Registration No. 33-30198
811-5867
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 17 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940
AMENDMENT NO. 18 / X /
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
- ----------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center - Suite 3400
New York, New York 10048-0203
- -----------------------------------------------------------------
(Address of Principal Executive Offices)
(212) 323-0200
- ----------------------------------------------------------------
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
OppenheimerFunds, Inc.
Two World Trade Center - Suite 3400
New York, New York 10048-0203
- ------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On November 25, 1996, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
<PAGE>
/ / On __________, pursuant to paragraph (a)(1)
/ / 75 days after filing, pursuant to paragraph (a)(2)
/ / On _____________, pursuant to paragraph (a)(2) of Rule
485
The Registrant has elected to register an indefinite number of its shares under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal year ended July 31,
1996 was filed on September 26, 1996.
<PAGE>
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
FORM N-1A
Cross Reference Sheet
Oppenheimer Pennsylvania Municipal Fund, a series of the Registrant
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Cover Page
2 Expenses; A Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History;
Dividends, Capital Gains and Taxes; The Transfer Agent
7 How to Buy Shares; Special Investor Services; How to
Sell Shares; How to Exchange Shares; Service Plan For Class
A Shares; Distribution and Service Plan for Class B Shares;
Distribution and Service Plan for Class C Shares;
Shareholder Account Rules and Policies
8 Special Investor Services; How to Sell Shares; How to
Exchange Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Other Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the
Trust
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund
17 How the Fund is Managed
18 Additional Information about the Fund
19 About Your Account - How to Buy Shares, How to Sell
Shares, How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Additional Information About
the Fund - The Distributor; Distribution and Service
Plans
22 Performance of the Fund
23 Financial Statements
- ------------------------
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
FORM N-1A
Cross Reference Sheet
Oppenheimer Florida Municipal Fund, a series of the Registrant
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Cover Page
2 Expenses; A Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History;
Dividends, Capital Gains and Taxes; The Transfer Agent
7 How to Buy Shares; Special Investor Services; How to
Sell Shares; How to Exchange Shares; Service Plan For Class
A Shares; Distribution and Service Plan for Class B Shares;
Distribution and Service Plan for Class C Shares;
Shareholder Account Rules and Policies
8 Special Investor Services; How to Sell Shares; How to
Exchange Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Other Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the
Trust
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund
17 How the Fund is Managed
18 Additional Information about the Fund
19 About Your Account - How to Buy Shares, How to Sell
Shares, How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Additional Information About
the Fund - The Distributor; Distribution and Service
Plans
22 Performance of the Fund
23 Financial Statements
- ------------------------
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
FORM N-1A
Cross Reference Sheet
Oppenheimer New Jersey Municipal Fund, a series of the Registrant
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Cover Page
2 Expenses; A Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History;
Dividends, Capital Gains and Taxes; The Transfer Agent
7 How to Buy Shares; Special Investor Services; How to
Sell Shares; How to Exchange Shares; Service Plan For Class
A Shares; Distribution and Service Plan for Class B Shares;
Distribution and Service Plan for Class C Shares;
Shareholder Account Rules and Policies
8 Special Investor Services; How to Sell Shares; How to
Exchange Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Other Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the
Trust
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund
17 How the Fund is Managed
18 Additional Information about the Fund
19 About Your Account - How to Buy Shares, How to Sell
Shares, How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Additional Information About
the Fund - The Distributor; Distribution and Service
Plans
22 Performance of the Fund
23 Financial Statements
- ------------------------
* Not applicable or negative answer.
<PAGE>
Oppenheimer
Pennsylvania Municipal Fund
Prospectus dated November 25, 1996
Oppenheimer Pennsylvania Municipal Fund is a mutual fund that seeks as high a
level of current interest income exempt from Federal and Pennsylvania personal
income taxes for individual investors as is available from municipal securities
and consistent with preservation of capital. The Fund will invest primarily in
securities issued by the Commonwealth of Pennsylvania and local governments and
governmental agencies, the income from which is tax-exempt as discussed above.
However, in times of unstable economic or market conditions, the Fund's
investment manager may deem it advisable to temporarily invest a portion of the
Fund's assets in certain taxable instruments. The Fund may use certain hedging
instruments to try to reduce the risks of market fluctuations that affect the
value of the securities the Fund holds. The Fund is not intended to be a
complete investment program and there is no assurance that it will achieve its
objective. Please refer to "Investment Objective and Policies" for more
information about the types of securities the Fund invests in and refer to
"Investment Risks" for a discussion of the risks of investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it for
future reference. You can find more detailed information about the Fund in the
November 25, 1996 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated into this Prospectus by reference (which
means that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements
-2-
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during the fiscal period January 1, 1996 to July
31, 1996 (the Fund's new fiscal year end).
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," starting on page
___ for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge
on Purchases (as a %
of offering price) 4.75% None None
Maximum Deferred Sales
Charge (as a % of the
lower of the original
offering price or
redemption proceeds) None (1) 5% in the first 1% if shares
year, declining are redeemed
to 1% in the within 12
sixth year and months of
eliminated purchase(2)
thereafter(2)
Maximum Sales Charge on
Reinvested Dividends None None None
Exchange Fee None None None
- ----------------------
-3-
<PAGE>
<FN>
(1) If you invest $1 million or more in Class A shares, you may have to pay a
sales charge of up to 1% if you sell your shares within 18 calendar months from
the end of the calendar month in which you purchased those shares. See "How to
Buy Shares - Buying Class A Shares" below. (2) See "How to Buy Shares - Buying
Class B Shares," and "How to Buy Shares - Buying Class C Shares" below for more
information on the contingent deferred sales charges.
</FN>
</TABLE>
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (referred
to in this Prospectus as the "Manager"). The rates of the Manager's fees are set
forth in "How the Fund is Managed," below. The Fund has other regular expenses
for services, such as transfer agent fees, custodial fees paid to the bank that
holds the Fund's portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement of
Additional Information.
Annual Fund Operating Expenses as a Percentage of Average Net
Assets
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees 0.60% 0.60% 0.60%
12b-1 Plan Fees 0.14% 0.90% 0.90%
Other Expenses 0.29% 0.29% 0.37%
Total Fund
Operating Expenses 1.03% 1.79% 1.87%
</TABLE>
The numbers in the chart above are based upon the Fund's expenses in
its fiscal period January 1, 1996 to July 31, 1996 (the Fund's new fiscal year).
These amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan Fees for Class A
shares are Service Plan Fees. For Class B and Class C shares, the 12b-1
Distribution Plan Fees are Service Plan Fees and asset-based sales charges. The
service fee for Class A shares is 0.15% and for Class B and Class C shares is
0.25% (currently set at 0.15%) of average annual net assets of the class, and
the asset-based sales charge
-4-
<PAGE>
for Class B and Class C shares is 0.75%. These plans are described in greater
detail in "How to Buy Shares," below.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of factors,
including changes in the actual value of the Fund's assets represented by each
class of shares.
o Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown below.
Assume that you make a $1,000 investment in each class of shares of the Fund,
and that the Fund's annual return is 5%, and that its operating expenses for
each class are the ones shown in the Annual Fund Operating Expenses table above.
If you were to redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3, 5 and 10
years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $58 $79 $102 $167
Class B Shares $68 $86 $117 $172
Class C Shares $29 $59 $101 $219
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $58 $79 $102 $167
Class B Shares $18 $56 $ 97 $172
Class C Shares $19 $59 $101 $219
</TABLE>
* In the first example, expenses include the Class A initial sales charge and
the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not include contingent deferred sales charges. The Class
B expenses in years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into Class A shares
after 6 years. Because of the effect of the asset-based sales charge and the
contingent deferred sales charge, long-term holders of Class B and Class C
shares could pay the economic
-5-
<PAGE>
equivalent of more than the maximum front-end sales charge allowed under
applicable regulations. For Class B shareholders, the automatic conversion of
Class B shares to Class A shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment returns of
the Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What Is The Fund's Investment Objective? The Fund's investment
objective is to seek as high a level of current interest income exempt from
Federal and Pennsylvania personal income taxes for individual investors as is
consistent with preservation of capital.
o What Does the Fund Invest In? The Fund seeks its objective by
following the fundamental policy of investing, under normal market conditions,
at least 80% (and attempting to invest, as a non-fundamental policy, 100%) of
its total assets in Municipal Securities (as described in "Investment Objective
and Policies") and making no investment that will reduce to less than 80% the
portion of its total assets that are invested in Pennsylvania Municipal
Securities (also described in "Investment Objective and Policies").
The Fund may invest up to 20% of its assets in investments the income
from which may be taxable. Currently there is no limitation on investments in
securities which may be subject to an alternative minimum tax. In certain
circumstances the Fund may assume a temporary "defensive" position by investing
some or all of its
-6-
<PAGE>
assets in short-term money market investments. The Fund may also use hedging
instruments and some derivative investments in an effort to protect against
market risks. These investments are more fully explained in "Investment
Objective and Policies," starting on page __.
o Who Manages the Fund? The Fund's investment adviser (the "Manager")
is OppenheimerFunds, Inc. The Manager (including a subsidiary) advises
investment company portfolios having over $55 billion in assets. The Manager is
paid an advisory fee by the Fund, based on its net assets. The Fund's portfolio
manager, who is primarily responsible for the selection of the Fund's
securities, is Robert E. Patterson. The Board of Trustees, elected by
shareholders, oversees the investment adviser and the portfolio manager. Please
refer to "How the Fund is Managed," starting on page __ for more information
about the Manager and its fees.
o How Risky is the Fund? All investments carry risks to some degree.
The Fund's bond investments are subject to changes in their value from a number
of factors such as changes in general bond market movements, the change in value
of particular bonds because of an event affecting the issuer, or changes in
interest rates that can affect bond prices. These changes affect the value of
the Fund's investments and its price per share. The fact that the Fund
concentrates its investments in Pennsylvania Municipal Securities, or is able to
invest its assets in a single issuer or limited number of issuers, entails
greater risk than an investment in a diversified investment company. The Fund's
investment in certain derivative investments may add a degree of risk not
present in a fund that does not invest in such securities.
While the Manager tries to reduce risks by carefully researching
securities before they are purchased for the portfolio,
-7-
<PAGE>
and in some cases by using hedging techniques, there is no guarantee of success
in achieving the Fund's objective and your shares may be worth more or less than
their original cost when you redeem them. Please refer to "Investment Risks"
starting on page __ for a more complete discussion of the Fund's investment
risks.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the Fund's
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How To Buy Shares" starting on page __
for more details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has three classes
of shares. All three classes have the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge, starting at
4.75%, and reduced for larger purchases. Class B shares and Class C shares are
offered without a front-end sales charge, but may be subject to a contingent
deferred sales charge if redeemed within 6 years or 12 months, respectively, of
purchase. There are also annual asset-based sales charges on Class B and Class C
shares. Please review "How To Buy Shares" starting on page __ for more details,
including a discussion about factors you and your financial advisor should
consider in determining which class may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail, or by
telephone call to the Transfer Agent on any business day, through your dealer
or, by writing a check against your Fund account (available for Class A shares
only). Please refer to "How To Sell Shares" on page __. The Fund also offers
exchange privileges to other Oppenheimer funds, described in "How to Exchange
Shares" on page __.
o How Has the Fund Performed? The Fund measures its performance by
quoting its yield, tax equivalent yield, average annual total return and
cumulative total return, which measure historical performance. Those yields and
returns can be compared to the yields and returns (over similar periods) of
other funds. Of course, other funds may have different objectives, investments,
and levels of risk. The Fund's performance can also be compared to a broad
market index, which we have done on pages ___ and ___.
