust's cash is
kept.
Shareholder Services, Inc., a subsidiary of OMC, acts as Transfer
Agent and shareholder servicing agent on an at-cost basis for the Trust
and other mutual funds advised by the Manager. The fees to the Transfer
Agent do not include payments for any services of the type paid, or to be
paid, by the Trust to the Distributor and to Recipients under the Service
Plan. Shareholders should direct any inquiries regarding the Trust to the
Transfer Agent at the address or toll-free phone number on the back cover.
Program participants should direct any inquiries regarding the Trust to
their broker.
<PAGE>
No dealer, broker, salesperson or any other person has been authorized
to give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made such information and representations must not be
relied upon as having been authorized by the Trust, the Manager, the
Distributor or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state.
Investment Adviser and Distributor
Centennial Asset Management Corporation
3410 South Galena Street
Denver, Colorado 80231
Transfer and Shareholder Servicing Agent
Shareholder Services, Inc.
P.O. Box 5143
Denver, Colorado 80217-5143
1-800-525-9310
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
The Colorado State Bank Building
1600 Broadway, Suite 1850
Denver, Colorado 80202
PR 780 (11/95) * Printed on recycled paper
<PAGE>
Centennial New York Tax Exempt Trust
Effective November 1, 1995
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CENTENNIAL NEW YORK TAX EXEMPT TRUST
3410 South Galena Street, Denver, Colorado 80231
1-800-525-9310
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement should be read in
conjunction with the Prospectus (the "Prospectus") dated November 1, 1995,
of Centennial New York Tax Exempt Trust (the "Trust"), which may be
obtained upon written request to Shareholder Services, Inc. (the "Transfer
Agent"), P.O. Box 5143, Denver, Colorado 80217-5143, or by calling the
toll-free number shown above.
TABLE OF CONTENTS
Page
Investment Objective and Policies 2
Special Investment Considerations - New York Municipal Securities 8
Investment Restrictions 15
Trustees and Officers 16
Investment Management Services 20
Service Plan 22
Purchase, Redemption and Pricing of Shares 23
Yield Information 25
Additional Information 26
Automatic Withdrawal Plan Provisions 27
Independent Auditors' Report 30
Financial Statements 31
Appendix A: Description of Securities Ratings A-1
Appendix B: Tax Equivalent Yield Tables B-1
Appendix C: Industry Classifications C-1
This Additional Statement is effective November 1, 1995.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Trust are described in
the Prospectus. Set forth below is supplemental information about those
policies. Certain capitalized terms used in this Additional Statement are
defined in the Prospectus.
The Trust will not make investments with the objective of seeking
capital growth. However, the value of the securities held by the Trust may
be affected by changes in general interest rates. Because the current
value of debt securities varies inversely with changes in prevailing
interest rates, if interest rates increase after a security is purchased,
that security would normally decline in value. Conversely, should
interest rates decrease after a security is purchased, its value would
rise. However, those fluctuations in value will not generally result in
realized gains or losses to the Trust since the Trust does not usually
intend to dispose of securities prior to their maturity. A debt security
held to maturity is redeemable by its issuer at full principal value plus
accrued interest. To a limited degree, the Trust may engage in short-term
trading to attempt to take advantage of short-term market variations, or
may dispose of a portfolio security prior to its maturity if, on the basis
of a revised credit evaluation of the issuer or other considerations, the
Trust believes such disposition advisable or it needs to generate cash to
satisfy redemptions. In such cases, the Trust may realize a capital gain
or loss.
There are, of course, variations in the quality of Municipal
Securities, both within a particular classification and between
classifications, depending on numerous factors. The yields of Municipal
Securities depend on, among other things, general conditions of the
Municipal Securities market, size of a particular offering, the maturity
of the obligation and rating of the issue. The market value of Municipal
Securities will vary as a result of changing evaluations of the ability
of their issuers to meet interest and principal payments, as well as
changes in the interest rates payable on new issues of Municipal
Securities.
Municipal Securities.
Municipal Bonds. The principal classifications of Municipal Bonds
are "general obligations" (secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest),
"revenue obligations" (payable only from the revenues derived from a
particular facility or class of facilities, or specific excise tax or
other revenue source) and "industrial development bonds".
General Obligation Bonds. Issuers of general obligation bonds
include states, counties, cities, towns, and regional districts. The
proceeds of these obligations are used to fund a wide range of public
projects, including construction or improvement of schools, highways and
roads, and water and sewer systems. The basic security behind general
obligation bonds is the issuer's pledge of its full faith and credit and
taxing power for the payment of principal and interest. The taxes that
can be levied for the payment of debt service may be limited or unlimited
as to the rate or amount of special assessments.
Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, and/or
the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
Industrial Development Bonds. Industrial development bonds, which
are considered municipal bonds if the interest paid is exempt from Federal
income tax, are issued by or on behalf of public authorities to raise
money to finance various privately operated facilities for business and
manufacturing, housing, sports, and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports, and parking. The payment of the principal and interest
on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.
Municipal Notes. Municipal Securities having a maturity when issued
of less than one year are generally known as Municipal Notes. Municipal
Notes generally are used to provide for short-term working capital needs
and include:
Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of seasonal tax revenue, such as income, sales, use or
business taxes, and are payable from these specific future taxes.
Revenue Anticipation Notes. Revenue anticipation notes are issued
in expectation of receipt of other types of revenue, such as Federal
revenues available under Federal revenue sharing programs.
Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the notes.
Construction Loan Notes. Construction loan notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing
Administration.
Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-
term obligation issued by state and local governments or their agencies
to finance seasonal working capital needs or as short-term financing in
anticipation of longer-term financing.
Floating Rate/Variable Rate Obligations. Floating rate and variable rate
demand notes are tax-exempt obligations which may have a stated maturity
in excess of one year, but may include features that permit the holder to
recover the principal amount of the underlying security on not more than
thirty days' notice at any time or at specified intervals not exceeding
one year. The issuer of such notes normally has a corresponding right,
after a given period, to prepay in its discretion the outstanding
principal amount of the note plus accrued interest upon a specified number
of days notice to the holder. The interest rate on a floating rate demand
note is based on a stated prevailing market rate, such as the PSA
Municipal Swap Index, or J.J. Kenney Index, or some other standard, and
is adjusted automatically each time such rate is adjusted. The interest
rate on a variable rate demand note is also based on a stated prevailing
market rate but is adjusted automatically at specified intervals of no
more than one year. Generally, the changes in the interest rate on such
securities reduce the fluctuation in their market value. As interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than that for fixed-rate obligations of the same
maturity.
Puts and Stand-By Commitments. When the Trust buys Municipal Securities,
it may obtain a stand-by commitment from the seller to repurchase the
securities that entitles the Trust to achieve same-day settlement from the
repurchaser and to receive an exercise price equal to the amortized cost
of the underlying security plus accrued interest, if any, at the time of
exercise. A put purchased in conjunction with a Municipal Security
enables the Trust to sell the underlying security within a specified
period of time at a fixed exercise price. The Trust may pay for a stand-
by commitment or put either separately in cash or by paying a higher price
for the securities acquired subject to the stand-by commitment or put.
The Trust will enter into these transactions only with banks and dealers
which, in the Manager's opinion, present minimal credit risks.
The Trust's purchases of puts are subject to the provisions of Rule
2a-7 under the Investment Company Act because the Trust uses the amortized
cost method to value its portfolio securities. For purposes of the
Trust's compliance with Rule 2a-7 when investing in puts, a put will be
considered to be issued by the party to which the Trust will look for
payment of the exercise price, and an unconditional put will be considered
to be a guarantee of the underlying security. An unconditional put or
guarantee with respect to a security will not be deemed to be issued by
the institution providing the guarantee or put provided that the value of
all securities held by the Trust and issued or guaranteed by the issuer
providing the guarantee or put shall not exceed 10% of the Trust's total
assets. The Trust's ability to exercise a put or stand-by commitment will
depend on the ability of the bank or dealer to pay for the securities if
the put or stand-by commitment is exercised. If the bank or dealer should
default on its obligation, the Trust might not be able to recover all or
a portion of any loss sustained from having to sell the security
elsewhere. Puts and stand-by commitments are not transferable by the
Trust, and therefore terminate if the Trust sells the underlying security
to a third party. The Trust intends to enter into these arrangements to
facilitate portfolio liquidity, although such arrangements may enable the
Trust to sell a security at a pre-arranged price which may be higher than
the prevailing market price at the time the put or stand-by commitment is
exercised. However, the Trust might refrain from exercising a put or
stand-by commitment if the exercise price is significantly higher than the
prevailing market price, to avoid imposing a loss on the seller which
could jeopardize the Trust's business relationship with the seller. Any
consideration paid by the Trust for the put or stand-by commitment (which
increases the cost of the security and reduces the yield otherwise
available from the security) will be reflected on the Trust's books as
unrealized depreciation while the put or stand-by commitment is held, and
a realized gain or loss when the put or commitment is exercised or
expires. Interest income received by the Trust from Municipal Securities
subject to puts or stand-by commitments may not qualify as tax-exempt in
its hands if the terms of the put or stand-by commitment cause the Trust
not to be treated as the tax owner of the underlying Municipal Securities.
When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Trust may invest in Municipal Securities on a "when-
issued" or "delayed delivery" basis. Payment for and delivery of the
securities generally settles within thirty days of the date the offer is
accepted. The purchase price and yield are fixed at the time the buyer
enters into the commitment. During the period between the time of
commitment and settlement, no payment is made by the Trust to the issuer
and no interest accrues to the Trust from the investment. However, the
Trust intends to be as fully invested as possible and will not invest in
when-issued securities if its income or net asset value will be materially
adversely affected. At the time the Trust makes the commitment to
purchase a Municipal Security on a when-issued basis, it will record the
transaction on its books and reflect the value of the security in
determining its net asset value. It will also segregate cash or liquid
high-grade Municipal Securities equal in value to the commitment for the
when-issued securities. While when-issued securities may be sold prior
to settlement date, the Trust intends to acquire the securities upon
settlement unless a prior sale appears desirable for investment reasons.
There is a risk that the yield available in the market when delivery
occurs may be higher than the yield on the security acquired.
Municipal Lease Obligations. Municipal leases may take the form of a
lease or an installment purchase contract issued by a state or local
government authority to obtain funds to acquire a wide variety of
equipment and facilities. Although lease obligations do not constitute
general obligations of the municipality for which the municipality's
taxing power is pledged, a lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make the payments
due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality
has no obligation to make lease or installment purchase payments in future
years unless money is appropriated for such purpose on a yearly basis.
In addition to the risk of "non-appropriation," municipal lease securities
do not yet have a highly developed market to provide the degree of
liquidity of conventional municipal bonds. Municipal leases, like other
municipal debt obligations, are subject to the risk of non-payment. The
ability of issuers of municipal leases to make timely lease payments may
be adversely affected in general economic downturns and as relative
governmental cost burdens are reallocated among federal, state and local
governmental units. Such non-payment would result in a reduction of
income to the Trust, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the
net asset value of the Trust.
Private Activity Municipal Securities. The Tax Reform Act of 1986 (the
"Tax Reform Act") reorganized, as well as amended, the rules governing tax
exemption for interest on Municipal Securities. The Tax Reform Act
generally did not change the tax treatment of bonds issued in order to
finance governmental operations. Thus, interest on obligations issued by
or on behalf of a state or local government, the proceeds of which are
used to finance the operations of such governments (e.g., general
obligation bonds) continues to be tax-exempt. However, the Tax Reform Act
further limited the use of tax-exempt bonds for non-governmental (private)
purposes. More stringent restrictions were placed on the use of proceeds
of such bonds. Interest on certain private activity bonds (other than
those specified as "qualified" tax-exempt private activity bonds, e.g.,
exempt facility bonds including certain industrial development bonds,
qualified mortgage bonds, qualified Section 501(c)(3) bonds, qualified
student loan bonds, etc.) is taxable under the revised rules.
Interest on certain private activity bonds issued after August 7,
1986, which continues to be tax-exempt will be treated as a tax preference
item subject to the alternative minimum tax (discussed below) to which
certain taxpayers are subject. Further, a private activity bond which
would otherwise be a qualified tax-exempt private activity bond will not,
under Internal Revenue Code Section 147(a), be a qualified bond for any
period during which it is held by a person who is a "substantial user" of
the facilities or by a "related person" of such a substantial user. This
"substantial user" provision is applicable primarily to exempt facility
bonds, including industrial development bonds. The Trust may not be an
appropriate investment for entities which are "substantial users" (or
persons related thereto) of such exempt facilities, and such persons
should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-
exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be
a "related person" under the Internal Revenue Code unless such investor
or the investor's immediate family (spouse, brothers, sisters and
immediate descendants) own directly or indirectly in the aggregate more
than 50% in value of the equity of a corporation or partnership which is
a "substantial user" of a facility financed from the proceeds of exempt
facility bonds. In addition, limitations on the dollar amount of private
activity bonds which each state may issue were revised downward by the Tax
Reform Act, which will reduce the supply of such bonds. The value of the
Trust's portfolio could be affected if there is a reduction in the
availability of such bonds. That value may also be affected by a 1988
U.S. Supreme Court decision upholding the constitutionality of the
imposition of a Federal tax on the interest earned on Municipal Securities
issued in bearer form.
A Municipal Security is treated as a taxable private activity bond
under a test for (a) a trade or business use and security interest, or (b)
a private loan restriction. Under the trade or business use and security
interest test, an obligation is a private activity bond if (i) more than
10% of bond proceeds are used for private business purposes and (ii) 10%
or more of the payment of principal or interest on the issue is directly
or indirectly derived from such private use or is secured by the privately
used property or the payments related to the use of the property. For
certain types of users, a 5% threshold is substituted for this 10%
threshold. (The term "private business use" means any direct or indirect
use in a trade or business carried on by an individual or entity other
than a state or municipal governmental unit.) Under the private loan
restriction, the amount of bond proceeds which may be used to make private
loans is limited to the lesser of 5% or $5.0 million of the proceeds.
Thus, certain issues of Municipal Securities could lose their tax-exempt
status retroactively if the issuer fails to meet certain requirements as
to the expenditure of the proceeds of that issue or use of the bond-
financed facility. The Trust makes no independent investigation of the
users of such bonds or their use of proceeds. If the Trust holds a bond
that loses its tax-exempt status retroactively, an adjustment to the tax-
exempt income previously paid to shareholders may result.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if they have no other income tax obligation.
This is accomplished in part by including in taxable income certain tax
preference items in arriving at alternative minimum taxable income. The
Tax Reform Act made tax-exempt interest from certain private activity
bonds a tax preference item for purposes of the alternative minimum tax
on individuals and corporations. Any exempt-interest dividend paid by a
regulated investment company will be treated as interest on a specific
private activity bond to the extent of its proportionate share of the
interest on such bonds received by the regulated investment company. The
U.S. Treasury is authorized to issue regulations implementing this
provision. In addition, corporate taxpayers subject to the alternative
minimum tax may, under some circumstances, have to include exempt-interest
dividends in calculating their alternative minimum taxable income in
situations where the "adjusted current earnings" of the corporation
exceeds its alternative minimum taxable income. The Trust may hold
Municipal Securities the interest on which (and thus a proportionate share
of the exempt-interest dividends paid by the Trust) will be subject to the
Federal alternative minimum tax. For calendar year 1994, approximately
13.8% of the Trust dividends paid to shareholders were a tax preference
item for shareholders subject to the Federal alternative minimum tax. The
Trust anticipates that under normal circumstances it will not purchase any
such securities in an amount greater than 20% of the Trust's total assets.
Ratings of Securities. The prospectus describes "Eligible Securities" in
which the Trust may invest and indicates that if a security's rating is
downgraded, the Manager and/or the Board may have to reassess the
security's credit risks. If a security has ceased to be a First Tier
Security, the Manager will promptly reassess whether the security
continues to present "minimal credit risks." If the Manager becomes aware
that any Rating Organization has downgraded its rating of a Second Tier
Security or rated an unrated security below its second highest rating
category, the Trust's Board of Trustees shall promptly reassess whether
the security presents minimal credit risks and whether it is in the best
interests of the Trust to dispose of it. If a security is in default, or
ceases to be an Eligible Security, or is determined no longer to present
minimal credit risks, the Board must determine whether it would be in the
best interests of the Trust to dispose of the security; but if the Trust
disposes of the security within 5 days of the Manager learning of the
downgrade, the Manager will provide the Board with subsequent notice of
such downgrade. The Rating Organizations currently designated as such by
the Securities and Exchange Commission ("SEC") are Standard & Poor's
Corporation, Moody's Investors Service, Inc., Fitch Investors Services,
Inc., Duff and Phelps, Inc., IBCA Limited, its affiliate, IBCA, Inc. and
Thomson BankWatch, Inc. A description of the ratings categories of those
Rating Organizations is contained in Appendix A.
Repurchase Agreements. In a repurchase transaction, the Trust acquires
a security from, and simultaneously resells it to, an approved vendor
which meets the requirements of Rule 2a-7. The resale price exceeds the
purchase price by an amount that reflects an agreed-upon interest rate
effective for the period during which the repurchase agreement is in
effect. The majority of these transactions run from day to day, and
delivery pursuant to the resale typically will occur within one to five
days of the purchase. Repurchase agreements are considered loans under
the Investment Company Act, collateralized by the underlying security.
The Trust's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repayment obligation to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
Loans of Portfolio Securities. The Trust may lend its portfolio
securities subject to the restrictions stated in the Prospectus, to
attempt to increase the Trust's income for liquidity purposes. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the value of
the loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities)
or other cash equivalents in which the Trust is permitted to invest. To
be acceptable as collateral, letters of credit must obligate a bank to pay
amounts demanded by the Trust if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Trust. The
Trust receives an amount equal to the dividends or interest on loaned
securities and also receives one or more of: (a) negotiated loan fees, (b)
interest on securities used as collateral, or (c) interest on short-term
debt securities purchased with such loan collateral; either type of
interest may be shared with the borrower. The Trust may also pay
reasonable finder's, custodian and administrative fees and will not lend
its portfolio securities to any officer, trustee, employee or affiliate
of the Trust or the Manager. The terms of the Trust's loans must meet
certain tests under the Internal Revenue Code and permit the Trust to
reacquire loaned securities on five days' notice or in time to vote on any
important matter. Income from securities loans is not included in the
exempt-interest dividends paid by the Trust.
Special Investment Considerations - New York Municipal Securities. As
explained in the Prospectus, the Trust is highly sensitive to the fiscal
stability of New York State (the "State") and its subdivisions, agencies,
instrumentalities or authorities, including New York City, which issue the
Municipal Securities in which the Trust concentrates its investments. The
following information on risk factors in concentrating in New York
Municipal Securities is only a summary, based on publicly available
information, and official statements relating to offerings of New York
issuers of Municipal Securities prior to September 27, 1995, and no
representation is made as to the accuracy of such information.
During the mid-1970's the State, some of its agencies,
instrumentalities and public benefit corporations (the "Authorities"), and
certain of its municipalities faced serious financial difficulties. To
address many of these financial problems, the State developed various
programs, many of which were successful in ameliorating the financial
crisis. Any further financial problems experienced by these Authorities
or municipalities could have a direct adverse effect on the New York
Municipal Securities in which the Trust invests.
New York City
General. More than any other municipality, the fiscal health of New
York City (the "City") has a significant effect on the fiscal health of
the State. The national economic downturn which began in July 1990
adversely affected the local economy which had been declining since late
1989. As a result, the City experienced job losses in 1990 and 1991 and
real Gross City Product ("GCP") fell in those two years. Beginning in
1992, the improvement in the national economy helped stabilize conditions
in the City. Employment losses moderated toward year-end and real GCP
increased, boosted by strong wage gains. After noticeable improvements
in the City's economy during 1994, the City's current four-year financial
plan assumes that economic growth will slow in 1995 and 1996 with local
employment increasing modestly. During the 1995 fiscal year, the City
experienced substantial shortfalls in payments of non-property tax
revenues from those forecasted. On July 21, 1995, the City submitted to
the Control Board a fourth quarter modification to the City's financial
plan for the 1995 fiscal year (the "1995 Modification") which projects a
balanced budget in accordance with GAAP for the 1994 fiscal year, after
taking into account a transfer of $75 million.
For each of the 1981 through 1994 fiscal years, the City achieved
balanced operating results as reported in accordance with generally
accepted accounting principles ("GAAP") and the City's 1995 fiscal year
results are projected to be balanced in accordance with GAAP. For fiscal
year 1995, the City has adopted a budget which has halted the trend in
recent years of substantial increases in City spending from one year to
the next. The adopted budget for the fiscal year 1996 reduces City-funded
spending for the second consecutive year. There can be no assurance that
the City will continue to maintain a balanced budget, or that it can
maintain a balanced budget without additional tax or other revenue
increases or reductions in City services, which could adversely affect the
City's economic base.
The Mayor is responsible for preparing the City's four-year financial
plan, including the City's current financial plan for the 1996 through
1999 fiscal years (the "1996-1999 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 current downturn
in the real estate market, wage increases for City employees consistent
with those assumed in the City Plan, employment growth, the ability to
implement reductions in City personnel and other cost reduction
initiatives, provision of State and Federal aid and mandate relief and the
impact on City revenues of proposals for Federal and State welfare reform.
Implementation of the City Plan is also dependent upon the City's
ability to market its securities successfully in the public credit
markets. The City's financing program for fiscal years 1996 through 1999
contemplates the issuance of $9.7 billion of general obligation bonds
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make capital investments. In addition, the City
issues revenue and tax anticipation notes to finance its seasonal working
capital requirements. The success of projected public sales of City bonds
and notes will be subject to prevailing market conditions, and no
assurance can be given that such sales will be completed. If the City
were unable to sell its general obligation bonds and notes, it would be
prevented from meeting its planned operating and capital expenditures.
Future developments concerning the City and public discussion of such
developments, as well as prevailing market conditions, may affect the
market for outstanding City general obligation bonds and notes.
The City Comptroller and other agencies and public officials have
issued reports and make public statements which, among other things, state
that projected revenues may be less and future expenditures may be greater
than forecasted in the City Plan. It is reasonable to expect that such
reports and statements will continue to be issued and to engender public
comment.
1996-1999 Financial Plan. The 1996-1999 Financial Plan projects
revenues and expenditures for the 1996 fiscal year balanced in accordance
with GAAP. The Financial Plan sets forth actions to close a previously
projected gap of approximately $3.1 billion in the 1996 fiscal year. The
gap-closing actions for the 1996 fiscal year include agency actions,
including productivity savings and savings from restructuring the delivery
of City services; service reductions; the sale of delinquent real property
tax receivables; reduced debt service costs, resulting from refinancings
and other actions; proposed increased Federal assistance; proposed
increased State aid; and various revenue actions.
The Financial Plan also sets forth projections for the 1997 through
1999 fiscal years and outlines a proposed gap-closing program to close
projected budget gaps of $888 million, $1.5 billion and $1.4 billion for
the 1997 through 1999 years, respectively. These projections take into
account expected increases in Federal and State assistance. The
projections for the 1996 through 1999 fiscal years assume (i) agreement
with the City's unions with respect to approximately $100 million of
savings to be derived from efficiencies in management of employee health
insurance programs and other health benefit related savings for each of
the City's unions; (ii) $200 million of additional anticipated State aid
and $75 million of additional anticipated Federal aid in each of the 1997
through 1999 fiscal years; (iii) that the New York City Health and
Hospitals Corporation ("HHC") and the Board of Education will each be able
to identify actions to offset substantial revenue shortfalls reflected in
the Financial Plan, including approximately $254 million annual reduction
in revenues for HHC, which results from the reduction in Medicaid payments
proposed by the State and the City, without any increase in City subsidy
payments to HHC; (iv) the continuation of the current assumption of no
wage increases after fiscal year 1995 for City employees unless offset by
productivity increases; (v) $130 million of additional revenues as a
result of the increased rent payments for the City's airports proposed by
the City, which is subject to further discussion with the Port Authority;
and (vi) savings of $45 million in each of the 1997 through 1999 fiscal
years which would result from the State Legislature's enactment of
proposed tort reform legislation. In addition, the 1996-1999 Financial
Plan anticipates the receipt of substantial amounts of Federal aid.