-8-
<PAGE>
Please remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense ratios and
other data based on the Fund's average net assets. This information has been
audited by KPMG Peat Marwick LLP, the Fund's independent auditors, whose reports
on the Fund's financial statements for the fiscal year ended December 31, 1995
and for the fiscal period January 1, 1996 to July 31, 1996 (the Fund's new
fiscal year end) are included in the Statement of Additional Information. Class
C shares were publicly offered only during a portion of the fiscal year ended
December 31, 1995, commencing on August 29, 1995.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS A
--------------------------------------------------------------------------------
SEVEN MONTHS
ENDED
JULY 31, YEAR ENDED DECEMBER 31,
1996(2) 1995 1994 1993 1992 1991 1990 1989(4)
------- ------ ------ ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 12.36 $11.19 $12.85 $ 12.05 $ 11.93 $ 11.43 $11.58 $11.43
------- ------ ------ ------- ------- ------- ------ ------
Income (loss) from investment operations:
Net investment income .40 .68 .67 .69 .76 .74 .81 .18
Net realized and unrealized gain (loss) (.35) 1.18 (1.64) .85 .17 .53 (.15) .15
------- ------ ------ ------- ------- ------- ------ ------
Total income (loss) from investment
operations .05 1.86 (.97) 1.54 .93 1.27 .66 .33
------- ------ ------ ------- ------- ------- ------ ------
Dividends and distributions to shareholders:
Dividends from net investment income (.40) (.67) (.69) (.70) (.73) (.73) (.81) (.18)
Dividends in excess of net investment income -- (.02) -- -- -- -- -- --
Distributions from net realized gain -- -- -- (.04) (.08) (.04) -- --
------- ------ ------ ------- ------- ------- ------ ------
Total dividends and distributions
to shareholders (.40) (.69) (.69) (.74) (.81) (.77) (.81) (.18)
------- ------ ------ ------- ------- ------- ------ ------
Net asset value, end of period $ 12.01 $ 12.36 $ 11.19 $ 12.85 $ 12.05 $ 11.93 $11.43 $11.58
======= ====== ====== ======= ======= ======= ====== ======
------- ------ ------ ------- ------- ------- ------ ------
TOTAL RETURN, AT NET ASSET VALUE(5) 0.44% 16.94% (7.68)% 13.12% 8.04% 11.49% 6.00% 3.25%
------- ------ ------ ------- ------- ------- ------ ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $64,391 $66,483 $60,857 $64,640 $33,290 $13,791 $8,406 $2,353
------- ------ ------ ------- ------- ------- ------ ------
Average net assets (in thousands) $64,997 $64,901 $62,786 $50,974 $21,936 $10,717 $5,170 $1,231
------- ------ ------ ------- ------- ------- ------ ------
Ratios to average net assets:
Net investment income 5.71%(6) 5.68% 5.65% 5.52% 6.36% 6.30% 7.06% 6.12%(6)
Expenses, before voluntary assumption by the
Manager or Distributor(7) 1.03%(6) 1.02% 0.98% 1.06% 1.39% 1.29% 1.77% 2.49%(6)
Expenses, net of voluntary assumption by the
Manager or Distributor N/A N/A N/A 0.99% 1.06% N/A 0.59% 0.91%(6)
------- ------ ------ ------- ------- ------- ------ ------
Portfolio turnover rate(8) 5.8% 31.1% 37.0% 14.6% 29.9% 15.5% 5.3% 0.0%
<CAPTION>
--------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS B CLASS C
------------------------------------------ ---------------------------
SEVEN MONTHS SEVEN MONTHS
ENDED ENDED PERIOD ENDED
JULY 31, YEAR ENDED DECEMBER 31, JULY 31 DECEMBER 31,
1996(2) 1995 1994 1993(3) 1996(2)(7) 1995(1)
------- ------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 12.36 $11.19 $12.84 $12.44 $12.36 $11.91
------- ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income .35 .59 .59 .36 .34 .21
Net realized and unrealized gain (loss) (.35) 1.17 (1.65) .45 (.36) .45
------- ------ ------ ------ ------ ------
Total income (loss) from investment
operations -- 1.76 (1.06) .81 (.02) .66
------- ------ ------ ------ ------ ------
Dividends and distributions to shareholders:
Dividends from net investment income (.35) (.57) (.59) (.37) (.34) (.21)
Dividends in excess of net investment income -- (.02) -- -- -- --
Distributions from net realized gain -- -- -- (.04) -- --
------- ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.35) (.59) (.59) (.41) (.34) (.21)
------- ------ ------ ------ ------ ------
Net asset value, end of period $ 12.01 $ 12.36 $ 11.19 $12.84 $12.00 $12.36
======= ====== ====== ====== ====== ======
------- ------ ------ ------ ------ ------
TOTAL RETURN, AT NET ASSET VALUE(5) (0.01)% 16.06% (8.32)% 6.67% (0.15)% 5.55%
------- ------ ------ ------ ------ ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $16,005 $14,466 $ 9,484 $5,576 $ 482 $ 264
------- ------ ------ ------ ------ ------
Average net assets (in thousands) $15,085 $12,183 $ 7,329 $2,770 $ 296 $ 51
------- ------ ------ ------ ------ ------
Ratios to average net assets:
Net investment income 4.94%(6) 4.89% 4.88% 4.26%(6) 4.83%(6) 4.40%(6)
Expenses, before voluntary assumption by the
Manager or Distributor(7) 1.89%(6) 1.89% 1.85% 1.88%(6) 1.97%(6) 2.07%(6)
Expenses, net of voluntary assumption by the
Manager or Distributor 1.79%(6) 1.78% 1.75% 1.78%(6) 1.87%(6) 1.96%(6)
------- ------ ------ ------ ------ ------
Portfolio turnover rate(8) 5.8% 31.1% 37.0% 14.6% 5.8% 31.1%
<FN>
1. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year end from December 31 to July 31.
3. For the period from May 1, 1993 (inception of offering) to December 31,
1993.
4. For the period from September 18, 1989 (commencement of operations) to
December 31, 1989.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less
than one full year.
6. Annualized.
7. Beginning in fiscal 1995, the expense ratio reflects the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not
been adjusted.
8. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended July 31, 1996 were $6,434,765
and $4,628,630, respectively.
</FN>
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks as high a level of current interest income exempt from
Federal and Pennsylvania personal income taxes for individual investors as is
available from Municipal Securities and consistent with preservation of capital.
Since market risks are inherent in all securities to varying degrees, assurance
cannot be given that the Fund will achieve its investment objective.
Investment Policies and Strategies. The Fund seeks its objective by following
the fundamental policy of investing, under normal market conditions, at least
80% (and attempting to invest, as a non-fundamental policy, 100%) of its total
assets in Municipal Securities and making no investment that will reduce to less
than 80% the portion of its total assets that are invested in Pennsylvania
Municipal Securities (which are described below).
Dividends paid by the Fund derived from interest attributable to
Pennsylvania Municipal Securities, and obligations of certain U.S. territories
and possessions, will be exempt from Federal individual income taxes,
Pennsylvania personal income taxes and, in the case of residents of
Philadelphia, the investment income tax of the School District of Philadelphia.
Dividends derived from interest on Municipal Securities of other governmental
issuers will be exempt from Federal individual income tax, but will be subject
to Pennsylvania personal income taxes. Although exempt-interest
-9-
<PAGE>
dividends will not be subject to federal income tax for Fund shareholders, a
portion of such dividends which is derived from interest on certain "private
activity" bonds may be an item of tax preference if you are subject to the
federal alternative minimum tax. Any net interest income on taxable investments
and repurchase agreements will be taxable as ordinary income when distributed to
shareholders.
o Can the Fund's Investment Objective and Policies Change? The Fund has
an investment objective, which is described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the Fund uses
certain investment techniques and strategies in carrying out those investment
policies. The Fund's investment policies and techniques are not "fundamental"
unless this Prospectus or the Statement of Additional Information says that a
particular policy is "fundamental." The Fund's investment objective is a
fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
percentage of outstanding voting shares (and this term is explained in the
Statement of Additional Information). The Board of Trustees of the Trust (as
defined below) (the "Board of Trustees") may change non-fundamental policies
without shareholder approval, although significant changes will be described in
amendments to this Prospectus.
o Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund generally will not engage in the trading
of securities for the purpose of realizing short-term gains, but the Fund may
sell securities as the Manager deems advisable to take advantage of
differentials in yield. The "Financial Highlights" table above, shows the Fund's
portfolio turnover rate during past first fiscal years. Portfolio turnover
affects brokerage costs, dealer markup and other transaction costs, and results
in the Fund's realization of capital gains or losses for tax purposes.
Investment Risks
All investments carry risks to some degree, whether they are risks that
market prices of the investment will fluctuate (this is
-10-
<PAGE>
known as "market risk") or that the underlying issuer will experience financial
difficulties and may default on its obligation under a fixed-income investment
to pay interest and repay principal (this is referred to as "credit risk").
These general investment risks, and the special risks of certain types of
investments that the Fund may hold are described below. They affect the value of
the Fund's investments, its investment performance, and the prices of its
shares. These risks collectively form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for investors who are
investing for the long term. It is not intended for investors seeking assured
income. While the Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased, and in some cases by
using hedging techniques, changes in overall market prices can occur at any
time, and because the income earned on securities is subject to change, there is
no assurance that the Fund will achieve its investment objective. When you
redeem your shares, they may be worth more or less than what you paid for them.
o Special Considerations - Pennsylvania Municipal Securities. The Fund
concentrates its investments in Municipal Securities issued by Pennsylvania and
its agencies, authorities, instrumentalities and subdivisions. The market value
and marketability of Pennsylvania Municipal Securities and the interest income
and repayment of principal to the Fund from them could be adversely affected by
a default or a financial crisis relating to any of such issuers. For example,
the Commonwealth of Pennsylvania and certain of its municipalities (most notably
the City of Philadelphia) have from time to time experienced significant budget
deficits and other financial difficulties. Investors should consider these
matters as well as economic trends in Pennsylvania, which are discussed in the
Statement of Additional Information.
o Interest Rate Risk. The values of Municipal Securities will change in
response to changes in prevailing interest rates. Should interest rates rise,
the values of outstanding Municipal Securities will probably decline and (if
purchased at principal amount) would sell at a discount. If interest rates fall,
the values of outstanding Municipal Securities will probably increase and (if
purchased at principal amount) would sell at a premium.
-11-
<PAGE>
Changes in the values of Municipal Securities owned by the Fund from these or
other factors will not affect interest income derived from these securities but
will affect the Fund's net asset value per share.
o There are special risks in investing in derivative investments. The
risks of investing in derivative investments include not only the ability of the
issuer of the derivative investment to pay the amount due on the maturity of the
investment, but also the risk that the underlying security or investment might
not perform the way the Manager expected it to perform. That can mean that the
Fund will realize less income than expected. Another risk of investing in
derivative investments is that their market value could be expected to vary to a
much greater extent than the market value of municipal securities that are not
derivative investments but have similar credit quality, redemption provisions
and maturities.
o Non-diversification. The Trust is a "non-diversified" investment
company under the Investment Company Act. As a result, the Fund may invest its
assets in a single issuer or limited number of issuers without limitation by
that Act. However, the Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), pursuant to which (i) not more than 25% of the market value of
the Fund's total assets will be invested in the securities of a single issuer,
and (ii) 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 Fund must not own more than 10% of the
outstanding voting securities of a single issuer.
An investment in the Fund will 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 Fund's portfolio, and economic, political or regulatory developments may
have a greater impact on the value of the Fund's portfolio than would be the
case if the portfolio were diversified among more issuers.
o Hedging instruments can be volatile investments and may
involve special risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
-12-
<PAGE>
different from what is required for normal portfolio management. If the Manager
uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund could
also experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option. Such losses
might cause previously distributed short-term capital gains to be
re-characterized as a non-taxable return of capital to shareholders.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment at
the call price and will not be able to realize any profit if the investment has
increased in value above the call price. Interest rate swaps are subject to
credit risks (if the other party fails to meet its obligations) and also to
interest rate risks. The Fund could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate changes.
These risks are described in greater detail in the Statement of Additional
Information.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies
described below. These techniques involve certain risks. The Statement of
Additional Information contains more information about these practices,
including limitations on their use that are designed to reduce some of the
risks.
o Municipal Securities. Municipal Securities consist of municipal
bonds, municipal notes (including tax anticipation notes, bond anticipation
notes, revenue anticipation notes, construction loan notes and other short-term
loans), tax-exempt commercial paper and other debt obligations issued by or on
behalf of the Commonwealth of Pennsylvania or its political subdivisions, 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 income tax in the opinion of
-13-
<PAGE>
bond counsel to the respective issuer at the time of issue. Pennsylvania
Municipal Securities are Municipal Securities the interest from which is not
subject to Pennsylvania personal income tax in the opinion of bond counsel for
the respective issuer at the time of issue. No independent investigation has
been made by the Manager as to the users of proceeds of bond offerings or the
application of such proceeds.
"Municipal bonds" are Municipal Securities that have a maturity when
issued of one year or more and "municipal notes" are Municipal Securities that
have a maturity when issued of less than one year. The two principal
classifications of Municipal Securities are "general obligations" (secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest) and "revenue obligations" (payable only from the
revenues derived from a particular facility or class of facilities, or specific
excise tax or other revenue source). The Fund may invest in Municipal Securities
of both classifications. See "Investment Objective and Policies" in the
Statement of Additional Information for further information about the Fund's
investment policies and Municipal Securities.
o Investments in Taxable Securities and Temporary Defensive Investment
Strategy. Under normal market conditions, the Fund may invest up to 20% of its
assets in taxable investments, including (i) certain "Temporary Investments"
(described in the next paragraph); (ii) hedging instruments (described in
"Hedging," below); (iii) repurchase agreements.
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary "defensive"
position by investing some or all of its assets (there is no limit on the
amount) in short-term money market instruments. These include the taxable
obligations described above, U.S. Government securities, bank obligations,
commercial paper, corporate obligations and other instruments approved by the
Board of Trustees. This strategy would be implemented to attempt to reduce
fluctuations in the value of the Fund's assets. The Fund may hold temporary
investments pending the investment of proceeds from the sale of Fund shares or
portfolio securities, pending settlement of purchases of Municipal Securities,
or to meet anticipated redemptions. To the extent the Fund assumes a temporary
defensive position, a portion of the Fund's distributions
-14-
<PAGE>
may be subject to Federal and state income taxes and the Fund may
not achieve its objective.
o Municipal Lease Obligations. Municipal leases may take the form of a
lease or an installment purchase contract issued by state and local government
authorities to obtain funds to acquire a wide variety of equipment and
facilities. The Fund may invest in certificates of participation that represent
a proportionate interest in or right to the lease-purchase payments under
municipal lease obligations. Certain of these securities may be deemed to be
"illiquid" securities and their purchase would be limited as described below in
"Illiquid and Restricted Securities". Investment in certificates of
participation that the Manager has determined to be liquid (under guidelines set
by the Board of Trustees) will not be subject to such limitations.
o Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest rates.