Certain Federal legislative proposals contemplate significant reductions
in Federal spending, including proposed Federal welfare reform, which
could result in caps on, or block grants of, Federal Programs.
Various actions proposed in the Financial Plan are subject to
approval by the Governor and the State Legislature, the City's municipal
unions and the Federal government. No assurance can be given that such
actions will in fact be taken or that the savings that the City projects
will result from these actions will be realized. 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 Financial Plan reflects certain cost and expenditure increases
including increases in salaries and benefits paid to City employees
pursuant to certain collective bargaining agreements. In the event of a
collective bargaining impasse, the terms of wage settlements could be
determined through the impasse procedure in the New York City Collective
Bargaining Law, which can impose a binding settlement.
Ratings. On July 10, 1995, Standard & Poor's Ratings Group
("Standard & Poor's") revised downward its rating on City general
obligations bonds from A- to BBB+ and removed City bond 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 a 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 bond A-. Moody's Investors
Service, Inc. ("Moody's") rating for City general obligation bonds is
Baa1. 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 June 30, 1995, the City and the
Municipal Assistance Corporation for the City of New York had,
respectively, $23.258 billion and $4.033 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. The State's
1995-1996 Financial Plan projects a balanced General Fund. There can be
no assurance that there will not be reductions in State aid to the City
from amounts currently projected or that State budgets in future fiscal
years will be adopted by the April 1 statutory deadline or that any such
reductions or delays will not have adverse effects on the City's cash flow
or expenditures.
Litigation. The City is a defendant in a significant number of
lawsuits. Such litigation includes, but is not limited to, routine
litigation incidental to the performance of its government and other
functions, actions commenced and claims asserted against the City arising
out of alleged constitutional violations, alleged torts, alleged breaches
of contracts and other violations of law and condemnation proceedings and
other tax and miscellaneous actions. While the ultimate outcome and
fiscal impact, if any, on the proceedings and claims are not currently
predictable, adverse determination in certain of them might have a
material adverse effect upon the City's ability to carry out the City
Plan. As of June 30, 1994, the City estimated its potential future
liability on account of all outstanding claims to be approximately $2.6
billion.
New York State
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State economy has grown more slowly
than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of this relative decline are
varied and complex, in many cases involving national and international
developments beyond the State's control.
Recent Developments. The national economy began the current expansion
in 1991 and has added over 7 million jobs since early 1992. However, the
recession lasted longer in the State and State's economy recovery has
lagged behind the nation's. Although the State has added approximately
185,000 jobs since November 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.
The 1995-1996 New York State Financial Plan (the "State Plan") is
based on projections that the State's economy is expected to expand during
1995, but that there will be a pronounced slow-down during the course of
the year. Although industries that export goods and services abroad are
expected to benefit from the lower dollar, growth will be slowed by
government cutbacks at all levels. On an average annual basis, employment
growth will be about the same as 1994. Both personal income and wages are
expected to record moderate gains in 1995. Bonus payments in the
securities industry are expected to increase from last year's depressed
level.
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 1995-96 Fiscal Year. The State's General Fund (the major operating
Fund of the State) is projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts and transfers from other funds are
projected to be $33.110 billion, a decrease of $48 million from total
receipts in the prior fiscal year. Total General Fund disbursements and
transfers to other funds are projected to be $33.055 billion, a decrease
of $344 million from the total amount disbursed in the prior fiscal year.
The State Plan projects: (i) nearly $1.6 billion in savings from cost
containment, disbursement reestimates, and other savings in social welfare
programs, including Medicaid, income maintenance and various child and
family care programs; (ii) $2.2 billion in savings from State agency
actions to reduce spending on the State workforce, SUNY and CUNY, mental
hygiene programs, capital projects, the prison system and fringe benefits;
(iii) $300 million in savings from local assistance reforms, including
actions affecting school aid and revenue sharing while proposing program
legislation to provide relief from certain mandates that increase local
spending; (iv) over $400 million in revenue measures, primarily a new
Quick Draw Lottery game, changes to tax payment schedules, and the sale
of assets; and (v) $300 million from reestimates in receipts.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant
disparity between tax revenues projected from a lower recurring receipts
base and the spending required to maintain state programs at current
levels. To address any potential budgetary imbalance, the State may need
to take significant actions to align recurring receipts and disbursements
in future fiscal years.
Composition of State Cash Receipts and Disbursements. 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 and which for the State's 1995-96 fiscal year is expected to
account for approximately 49% of total projected governmental fund
receipts; 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 and which is expected
to comprise more than 40% of total projected governmental funds receipts
in the 1995-96 fiscal year; 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. Receipts in Capital Projects and Debt Service Funds comprise
an aggregate of approximately 11% of total projected governmental funds
receipts in the 1995-96 fiscal year.
Local Government Assistance Corporation ("LGAC"). In 1990, as part of
a State fiscal reform program, legislation was enacted creating LGAC, a
public benefit corporation empowered to issue long-term obligations to
fund certain payments to local governments traditionally funded through
the State's annual seasonal borrowing. The legislation authorized LGAC
to issue its bond and notes in an amount not in excess of $4.7 billion
(exclusive of certain refunding bonds) plus certain other amounts. Over
a period of years, the issuance of these long-term obligations, which are
to be amortized over no more than 30 years, was expected to eliminate the
need for continued short-term seasonal borrowing. The legislation also
dedicated revenues equal to one-quarter of the four cent State sales and
use tax to pay debt service on these bonds. The legislation also imposed
a cap on the annual seasonal borrowing of the State at $4.7 billion, less
net proceeds of bonds issued by LGAC and bonds issued to provide for
capitalized interest, except in cases where the Governor and the
legislative leaders have certified the need for additional borrowing and
provided a schedule for reducing it to the cap. If borrowing above the
cap is thus permitted in any fiscal year, it is required by law to be
reduced to the cap by the fourth fiscal year after the limit was first
exceeded. This provision capping the seasonal borrowing was included as
a covenant with LGAG's bondholders in the resolution authorizing such
bonds.
As of June 1995, LGAC had issued bonds and notes to provide net
proceeds of $4.7 billion completing the program. The impact of LGAC's
borrowing is that the State is able to meet its cash flow needs in the
first quarter of the fiscal year without relying on short-term seasonal
borrowings. The State Plan includes no spring borrowing nor did the 1994-
1995 State Financial Plan, which was the first time in 35 years there was
no short-term borrowing.
Authorities. The fiscal stability of the State is related to the
fiscal stability of its Authorities, which generally have responsibility
for financing, constructing and operating revenue-producing public benefit
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 of, and as otherwise
restricted by, their legislative authorization. As of September 30, 1994,
the latest data available, there were 18 Authorities that had outstanding
debt of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 18 Authorities was $70.3 billion as of September
30, 1994.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges,
highway tolls and rentals for dormitory rooms and housing. In recent
years, however, the State has provided financial assistance through
appropriations, in some cases of a recurring nature, to certain of the 18
Authorities for operating and other expenses and, in fulfillment of its
commitments on moral obligation indebtedness or otherwise, for debt
service. This operating assistance is expected to continue to be required
in future years.
The State's experience has been that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities
to obtain financing in the public credit markets and the market price of
the State's outstanding bonds and notes may be adversely affected. There
are certain statutory arrangements that provide for State local assistance
payments otherwise payable to localities to be made under certain
circumstances to certain Authorities. The State has no obligation to
provide additional assistance to localities whose local assistance
payments have been paid to Authorities under these arrangements. However,
in the event that such local assistance payments are so diverted, the
affected localities could seek additional State funds.
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 July 13, 1995, confirmed its A-
rating. On January 6, 1992, Moody's reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from
A to Baa1. On July 3, 1995, Moody's reconfirmed its A rating on the
State's general obligation long-term indebtedness. Ratings reflect only
the respective views of such organizations, and an explanation of the
significance of such ratings may be obtained from the rating agency
furnishing the same. There is no assurance that a particular rating will
continue for any given period of time or that any such rating will not be
revised downward or withdrawn entirely, if in the judgment of the agency
originally establishing the rating, circumstances so warrant. A downward
revision or withdrawal of such ratings, or either of them, may have an
effect on the market price of the State Municipal Securities in which the
Trust invests.
General Obligation Debt. As of March 31, 1995, the State had
approximately $5.181 billion in general obligation bonds, excluding
refunding bonds, and $149 million in bond anticipation notes outstanding.
Principal and interest due on general obligation bonds and interest due
on bond anticipation notes were $793.3 million for the 1994-95 fiscal year
and are estimated to be $774.4 million for the State's 1995-96 fiscal
year, not including interest on refunding bonds to the extent that such
interest is to be paid from escrowed funds.
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 1995-1996 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 1995-96
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 1995-1996 State Plan. In its
audited financial statements for the fiscal year ended March 31, 1995, the
State reported its estimated liability for awarded and anticipated
unfavorable judgments at $676 million.
In addition, the State is party to other claims and litigations which
its counsel has advised are not probable of adverse court decisions.
Although, the amounts of potential losses, if any, are not presently
determinable, it is the State's opinion that its ultimate liability in
these cases is not expected to have a material adverse effect on the
State's financial position in the 1995-96 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 1995-96 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 1995-96 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of
Yonkers (the "Yonkers Board") by the State in 1984. The Yonkers Board is
charged with oversight of the fiscal affairs of Yonkers. Future actions
taken by the Governor or the State Legislature to assist Yonkers could
result in allocation of State resources in amounts that cannot yet be
determined.
INVESTMENT RESTRICTIONS
The Trust's most significant investment restrictions are set forth in the
Prospectus. The following investment restrictions are also fundamental
investment policies of the Trust, and, together with the fundamental
policies and investment objective described in the Prospectus, cannot be
changed without the vote of a "majority" of the Trust's outstanding
shares. Under the Investment Company Act, such "majority" vote is
defined as the vote of the holders of the lesser of: (i) 67% or more of
the shares present or represented by proxy at a shareholder's meeting, if
the holders of more than 50% of the outstanding shares are present or
represented by proxy, or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Trust cannot: (1) invest in any
debt instrument having a maturity in excess of one year from the date of
purchase, unless purchased subject to a demand feature which may not
exceed one year and requires payment on not more than 30 days' notice; (2)
enter into a repurchase agreement or purchase a security subject to a call
if the scheduled repurchase or redemption date is greater than one year;
(3) invest in commodities or commodity contracts, or invest in interests
in oil, gas, or other mineral exploration or development programs; (4)
invest in real estate; however, the Trust may purchase debt securities
issued by companies which invest in real estate or interests therein; (5)
purchase securities on margin or make short sales of securities; (6)
invest in or hold securities of any issuer if those officers and trustees
or directors of the Trust or its adviser who beneficially own individually
more than 0.5% of the securities of such issuer together own more than 5%
of the securities of such issuer; (7) underwrite securities of other
companies except insofar as the Trust may be deemed an underwriter under
the Securities Act of 1933 in connection with the disposition of portfolio
securities; (8) invest more than 5% of the value of its total assets in
securities of companies that have operated less than three years,
including the operations of predecessors; or (9) purchase securities of
other investment companies, except in connection with a merger,
consolidation, acquisition or reorganization.
For purposes of investment restriction (6) above and the investment
restrictions in the Prospectus, the identification of the "issuer" of a
Municipal Security depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the
sole issuer. Similarly, in the case of an industrial development bond,
if that bond is backed only by the assets and revenues of the
nongovernmental user, then such nongovernmental user would be deemed to
be the sole issuer. However, if in either case the creating government
or some other entity guarantees the security, such guarantee would be
considered a separate security and would be treated as an issue of such
government or other agency.