Variable rates are adjustable at stated periodic intervals. Floating rates are
automatically adjusted according to a specified market rate for such
investments, such as the percentage of the prime rate of a bank, or the 91-day
U.S. Treasury Bill rate. Such obligations may be secured by bank letters of
credit or other credit support arrangements.
o Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments". The Fund may use some
derivative investments for hedging purposes, and may invest in others because
they offer the potential for increased income and principal value. In general, a
"derivative investment" is a specially-designed investment. Its performance is
linked to the performance of another investment or security, such as an option,
future or index. In the broadest sense, derivative investments include
exchange-traded options and futures contracts (please refer to "Hedging,"
below).
The Fund may invest in "inverse floater" variable rate bonds, a type of
derivative investment whose yields move in the opposite direction from changes
in short-term interest rates. As interest rates rise, inverse floaters produce
less current income. Their price may be more volatile than the price of a
comparable fixed-rate security. Some inverse floaters have a "cap" whereby if
interest rates rise above the "cap," the security pays additional
-15-
<PAGE>
interest income. If rates do not rise above the "cap," the Fund will have paid
an additional amount for a feature that proves worthless. The Fund may also
invest in municipal securities that pay interest that depends on an external
pricing mechanism, also a type of derivative investment. Examples of external
pricing mechanisms are interest rate swaps or caps and municipal bond or swap
indices. The Fund anticipates that under normal circumstances it will invest no
more than 10% of its net assets in inverse floaters.
o Ratings of Municipal Securities; Special Risks of Lower Rated
Municipal Securities. No more than 25% of the Fund's total assets will be
invested in Municipal Securities that at the time of purchase are not
"investment grade," that is, rated below the four highest rating categories of
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc. or any
other nationally recognized statistical rating organization. If the securities
are not rated, the Manager will determine the equivalent rating category for
purposes of this limitation. (See Appendix A to the Statement of Additional
Information for a description of those ratings). A reduction in the rating of a
security after its purchase by the Fund will not require the Fund to dispose of
such security.
Lower-grade Municipal Securities (sometimes called "municipal junk
bonds") may be subject to greater market fluctuations and are subject to greater
risks of loss of income and principal than higher-rated Municipal Securities,
and may be considered to have some speculative characteristics. Securities that
are or that have fallen below investment grade entail a greater risk that the
ability of the issuers of such securities to meet their debt obligations will be
impaired. There may be less of a market for lower-grade Municipal Securities and
therefore they may be harder to sell at an acceptable price. These risks mean
that the Fund may not achieve the expected income from lower-grade Municipal
Securities, and that the Fund's income and net asset value per share may be
affected by declines in value of these securities. However, the Fund's
limitations on investments in non-investment grade Municipal Securities may
reduce some of these risks.
o When-Issued and Delayed Delivery Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis and may
-16-
<PAGE>
purchase or sell such securities on a "delayed delivery" basis. These terms
refer to securities that have been created and for which a market exists, but
which are not available for immediate delivery. There may be a risk of loss to
the Fund if the value of the security declines prior to the settlement date.
o Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. They are used primarily for cash liquidity purposes.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may incur
costs in disposing of the collateral and may experience losses if there is any
delay in its ability to do so. The Fund will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days. There is no limit on
the amount of the Fund's net assets that may be subject to repurchase agreements
of seven days or less.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Board of Trustees, the Manager determines the liquidity of
certain of the Fund's investments. Investments may be illiquid because of the
absence of an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. The Fund will not invest more
than 10% of its net assets in illiquid investments (the Board may increase that
limit to 15%). The Fund may not invest any portion of its assets in restricted
securities. A restricted security is one that has a contractual restriction on
its resale or that cannot be sold publicly until registered under the Securities
Act of 1933, as amended.
o Loans of Portfolio Securities. To attempt to increase its income, the
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions. The Fund must receive collateral for a loan. These loans are
limited to not more than 25% of the Fund's net assets and are subject to other
conditions described in the Statement of Additional Information. The Fund
presently does not intend to lend its portfolio securities, but if it does, the
value of securities loaned is not expected to exceed 5% of the value of its
total assets in the coming year.
-17-
<PAGE>
o Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, and options on futures and
broadly-based municipal bond indices, or enter into interest rate swap
agreements. These are all referred to as "hedging instruments." The Fund does
not use hedging instruments for speculative purposes, and has limits on the use
of them, described below. The hedging instruments the Fund may use are described
below and in greater detail in "Other Investment Techniques and Strategies" in
the Statement of Additional Information.
The Fund may buy and sell options and futures for a number of purposes.
It may do so to try to manage its exposure to the possibility that the prices of
its portfolio securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. It may do so to try to manage its exposure to changing interest
rates. Some of these strategies, such as selling futures, buying puts and
writing covered calls, hedge the Fund's portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options, tend
to increase the Fund's exposure to the securities market. Writing covered call
options may also provide income to the Fund for liquidity purposes, defensive
reasons, or to raise cash to distribute to shareholders.
o Futures. The Fund may buy and sell futures contracts that relate to
(1) broadly-based municipal bond indices (these are referred to as Municipal
Bond Index Futures) and (2) interest rates (these are referred to as Interest
Rate Futures). These types of Futures are described in "Hedging" in the
Statement of Additional Information.
o Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).
The Fund may buy calls only on securities, broadly-based municipal bond
indices, Municipal Bond Index Futures or Interest Rate Futures, or to terminate
its obligation on a call the Fund previously wrote. The Fund may write (that is,
sell) covered call options. When the Fund writes a call, it receives cash
(called a premium). The call gives the buyer the ability to buy the
-18-
<PAGE>
investment on which the call was written from the Fund at the call price during
the period in which the call may be exercised. If the value of the investment
does not rise above the call price, it is likely that the call will lapse
without being exercised, while the Fund keeps the cash premium (and the
investment).
The Fund may purchase puts. Buying a put on an investment gives the
Fund the right to sell the investment at a set price to a seller of a put on
that investment. The Fund can buy only those puts that relate to (1) securities
that the Fund owns, (2) broadly- based municipal bond indices, (3) Municipal
Bond Index Futures or (4) Interest Rate Futures. The Fund can buy a put on a
Municipal Bond Index Future or Interest Rate Future whether or not the Fund owns
the particular Future in its portfolio. The Fund may not sell a put other than a
put that it previously purchased.
The Fund may buy and sell puts and calls only if certain conditions are
met: (1) after the Fund writes a call, not more than 25% of the Fund's total
assets may be subject to calls; (2) calls the Fund buys or sells must be listed
on a securities or commodities exchange, or quoted on the Automated Quotation
System ("NASDAQ") of the Nasdaq Stock Market, Inc., or traded in the
over-the-counter market; (3) each call the Fund writes must be "covered" while
it is outstanding (that means the Fund must own the investment on which the call
was written); (4) the Fund may write calls on Futures contracts it owns, but
these calls must be covered by securities or other liquid assets the Fund owns
and segregates to enable it to satisfy its obligations if the call is exercised;
(5) a call or put option may not be purchased if the value of all of the Fund's
put and call options would exceed 5% of the Fund's total assets; and (6) the
aggregate premiums paid on all such options which the Fund holds at any time
will be limited to 20% of the Fund's total assets, and the aggregate margin
deposits on all such futures or options thereon at any time will be limited to
5% of the Fund's total assets.
o Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest on a
security. For example, they may swap a right to receive floating rate payments
for fixed rate payments. The Fund enters into swaps only on securities it owns.
The Fund may not enter into swaps with respect to more than 25% of its total
assets. Also, the Fund will segregate liquid assets
-19-
<PAGE>
(such as cash or U.S. Government securities) to cover any amounts
it could owe under swaps that exceed the amounts it is entitled to
receive, and it will adjust that amount daily, as needed. Income
from interest rate swaps may be taxable.
Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies. Under these
fundamental policies, the Fund cannot do any of the following:
o Invest in securities or any investment other than the Municipal Securities,
temporary investments, taxable investments and hedging instruments described in
"Investment Objective and Policies," above.
o Make loans, except through the purchase of portfolio securities subject to
repurchase agreements or through loans of portfolio securities as described
under "Loans of Portfolio Securities".
o Borrow money in excess of 10% of the value of its total assets, or make any
investment whenever borrowings exceed 5% of the Fund's total assets; it may
borrow only from banks as a temporary measure for extraordinary or emergency
purposes (not for the purpose of leveraging its investments).
o Pledge, mortgage or otherwise encumber, transfer or assign any of its assets
to secure a debt; collateral arrangements for premium and margin payments in
connection with hedging instruments are not deemed to be a pledge of assets.
o Concentrate investments to the extent of more than 25% of its total assets in
any industry; however, there is no limitation as to investment in Municipal
Securities, U.S. Government obligations or in obligations issued by Pennsylvania
or its subdivisions, agencies, authorities or instrumentalities.
o Buy or sell futures contracts other than interest rate futures or municipal
bond index futures.
Unless the prospectus states that a percentage restrictions applies on
an ongoing basis, it applies only at the time the Fund purchases an investment,
and the Fund need not sell securities to meet the percentage limits if the value
of the investment increases in proportion to the size of the Fund. Other
investment
-20-
<PAGE>
restrictions are listed in "Investment Restrictions" in the
Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1989 as a Massachusetts
business trust (the "Trust") with one series. In June 1993, the Trust was
reorganized to become a multi-series business trust called Oppenheimer
Multi-State Municipal Trust, and the Fund became a separate series of it. The
Trust is an open-end, non-diversified management investment company, with an
unlimited number of authorized shares of beneficial interest. Each of the three
series of the Trust is a fund that issues its own shares, has its own investment
portfolio, and its own assets and liabilities.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Trust" in the Statement of Additional Information names the Trustees and
provides more information about them and the officers of the Trust. Although the
Trust will not normally hold annual meetings of Fund shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Trust's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All three classes invest in the same investment portfolio. Each class
has its own dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a different net asset
value. Each share has one vote at shareholder meetings, with fractional shares
voting proportionally. Only shares of a particular class vote as a class on
matters that affect that class alone. Shares are freely transferrable. Please
refer to "How the Fund is Managed" in the Statement of Additional Information on
voting of shares.
-21-
<PAGE>
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out its
duties, subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement which states the Manager's responsibilities. The
Agreement sets forth the fees paid by the Fund to the Manager, and describes the
expenses that the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $55 billion as of
September 30, 1996, with more than 3 million shareholder accounts. The Manager
is owned by Oppenheimer Acquisition Corp., a holding company that is owned in
part by senior officers of the Manager and controlled by Massachusetts Mutual
Life Insurance Company.
o Portfolio Manager. The Portfolio Manager of the Fund (who
is also a Vice President of the Fund) is Robert E. Patterson, who
is also a Senior Vice President of the Manager. He has been the
person principally responsible for the day-to-day management of the
Fund's portfolio since September 1989. Mr. Patterson also serves
as an officer and portfolio manager for other Oppenheimer funds.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional assets
as the Fund grows: 0.60% of the first $200 million of average annual net assets;
0.55% of the next $100 million; 0.50% of the next $200 million; 0.45% of the
next $250 million; 0.40% of the next $250 million; and 0.35% of average annual
net assets over $1 billion. The Fund's management fee for its fiscal year was
0.60% of average annual net assets for Class A, Class B and Class C shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal fees and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset value of
shares, and therefore are indirectly borne by shareholders through their
investment. More information about the Investment Advisory Agreement and the
other
-22-
<PAGE>
expenses paid by the Fund is contained in the Statement of
Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it therefore
incurs relatively little expense for brokerage. From time to time, however, it
may use brokers when buying portfolio securities. When deciding which brokers to
use, the Manager is permitted by the Investment Advisory Agreement to consider
whether brokers have sold shares of the Fund or any other funds for which the
Manager serves as investment adviser.
o The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with OppenheimerFunds Distributor, Inc., a
subsidiary of the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of other "Oppenheimer funds" and is sub-distributor
for funds managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return,"
"average annual total return," "standardized yield," "dividend yield," "yield"
and "tax-equivalent yield" to illustrate its performance. The performance of
each class of shares is shown separately, because the performance of each class
of shares will usually be different as a result of the different kinds of
expenses each class bears. These returns and yields measure the performance of a
hypothetical account in the Fund over
-23-
<PAGE>
various periods, and do not show the performance of each shareholder's account
(which will vary if dividends are received in cash, or shares are sold or
purchased). The Fund's performance may help you see how well your Fund has done
over time and to compare it to other funds or to a market index.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions of
future returns or performance. This performance data is described below, but
more detailed information about how total returns and yields are calculated is
contained in the Statement of Additional Information, which also contains
information about indices and other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time, depending on
market conditions, the composition of the portfolio, expenses and which class of
shares you purchase.
o Total Returns. There are different types of "total returns" used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted.