In applying the restrictions in the Prospectus as to the Trust's
investments, the Manager will consider a nongovernmental user of
facilities financed by industrial development bonds as being in a
particular industry, despite the fact that there is no industry
concentration limitation as to municipal securities the Trust may own.
Although this application of the restriction is not technically a
fundamental policy of the Trust, it will not be changed without
shareholder approval. This is not a fundamental policy, and therefore may
be changed without shareholder approval. Should any such change be made,
the Prospectus and/or Additional Statement will be supplemented to reflect
the change.
For purposes of the Trust's policy not to concentrate its assets,
described under restriction number (3) in the Prospectus, the Trust has
adopted the industry classifications set forth in Appendix C to this
Statement of Additional Information. This is not a fundamental policy.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and their principal
occupations and business affiliations during the past five years are
listed below. Except as noted below, each Trustee is also a Trustee,
Director or Managing General Partner of Daily Cash Accumulation Fund,
Inc., Centennial Money Market Trust, Centennial Government Trust,
Centennial Tax Exempt Trust, Centennial California Tax Exempt Trust,
Centennial America Fund, L.P. (collectively with the Trust the "Centennial
Trusts"), Oppenheimer Total Return Fund, Inc., Oppenheimer High Yield
Fund, Oppenheimer Equity Income Fund, Oppenheimer Cash Reserves,
Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Income & Growth
Fund, Oppenheimer Variable Account Funds, Oppenheimer Champion Income
Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer Limited-Term
Government Fund, Oppenheimer Tax-Exempt Fund, Oppenheimer Bond Fund,
Oppenheimer Value Stock Fund, Oppenheimer International Bond Fund and The
New York Tax-Exempt Income Fund, Inc. (collectively referred to as the
"Denver-based Oppenheimer funds"). Mr. Fossel is a Trustee, Director or
Managing Partner of all the Denver-based Oppenheimer funds except
Oppenheimer Bond Fund and Oppenheimer Strategic Income Fund. Mr. Fossel
is President and Mr. Swain is Chairman of all of the funds listed. All
other officers, with the exception of Mr. Carbuto, hold similar positions
with all of the funds listed. As of September 30, 1995, the Trustees and
officers of the Trust in the aggregate owned less than 1% of the Trust's
outstanding shares.
ROBERT G. AVIS, Trustee*; Age 64
One North Jefferson Avenue, St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent
holding company); Chairman of A.G.E. Asset Management and A.G. Edwards
Trust Company (its affiliated investment adviser and trust company,
respectively).
WILLIAM A. BAKER, Trustee; Age 80
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
CHARLES CONRAD, JR., Trustee; Age 65
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems Co.; formerly associated
with the National Aeronautics and Space Administration.
RAYMOND J. KALINOWSKI, Trustee; Age 66
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; formerly Vice Chairman
and a Director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. HOWARD KAST, Trustee; Age 73
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
ROBERT M. KIRCHNER, Trustee; Age 73
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
NED M. STEEL, Trustee; Age 80
3416 South Race Street, Englewood, Colorado 80112
Chartered Property and Casualty Underwriter; Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a Director of
Van Gilder Insurance Corp. (insurance brokers).
JAMES C. SWAIN, Chairman and Trustee*; Age 61
3410 South Galena Street, Denver, Colorado 80231
President and Director of Centennial Asset Management Corporation (the
"Manager"); Vice Chairman and a Director of Oppenheimer Management
Corporation ("OMC"), the immediate parent of the Manager; formerly
Chairman of the Board of Shareholder Services, Inc. (the "Transfer
Agent"), the Trust's transfer agent, which is a subsidiary of OMC.
___________________
*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act.
JON S. FOSSEL, Trustee and President*; Age 53
Two World Trade Center, New York, New York 10048
Chairman and a director of OMC; President and Director of Oppenheimer
Acquisition Corp. ("OAC"), OMC's parent holding company; President and a
director of HarbourView Asset Management Corporation, an investment
advisory subsidiary of OMC ("HarbourView"); a director of the Transfer
Agent and Shareholder Financial Services, Inc. ("SFSI"), transfer agent
subsidiaries of OMC; formerly President of OMC.
ANDREW J. DONOHUE, Vice President; Age 45
Two World Trade Center, New York, New York 10048
Executive Vice President and General Counsel of OMC and Oppenheimer Funds
Distributor, Inc. ("OFDI"); an officer of other OppenheimerFunds; formerly
Senior Vice President and Associate General Counsel of OMC and OFDI;
Partner in Kraft & McManimon (a law firm); an officer of First Investors
Corporation (a broker-dealer) and First Investors Management Company, Inc.
(broker-dealer and investment adviser); director and an officer of First
Investors Family of Funds and First Investors Life Insurance Company.
MICHAEL A. CARBUTO, Vice President and Portfolio Manager; Age 40
Two World Trade Center, New York, New York 10048
Vice President of the Manager and OMC; an officer of other
OppenheimerFunds.
GEORGE C. BOWEN, Vice President, Secretary and Treasurer; Age 59
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of OMC; Vice President and Treasurer
of OFDI and HarbourView; Senior Vice President, Treasurer, Assistant
Secretary and a director of the Manager; Vice President, Treasurer and
Secretary of the Transfer Agent and SFSI; an officer of other
OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary
of OAMC.
ROBERT G. ZACK, Assistant Secretary; Age 47
Two World Trade Center, New York, New York 10048
Senior Vice President and Associate General Counsel of OMC; Assistant
Secretary of the Transfer Agent and SFSI; an officer of other
OppenheimerFunds.
ROBERT BISHOP, Assistant Treasurer; Age 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of OMC/Mutual Fund Accounting; an officer of
other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions Supervisor
for Stuart James Company, Inc., a broker-dealer.
___________________
*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act.
SCOTT FARRAR, Assistant Treasurer; Age 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of OMC/Mutual Fund Accounting; an officer of
other OppenheimerFunds; formerly a Fund Controller for the Manager, prior
to which he was an International Mutual Fund Supervisor for Brown
Brothers, Harriman Co., a bank, and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
Remuneration of Trustees. The officers of the Trust (including Messrs.
Fossel and Swain) are affiliated with the Manager and receive no salary
or fee from the Trust. The Trust has an Audit and Review Committee
composed of William A. Baker (Chairman), Charles Conrad, Jr. and Robert
M. Kirchner. This Committee meets regularly to review audit procedures,
financial statements and other financial and operational matters of the
Trust. The Trustees of the Trust (excluding Messrs. Fossel and Swain)
received the total amounts shown below (i) from the Trust, during its
fiscal year ended June 30, 1995 and (ii) from all 21 of the funds
(including the Trust) listed in the first paragraph of this section (and
from Oppenheimer Tax-Exempt Cash Reserves, Oppenheimer Strategic
Investment Grade Bond Fund and Oppenheimer Strategic Short-Term Income
Fund, which ceased operation following the acquisition of their assets by
certain other Oppenheimer funds), for services in the positions shown.
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
Compensation Denver-based
Name Position from Trust Oppenheimer funds1
<S> <C> <C> <C>
Robert G. Avis Director $270 $53,000.00
William A. Baker Audit and Review $375 $73,257.01
Committee Chairman
and Director
Charles Conrad, Jr. Audit and Review $349 $68,293.67
Committee
Member and Director
Raymond J. Kalinowski Director $270 $53,000.00
C. Howard Kast Director $270 $53,000.00
Robert M. Kirchner Audit and Review $349 $68,293.67
Committee Member
and Director
Ned M. Steel Director $270 $53,000.00
<FN>
______________________
1 For the 1994 calendar year.
</TABLE>
Major Shareholders. As of October 6, 1995, A.G. Edwards & Sons, Inc.
("Edwards"), 1 North Jefferson Avenue, St. Louis, MO 63103, which in turn
is owned by A.G. Edwards, Inc., was the record owner of 32,913,861.230
shares of the Trust (approximately 82.78% of outstanding shares). The
Trust is informed that the shares held of record by Edwards were
beneficially owned for the benefit of its brokerage clients. As of that
date, no other person owned of record or was known by the Trust to own
beneficially 5% or more of the outstanding shares of the Trust.
INVESTMENT MANAGEMENT SERVICES
The Manager is wholly-owned by OMC which is a wholly-owned subsidiary
of Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. The remaining stock of OAC
is owned by: (i) certain of OMC's directors and officers, some of whom may
serve as officers of the Trust, and two of whom (Mr. James C. Swain and
Mr. Fossel) serve as a Trustee of the Trust and (ii) Edwards, which owns
less than 5% of its equity.
The Code of Ethics governing the Fund is designed to detect and
prevent improper personal trading by certain employees, including
portfolio managers, that would compete with or take advantage of the
Trust's portfolio transactions. Compliance with the Code of Ethics is
carefully monitored and strictly enforced by the Manager.
A management fee is payable monthly to the Manager under the terms
of the investment advisory agreement between the Manager and the Trust
(the "Agreement"), and is computed on the aggregate net assets of the
Trust as of the close of business each day. The Agreement requires the
Manager, at its expense, to provide the Trust with adequate office space,
facilities and equipment and to provide and supervise the activities of
all administrative and clerical personnel required to provide effective
administration of the Trust, including the compilation and maintenance of
records with respect to its operations, the preparation and filing of
specified reports, and composition of proxy materials and registration
statements for continuous public sale of shares of the Trust. Expenses
not expressly assumed by the Manager under the Agreement or by the
Distributor of the shares of the Trust are paid by the Trust. A
description of examples of such expenses is in the Prospectus.
The Agreement contains no expense limitation. However, independently
of the Agreement, the Manager has undertaken that the total expenses of
the Trust in any fiscal year (including the management fee, but excluding
taxes, interest, brokerage commissions, distribution assistance payments
and extraordinary expenses such as litigation costs) shall not exceed (and
the Manager undertakes to assume any amount by which such expenses shall
exceed) the most stringent state securities law expense limitation
applicable to the sale of the Trust's shares. At present, the Trust's
shares will be sold only in New York State, which currently has no expense
limitation applicable to sales of mutual fund shares. In addition,
independently of the Agreement, the Manager has temporarily undertaken to
assume any expenses of the Trust in any fiscal year they exceed 0.80% of
the Trust's average annual net assets. The payment of the management fee
at the end of any month will be reduced so that there will not be any
accrued but unpaid liability under those expense limitations. Any
assumption of the Trust's expenses under either limitation lowers the
Trust's overall expense ratio and increases its yield and total return
during the time such expenses are assumed. The Manager reserves the right
to terminate or amend either of these undertakings at any time. For the
fiscal years ended June 30, 1993, 1994 and 1995 the management fees
payable by the Trust to the Manager would have been $121,281, $127,154 and
$147,859, respectively. Those amounts do not reflect the effect of the
expense assumptions of $43,840, $55,589 and $44,890, respectively, in
those periods by the Manager.
The Agreement provides that the Manager is not liable for any loss
sustained by reason of good faith errors or omissions in connection with
matters to which the Agreement relates, except a loss resulting by reason
of its willful misfeasance, bad faith, gross negligence or reckless
disregard for its obligations thereunder. The Manager is permitted by the
Agreement to act as investment adviser for any other person, firm or
corporation. If the Manager shall no longer act as investment adviser to
the Trust, the right of the Trust to use the name "Centennial" as part of
its name may be withdrawn.
Portfolio Transactions. Portfolio decisions are based upon the
recommendations and judgment of the Manager subject to the overall
authority of the Board of Trustees. As most purchases made by the Trust
are principal transactions at net prices, the Trust incurs little or no
brokerage costs. The Trust deals directly with the selling or purchasing
principal or market maker without incurring charges for the services of
a broker on its behalf unless it is determined that a better price or
execution may be obtained by using the services of a broker. Purchases
of portfolio securities from underwriters include a commission or
concession paid by the issuer to the underwriter, and purchases from
dealers include a spread between the bid and asked prices.
The Trust seeks to obtain prompt and reliable execution of orders at
the most favorable net price. If dealers or brokers are used for
portfolio transactions, transactions may be directed to dealers or brokers
furnishing execution and research services. The research services
provided by a particular dealer or broker may be useful only to one or
more of the advisory accounts of the Manager or its affiliates and
investment research received for the commissions of those other accounts
may be useful to both the Trust and one or more of such other accounts.
Such research, which may be supplied by a third party at the instance of
a dealer or broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The research services provided by dealers or brokers
broaden the scope and supplement the research activities of the Manager
by making available additional views for consideration and comparisons,
and enabling the Manager to obtain market information for the valuation
of securities held in the Trust's portfolio or being considered for
purchase. In the rare instances where the Trust pays commissions for
research, the Board of Trustees, including the independent Trustees of the
Trust, will review information furnished by the Manager as to the
commissions paid to brokers furnishing such services in an effort to
ascertain that the amount of such commissions was reasonably related to
the value or the benefit of such services. The Trust does not direct the
handling of purchases or sales of portfolio securities, whether on a
principal or agency basis, to brokers for selling shares of the Trust.
No portfolio transactions are handled by firms which are affiliated with
the Trust or the Manager if that dealer or broker is acting as principal.
The Trust's policy of investing in short-term debt securities with
maturities of less than one year results in high portfolio turnover.
However, since brokerage commissions, if any, are small and securities are
usually held to maturity, high turnover does not have an appreciable
adverse effect upon the net asset value or income of the Trust.
Other funds advised by the Manager have investment objectives and
policies similar to that of the Trust. Such other funds may purchase or
sell the same securities at the same time as the Trust, which could affect
the supply or price of such securities. If two or more of such funds
purchase the same security on the same day from the same dealer, the
Manager may average the price of the transactions and allocate the cost
among such funds.
SERVICE PLAN
The Trust has adopted a service plan (the "Plan") under Rule 12b-1
of the Investment Company Act, as described in the Prospectus. No payment
will be made by the Distributor to any Recipient if the aggregate net
asset value of Trust shares held by it or its customers at the end of a
calendar quarter is less than the minimum level of qualified holdings, if
any, established under the Plan from time to time by the "Independent
Trustees". Currently, no minimum level of qualified holdings has been
established by the Board of Trustees. For the Trust's fiscal year ended
June 30, 1995, payments under the Plan totalled $57,630, all of which were
paid by the Distributor to Recipients, as reimbursement for costs incurred
with the personal service and maintenance of accounts that hold Trust
shares.
The Distributor has entered into Supplemental Distribution Assistance
Agreements ("Supplemental Agreements") under the Plan with selected
dealers distributing shares of Oppenheimer Cash Reserves, Centennial
Government Trust, Centennial California Tax Exempt Trust, Centennial
America Fund, L.P. and the Trust. Quarterly payments by the Distributor
for distribution-related services will range from 0.10% to 0.30%,
annually, of the average net asset value of shares of the above-mentioned
funds owned during the quarter beneficially or of record by the dealer or
its customers. However, no payment shall be made to any dealer for any
quarter during which the average net asset value of shares of the above-
mentioned funds owned during that quarter by the dealer or its customers
is less than $5 million. Payments made pursuant to Supplemental
Agreements are not a Trust expense, but are made by the Distributor out
of its own resources or out of the resources of the Manager which may
include profits derived from the advisory fee it receives from the Trust.
Payments to affiliates of the Distributor are not permitted under the
Supplemental Agreements.
The Plan shall, unless terminated as described below, continue in
effect from year to year but only so long as such continuance is
specifically approved at least annually by the Trust's Board of Trustees
including its Independent Trustees by a vote cast in person at a meeting
called for that purpose. The Supplemental Agreements are subject to the
same renewal requirement. The Plan and the Supplemental Agreements may
be terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" of the Trust's
outstanding voting securities. The Supplemental Agreements will
automatically terminate in the event of their "assignment" (as defined in
the Investment Company Act), and each may be terminated by the
Distributor: (i) in the event the Trust terminates the Plan, or (ii) if
the net asset value of shares of the above-mentioned funds covered by
Supplemental Agreements held by the dealer or its customers is less than
$5 million for two or more consecutive quarters. A dealer may terminate
a Supplemental Agreement at any time upon giving 30 days' notice. The
Plan may not be amended without shareholder approval, as set forth above,
to increase materially the amount of payments to be made and all material
amendments must be approved by the Board and the Independent Trustees.
While the Plan is in effect, the Treasurer of the Trust shall provide
a report to the Board of Trustees in writing at least quarterly on the
amount of all payments made pursuant to the Plan and the identity of each
Recipient that received any such payment and the purposes for which
payments were made. The Plan further provides that while it is in effect,
the selection and nomination of those Trustees of the Trust who are not
"interested persons" of the Trust is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision as to the selection
or nomination is approved by a majority of the Independent Trustees.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Net Asset Value Per Share. The net asset value per
share of the Trust is determined twice each day, as of 12:00 Noon (all
references to time mean New York time) and the close of The New York Stock
Exchange (the "Exchange") which is normally 4:00 P.M., but may be earlier
on some days, each day the Exchange is open (a "regular business day") by
dividing the Trust's net assets (the total value of the Trust's portfolio
securities, cash and other assets less all liabilities) by the total
number of shares outstanding. Shares of the Trust are sold at their
offering price (net asset value, without a sales charge) as described in
the Prospectus. The Exchange's most recent annual holiday schedule states
that it will close New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
Exchange may also close on other days. Dealers other than Exchange
members may conduct trading in Municipal Securities on certain days on
which the Exchange is closed (e.g., Good Friday), so that securities of
the same type held by the Trust may be traded, and its net asset value per
share may be significantly affected, on such days when shareholders may
not purchase or redeem shares.
The Trust will seek to maintain a net asset value of $1.00 per share
for purchases and redemptions. There can be no assurance that it will do
so. The Trust operates under Rule 2a-7 under which it may use the
amortized cost method of valuing its shares. The amortized cost method
values a security initially at its cost and thereafter assumes a constant
amortization of any market discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the security. This
method does not take into account unrealized capital gains or losses.
The Trust's Board of Trustees has established procedures intended to
stabilize the Trust's net asset value at $1.00 per share. If the Trust's
net asset value per share were to deviate from $1.00 by more than 0.5%,
Rule 2a-7 requires the Board promptly to consider what action, if any,
should be taken. If the Trustees find that the extent of any such
deviation may result in material dilution or other unfair effects on
shareholders, the Board will take whatever steps as it considers
appropriate to eliminate or reduce any such dilution or unfair effects,
including without limitation selling portfolio securities prior to
maturity, shortening the average portfolio maturity, withholding or
reducing dividends, reducing the number of outstanding Trust shares
without monetary consideration, or calculating net asset value per share
by using available market quotations.
As long as it uses Rule 2a-7, the Trust must abide by certain
conditions described in the Prospectus. Some of those conditions which
relate to portfolio management are that the Trust must: (i) maintain a
dollar-weighted average portfolio maturity not in excess of 90 days; (ii)
limit its investments, including repurchase agreements, to those
instruments which are denominated in U.S. dollars, and which are rated in
one of the two highest short-term rating categories by at least two
"nationally-recognized statistical rating organizations" ("NRSROs"), as
defined in the Rule, or by one NRSRO if only one NRSRO has rated the
security; an instrument that is not rated must be of comparable quality
as determined by the Manager under guidelines approved by the Board; and
(iii) not purchase any instruments with a remaining maturity of more than
397 days. The Trust's fundamental investment policy that the remaining
maturity of an instrument shall not exceed one year is more restrictive
than the provisions of Rule 2a-7. Under Rule 2a-7, the maturity of an
instrument is generally considered to be its stated maturity (or in the
case of an instrument called for redemption, the date on which the
redemption payment must be made), with special exceptions for certain
variable and floating rate instruments. Repurchase agreements and
securities loan agreements are, in general, treated as having a maturity
equal to the period scheduled until repurchase or return, or if subject
to demand, equal to the notice period.
While the amortized cost method provides certainty in valuation,
there may be periods during which the value of an instrument as determined
by amortized cost, is higher or lower than the price the Trust would
receive if it sold the instrument. During periods of declining interest
rates, the daily yield on shares of the Trust may tend to be lower (and
net investment income and daily dividends higher) than a like computation
made by a fund with identical investments utilizing a method of valuation
based upon market prices or estimates of market prices for its portfolio.
Thus, if the use of amortized cost by the Trust resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in
the Trust would be able to obtain a somewhat higher yield than would
result from investment in a fund utilizing solely market values, and
existing investors in the Trust would receive less investment income than
if the Trust were priced at market value. Conversely, during periods of
rising interest rates, the daily yield on Trust shares will tend to be
higher and its aggregate value lower than that of a portfolio priced at
market value. A prospective investor would receive a lower yield than
from an investment in a portfolio priced at market value, while existing
investors in the Trust would receive more investment income than if the
Trust were priced at market value.
Redemption of Shares. Information on how to redeem shares of the Trust
is stated in the Prospectus. The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash. If, however,
the Board of Trustees determines that it would be detrimental to the best
interests of the remaining shareholders of the Trust to make payment
wholly in cash, the redemption price may be paid in whole or in part by
a distribution in kind of securities from the portfolio of the Trust in
lieu of cash or in conformity with applicable Securities and Exchange
Commission rules. The Trust has elected to be governed by Rule 18f-1
under the Investment Company Act, pursuant to which the Trust is obligated
to redeem shares solely in cash up to the lesser of $250,000 or 1% of the
net assets of the Trust during any 90-day period for any one shareholder.
If shares are redeemed in kind, the redeeming shareholder might incur
transaction or other costs in converting the assets to cash. The method
of valuing securities used to make redemptions in kind will be the same
as the method of valuing securities described under "Determination of Net
Asset Value" above, and such valuation will be made as of the same time
the redemption price is determined.
The Trust's Board of Trustees has the right, in conformity with
applicable law, to cause the involuntary redemption of shares held in any
account if the aggregate net asset value of such shares is less than $200
or such lesser amount as the Board may fix. Should the Board elect to
exercise this right, it may also fix, in accordance with the Investment
Company Act or Massachusetts law, the requirements for any notice to be
given to the shareholder(s) in question (not less than 30 days) or may set
requirements for permission to allow the shareholder to increase the
investment so that the shares would not be involuntarily redeemed.
Expedited Redemption Procedures. Under the Expedited Redemption Procedure
available to direct shareholders of the Trust, discussed in the
Prospectus, the wiring of redemption proceeds may be delayed if the
Trust's Custodian bank is not open for business on a day that the Trust
would normally authorize the wire to be made, which is usually the same
day for redemptions prior to 12:00 Noon and the Trust's next regular
business day for redemptions between 12:00 Noon and the close of the
Exchange, which is normally 4:00 P.M., but may be earlier on some days.
In those circumstances, the wire will not be transmitted until the next
bank business day on which the Trust is open for business, and no
dividends will be paid on the proceeds of redeemed shares awaiting
transfer by wire.
Dividend Reinvestment in Another Fund. Direct shareholders of the Trust
may elect to reinvest all dividends and/or distributions in Class A shares
of any of the other funds listed in the Prospectus as "Eligible Funds" at
net asset value without sales charge. To elect this option, a shareholder
must notify the Transfer Agent in writing, and either must have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Transfer Agent to
establish an account. The investment will be made at the net asset value
per share next determined on the payable date of the dividend or
distribution.
YIELD INFORMATION
The Trust's current yield is calculated for a seven-day period of
time in accordance with regulations adopted under the Investment Company
Act. First, a base period return is calculated for the seven-day period
by determining the net change in the value of a hypothetical pre-existing
account having one share at the beginning of the seven day period. The
change includes dividends declared on the original share and dividends
declared on any shares purchased with dividends on that share, but such
dividends are adjusted to exclude any realized or unrealized capital gains
or losses affecting the dividends declared. Next, the base period return
is multiplied by 365/7, to obtain the current yield to the nearest
hundredth of one percent. The compounded effective yield for a seven-day
period is calculated by (a) adding 1 to the base period return (obtained
as described above), (b) raising the sum to a power equal to 365 divided
by 7, and (c) subtracting 1 from the result. For the seven-day period
ended June 30, 1995, the Trust's current yield was 2.72%, and its
compounded effective yield was 2.76%.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each daily
dividend to the nearest full cent. Since the calculation of yield under
either procedure described above does not take into consideration any
realized or unrealized gains or losses on the Trust's portfolio securities
which may affect dividends, the return on dividends declared during a
period may not be the same on an annualized basis as the yield for that
period.