However, total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be less if
sales charges were deducted.
o Yield. Each class of shares calculates its yield by
dividing the annualized net investment income per share from the
portfolio during a 30-day period by the maximum offering price on
the last day of the period. The yield of each class will differ
because of the different expenses of each class of shares. The
-24-
<PAGE>
yield data represents a hypothetical investment return on the portfolio, and
does not measure an investment return based on dividends actually paid to
shareholders. To show that return, a dividend yield may be calculated. Dividend
yield is calculated by dividing the dividends of a class derived from net
investment income during a stated period by the maximum offering price on the
last day of the period. Yields and dividend yields for Class A shares reflect
the deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B and Class C shares
do not reflect the deduction of the contingent deferred sales charge. The tax-
equivalent yield is the equivalent yield that would be earned in the absence of
taxes. It is calculated by dividing that portion of the yield that is tax-exempt
by a factor equal to one minus the applicable tax rate.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its last fiscal year ended July 31, 1996, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. During the Fund's fiscal year
ended July 31, 1996, the Fund's performance was affected by several economic and
market factors. A major factor in the Fund's performance was the portfolio
manager's emphasis on pre- refunded bonds, with shorter effective maturities
which performed well compared to other municipal bonds. Another factor was the
small percentage owned of municipal bonds trading at a discount. Discount bonds
tend to be more volatile than bonds trading at par or a premium. Holdings in
long-term municipal bonds underperformed other municipal bond sectors. Weighting
in this sector over the past six months has been lowered.
o Comparing the Fund's Performance to the Market. The graphs below show
the performance of a hypothetical $10,000 investment in each class of shares of
the Fund held until December 31, 1995. In the case of Class A shares,
performance is measured from the Fund's inception on September 18, 1989, in the
case of Class B shares, from the inception of the Class on May 1, 1993 and in
the case of Class C shares, from the inception of the Class on August 29, 1995.
The Fund's performance is compared to that of the Lehman Brothers
Municipal Bond Index, an unmanaged index of a broad range
-25-
<PAGE>
of investment grade municipal bonds that is widely regarded as a measure of the
performance of the general municipal bond market. Index performance reflects the
reinvestment of income but does not consider the effect of capital gains or
transaction costs, and none of the data below shows the effect of taxes. Also,
the Fund's performance data reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the securities in any one index. Moreover, the index performance data does
not reflect any assessment of the risk of the investments included in the index.
<TABLE>
<CAPTION>
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Oppenheimer Pennsylvania Municipal Fund
and The Lehman Brothers Municipal Bond Index
[Graph]
Past Performance is not predictive of future
performance.
Average Annual Total Returns of the Fund at 7/31/96
1 Year 5 year Life
------ ------ -----
<S> <C> <C> <C>
Class A: 1.30% 5.91% 6.49%(1)
Class B: 0.55% 3.43%(2)
Class C: 4.39%(3)
- -----------------
Total returns and the ending account values in the graph show change in share
value and include reinvestment of all dividends and capital gains distributions.
<FN>
(1) The inception of the Fund (Class A shares) was 9/18/89. Class A returns are
shown net of the current applicable 4.75% maximum initial sales charge.
(2)Class B shares of the Fund were first publicly offered on 5/1/93. The
average annual total returns reflect reinvestment of all dividends and
capital gains distributions and are shown net of the applicable 5% and 3%
contingent deferred sales charges, respectively, for the one year period and
life-of-the-class. The
-26-
<PAGE>
ount value in the graph is net of the applicable 3% sales charge. (3)
Class C shares of the Fund were first publicly offered on 8/29/95. The
life-of-the-class is shown net of the applicable 1% contingent deferred sales
charge.
</FN>
</TABLE>
Past performance is not predictive of future performance. Graphs are not drawn
to same scale.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
o Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million). If you purchase Class A shares as part
of an investment of at least $1 million in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 18 months of buying them, you may pay a contingent deferred sales
charge. The amount of that sales charge will vary depending on the amount you
invested. Sales charge rates are described in "Buying Class A Shares," below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares, as described in "Buying
Class B Shares" below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
described in "Buying Class C Shares" below.
-27-
<PAGE>
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decisions as to which class of shares is
best suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class and considered the effect of the annual
asset-based sales charge on Class B and Class C expenses (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns and the operating
expenses borne by each class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you expect
to hold your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will also
depend on how much you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time, offset the
effect of paying an initial sales charge on your investment (which reduces the
amount of your investment dollars used to buy shares for your account), compared
to the effect over time of higher
-28-
<PAGE>
class-based expenses on Class B or Class C shares for which no initial sales
charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than seven years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C shares (as well as Class
B shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C shares (and
Class B shares). If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C shares from a single investor.
o Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to your
money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less
-29-
<PAGE>
than $100,000. If you plan to invest more than $100,000 over the long term,
Class A shares will likely be more advantageous than Class B shares or C shares,
as discussed above, because of the effect of the expected lower expenses for
Class A shares and the reduced initial sales charges available for larger
investments in Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore you should
analyze your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features such as checkwriting may not be available to Class B or
Class C shareholders, or other features (such as Automatic Withdrawal Plans) may
not be advisable (because of the effect of the contingent deferred sales charge)
for Class B or Class C shareholders, you should carefully review how you plan to
use your investment account before deciding which class of shares to buy.
Additionally, dividends payable to Class B and Class C shareholders will be
reduced by the additional expenses borne by those classes that are not borne by
Class A, such as the Class B and Class C asset-based sales charges described
below and in the Statement of Additional Information. Share certificates are not
available for Class B and Class C shares, and if you are considering using your
shares as collateral for a loan, that may be a factor to consider.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the Class B and Class C contingent deferred sales charge and
asset-based sales charges is the same as the purpose of the front-end sales
charge on sales of Class A shares: that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
-30-
<PAGE>
minimum investments under special investment plans.
With Asset Builder Plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments for as
little as $25; and subsequent purchases of at least $25 can be made by telephone
through AccountLink.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer funds (a list
of them appears in the Statement of Additional Information, or you can ask your
dealer or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is appropriate for
you.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to send redemption
proceeds and to have the Transfer Agent transmit dividends and distributions.
-31-
<PAGE>
Shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the ACH transfer to buy shares. You
can provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds PhoneLink,
also described below. You should request AccountLink privileges on the
application or dealer settlement instructions used to establish your account.
Please refer to "AccountLink" below for more details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to
four other Oppenheimer funds) automatically each month from your account at a
bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of Additional
Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado. In most cases, to enable you to receive that day's offering
price, the Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally 4:00 P.M., New
York time, but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each class of shares is
determined as of that time on each day The New York Stock Exchange is open
(which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your order
by the close of The New York Stock Exchange on a regular business day and
transmit it to the Distributor so that it is received before the Distributor's
close of business that day, which is normally 5:00 P.M. The Distributor may
reject any purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A in
this prospectus sets forth conditions for the waiver of, or exemption from,
sales charges or the special sales charge rates that apply to purchases of
shares of the Fund (including purchases by exchange) by a person who was a
shareholder of one of the former Quest for Value Funds (as defined in that
Appendix).
-32-
<PAGE>
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Percentage Percentage of Offering
of Offering of Amount Price
Amount of Purchase Price Invested
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- -------------------------------------------------------------------------------------------------------------------
$50,000 or more
but less than
$100,000 4.50% 4.71% 4.00%
- --------------------------------------------------------------------------------------------------------------------
$100,000 or more
but less than
$250,000 3.50% 3.63% 3.00%
- --------------------------------------------------------------------------------------------------------------------
$250,000 or more
but less than
$500,000 2.50% 2.56% 2.25%
$500,000 or more
but less than
$1 million 2.00% 2.04% 1.80%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter" under
Federal securities laws.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more.
-33-
<PAGE>
The Distributor pays dealers of record commissions on those
non-retirement plan purchases in an amount equal to the sum of 1.0%. That
commission will be paid only on the amount of those purchases that were not
previously subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge (called the
"Class A contingent deferred sales charge") may be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gain distributions) or (2) the original
offering price (which is the original net asset value) of the redeemed shares.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer on all
Class A shares of all Oppenheimer funds you purchased subject to the Class A
contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 months of the end of the
calendar month of the purchase of the exchanged shares, the sales charge will
apply.
o Special Arrangements With Dealers. The Distributor may advance up to
13 months' commissions to dealers that have established special arrangements
with the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
-34-
<PAGE>
o Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts, on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can also
include Class A and Class B shares of Oppenheimer funds you previously purchased
subject to an initial or contingent deferred sales charge to reduce the sales
charge rate for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of those shares
will be based on the greater of the amount you paid for the shares or their
current value (at offering price). The Oppenheimer funds are listed in "Reduced
Sales Charges" in the Statement of Additional Information, or a list can be
obtained from the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares.
The total amount of your intended purchases of both Class A and Class B shares
will determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before the
date of the Letter. More information is contained in the Application and in
"Reduced Sales Charges" in the Statement of Additional Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
-35-
<PAGE>
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker, bank or advisor for the purchase or sale of Fund shares);
o directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts; or
o any unit investment trust that has entered into an appropriate
agreement with the Distributor.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
-36-
<PAGE>
o shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the past 12 months from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below); or
o if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales charge, the
dealer agrees in writing to accept the dealer's portion of the commission
payable on the sale in installments of 1/18th of the commission per month (and
no further commission will be payable if the shares are redeemed within 18
months of purchase).
o Service Plan for Class A Shares. The Fund has adopted a Service Plan
for Class A shares to reimburse the Distributor for a portion of its costs
incurred in connection with the personal service and maintenance of accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate that
may not exceed 0.15% of the average annual net assets of Class A shares of the
Fund. The Distributor uses all of those fees to compensate
-37-
<PAGE>
dealers, brokers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares and to reimburse itself (if the Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.15% of the average
annual net assets of Class A shares held in accounts of the service providers or
their customers. The payments under the Plan increase the annual expenses of
Class A shares. For more details, please refer to "Distribution and Service
Plans" in the Statement of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
-38-
<PAGE>
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
<S> <C>
- ----------------------------------------------------------------------------------------------------
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the month in
which the purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
o Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate the
Distributor for distributing Class B shares and servicing accounts. This Plan is
described below under "Buying Class C Shares - Distribution and Service Plans
for Class B and Class C Shares."
-39-
<PAGE>
o Waivers of Class B Sales Charges. The Class B contingent deferred
sales charge will not apply to shares purchased in certain types of
transactions, nor will it apply to shares redeemed in certain circumstances, as
described below under "Buying Class C Shares - Waivers of Class B and Class C
Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if the Class C shares are redeemed
within 12 months of their purchase, a contingent deferred sales charge of 1.0%
will be deducted from the redemption proceeds. That sales charge will not apply
to shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
o Distribution and Service Plans for Class B and Class C Shares. The
Fund has adopted Distribution and Service Plans for Class B and Class C shares
to compensate the Distributor for distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays the Distributor an annual
"asset-based sales charge" of 0.75% per year on Class B shares that are
outstanding for 6 years or less and on Class C shares. Under the Plans, the
Distributor is entitled to receive a service fee of up to 0.25% per year under
each plan. The Board of Trustees has currently set the service fee at 0.15% per
year, which amount may be increased by the Board from time to time up to the
maximum of 0.25%.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of
-40-
<PAGE>
the close of each regular business day during the period. The asset-based sales
charge and service fees increase Class B and Class C expenses by up to 1.00% of
the net assets per year of the respective class.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class C shares.
Those services are similar to those provided under the Class A Service Plan,
described above. The Distributor pays the service fees to dealers in advance for
the first year after Class B or Class C shares have been sold by the dealer.
After the shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charge to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.85% of the
purchase price of Class B shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
0.90% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more.
-41-
<PAGE>
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B and Class C shares. If either Plan is terminated by the
Fund, the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for distributing shares before the
Plan was terminated.
At December 31, 1996 and July 31, 1996, the end of the Class B Plan years, the
Distributor had incurred unreimbursed expenses under the Class B Plan of
$473,840 and $547,290, respectively (equal to 3.28% and 3.42%, respectively, of
the Fund's net assets represented by Class B shares), which have been carried
over into the present plan year. At December 31, 1995 and July 31, 1996, the end
of the Class C Plan years, the Distributor had incurred unreimbursed expenses
under the Class C Plan of $2,309 and $3,768, respectively (equal to 0.88% and
0.78%, respectively, of the Fund's net assets represented by Class C shares),
which have been carried over into the present plan year.
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances, as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemption of shares in the
following cases:
o redemptions from accounts following the death or disability of the
last surviving shareholder, including a trustee of a "grantor" trust or
revocable living trust for which the trustee is also the sole beneficiary (the
death or disability must have occurred after the account was established and for
disability you must provide evidence of a determination of disability by the
Social Security Administration); or
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below.
-42-
<PAGE>
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C shares
sold or issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please refer to the
Application for details or call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can request
AccountLink privileges by sending signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder listed in
the registration on your account as well as to your dealer representative of
record unless and until the Transfer Agent receives written instructions
terminating or changing those privileges. After you establish AccountLink for
your account, any change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all shareholders who own
the account.
o Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the
-43-
<PAGE>
Distributor at 1-800-852-8457. The purchase payment will be debited from your
bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer fund account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Application and Statement of Additional
Information for more details.
o Automatic Exchange Plans. You can authorize the Transfer
Agent to automatically exchange an amount you establish in advance
for shares of up to five other Oppenheimer funds on a monthly,
-44-
<PAGE>
quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The
minimum purchase for each Oppenheimer fund account is $25. These exchanges are
subject to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C shares. You must be sure to ask
the Distributor for this privilege when you send your payment. Please consult
the Statement of Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day. Your shares
will be sold at the next net asset value calculated after your order is received
and accepted by the Transfer Agent. The Fund offers you a number of ways to sell
your shares: in writing, by using the Fund's checkwriting privilege or by
telephone. You can also set up Automatic Withdrawal Plans to redeem shares on a
regular basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special situation,
such as due to the death of the owner, please call the Transfer Agent first, at
1-800-525- 7048, for assistance.
o Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and must
include a signature guarantee in the following situations (there may be other
situations also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o The redemption check is not payable to all shareholders
listed on the account statement
-45-
<PAGE>
o The redemption check is not sent to the address of record on
your account statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are redeemed by someone other than the owners (such
as an Executor)
o Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the account is
registered, and o Any special requirements or documents requested by
the Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
-46-
<PAGE>
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but which may
be earlier on some days. You may not redeem shares held under a share
certificate by telephone.
o To redeem shares through a service representative, call 1-
800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that account.