The Trust's "tax-equivalent yield" adjusts the Trust's current yield,
as calculated above, by a combined Federal, New York State and New York
City tax rate. The tax-equivalent yield is computed by dividing the tax-
exempt portion of the Trust's current yield by one minus a stated income
tax rate and adding the result to the portion (if any) of the Trust's
current yield that is not tax-exempt. The tax-equivalent yield may be
compounded as described above to provide a compounded effective tax
equivalent yield. The tax-equivalent yield may be used to compare the tax
effects of income derived from the Trust with income from taxable
investments at the tax rates stated. Appendix B includes a tax equivalent
yield table, based on various effective tax brackets for individual
taxpayers. Such tax brackets are determined by a taxpayer's Federal, New
York State and City taxable income (the net amount subject to income tax
after deductions and exemptions). The tax equivalent yield table assumes
that the investor is taxed at the highest bracket, regardless of whether
a switch to non-taxable investments would cause a lower bracket to apply,
and that state income tax payments are fully deductible for income tax
purposes. For taxpayers with income above certain levels, otherwise
allowable itemized deductions are limited. For the seven-day period ended
June 30, 1995, the Trust's tax-equivalent yield was 5.06% and its tax-
equivalent compounded yield was 5.13% for an investment subject to a
46.24% combined effective tax rate (the maximum for a New York City
resident).
Yield information may be useful to investors in reviewing the Trust's
performance. The Trust's yield may be compared to that of other
investments, by citing various indices such as The Bank Rate Monitor
National Index (provided by Bank Rate MonitorTM), which measures the
average rate paid on bank money market accounts, NOW accounts and
certificates of deposit by the 100 largest banks and thrift institutions
in the top ten metropolitan areas. However, a number of factors should
be considered before using yield information as a basis for comparison
with other investments. An investment in the Trust is not insured. Its
yield is not guaranteed and normally will fluctuate on a daily basis. The
yield for any given past period is not an indication or representation by
the Trust of future yields or rates of return on its shares. The Trust's
yield is affected by portfolio quality, portfolio maturity, type of
instruments held and operating expenses. The Trust's performance reflects
the voluntary assumption of expenses by the Manager, absent which such
figures would have been lower than those shown above. When comparing the
Trust's yield and investment risk with that of other investments,
investors should understand that certain other investment alternatives,
such as certificates of deposit, U.S. Government Securities, money market
instruments or bank accounts may provide fixed yields or yields that may
vary above a stated minimum, and also that bank accounts may be insured
or guaranteed. Certain types of bank accounts may not pay interest when
the balance falls below a specified level and may limit the number of
withdrawals by check per month. In order to compare the Trust's dividends
to the rate of return on taxable investments federal and New York state
and city income taxes on such investments should be considered.
ADDITIONAL INFORMATION
Description of the Trust. Until February 1, 1990, the Trust's name was
"Oppenheimer New York Tax-Exempt Cash Reserves." The Trust's Declaration
of Trust contains an express disclaimer of shareholder or Trustee
liability for the Trust's obligations, and provides for indemnification
and reimbursement of expenses out of its property for any shareholder held
personally liable for its obligations. The Declaration of Trust also
provides that the Trust shall, upon request, assume a defense of any claim
made against any shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a trust (such as the Trust) to be held personally liable
as a "partner" for the Trust's obligations under certain circumstances,
the risk of a Trust shareholder incurring any financial loss on account
of shareholder liability is highly unlikely and is limited to the
relatively remote circumstance in which the Trust itself would be unable
to meet its obligations. Any person doing business with the Trust, and
any shareholder of the Trust, agrees under the Trust's Declaration of
Trust to look solely to the assets of the Trust for satisfaction of any
claim or demand which may arise out of any dealings with the Trust, and
the Trustees shall have no personal liability to any such person, to the
extent permitted by law. It is not contemplated that regular annual
meetings of shareholders will be held. The Trust will hold meetings when
required to do so by the Investment Company Act or other applicable law,
or when a shareholder meeting is called by the Trustees. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of
the outstanding shares of the Trust, to remove a Trustee. The Trustees
will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of 10% of its outstanding
shares. In addition, if the Trustees receive a request from at least 10
shareholders (who have been shareholders for at least six months) holding
in the aggregate shares of the Trust valued at $25,000 or more or holding
1% or more of the Trust's outstanding shares, whichever is less, that they
wish to communicate with other shareholders to request a meeting to remove
a Trustee, the Trustees will then either make the Trust's shareholder list
available to the applicants or mail their communication to all other
shareholders at the applicants' expense, or the Trustees may take such
other action as set forth in Section 16(c) of the Investment Company Act.
Tax Status of the Trust's Dividends and Distributions. The Federal and
New York tax treatment of the Trust's dividends and distributions to
shareholders is explained in the Prospectus under the caption "Dividends,
Distributions and Taxes." Under the Internal Revenue Code, by December
31 each year, the Trust must distribute 98% of its taxable investment
income earned from January 1 through December 31 of that year and 98% of
its capital gains realized in the period from November 1 of the prior year
through October 31 of the current year or else the Trust must pay an
excise tax on the amounts not distributed. While it is presently
anticipated that the Trust's distributions will meet those requirements,
the Trust's Board and the Manager might determine in a particular year
that it might be in the best interest of the Trust's shareholders not to
distribute income or capital gains at the mandated levels and to pay the
excise tax on the undistributed amounts, which would reduce the amount
available for distribution to shareholders.
The Custodian and the Transfer Agent. The Custodian's responsibilities
include safeguarding and controlling the Trust's portfolio securities and
handling the delivery of portfolio securities to and from the Trust. The
Manager has represented to the Trust that its banking relationships
between the Manager and the Custodian have been and will continue to be
unrelated to and unaffected by the relationships between the Trust and the
Custodian. It will be the practice of the Trust to deal with the
Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager or its affiliates.
The Transfer Agent (Shareholder Services, Inc.) is responsible for
maintaining the Trust's shareholder registry and shareholder accounting
records, and for shareholder servicing and administrative functions.
General Distributor's Agreement. Under the General Distributor's
Agreement between the Trust and the Distributor, the Distributor acts as
the Trust's principal underwriter in the continuous public offering of its
shares. The General Distributor is not obligated to sell a specific
number of shares. Expenses normally attributable to sales (other than
those paid under the Service Plan), including advertising and the cost of
printing and mailing prospectuses other than those furnished to existing
shareholders, are borne by the Distributor.
Independent Auditors and Financial Statements. The independent auditors
of the Trust audit the Trust's financial statements and perform other
related audit services. They also act as auditors for the Manager and for
Oppenheimer Management Corporation ("OMC") the Manager's immediate parent,
as well as for certain other funds advised by the Manager and OMC.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the shareholder agrees
to the terms and conditions applicable to such plans, as stated below and
elsewhere in the Application for such Plans, the Prospectus and this
Statement of Additional Information as they may be amended from time to
time by the Trust and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
Trust shares will be redeemed as necessary to meet withdrawal
payments. Shares acquired without a sales charge will be redeemed first
and thereafter shares acquired with reinvested dividends and distributions
followed by shares acquired with a sales charge will be redeemed to the
extent necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made to
shareholders under such plans should not be considered as a yield or
income on an investment. Purchases of additional shares concurrently with
withdrawals are undesirable because of sales charges on purchases when
made. Accordingly, a
shareholder may not maintain an Automatic Withdrawal Plan while
simultaneously making regular purchases.
1. Shareholder Services, Inc., the Transfer Agent of the Trust, will
administer the Automatic Withdrawal Plan (the "Plan") as agent for the
person (the "Planholder") who executed the Plan authorization and
application submitted to the Transfer Agent.
2. Certificates will not be issued for shares of the Trust purchased
for and held under the Plan, but the Transfer Agent will credit all such
shares to the account of the Planholder on the records of the Trust. Any
share certificates now held by the Planholder may be surrendered
unendorsed to the Transfer Agent with the Plan application so that the
shares represented by the certificate may be held under the Plan. Those
shares will be carried on the Planholder's Plan Statement.
3. Distributions of capital gains must be reinvested in shares of
the Trust, which will be done at net asset value without a sales charge.
Dividends may be paid in cash or reinvested.
4. Redemptions of shares in connection with disbursement payments
will be made at the net asset value per share determined on the redemption
date.
5. Checks or ACH payments will be transmitted approximately three
business days prior to the date selected for receipt of the monthly or
quarterly payment (the date of receipt is approximate), according to the
choice specified in writing by the Planholder.
6. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed at any time by the
Planholder on written notification to the Transfer Agent. The Planholder
should allow at least two weeks' time in mailing such notification before
the requested change can be put in effect.
7. The Planholder may, at any time, instruct the Transfer Agent by
written notice (in proper form in accordance with the requirements of the
then-current prospectus of the Trust) to redeem all, or any part of, the
shares held under the Plan. In such case, the Transfer Agent will redeem
the number of shares requested at the net asset value per share in effect
in accordance with the Trust's usual redemption procedures and will mail
a check for the proceeds of such redemption to the Planholder.
8. The Plan may, at any time, be terminated by the Planholder on
written notice to the Transfer Agent, or by the Transfer Agent upon
receiving directions to that effect from the Trust. the Transfer Agent
will also terminate the Plan upon receipt of evidence satisfactory to it
of the death or legal incapacity of the Planholder. Upon termination of
the Plan by the Transfer Agent or the Trust, shares remaining unredeemed
will be held in an uncertificated account in the name of the Planholder,
and the account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the
Planholder, his executor or guardian, or as otherwise appropriate.
9. For purposes of using shares held under the Plan as collateral,
the Planholder may request issuance of a portion of his shares in
certificated form. Upon written request from the Planholder, the Transfer
Agent will determine the number of shares as to which a certificate may
be issued, so as not to cause the withdrawal checks to stop because of
exhaustion of uncertificated shares needed to continue payments. Should
such uncertificated shares become exhausted, Plan withdrawals will
terminate.
10. The Transfer Agent shall incur no liability to the Planholder
for any action taken or omitted by the Transfer Agent in good faith.
11. In the event that the Transfer Agent shall cease to act as
transfer agent for the Trust, the Planholder will be deemed to have
appointed any successor transfer agent to act as his agent in
administering the Plan.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Centennial New York Tax Exempt Trust
The Board of Trustees and Shareholders of
Centennial New York Tax Exempt Trust:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Centennial New York Tax Exempt
Trust as of June 30, 1995, the related statement of operations for the year
then ended, the statements of changes in net assets for the years ended June
30, 1995 and 1994, and the financial highlights for the period January 4,
1989 (commencement of operations) to June 30, 1995. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned at June 30, 1995 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Centennial New
York Tax Exempt Trust at June 30, 1995, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
July 24, 1995
<PAGE>
STATEMENT OF INVESTMENTS June 30, 1995
Centennial New York Tax Exempt Trust
<TABLE>
<CAPTION>
FACE AMORTIZED COST
AMOUNT SEE NOTE 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------
SHORT-TERM TAX-EXEMPT OBLIGATIONS - 97.3%
- ------------------------------------------------------------------------------------------
NEW YORK - 97.3%
----------------------------------------------------------------------------------
Albany County, New York General
Obligation Revenue Refunding Bonds,
South Mall Construction Project, Series
A, FGIC Insured, 4.30%, 4/1/96 $1,000,000 $ 1,001,490
----------------------------------------------------------------------------------
Babylon, New York General Obligation
Bonds, Series B, AMBAC Insured, 3.95% (1) 700,000 700,000
----------------------------------------------------------------------------------
Babylon, New York Industrial Develop-
ment Agency Revenue Bonds, J. D'Addario
& Co. Project, 3.95% (1) 500,000 500,000
----------------------------------------------------------------------------------
Buffalo, New York General Obligation
Revenue Anticipation Nts., Series A,
5%, 7/12/95 1,500,000 1,500,354
----------------------------------------------------------------------------------
City of New York Development Corp.
Mtg. Revenue Bonds, Columbus Multi-
family Project, Series A, 4% (1) 200,000 200,000
----------------------------------------------------------------------------------
City of New York Housing Development
Corp. Mtg. Revenue Bonds, East 96th
Street Project, Series A, 3.75% (1) 1,100,000 1,100,000
----------------------------------------------------------------------------------
City of New York Industrial Develop-
ment Agency Revenue Bonds, Columbia
Grammar School Project, 3.80% (1) 1,000,000 1,000,000
----------------------------------------------------------------------------------
City of New York Trust Cultural
Resources Revenue Refunding Bonds,
American Museum of Natural History,
Series B, MBIA Insured, 3.95% (1) 100,000 100,000
----------------------------------------------------------------------------------
Dormitory Authority of the State of
New York Revenue Bonds, Columbia
University Putters Dormitory 14C
Project, 4.40% (1) 1,000,000 1,000,000
----------------------------------------------------------------------------------
Dormitory Authority of the State of
New York Revenue Bonds, Series A, FGIC
Insured, 3.26% (1) 1,000,000 1,000,000
----------------------------------------------------------------------------------
Erie County, New York General Obliga-
tion Revenue Anticipation Nts.,
4.75%, 8/15/95 1,200,000 1,199,959
----------------------------------------------------------------------------------
New York State Energy Research &
Development Authority Electric
Facilities Revenue Bonds, Long Island
Lighting Co., Series B, 3.90% (1) 2,300,000 2,300,000
----------------------------------------------------------------------------------
New York State Energy Research &
Development Authority Pollution
Control Revenue Bonds, Rochester Gas
& Electric Co., 3.80% (1) 600,000 600,000
----------------------------------------------------------------------------------
New York State Environmental
Facilities Corp. Solid Waste Disposal
Revenue Bonds, General Electric Co.
Project, Series A, 3.95%, 8/8/95 (2) 1,000,000 1,000,000
----------------------------------------------------------------------------------
New York State Environmental Facili-
ties Corp. Solid Waste Disposal Reve-
nue Refunding Bonds, General Electric
Co. Project, Series A, 3.95%, 9/8/95 (2) 1,000,000 1,000,000
----------------------------------------------------------------------------------
New York State Environmental Facili-
ties Corp. Solid Waste Disposal Reve-
nue Refunding Bonds, General Electric
Co. Project, Series A, 4.05%, 8/3/95 (2) 600,000 600,000
----------------------------------------------------------------------------------
New York State Housing Finance Agency
Revenue Bonds, Mount Sinai School of
Medicine, Series A, 4% (1) 900,000 900,000
----------------------------------------------------------------------------------
New York State Housing Finance Agency
Revenue Bonds, Normandie Court I
Project, 3.90% (1) 1,000,000 1,000,000
----------------------------------------------------------------------------------
New York State Job Development
Authority Gtd. Revenue Bonds, 1984
Series E-1 to E-55, 3.60% (1) 945,000 945,000
----------------------------------------------------------------------------------
New York State Job Development
Authority Gtd. Revenue Bonds, 1984
Series F-1 to F-17, 3.60% (1) 410,000 410,000
----------------------------------------------------------------------------------
New York State Job Development
Authority Gtd. Revenue Bonds, Series
C-1 to C-30, 4.60% (1) 725,000 725,000
</TABLE>
3
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
Centennial New York Tax Exempt Trust
<TABLE>
<CAPTION>
FACE AMORTIZED COST
SHORT - TERM TAX-EXEMPT OBLIGATIONS (CONTINUED) AMOUNT SEE NOTE 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
----------------------------------------------------------------------------------
New York State Job Development
Authority Gtd. Revenue Bonds, Special
Purpose, Series C-1, 3.70% (1) $ 60,000 $ 60,000
----------------------------------------------------------------------------------
New York State Local Government
Assistance Corp. Revenue Bonds,
Series A, 3.70% (1) 1,300,000 1,300,000
----------------------------------------------------------------------------------
New York State Medical Care Facilities
Finance Agency Revenue Bonds, Mt.
Sinai Hospital Project, Prerefunded,
Series C, FHA Insured, 8.875%, 1/15/96 (2) 1,000,000 1,044,062
----------------------------------------------------------------------------------
New York State Medical Care Facilities
Finance Agency Revenue Bonds, St.
Mary's Hospital-Private Insurance
Program, Prerefunded, AMBAC Insured,
8.375%, 11/1/95 (2) 2,700,000 2,784,176
----------------------------------------------------------------------------------
New York State Power Authority Revenue
Bonds, 4.05%, 8/1/95 (2) 1,000,000 1,000,000
----------------------------------------------------------------------------------
New York State Urban Development Corp.
Correctional Facilities Revenue Bonds,
Prerefunded, Series B, 8%, 1/1/96 (2) 1,700,000 1,763,370
----------------------------------------------------------------------------------
New York State Urban Development Corp.
Revenue Refunding Bonds, Prerefunded,
8%, 1/1/96 (2) 800,000 829,629
----------------------------------------------------------------------------------
North Hempstead, New York Solid Waste
Management Authority Revenue
Refunding Bonds, Series A, 3.75% (1) 1,300,000 1,300,000
----------------------------------------------------------------------------------
Port Authority of New York & New
Jersey, 4.05%, 8/25/95 (2) 1,300,000 1,300,000
----------------------------------------------------------------------------------
Seneca County, New York Industrial
Development Agency Civic Facilities
Revenue Bonds, New York Chiropractic
College, 4.05% (1) 400,000 400,000
----------------------------------------------------------------------------------
Suffolk County, New York Industrial
Development Agency Revenue Bonds,
Nissequogue Cogen Partners Project,
4.30% (1) 800,000 800,000
----------------------------------------------------------------------------------
Triborough Bridge & Tunnel Authority
of New York Revenue Bonds, Series
BT-42, 4.05% (1) 1,000,000 1,000,000
----------------------------------------------------------------------------------
Westchester County, New York Tax
Anticipation Notes, 1995 Series,
5%, 12/14/95 2,500,000 2,505,502
----------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT AMORTIZED COST 97.3% 34,868,542
----------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.7 977,270
--------- ------------
NET ASSETS 100.0% $35,845,812
========= ============
</TABLE>
[FN]
1. Floating or variable rate obligation maturing in more than
one year. The interest rate, which is based on specific, or an
index of, market interest rates, is subject to change periodically
and is the effective rate on June 30, 1995. This instrument may
also have a demand feature which allows the recovery of principal
at any time, or at specified intervals not exceeding one year, on
up to 30 days' notice. Maturity date shown represents effective
maturity based on variable rate and, if applicable, demand feature.
2. Put obligation redeemable at full face value on the date reported.
See accompanying Notes to Financial Statements.
4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES June 30, 1995
Centennial New York Tax Exempt Trust
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at amortized cost - see accompanying statement $34,868,542
Cash 420,464
Receivables:
Shares of beneficial interest sold 601,434
Interest 466,033
Other 23,051
-----------
Total assets 36,379,524
-----------
LIABILITIES:
Payables and other liabilities:
Shares of beneficial interest redeemed 451,156
Dividends 40,334
Service plan fees - Note 3 16,528
Transfer and shareholder servicing agens - Note 3 3,888
Trustees' fees 100
Other 21,706
-----------
Total liabilities 533,712
-----------
NET ASSETS $35,845,812
===========
COMPOSITION OF NET ASSETS:
Paid-in capital $35,847,135
Accumulated net realized loss from investment
transactions (1,323)
-----------
Net assets - Applicable to 35,847,135 shares of
beneficial interest outstanding $35,845,812
===========
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE
SHARE $1.00
</TABLE>
See accompanying Notes to Financial Statements.
5
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended June 30, 1995
Centennial New York Tax Exempt Trust
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME - Interest $1,078,023
----------
EXPENSES:
Management fees - Note 3 147,859
Service plan fees - Note 3 57,630
Transfer and shareholder servicing agent fees - Note 3 35,115
Shareholder reports 12,115
Legal and auditing fees 10,657
Custodian fees and expenses 6,194
Registration and filing fees 3,419
Trustees' fees and expenses 2,153
Other 6,713
----------
Total expenses 281,855
Less assumption of expenses by Centennial Asset
Management Corporation - Note 3 (44,890)
----------
Net expenses 236,965
----------
NET INVESTMENT INCOME 841,058
NET REALIZED LOSS ON INVESTMENTS (171)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 840,887
==========
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Centennial New York Tax Exempt Trust
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
OPERATIONS: 1995 1994
---------- ----------
<S> <C> <C>
Net investment income $ 841,058 $ 423,262
Net realized gain (loss) on
investments (171) 1,817
----------- ----------
Net increase in net assets
resulting from operations 840,887 425,079
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS (842,946) (423,702)
BENEFICIAL INTEREST TRANSACTIONS:
Net increase in net assets
resulting from beneficial
interest transactions
- Note 2 9,328,969 1,523,824
----------- -----------
NET ASSETS:
Total increase 9,326,910 1,525,201
Beginning of year 26,518,902 24,993,701
----------- -----------
End of year $35,845,812 $26,518,902
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS
Centennial New York Tax Exempt Trust
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994 1993 1992
------- ------- ------- ------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------
Income from investment operations -
net investment income and net
realized gain on investments .03 .02 .02 .03
Dividends and distributions to
shareholders (.03) (.02) (.02) (.03)
------- ------- ------- -------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
======= ======= ======= =======
TOTAL RETURN, AT NET
ASSET VALUE (2) 2.85% 1.68% 1.83% 3.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $35,846 $26,519 $24,994 $24,103
Average net assets (in
thousands) $29,590 $25,419 $24,257 $23,221
Number of shares
outstanding at end of
period (in thousands) 35,847 26,518 24,994 24,105
Ratios to average net assets:
Net investment income 2.84% 1.67% 1.74% 3.00%
Expenses, before voluntary assumption
by the Manager .95% 1.02% .98% 1.09%
Expenses, net of voluntary assumption
by the Manager .80% .80% .80% .80%
</TABLE>
[FN]
1. For the period from January 4, 1989 (commencement of operations) to
September 30, 1989.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends reinvested in additional
shares on the reinvestment date, and redemption at the net asset value
calculated on the last business day of the fiscal period. Total returns
are not annualized for periods of less than one full year. Total returns
reflect changes in net investment income only.
3. Annualized.
FINANCIAL HIGHLIGHTS
Centennial New York Tax Exempt Trust
<TABLE>
<CAPTION>
NINE
YEAR MONTHS PERIOD
ENDED ENDED ENDED
JUNE 30, JUNE 30, SEPTEMBER 30,
1991 1990 1989(1)
------- ------- -------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $1.00 $1.00 $1.00
------- ------- -------
Income from investment operations -
net investment income and net
realized gain on investments .05 .04 .04
Dividends and distributions to
shareholders (.05) (.04) (.04)
------- ------- -------
Net asset value, end of period $1.00 $1.00 $1.00
======= ======= =======
TOTAL RETURN, AT NET
ASSET VALUE (2) 4.74% 3.87% 3.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $21,439 $9,133 $4,935
Average net assets
(in thousands) $16,766 $7,008 $2,084
Number of shares
outstanding at end of
period (in thousands) 21,443 9,135 4,934
Ratios to average net assets:
Net investment income 4.42% 4.98%(3) 5.41%(3)
Expenses, before voluntary assumption
by the Manager 1.08% 1.48%(3) 2.21%(3)
Expenses, net of voluntary assumption
by the Manager .72% .96%(3) 1.00%(3)
</TABLE>
[FN]
1. For the period from January 4, 1989 (commencement of operations) to
September 30, 1989.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends reinvested in
additional shares on the reinvestment date, and redemption at the net
asset value calculated on the last business day of the fiscal period.