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
o Telephone Redemptions Through AccountLink. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
Checkwriting. To be able to write checks against your Fund account, you may
request that privilege on your account Application or you can contact the
Transfer Agent for signature cards, which must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If you
previously signed a signature card to establish Checkwriting in another
Oppenheimer fund, simply call 1-800-525-7048 to request
-47-
<PAGE>
Checkwriting for an account in this Fund with the same registration as the
previous checkwriting account.
o Checks can be written to the order of whomever you wish, but may not
be cashed at the Fund's bank or custodian.
o Checkwriting privileges are not available for accounts holding Class
B shares or Class C shares, or Class A shares that are subject to a contingent
deferred sales charge.
o Checks must be written for at least $100.
o Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you
should not write a check close to the total account value.
o You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within the
prior 10 days.
o Don't use your checks if you changed your Fund account
number.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for more
information about this procedure. Please refer to "Special Arrangements for
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. To
exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale
in your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them; after the account is open 7 days,
you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
-48-
<PAGE>
o Before exchanging into a fund, you should obtain and read
its prospectus.
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of shares
which are considered to be "Class A shares" for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852- 8457 or by using
PhoneLink for automated exchanges, by calling 1- 800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that is in proper form by the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to seven days if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy shares. For
example, the receipt of multiple
-49-
<PAGE>
exchange requests from a dealer in a "market-timing" strategy might require the
sale of portfolio securities at a time or price disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the
shares of the fund you own and a purchase of the shares of the other Fund, which
may result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as
of the close of The New York Stock Exchange, which is normally 4:00 p.m. but may
be earlier on some days, on each day the Exchange is open by dividing the value
of the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are special
procedures for valuing illiquid and restricted securities, and obligations for
which market values cannot be readily obtained. These procedures are described
more completely in the Statement of Additional Information.
o The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
-50-
<PAGE>
offering may be suspended by the Board of Trustees at any time the Board
believes it is in the Fund's best interest to do so.
o Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless and
until the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time to
time, the Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and
-51-
<PAGE>
Class C shares. Therefore, the redemption value of your shares may be more or
less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within seven days after the Transfer
Agent receives redemption instructions in proper form, except under unusual
circumstances determined by the Securities and Exchange Commission delaying or
suspending such payments. For accounts registered in the name of a
broker-dealer, payment will be forwarded within three business days. The
Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase payment
has cleared. That delay may be as much as 10 days from the date the shares were
purchased. That delay may be avoided if you purchase shares by certified check
or arrange with your bank to provide telephone or written assurance to the
Transfer Agent that your purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if
the account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate
of 31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a certified Social Security or
Employer Identification Number when you sign your application, or if you violate
Internal Revenue Service regulations on tax reporting of income.
o The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be avoided
by redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in
-52-
<PAGE>
"How To Buy Shares," you may be subject to a contingent deferred sales charge
when redeeming certain Class A, Class B and Class C shares.
o To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask
that copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net tax-exempt income and/or net investment income each regular
business day and pays such dividends to shareholders monthly. Normally,
dividends are paid on or about the tenth business day of each month, but the
Board of Trustees can change that date. It is expected that distributions paid
with respect to Class A shares will generally be higher than for Class B and
Class C shares because expenses allocable to Class B and Class C shares will
generally be higher.
For the fiscal year ended December 31, 1995, the Fund maintained the
practice, to the extent consistent with the amount of the Fund's net investment
income and other distributable income, of attempting to pay dividends on Class A
shares at a constant level, although the amount of such dividends was subject to
change from time to time depending on market conditions, the composition of the
Fund's portfolio and expenses borne by the Fund or borne separately by that
class. The practice of attempting to pay dividends on Class A shares at a
constant level requires the Manager, consistent with the Fund's investment
objective and investment restrictions, to monitor the Fund's portfolio and
select higher yielding securities when deemed appropriate to maintain necessary
net investment income levels. The Fund anticipates paying dividends at the
targeted dividend level from net investment income and other distributable
income without any impact on the Fund's net asset value per share. The Board of
Trustees may change the Fund's targeted dividend level at any time, without
prior notice to shareholders; the Fund does not otherwise have a fixed dividend
rate and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
-53-
<PAGE>
Capital Gains. Although the Fund does not seek capital gains, it may realize
capital gains on the sale of portfolio securities. If it does, it may make
distributions out of any net short-term or long-term capital gains in December.
The Fund may make supplemental distributions of dividends and capital gains
following the end of its fiscal year (which ends December 31st). Long-term
capital gains will be separately identified in the tax information the Fund
sends you after the end of the year. Short-term capital gains are treated as
dividends for tax purposes. There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. You have
four options:
o Reinvest all distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains distributions in additional shares of the
Fund.
o Reinvest long-term capital gains only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or sent
to your bank account on AccountLink.
o Receive all distributions in cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them sent to
your bank account on AccountLink.
o Reinvest your distributions in another Oppenheimer fund account. You
can reinvest all distributions in another Oppenheimer fund account you have
established.
Taxes. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders for Federal income tax purposes. It does not matter
how long you hold your shares. Dividends paid from short-term capital gains and
net investment income are taxable as ordinary income for federal income tax
purposes. Dividends paid from net investment income earned by the Fund on
Municipal Securities will be excludable from your gross income for Federal
income tax purposes. A portion of the dividends paid by the Fund may be an item
of tax preference if you are subject to the Federal alternative minimum tax.
Certain distributions are subject to Federal income tax and may be subject to
state and/or local taxes. Such distributions are taxable when paid, whether you
reinvest them in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement
-54-
<PAGE>
showing the amount of each taxable distribution you received in the
previous year.
o "Buying a Dividend". When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or a capital gain.
o Taxes on Transactions. Even though the Fund seeks tax-exempt income
for distribution to shareholders, you may have a capital gain or loss when you
sell or exchange your shares. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking, a capital gain
or loss is the difference between the price you paid for the shares and the
price you received when you sold them. Any capital gain is subject to capital
gains tax.
o Returns of Capital. In certain cases distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If that
occurs, it will be identified in notices to shareholders. A non-taxable return
of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain Federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
-55-
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND
Graphic material included in Prospectus of Oppenheimer
Pennsylvania Municipal Fund: "Comparison of Change in Value of
$10,000 Hypothetical Investments in Oppenheimer Pennsylvania
Municipal Fund and the Lehman Brothers Municipal Bond Index
A linear graph will be included in the Prospectus of Oppenheimer Pennsylvania
Tax-Exempt Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in the Fund during each of
the Fund's fiscal years since the commencement of the Fund's operations as to
Class A shares (September 18, 1989), the initial public offering of Class B
shares (May 1, 1993) and the initial public offering of Class C shares (August
29, 1995) and comparing such values with the same investments over the same time
periods with the Lehman Brothers Municipal Bond Index. Set forth below are the
relevant data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description of the Lehman
Brothers Municipal Bond Index, is set forth in the Prospectus under "Performance
of the Fund - How Has the Fund Performed?"
<TABLE>
<CAPTION>
Fiscal Year Oppenheimer Pennsylvania Lehman Brothers
(Period) Ended Municipal Fund A Municipal Bond Index
- -------------- ------------------------ --------------------
<S> <C> <C>
9/18/89(1) $ 9,525 $10,000
12/31/89 $ 9,835 $10,384
12/31/90 $10,425 $11,140
12/31/91 $11,623 $12,493
12/31/92 $12,557 $13,594
12/31/93 $14,204 $15,264
12/31/94 $13,113 $14,474
12/31/95 $15,335 $17,003
7/31/96 $15,402 $17,080
Fiscal Year Oppenheimer Pennsylvania Lehman Brothers
(Period) Ended Municipal Fund B Municipal Bond Index
- -------------- ------------------------ --------------------
5/1/93(2) $10,000 $10,000
12/31/93 $10,667 $10,718
12/31/94 $ 9,780 $10,163
12/31/95 $11,351 $11,939
-56-
<PAGE>
7/31/96 $11,157 $11,993
Fiscal Year Oppenheimer Pennsylvania Lehman Brothers
(Period) Ended Municipal Fund C Municipal Bond Index
- -------------- ------------------------ --------------------
8/29/95(3) $10,000 $10,000
12/31/95 $10,555 $10,478
7/31/96 $10,439 $10,525
<FN>
(1) The Fund commenced operations on September 18, 1989.
(2) Class B shares of the Fund were first publicly offered on May
1, 1993.
(3) Class C shares of the Fund were first publicly offered on August 29, 1995.
</FN>
</TABLE>
-57-
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class
A, Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value Global
Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment adviser to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax- Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was (i) one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
o Purchases by Groups and Associations. The following table sets forth the
initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of securities if
that Association purchased shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995.
-58-
<PAGE>
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described on pages __ to __ of this Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of members of an Association
or the sales charge rate that applies under the Rights of Accumulation described
above in the Prospectus. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase shares
for their individual or custodial accounts at these reduced sales charge rates,
upon request to the Fund's Distributor.
o Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of Former Quest
for Value Funds into those Oppenheimer funds, and which shares were subject to a
Class A contingent deferred sales charge prior to November 24, 1995, will be
subject to a contingent deferred sales charge at the following rates: if they
are redeemed within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs within 12
months of their initial purchase and at a rate of 0.50 of 1.0% if the redemption
occurs in the subsequent six months. Class A shares of any of the Former Quest
for Value Funds purchased without an initial sales charge on or before November
22, 1995 will continue to be subject to the applicable
-59-
<PAGE>
contingent deferred sales charge in effect as of that date as set forth in the
then-current prospectus for such fund.
o Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not subject
to any Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6,
1995
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by the
merger of a Former Quest for Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest for Value Fund or into which such fund
merged, if those shares were purchased prior to March 6, 1995 in connection
-60-
<PAGE>
with (i) withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (ii) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less than the
required minimum value of such accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by the
merger of a Former Quest for Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such fund
merged, if those shares were purchased on or after March 6, 1995, but prior to
November 24, 1995: (1) redemptions following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability by the U.S.
Social Security Administration); (2) withdrawals under an automatic withdrawal
plan (but only for Class B or Class C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and (3) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, Class B or Class C shares of the Fund described
in this section if within 90 days after that redemption, the proceeds are
invested in the same Class of shares in this Fund or another Oppenheimer fund.
-61-
<PAGE>
Oppenheimer Pennsylvania Municipal Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
One Citicorp Center
New York, New York 10154
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds, Inc. OppenheimerFunds
Distributor, Inc., or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state. PR0740.001.1196 * Printed on recycled paper
-62-
<PAGE>
Oppenheimer Pennsylvania Municipal Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated November 25, 1996
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated November 25, 1996. It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217 or by calling the Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies..........................................
Investment Policies and Strategies....................................
Special Investment Considerations - Pennsylvania Municipal
Securities.........................................................
Other Investment Techniques and Strategies............................
Other Investment Restrictions.........................................
How the Fund is Managed ...................................................
Organization and History..............................................
Trustees and Officers of the Trust....................................
The Manager and Its Affiliates........................................
Brokerage Policies of the Fund.............................................
Performance of the Fund....................................................
Distribution and Service Plans.............................................
About Your Account
How To Buy Shares..........................................................
How To Sell Shares.........................................................
How To Exchange Shares.....................................................
Dividends, Capital Gains and Taxes.........................................
Additional Information About the Fund......................................
Financial Information About the Fund
Independent Auditors' Report...............................................
Financial Statements.......................................................
Appendix A: Description of Ratings Categories...............................A-1
Appendix B: Tax-Equivalent Yield Tables.....................................B-1
Appendix C: Industry Classifications........................................C-1
-1-
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
invests, as well as the strategies the Fund may use to try to achieve its
objective. Certain capitalized terms used in this Statement of Additional
Information have the same meaning as those terms used in the Prospectus.
The Fund will not make investments with the objective of seeking capital
growth. However, the value of the securities held by the Fund 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 normally rise. Thus, the Fund may realize a capital gain or loss
upon disposition of a portfolio security. There are, of course, variations in
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 market conditions, general
conditions of the Municipal Securities market, the size of a particular
offering, the maturity of the obligation and the 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 and Pennsylvania Municipal Securities. The types of
Municipal Securities in which the Fund may invest are described in the
Prospectus under "Investment Objective and Policies." A discussion of the
general characteristics of types of Municipal Securities follows.
o Municipal Bonds. The principal classifications of long-term municipal
bonds in which the Fund may invest are "general obligation" and "revenue" or
"industrial development" bonds.
o General Obligation Bonds. Issuers of general obligation bonds
include states, counties, cities, towns, and regional districts. The proceeds of
these obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
o Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects including: electric, gas, water and sewer systems; highways,
bridges, and tunnels;
-2-
<PAGE>
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 the money from which may be
used to make principal and interest payments on the issuer's obligations.
Housing finance authorities have a wide range of security, including partially
or fully insured mortgages, rent subsidized and/or collateralized mortgages,
and/or the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without obligation)
to make up deficiencies in the debt service reserve fund.
o Industrial Development Bonds. Industrial development bonds, which
are considered municipal bonds if the interest paid is exempt from federal
income tax, are issued by or on behalf of public authorities to raise money to
finance various privately operated facilities for business and manufacturing,
housing, sports, and pollution control. These bonds are also used to finance
public facilities such as airports, mass transit systems, ports, and parking.
The payment of the principal and interest on such bonds is dependent solely on
the ability of the facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment.
o Municipal Notes. Municipal Securities having a maturity when issued of
less than one year are generally known as municipal notes. Municipal notes
generally are used to provide for short-term working capital needs and include:
o Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use of
business taxes, and are payable from these specific future taxes.
o Revenue Anticipation Notes. Revenue anticipation notes are issued
in expectation of receipt of other types of revenue, such as federal revenues
available under the Federal revenue sharing programs.
o Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In most
cases, the long-term bonds then provide the money for the repayment of the
notes.
o Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and acceptance,
many projects receive permanent financing through the Federal Housing
Administration.
o Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is issued
by state and local governments or their agencies to finance seasonal working
capital needs or as short-term financing in anticipation of longer-term
financing.
-3-
<PAGE>
o Municipal Lease Obligations. From time to time the Fund may invest in
municipal lease obligations, some of which may be illiquid and others which the
Manager has determined to be liquid under guidelines set by the Board of
Trustees. Those guidelines require the Manager to evaluate (1) the frequency of
trades and price quotations for such securities; (2) the number of dealers or
other potential buyers willing to purchase or sell such securities; (3) the
availability of market-makers; and (4) the nature of the trades for such
securities. The Manager will also evaluate the likelihood of a continuing market
for such securities throughout the time they are held by the Fund, and the
credit quality of the instrument. Municipal leases may take the form of a lease
or an installment purchase contract issued by a state or local government
authority to obtain funds to acquire a wide variety of equipment and facilities.
Although lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non- appropriation" clauses which provide
that the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the risk of such "non-appropriation," municipal
lease securities do not yet have a highly developed market to provide the same
degree of liquidity as conventional municipal bonds. Municipal leases, like
other municipal debt obligations, are subject to the risk of non-payment. The
ability of issuers of municipal leases to make timely lease payments may be
adversely affected in general economic downturns and as relative governmental
cost burdens are reallocated among federal, state and local governmental units.
Such non-payment would result in a reduction of income to the Fund, and could
result in a reduction in the value of the municipal lease experiencing
non-payment and a potential decrease in the net asset value of the Fund.
o Private Activity Municipal Securities. The Tax Reform Act of 1986 (the
"Tax Reform Act") reorganized, as well as amended, the rules governing tax
exemption for interest on Municipal Securities. The Tax Reform Act generally
does not change the tax treatment of bonds issued in order to finance
governmental operations. Thus, interest on obligations issued by or on behalf of
state or local government, the proceeds of which are used to finance the
operations of such governments (e.g., general obligation bonds) continues to be
tax-exempt. However, the Tax Reform Act further limited the use of tax-exempt
bonds for non-governmental (private) purposes. More stringent restrictions were
placed on the use of proceeds of such bonds. Interest on certain private
activity bonds (other than those specified as "qualified" tax-exempt private
activity bonds, e.g., exempt facility bonds including certain industrial
development bonds, qualified mortgage bonds, qualified Section 501(c)(3) bonds,
qualified student loan bonds, etc.) is taxable under the revised rules.
Interest on certain private activity bonds issued after August 7, 1986,
which continues to be tax-exempt, will be treated as a tax preference item
subject to the alternative minimum tax (discussed below) to which certain
taxpayers are subject. Further, a private activity bond which would otherwise be
a qualified tax-exempt private activity bond will not, under Internal Revenue
Code Section 147(a), be a qualified bond for any period during which it is held
by a person who is a "substantial user" of the facilities or by a "related
person" of such a substantial user. This "substantial user" provision is
applicable primarily to exempt facility bonds, including industrial
-4-
<PAGE>
development bonds. The Fund may not be an appropriate investment for entities
which are "substantial users" (or persons related thereto) of such exempt
facilities, and such persons should consult their own tax advisers before
purchasing shares. A "substantial user" of such facilities is defined generally
as a "non-exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be a
"related person" under the Internal Revenue Code unless such investor or the
investor's immediate family (spouse, brothers, sisters and immediate
descendants) own directly or indirectly in the aggregate more than 50% in value
of the equity of a corporation or partnership which is a "substantial user" of a
facility financed from the proceeds of exempt facility bonds. In addition, the
Tax Reform Act revised downward the limitations as to the amount of private
activity bonds which each state may issue, which will reduce the supply of such
bonds. The value of the Fund's portfolio could be affected if there is a
reduction in the availability of such bonds. That value may also be affected by
a 1988 U.S. Supreme Court decision upholding the constitutionality of the
imposition of a Federal tax on the interest earned on Municipal Securities
issued in bearer form.
A Municipal Security is treated as a taxable private activity bond under a
test for: (a) a trade or business use and security interest, or (b) a private
loan restriction. Under the trade or business use and security interest test, an
obligation is a private activity bond if: (i) more than 10% of bond proceeds are
used for private business purposes and (ii) 10% or more of the payment of
principal or interest on the issue is directly or indirectly derived from such
private use or is secured by the privately used property or the payments related
to the use of the property. For certain types of uses, a 5% threshold is
substituted for this 10% threshold. (The term "private business use" means any
direct or indirect use in a trade or business carried on by an individual or
entity other than a state of 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 Fund makes no independent investigation of the users of such bonds or their
use of proceeds. If the Fund should hold a bond that loses its tax-exempt status
retroactively, there might be an adjustment to the tax-exempt income previously
paid to shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is accomplished
in part by including in taxable income certain tax preference items in arriving
at alternative minimum taxable income. The Tax Reform Act made tax-exempt
interest from certain private activity bonds a tax preference item for purposes
of the alternative minimum tax on individuals and corporations. Any
exempt-interest dividend paid by a regulated investment company will be treated
as interest on a specific private activity bond to the extent of its
proportionate share of the interest on such bonds received by the regulated
investment company. The 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
-5-
<PAGE>
minimum taxable income. The Fund may hold Municipal Securities the interest on
which (and thus a proportionate share of the exempt-interest dividends paid by
the Fund) will be subject to the Federal alternative minimum tax on individuals
and corporations. The Fund anticipates that under normal circumstances it will
not purchase any such securities in an amount greater than 20% of its total
assets.
o Ratings of Municipal Securities. Moody's, S&P's, Fitch's and Duff &
Phelps ratings (see Appendix A) represent their respective opinions of the
quality of the Municipal Securities they undertake to rate. However, such
ratings are general and are not absolute standards of quality. Consequently,
Municipal Securities with the same maturity, coupon and rating may have
different yields, while Municipal Securities of the same maturity and coupon
with different ratings may have the same yield. Investment in lower quality
securities may produce a higher yield than securities rated in the higher rating
categories described in the Prospectus (or judged by the Manager to be of
comparable quality). However, the added risk of lower quality securities might
not be consistent with a policy of preservation of capital.
Special Investment Considerations - Pennsylvania Municipal Securities. As
explained in the Prospectus, the Fund is highly sensitive to the fiscal
stability of Pennsylvania and its subdivisions, agencies, instrumentalities or
authorities which issue the Pennsylvania Municipal Securities in which the Fund
concentrates its investments. Investors should also consider the factors
discussed below under "Other Investment Techniques and Strategies."
The following information as to the fiscal condition of the Commonwealth
of Pennsylvania (the "Commonwealth") is provided in view of the Fund's policy of
investing primarily in securities of Pennsylvania issuers. Such information is
derived from sources that are generally available to investors. Although the
Fund has not independently verified any of this information, it is not aware of
any inaccuracies. Such information constitutes only a brief summary, does not
purport to be a complete description and is based on information from official
statements relating to securities offerings of Pennsylvania issuers.
Pennsylvania has historically been identified as a heavy industry state
although that reputation has changed over the last thirty years as the coal,
steel and railroad industries declined and the Commonwealth's business
environment readjusted to reflect a more diversified industrial base. This
economic readjustment was a direct result of a long-term shift in jobs,
investment and workers away from the northeast part of the nation. Currently,
the major sources of growth in Pennsylvania are in the service sector, including
trade, medical and the health services, education and financial institutions.
The Commonwealth and certain of its counties, cities and school districts
and public bodies have from time to time in the past encountered financial
difficulties which have adversely affected their respective credit standings and
borrowing abilities. The following are highlights of certain factors bearing on
the financial conditions of such entities.
-6-
<PAGE>
The General Fund, the Commonwealth's largest fund, receives all tax
revenue, non-tax revenues and Federal grants and entitlements that are not
specified by law to be deposited elsewhere. The majority of the Commonwealth's
operating and administrative expenses are payable from the General Fund. Debt
service on all bonded indebtedness of the Commonwealth, except that issued for
highway purposes or for the benefit of other special revenue funds, is payable
from the General Fund.
For the five year period fiscal 1991 through fiscal 1995, total revenues
and other sources rose at a 9.1% average annual rate while expenditures and
other uses grew by 7.4% annually. Over two-thirds of the increase in total
revenues and other sources during this period occurred during fiscal 1992 when a
$2.7 billion tax increase was enacted to address a fiscal 1991 budget deficit
and to fund increased expenditures for fiscal 1992. For the four year period
fiscal 1992 through fiscal 1995, total revenues and other sources increased at
an annual average of 3.3%, less than one-half the rate of increase for the five
year period beginning with fiscal 1991. This slower rate of growth was due, in
part, to tax reductions and other tax law revisions that restrained the growth
of tax receipts for the fiscal years 1993, 1994 and 1995.
Expenditures and other uses followed a pattern similar to that for
revenues, although with smaller growth rates, during the fiscal years 1991
through 1995. Program areas having the largest increase in costs for the fiscal
years 1991 through 1995 were for protection of persons and property, due to an
expansion of state prisons, and for public health and welfare, due to rising
caseloads, program utilization and increased prices. Recent efforts to restrain
the rapid expansion of public health and welfare program costs have resulted in
expenditure increases at or below the total rate of increase for total
expenditures in each fiscal year.
Fiscal 1995 was the fourth consecutive fiscal year the Commonwealth
reported an increase in the fiscal year-end unappropriated balance. The fiscal
1995 unappropriated surplus (prior to reserves for transfer to the Tax
Stabilization Fund) was $540 million, an increase of $204.2 million over the
fiscal 1994 unappropriated surplus (prior to transfers). Commonwealth revenues
were $459.4 million (2.9%) above the estimate of revenues used at the time the
budget was enacted. The higher than estimated revenues from tax sources were due
to faster economic growth in the national and state economy that had been
projected when the budget was adopted. Expenditures from Commonwealth revenues
(excluding pooled financing expenditures), including $65.5 million of
supplemental appropriations enacted at the close of the 1995 fiscal year,
totaled $15,674 million, representing an increase of 5% over spending during
fiscal 1994.
For GAAP purposes, the General Fund recorded a $49.8 million deficit for
fiscal 1995, leading to a decline in the fund balance to $688.3 million at June
30, 1995. The two items which predominately contributed to the decline in the
fund balance were (i) the use of a more comprehensive procedure to compute the
liabilities for certain public welfare programs, leading to an increase for the
year-end accruals, and (ii) a change to the methodology to calculate the
year-end accrual for corporate tax payables which increased the tax refund
liability by $72 million for the 1995 fiscal year when compared to the previous
fiscal year.
-7-
<PAGE>
The fiscal 1996 unappropriated surplus (prior to transfer to the Tax
Stabilization Reserve Fund) was $183.8 million, $65.5 million above estimate.
Net expenditures and encumbrances from Commonwealth revenues, including $113
million of supplemental appropriations (but excluding pooled financing
expenditures) totalled $16,162.9 million. Expenditures exceeded available
revenues and lapses by $253.2 million. The difference was funded from a planned
partial drawdown of the $437 million fiscal year adjusted beginning
unappropriated surplus.
Commonwealth revenues (prior to tax refunds) for fiscal 1996 increased by
$113.9 million over the prior year to $16,338.5 million (representing a growth
rate of .7 percent). Tax rate reductions and other tax law changes substantially
reduced the amount and rate of revenue growth for the fiscal year. It is
estimated the tax changes enacted for the fiscal year reduced Commonwealth
revenues by $283.4 million. The most significant tax changes enacted for the
fiscal year were (i) acceleration of the reduction of the corporate net income
tax rate to 9.99 percent; (ii) double weighing of the sales factor of the
corporate net income apportionment calculation; (iii) an increase in the maximum
annual allowance for a net operating loss deduction from .5 million to $1
million; (iv) an increase in the basic exemption amount for the capital stock
and franchise tax; (v) the repeal of the tax on annuities; and (vi) the
elimination of inheritance tax on transfers of certain property to surviving
spouses.