Total returns are not annualized for periods of less than one full year.
Total returns reflect changes in net investment income only.
3. Annualized.
See accompanying Notes to Financial Statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Centennial New York Tax Exempt Trust
1. SIGNIFICANT ACCOUNTING POLICIES
Centennial New York Tax Exempt Trust (the Trust) is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The Trust's investment advisor is Centennial
Asset Management Corporation (the Manager), a subsidiary of Oppenheimer
Management Corporation (OMC). The following is a summary of significant
accounting policies consistently followed by the Trust.
INVESTMENT VALUATION. Portfolio securities are valued on the basis of
amortized cost, which approximates market value.
FEDERAL TAXES. The Trust intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required.
DISTRIBUTIONS TO SHAREHOLDERS. The Trust intends to declare dividends from
net investment income each day the New York Stock Exchange is open for
business and pay such dividends monthly. To effect its policy of maintaining
a net asset value of $1.00 per share, the Trust may withhold dividends or
make distributions of net realized gains.
OTHER. Investment transactions are accounted for on the date the investments
are purchased or sold (trade date). Realized gains and losses on investments
are determined on an identified cost basis, which is the same basis used for
federal income tax purposes.
2. SHARES OF BENEFICIAL INTEREST
The Trust has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995 YEAR ENDED JUNE 30, 1994
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold 94,305,152 $ 94,305,152 75,789,053 $ 75,789,053
Dividends and distributions
reinvested 798,765 798,765 405,612 405,612
Redeemed (85,774,948) (85,774,948) (74,670,841) (74,670,841)
------------ ------------- ------------ -------------
Net increase 9,328,969 $ 9,328,969 1,523,824 $ 1,523,824
============ ============= ============
=============
</TABLE>
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Trust which provides for a fee of .50% on the
first $250 million of average annual net assets with a reduction of .025% on
each $250 million thereafter, to .40% on net assets in excess of $1 billion.
The Manager has agreed to assume Trust expenses (with specified exceptions)
in excess of the most stringent applicable regulatory limit on Trust
expenses. In addition, the Manager has voluntarily undertaken to assume
Trust expenses in excess of .80% of average annual net assets.
Shareholder Services, Inc. (SSI), a subsidiary of OMC, is the transfer and
shareholder servicing agent for the Trust, and for other registered
investment companies. SSI's total costs of providing such services are
allocated ratably to these companies.
Under an approved service plan, the Trust may expend up to .20% of its net
assets annually to reimburse Centennial Asset Management Corporation, as
distributor, for costs incurred in connection with the personal service and
maintenance of accounts that hold shares of the Trust, including amounts paid
to brokers, dealers, banks and other institutions.
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
Below is a description of the two highest rating categories for Short Term
Debt and Long Term Debt by the "Nationally-Recognized Statistical Rating
Organizations" which the Manager evaluates in purchasing securities on
behalf of the Trust. The ratings descriptions are based on information
supplied by the ratings organizations to subscribers.
Short Term Debt Ratings.
Moody's Investors Service, Inc. ("Moody's"): The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months), are
judged by Moody's to be investment grade, and indicate the relative
repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling market positions
in well-established industries; (b) high rates of return on funds
employed; (c) conservative capitalization structures with moderate
reliance on debt and ample asset protection; (d) broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
(e) well established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained.
Moody's ratings for state and municipal short-term obligations are
designated "Moody's Investment Grade" ("MIG"). Short-term notes which
have demand features may also be designated as "VMIG". These rating
categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by
established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample although not
so large as in the preceding group.
Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of
no more than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to
possess extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the relative
degree of safety is not as high as for issues designated "A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have a demand
or double feature as part of their provisions. The first rating addresses
the likelihood of repayment of principal and interest as due, and the
second rating addresses only the demand feature. With short-term demand
debt, S&P's note rating symbols are used with the commercial paper symbols
(for example, "SP-1+/A-1+").
Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the following
short-term ratings to debt obligations that are payable on demand or have
original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is only
slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues assigned
"F-1+" or "F-1" ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for
commercial paper (defined by Duff & Phelps as obligations with maturities,
when issued, of under one year), asset-backed commercial paper, and
certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year, including
bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources
of funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are
very small.
Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors
are small.
IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term ratings,
including commercial paper (with maturities up to 12 months), are as
follows:
A1+: Obligations supported by the highest capacity for timely repayment.
A1: Obligations supported by a very strong capacity for timely repayment.
A2: Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic, or financial conditions.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply
to commercial paper, certificates of deposit, unsecured notes, and other
securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding
timely repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1".
Long Term Debt Ratings. These ratings are relevant for securities
purchased by the Trust with a remaining maturity of 397 days or less, or
for rating issuers of short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin,
and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong positions of such issues.
Aa: Judged to be of high quality by all standards. Together with the
"Aaa" group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may
not be as large as in "Aaa" securities or fluctuations of protective
elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in
"Aaa" securities.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the security ranks in the
higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks
in the lower end of its generic rating category.
Standard & Poor's: Bonds (including municipal bonds) are rated as
follows:
AAA: The highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and differ from
"AAA" rated issues only in small degree.
Fitch:
AAA: Considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Plus (+) and minus (-)
signs are used in the "AA" category to indicate the relative position of
a credit within that category.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+".
Duff & Phelps:
AAA: The highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
Plus (+) and minus (-) signs are used in the "AA" category to indicate the
relative position of a credit within that category.
IBCA: Long-term obligations (with maturities of more than 12 months) are
rated as follows:
AAA: The lowest expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial such that adverse
changes in business, economic, or financial conditions are unlikely to
increase investment risk significantly.
AA: A very low expectation for investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in
business, economic, or financial conditions may increase investment risk
albeit not very significantly.
A plus (+) or minus (-) sign may be appended to a long term rating to
denote relative status within a rating category.
TBW: TBW issues the following ratings for companies. These ratings
assess the likelihood of receiving payment of principal and interest on
a timely basis and incorporate TBW's opinion as to the vulnerability of
the company to adverse developments, which may impact the market's
perception of the company, thereby affecting the marketability of its
securities.
A: Possesses an exceptionally strong balance sheet and earnings record,
translating into an excellent reputation and unquestioned access to its
natural money markets. If weakness or vulnerability exists in any aspect
of the company's business, it is entirely mitigated by the strengths of
the organization.
A/B: The company is financially very solid with a favorable track record
and no readily apparent weakness. Its overall risk profile, while low,
is not quite as favorable as for companies in the highest rating category.
<PAGE>
APPENDIX B
TAX EQUIVALENT YIELD TABLES
The equivalent yield tables below compare tax-free income with taxable
income under Federal, New York State and New York City income tax rates
effective January 1, 1995. Combined taxable income refers to the net
amount subject to (i) Federal and New York State income tax as to the
first two tables below and (ii) Federal, New York State and New York City
income tax as to the third and fourth tables below, in each case after
deductions and exemptions. The tables assume that an investor's highest
tax bracket applies to the change in taxable income resulting from a
switch between taxable and non-taxable investments, that the investor is
not subject to the Alternative Minimum Tax and that New York State and
local income tax payments are fully deductible for Federal income tax
purposes. They do not reflect the phaseout of itemized deductions and
personal exemptions at higher income levels, resulting in higher effective
tax rates and tax equivalent yields.
New York State Residents
Combined Taxable Income
<TABLE>
<CAPTION>
Centennial New York
Tax-Exempt Trust Yield
Single Return Joint Return of:
Combined 2.0% 2.5% 3.0%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13,000 $ 19,000 19.72% 2.49% 3.11% 3.74%
$ 19,000 $ 25,000 20.57% 2.52% 3.15% 3.78%
$ 13,000 $ 23,350 $ 25,000 $ 39,000 21.45% 2.55% 3.18% 3.82%
$ 23,350 $ 56,550 $ 39,000 $ 94,250 33.47% 3.01% 3.76% 4.51%
$ 56,550 $117,950 $ 94,250 $143,600 36.24% 3.14% 3.92% 4.71%
$117,950 $256,500 $143,600 $256,500 40.86% 3.38% 4.23% 5.07%
$256,500 $256,500 44.19% 3.58% 4.48% 5.38%
New York State Residents
Combined Taxable Income
Centennial New York
Tax-Exempt Trust Yield
Single Return Joint Return of:
Combined 3.5% 4.0% 4.5%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
$ 13,000 $ 19,000 19.72% 4.36% 4.98% 5.61%
$ 19,000 $ 25,000 20.57% 4.41% 5.04% 5.67%
$ 13,000 $ 23,350 $ 25,000 $ 39,000 21.45% 4.46% 5.09% 5.73%
$ 23,350 $ 56,550 $ 39,000 $ 94,250 33.47% 5.26% 6.01% 6.76%
$ 56,550 $117,950 $ 94,250 $143,600 36.24% 5.49% 6.27% 7.06%
$117,950 $256,500 $143,600 $256,500 40.86% 5.92% 6.76% 7.61%
$256,500 $256,500 44.19% 6.27% 7.17% 8.06%
New York City Residents
Combined Taxable Income
Centennial New York
Tax-Exempt Trust Yield
Single Return Joint Return of:
Combined 2.0% 2.5% 3.0%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
$ 15,000 $ 19,000 22.14% 2.57% 3.21% 3.85%
$ 19,000 $ 25,000 22.99% 2.60% 3.25% 3.90%
$ 25,000 $ 27,000 23.88% 2.63% 3.28% 3.94%
$ 15,000 $ 23,350 $ 27,000 $ 39,000 24.26% 2.64% 3.30% 3.96%
$ 23,350 $ 25,000 $ 39,000 $ 45,000 35.84% 3.12% 3.90% 4.68%
$ 25,000 $ 56,550 $ 45,000 $ 94,250 35.88% 3.12% 3.90% 4.68%
$ 56,550 $ 60,000 $ 94,250 $108,000 38.55% 3.25% 4.07% 4.88%
$ 60,000 $117,950 $108,000 $143,600 38.59% 3.26% 4.07% 4.88%
$117,950 $256,500 $143,600 $256,500 43.04% 3.51% 4.39% 5.27%
$256,500 $256,500 46.24% 3.72% 4.65% 5.58%
New York City Residents
Combined Taxable Income
Centennial New York
Tax-Exempt Trust Yield
Single Return Joint Return of:
Combined 3.5% 4.0% 4.5%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
$ 15,000 $ 19,000 22.14% 4.50% 5.14% 5.78%
$ 19,000 $ 25,000 22.99% 4.54% 5.19% 5.84%
$ 25,000 $ 27,000 23.88% 4.60% 5.25% 5.91%
$ 15,000 $ 23,350 $ 27,000 $ 39,000 24.26% 4.62% 5.28% 5.94%
$ 23,350 $ 25,000 $ 39,000 $ 45,000 35.84% 5.46% 6.23% 7.01%
$ 25,000 $ 56,550 $ 45,000 $ 94,250 35.88% 5.46% 6.24% 7.02%
$ 56,550 $ 60,000 $ 94,250 $108,000 38.55% 5.70% 6.51% 7.32%
$ 60,000 $117,950 $108,000 $143,600 38.59% 5.70% 6.51% 7.33%
$117,950 $256,500 $143,600 $256,500 43.04% 6.14% 7.02% 7.90%
$256,500 $256,500 46.24% 6.51% 7.44% 8.37%
</TABLE>
<PAGE>
Industry Classifications
General Obligation Bonds
Special Tax Bonds
Lease/Rental
Revenue
Education
Hospitals
Housing
Transportation
Utilities
Student Loans
Corporate Backed Municipals
Industrial Development
Pollution Control
<PAGE>
Investment Adviser and Distributor
Centennial Asset Management Corporation
3410 South Galena Street
Denver, Colorado 80231
Transfer and Shareholder Servicing Agent
Shareholder Services, Inc.
P.O. Box 5143
Denver, Colorado 80201-5143
1-800-525-9310
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
The Colorado State Bank Building
1600 Broadway, Suite 1850
Denver, Colorado 80202