The enacted fiscal 1997 budget provides for expenditures from Commonwealth
revenues of $16,375.8 million, an increase of .6 percent over appropriated
amounts from Commonwealth revenues for fiscal 1996. The fiscal 1997 budget is
based on anticipated Commonwealth revenues (before refunds) of $16,744.5
million, an increase over actual fiscal 1996 revenues of 2.5 percent. The
revenue estimate includes provision for a $15 million tax credit program enacted
with the fiscal 1997 budget for businesses creating new jobs. Staggered
corporation tax year cause fiscal 1997 revenues to continue to be affected by
the business tax reductions enacted during the two prior completed fiscal years.
Those reductions, together with the new jobs creation tax credit, cause revenue
growth comparisons between fiscal 1996 and 1997 to be understated. When these
tax changes are taken into account, revenues in the fiscal 1997 budget are
anticipated to increase at the rate of 3 percent. The fiscal 1997 revenue
estimate is based on a forecast of the national economy for real gross domestic
product to slow to a growth rate of 2 percent for 1996 and below 1.5 percent for
1997. This is based on the assumption that the Federal Reserve Board does not
cut interest rates and that foreign economic growth is weak. The consequence of
this economic scenario is a U.S. economy with very low growth, slow gains in
consumer spending, declining inflation rates, but increasing unemployment.
Increased authorized spending for fiscal 1997 is driven largely by
increased costs of the corrections and probation and payroll programs. The
fiscal 1997 budget contains an appropriation increase in excess of $110 million
for these programs. The fiscal 1997 budget also contains some departmental
restructuring.
Providing funding for certain program increases required reductions and
savings in other programs funded from the General Fund. A major reform of the
current welfare system was enacted
-8-
<PAGE>
in May, 1996 to encourage recipients toward self-sufficiency through work
requirements, to provide temporary support for families showing personal
responsibility and to maintain safeguards for those who cannot help themselves.
The fiscal 1997 budget anticipates receiving $60 million of proceeds from
the securitization of $151.7 million of loans held by the Sunny Day Fund. This
fund was created to finance large-scale economic development loans to attract
significant employment opportunities to the Commonwealth. Its funding was
generally obtained from General Fund appropriations. The fund has been abolished
and its loans have been transferred to the Pennsylvania Industrial Development
Fund, which will issue bonds secured by its loan reserves (including the Sunny
Day Fund). These bond proceeds will be used to refund outstanding debt of the
Commonwealth. The effect of this transaction on the fiscal 1997 budget is to
reduce the amount of debt service needed to be appropriated from the General
Fund by at least $60 million.
The fiscal 1997 is based on the presumption that federally enacted reforms
to Medicaid will raise the federal reimbursement percentage for those costs to
57 percent from an approximate 53 percent rate for fiscal 1996. The higher
reimbursement rate (expected to be effective in October, 1996) was anticipated
to provide an additional $260 million of federal funds during fiscal 1997 and
enable the Commonwealth to reduce its appropriations for the medical assistance
program by a like amount for fiscal 1997. However, the U.S. Congress has not
approved the legislation making these changes and current expectations are that
additional federal funds will not be available at the time and in the amount as
anticipated in the approved fiscal 1997 budget. The Commonwealth expects to use
intergovernmental transfer funds obtained through a pooling transaction to help
make up the loss of this funding.
The fiscal 1997 budget assumes a drawdown of the $153.3 million fiscal
year beginning unappropriated surplus to fund the enacted level of
appropriations within the current estimate of revenues.
A disaster emergency was declared by the Governor and a federal major
disaster declaration was made by the President of the United States for certain
counties in the Commonwealth for a blizzard and subsequent flooding in January,
1996. Substantial damage to public and private facilities occurred and many
municipalities' financial resources have been strained by the costs of
responding to these weather-related conditions. A special session of the General
Assembly was convened by the Governor to consider legislation to respond to
these needs. Legislation was enacted that authorized $110 million of general
obligation debt to provide for the state's share of the required match for
federal public assistance and disaster mitigation funds. The legislation also
appropriated $13 million from tax amnesty receipts to fund the state match for
the federal individual assistance program, and authorized the use of current
Motor License Fund revenues for capital projects to repair flood damaged state
highways and bridges.
Nonagricultural employment in Pennsylvania over the last ten years
increased at an annual rate of 1.02%. This compares to a .36 percent rate for
the Middle Atlantic region and 1.8 percent for the
-9-
<PAGE>
U.S. during the period 1986 through 1995. For the last three years, employment
in the Commonwealth has increased 3.4 percent, as compared to 2.9 percent growth
in the Middle Atlantic region. The unemployment rate in Pennsylvania as of
August, 1996 stood at a seasonally adjusted rate of 5.3%. The seasonally
adjusted national unemployment rate for August, 1996 was 5.1%.
The current Constitutional provisions pertaining to Commonwealth debt
permit the issuance of the following types of debt: (1) debt to suppress
insurrection or rehabilitate areas affected by disaster, (ii)electorate-approved
debt, (iii) debt for capital projects subject to an aggregate debt limit of 1.75
times the annual average tax revenues of the preceding five fiscal years and
(iv) tax anticipation notes payable in the fiscal year of issuance. All debt
except tax anticipation notes must be amortized in substantial and regular
amounts. As of June 30, 1996, the Commonwealth had $5,054.5 million of a general
obligation debt outstanding.
The debt of the Pennsylvania Housing Finance Agency ("PHFA"), a state
agency which provides financing for housing for lower and moderate income
families, and certain obligations of The Hospitals and Higher Education
Facilities Authority of Philadelphia (the "Hospitals Authority"), a municipal
authority organized by the City of Philadelphia to, among other acquire and
prepare various sides for use as intermediate care facilities for the mentally
retarded, are the only debt bearing Pennsylvania's "moral obligation." PHFA's
bonds, but not its notes, are partially secured by a capital reserve fund
required to be maintained by PHFA in an amount equal to the maximum annual debt
service on its outstanding bonds in any succeeding calendar year. If there is a
potential deficiency in the capital reserve fund or if funds are necessary to
avoid default on interest, principal or sinking fund payments on bonds or notes
of PHFA, the Governor must place in Pennsylvania's budget for the next
succeeding year an amount sufficient to make up any such deficiency or to avoid
any such default. The budget which the General Assembly adopts may or may not
include such amount. PHFA is not permitted to borrow additional funds as long as
any deficiency exists in the capital reserve fund.
Other obligations of Pennsylvania include (i) long-term agreements of
certain Commonwealth departments and agencies, as lessees of property and
equipment, to make lease payments that are pledged as security for debt
obligations of certain public authorities or other state-related entities and
(ii) pension plans covering state public school and other employees.
Certain Pennsylvania-created agencies have statutory authorization to
incur debt for which state appropriations to pay debt service thereon is not
required. The debt of these agencies is funded by assets of, or revenues derived
from, the various projects financed and is not an obligation of Pennsylvania.
Some of these agencies, however, are indirectly dependent on Commonwealth
appropriations. These entities are as follows: the Delaware River Joint Toll
Bridge Commission, the Delaware River Port Authority, the Pennsylvania Energy
Development Authority, the Pennsylvania Higher Education Assistance Agency, the
Pennsylvania Higher Education Facilities Authority, the Pennsylvania Industrial
Development Authority, the Pennsylvania State Public School Building Authority,
the Pennsylvania Turnpike Commission, the Pennsylvania Economic
-10-
<PAGE>
Development Financing Authority, the Pennsylvania Infrastructure Investment
Authority and thePhiladelphia Regional Port Authority.
The City of Philadelphia is the largest city in the Commonwealth with an
estimated population of 1,585,577 according to the 1990 census. Legislation
providing for the establishment of Pennsylvania Intergovernmental Cooperation
Authority ("PICA") to assist Philadelphia in remedying fiscal emergencies was
enacted by the Pennsylvania General Assembly and approved by the Governor in
June, 1991. PICA is designed to provide assistance through the issuance of
funding debt and to make factual findings and recommendations to Philadelphia
concerning its budgetary and fiscal affairs. At this time, Philadelphia is
operating under a five year fiscal plan approved by PICA on April 30, 1996.
To date, PICA has issued $1.76 billion of its Special Tax Revenue Bonds.
This financial assistance has included the refunding of certain city general
obligation bonds, funding of capital projects and the liquidation of the
cumulative General Fund balance deficit as of June 30, 1992 of $224.9 million.
The audited General Fund balance of Philadelphia as of June 30, 1995 shows a
surplus of approximately $80.5 million, up from approximately $15.4 million as
of June 30, 1994.
No further bonds are to be issued by PICA for the purpose of financing a
capital project or deficit as the authority for such bond sales expired December
31, 1994. PICA's authority to issue debt for the purpose of financing a cash
flow deficit expires on December 31, 1996. Its ability to refund existing
outstanding debt is unrestricted. PICA had $1,146,175,000 in special revenue
bonds outstanding as of December 31, 1996.
Many factors affect the financial condition of the Commonwealth and its
counties, cities and school districts and public bodies, certain of which may
not be within the control of such entities, such as social, environmental and
economic conditions. Various litigation is pending against the Commonwealth, its
officers and employees. An adverse decision on one or more of these cases could
materially affect the Commonwealth's governmental operations. As is the case
with many states, the continuation of many of the Commonwealth's programs,
particularly its human services programs, is dependent to a significant degree
upon continuing federal reimbursements which have been steadily declining. The
loss of grants to the Commonwealth and its political subdivisions could slow
economic development. Also, changes to the Internal Revenue Code, by limiting
certain types of tax-exempt financing, may interfere with the ability of the
Commonwealth and its political subdivisions to carry out their programs. To the
extent that such factors exist, they could have an adverse effect on economic
conditions in Pennsylvania, although the Fund is unable to predict what effect,
if any, such factors would have on the Fund's investments.
Other Investment Techniques and Strategies
o 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
-11-
<PAGE>
features that permit the holder to recover the principal amount of the
underlying security at specified intervals not exceeding one year and upon no
more than 30 days' notice. The issuer of 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 a bank's prime rate, the
90-day U.S. Treasury Bill rate, or some other standard, and is adjusted
automatically each time such rate is adjusted. The interest rate on a variable
rate demand note is also based on a stated prevailing market rate but is
adjusted automatically at specified intervals of no less than one year.
Generally, the changes in the interest rate on such securities reduce the
fluctuation in their market value. As interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than that for
fixed-rate obligations of the same maturity. The Manager may determine that an
unrated floating rate or variable rate demand obligation meets the Fund's
quality standards by reason of being backed by a letter of credit or guarantee
issued by a bank that meets those quality standards. Floating rate or variable
rate obligations which do not provide for recovery of principal and interest
within seven days will be subject to the limitations applicable to illiquid
securities described in "Investment Objective and Policies - Illiquid
Securities" in the Prospectus. There is otherwise no limit on the amount of the
Fund's assets that may be invested in floating rate and variable rate
obligations.
o When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may purchase securities on a "when-issued" basis, and may
purchase or sell such securities on a "delayed delivery" basis. Although the
Fund will enter into such transactions for the purpose of acquiring securities
for its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-issued" or
"delayed delivery" refers to securities whose terms and indenture are available
and for which a market exists, but which are not available for immediate
delivery. When such transactions are negotiated the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date. During the
period between commitment by the Fund and settlement (generally within two
months but not to exceed 120 days), no payment is made for the securities
purchased by the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation; the value at
delivery may be less than the purchase price. The Fund will maintain a
segregated account with its Custodian, consisting of cash, U.S. Government
securities or other high grade debt obligations at least equal to the value of
purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure what
is considered to be an advantageous price and yield at the time of entering into
the obligation. When the Fund engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to
consummate the transaction. Failure to do so may result in the Fund losing the
opportunity to obtain a price and yield considered to be advantageous. If the
Fund chooses to (i) dispose of the right to acquire a when-issued security prior
to its acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss. At the time the Fund makes a
commitment to purchase or sell a security on a when-issued or forward commitment
basis, it
-12-
<PAGE>
records the transaction and reflects the value of the security purchased, or if
a sale, the proceeds to be received in determining its net asset value.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objective and policies and not for the purposes
of investment leverage. The Fund enters into such transactions only with the
intention of actually receiving or delivering the securities, although (as noted
above), when-issued securities and forward commitments may be sold prior to
settlement date. In addition, changes in interest rates in a direction other
than that expected by the Manager before settlement will affect the value of
such securities and may cause loss to the Fund.
When-issued transactions and forward commitments can be used by the Fund
as a defensive technique to use against anticipated changes in interest rates
and prices. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities in its portfolio on a forward commitment
basis to attempt to limit its exposure to anticipated falling prices. In periods
of falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
forward commitment basis, thereby obtaining the benefit of currently higher cash
yields.
o Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the market value of
the loaned securities and must consist of cash, bank letters of credit,
securities of the U.S. Government (or its agencies or instrumentalities) or
other cash equivalents in which the Fund is permitted to invest. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter. Such terms and
the issuing bank must be satisfactory to the Fund. When it lends securities, the
Fund receives an amount equal to the dividends or interest on loaned securities
and also receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such loan collateral. Either type of interest may be shared with
the borrower. The Fund may also pay reasonable finder's, custodian and
administrative fees. The terms of the Fund's loans must meet certain tests under
the Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important matter.
Income from securities loans is not included in the exempt-interest dividends
paid by the Fund.
o Inverse Floaters and Other Derivative Securities. The Fund will invest
in inverse floaters in the expectation that they will provide higher expected
tax-exempt yields than are available for fixed-rate bonds having comparable
credit ratings and maturity. In certain instances, the holder of an inverse
floater may have an option to convert it into a fixed-rate bond pursuant to a
"rate lock option." Inverse floaters may produce relatively high current income,
reflecting the spread between short-term and long-term tax-exempt interest
rates. As long as the municipal yield curve remains relatively steep and
short-term rates remain relatively low, owners of inverse floaters will continue
to earn above-market interest rates because they are receiving the higher
long-term rates and have
-13-
<PAGE>
paid for bonds with lower short-term rates. If the yield curve flattens and
shifts upward, an inverse floater will lose value more quickly than conventional
long-term municipal bonds.
Investing in inverse floaters that have interest rate caps might be a part
of a portfolio strategy to try to maintain a high current yield for the Fund
when the Fund has invested in inverse floaters that expose the Fund to the risk
of short-term interest rate fluctuation. Embedded caps may be used to hedge a
portion of the Fund's exposure to rising interest rates. When interest rates
exceed the "strike" price the "cap" generates additional cash flows that offset
the decline in interest rates on the inverse floater, and the hedge is
successful. However, the Fund bears the risk that if interest rates do not rise
above the strike price, the cap (which is purchased for additional cost) will
not provide additional cash flows and will expire worthless.
o Puts and Standby Commitments. When the Fund buys Municipal Securities,
it may obtain a standby commitment to repurchase the securities that entitles it
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 Fund to sell the underlying security within a
specified period of time at a fixed exercise price. The Fund may pay for a
standby commitment or put either separately in cash or by paying a higher price
for the securities acquired subject to the standby commitment or put. The Fund
will enter into these transactions only with banks and dealers which, in the
Manager's opinion, present minimal credit risks. The Fund's ability to exercise
a put or standby commitment will depend on the ability of the bank or dealer to
pay for the securities if the put or standby commitment is exercised. If the
bank or dealer should default on its obligation, the Fund might not be able to
recover all or a portion of any loss sustained from having to sell the security
elsewhere. Puts and standby commitments are not transferable by the Fund, and
therefore terminate if the Fund sells the underlying security to a third party.
The Fund intends to enter into these arrangements to facilitate portfolio
liquidity, although such arrangements may enable the Fund to sell a security at
a pre-arranged price which may be higher than the prevailing market price at the
time the put or standby commitment is exercised. However, the Fund might refrain
from exercising a put or standby commitment if the exercise price is
significantly higher than the prevailing market price, to avoid imposing a loss
on the seller which could jeopardize the Fund's business relationships with the
seller. Any consideration paid by the Fund for the put or standby commitment
(which increases the cost of the security and reduces the yield otherwise
available from the security) will be reflected on the Fund's books as unrealized
depreciation while the put or standby commitment is held, and a realized gain or
loss when the put or commitment is exercised or expires. Interest income
received by the Fund from Municipal Securities subject to puts or standby
commitments may not qualify as tax exempt in its hands if the terms of the put
or standby commitment cause the Fund not to be treated as the tax owner of the
underlying Municipal Securities.
o Hedging. As described in the Prospectus, the Fund may employ one or more
types of hedging instruments. When hedging to attempt to protect against
declines in the market value of the Fund's portfolio, to permit the Fund to
retain unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons, the
Fund may: (i)
-14-
<PAGE>
sell Interest Rate Futures or Municipal Bond Index Futures, (ii) buy puts on
such Futures or securities, or (iii) write covered calls on securities, Interest
Rate Futures or Municipal Bond Index Futures (as described in the Prospectus).
Covered calls may also be written on debt securities to attempt to increase the
Fund's income. When hedging to permit the Fund to establish a position in the
debt securities market as a temporary substitute for purchasing individual debt
securities (which the Fund will normally purchase, and then terminate that
hedging position), the Fund may: (i) buy Interest Rate Futures or Municipal Bond
Index Futures, or (ii) buy calls on such Futures or on securities.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's investment activities in the underlying cash market. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective and are legally
permissible and disclosed in the Prospectus. Additional information about the
hedging instruments the Fund may use is provided below.
o Writing Covered Call Options. When the Fund writes a call on a security,
it receives a premium and agrees to sell the underlying investment to a
purchaser of a corresponding call on the same security during the call period
(usually not more than nine months) at a fixed exercise price (which may differ
from the market price of the underlying investment) regardless of market price
changes during the call period. The Fund has retained the risk of loss should
the price of the underlying security decline during the call period, which may
be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call written was more
or less than the price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Any such profits are considered short-term
capital gains for Federal tax purposes, as are premiums on lapsed calls, and
when distributed by the Fund are taxable as ordinary income. An option position
may be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary market
will exist for a particular option. If the Fund could not effect a closing
purchase transaction due to a lack of a market, it would have to hold the
underlying investment until the call lapsed or were exercised.
o Interest Rate Futures. The Fund may buy and sell futures contracts
relating to debt securities ("Interest Rate Futures") and municipal bond indices
("Municipal Bond Index Futures," discussed below). An Interest Rate Future
obligates the seller to deliver and the purchaser to take the related debt
securities at a specified price on a specified date. No amount is paid or
received upon the purchase or sale of an Interest Rate Future.
-15-
<PAGE>
The Fund may concurrently buy and sell Futures contracts in the
expectation that the Future purchased will outperform the Future sold. For
example, the Fund might simultaneously buy Municipal Bond Futures and sell U.S.
Treasury Bond Futures. This type of transaction would be profitable to the Fund
if municipal bonds, in general, outperform U.S. Treasury bonds. Risks of this
type of Futures strategy include the possibility that the Manager does not
correctly assess the relative durations of the investments underlying the
Futures, with the result that the strategy changes the overall duration of the
Fund's portfolio in a manner that increases the volatility of the Fund's price
per share. Duration is a volatility measure that refers to the expected
percentage change in the value of a bond resulting from a change in general
interest rates (measured by each 1% change in the rates on U.S. Treasury
securities). For example, if a bond has an effective duration of three years, a
1% increase in general interest rates would be expected to cause the bond to
decline about 3%.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, equal to a specified percentage of the
contract amount, with the futures commission merchant (the "futures broker").
The initial margin will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures broker can gain
access to that account only under specified conditions. As the Future is marked
to market to reflect changes in its market value, subsequent margin payments,
called variation margin, will be made to and from the futures broker on a daily
basis. At any time prior to the expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required to be
paid by or released to the Fund. Any gain or loss is then realized. Although
Interest Rate Futures by their terms call for settlement by the delivery of debt
securities, in most cases the obligation is fulfilled by entering into an
offsetting transaction. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are traded.
o Municipal Bond Index Futures. A "municipal bond index" assigns relative
values to the municipal bonds in the index, and is used as the basis for trading
long-term municipal bond futures contracts. Municipal Bond Index Futures are
similar to Interest Rate Futures except that settlement is made in cash. The
obligation under such contracts may also be satisfied by entering into an
offsetting contract to close out the futures position. Net gain or loss on
options on Municipal Bond Index Futures depends on the price movements of the
securities included in the index. The strategies which the Fund employs
regarding Municipal Bond Index Futures are similar to those described above with
regard to Interest Rate Futures.
o Purchasing Calls and Puts. When the Fund purchases a call (other than in
a closing purchase transaction), it pays a premium and, except as to calls on
Municipal Bond Index Futures, has the right to buy the underlying investment
from a seller of a corresponding call on the same investment during the call
period at a fixed exercise price. The Fund benefits only if the call is sold at
a profit or if, during the call period, the market price of the underlying
investment is above the sum of the exercise price plus the transaction costs and
premium paid for the call, and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless
-16-
<PAGE>
at its expiration date and the Fund will lose its premium payment and the right
to purchase the underlying investment.
When the Fund purchases a call or put on a municipal bond index, Municipal
Bond Index Future or Interest Rate Future, it pays a premium, but settlement is
in cash rather than by delivery of the underlying investment to the Fund. Gain
or loss depends on changes in the index in question (and thus on price movements
in the debt securities market generally) rather than on price movements in
individual futures contracts.
When the Fund purchases a put, it pays a premium and, except as to puts on
municipal bond indices, has the right to sell the underlying investment to a
seller of a corresponding put on the same investment during the put period at a
fixed exercise price. Buying a put on a debt security, Interest Rate Future or
Municipal Bond Index Future the Fund owns enables the Fund to protect itself
during the put period against a decline in the value of the underlying
investment below the exercise price by selling such underlying investment at the
exercise price to a seller of a corresponding put. If the market price of the
underlying investment is equal to or above the exercise price and as a result
the put is not exercised or resold, the put will become worthless at its
expiration date and the Fund will lose its premium payment and the right to sell
the underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit).
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund's
option activities may affect its turnover rate and brokerage commissions. The
exercise of calls written by the Fund may cause it to sell underlying
investments, thus increasing its turnover rate in a manner beyond its control.
The exercise by the Fund of puts may also cause the sale of underlying
investments, also causing turnover, since the underlying investment might be
sold for reasons which would not exist in the absence of the put. The Fund will
pay a brokerage commission each time it buys a call or a put or sells a call.
Premiums paid for options are small in relation to the market value of the
related investments and, consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could cause the Fund's
net asset value to be more sensitive to changes in the value of the underlying
investments.
o Interest Rate Swap Transactions. Swap agreements entail both interest
rate risk and credit risk. There is a risk that, based on movements of interest
rates in the future, the payments made by the Fund under a swap agreement will
have been greater than those received by it. Credit risk arises from the
possibility that the counterparty will default. If the counterparty to an
interest rate swap defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Manager
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done between the
Fund and that counterparty under the master agreement shall be regarded as parts
of an integral agreement. If on any date amounts are payable in the same
-17-
<PAGE>
currency in respect of one or more swap transactions, the net amount payable on
that date in that currency shall be paid. In addition, the master netting
agreement may provide that if one party defaults generally or on one swap, the
counterparty may terminate the swaps with that party. Under such agreements, if
there is a default resulting in a loss to one party, the measure of that party's
damages is calculated by reference to the average cost of a replacement swap
with respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then netted,
and the result is the counterparty's gain or loss on termination. The
termination of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation."
o Additional Information about Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written calls
traded on exchanges, or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release the securities
on the expiration of the calls or upon the Fund's entering into a closing
purchase transaction. An option position may be closed out only on a market
which provides secondary trading for options of the same series and there is no
assurance that a liquid secondary market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it intends to into
an arrangement with a primary U.S. Government securities dealer, which would
establish a formula price at which the Fund would have the absolute right to
repurchase that OTC option. This formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security
("in-the-money"). For any OTC option the Fund writes, it will treat as illiquid
(for purposes of its restriction on illiquid securities, stated in the
Prospectus) the mark-to-market value of any OTC option held by it. The
Securities and Exchange Commission is evaluating the general issue of whether or
not OTC options should be considered as liquid securities, and the procedure
described above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its portfolio
turnover rate. The exercise by the Fund of puts on securities will cause the
sale of related investments, increasing portfolio turnover. Although such
exercise is within the Fund's control, holding a put might cause the Fund to
sell the related investments for reasons which would not exist in the absence of
the put. The Fund will pay a brokerage commission each time it buys a call or
put, sells a call, or buys or sells an underlying investment in connection with
the exercise of a call or put. Such commissions may be higher on a relative
basis than those which would apply to direct purchases or sales of such
underlying investments. Premiums paid for options as to underlying investments
are small in relation to the market value of such investments and consequently,
put and call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investment.
-18-
<PAGE>
o Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
futures and options on futures as established by the Commodity Futures Trading
Commission ("CFTC"). In particular, the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. Under the Rule, the Fund also must
use short futures and options on futures positions solely for "bona fide hedging
purposes" within the meaning and intent of the applicable provisions of the
Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by the Option Exchanges governing the maximum number of options that may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
different exchanges or through one or more brokers. Thus, the number of options
which the Fund may write or hold may be affected by options written or held by
other entities, including other investment companies having the same adviser as
the Fund (or an adviser that is an affiliate of the Fund's adviser). The
exchanges also impose position limits on futures transaction. An exchange may
order the liquidation of positions found to be in violation of those limits and
may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases an Interest Rate Future or Municipal Bond Index Future, the Fund will
maintain, in a segregated account or accounts with its Custodian, cash or
readily marketable short-term (maturing in one year or less) debt instruments in
an amount equal to the market value of the investments underlying such Future,
less the margin deposit applicable to it.
o Tax Aspects of Hedging Instruments and Covered Calls. The Fund intends
to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). One of the tests for such
qualification is that less than 30% of its gross income (irrespective of losses)
must be derived from gains realized on the sale of securities held for less than
three months. To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be precluded from
them: (i) selling investments, including Interest Rate Futures and Municipal
Bond Index Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii) writing calls on
investments held less than three months; (iii) purchasing calls or puts which
expire in less than three months; (iv) effecting closing transactions with
respect to calls or puts purchased less than three months previously; and (v)
exercising puts or calls held by the Fund for less than three months.
o Possible Risk Factors in Hedging. In addition to the risks with respect
to Futures and options discussed in the Prospectus and above, there is a risk in
using short hedging by selling Interest Rate Futures and Municipal Bond Index
Futures that the prices of such Futures or the applicable index will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of the
Fund's securities. The ordinary spreads between prices in the cash and futures
markets are subject to distortions due to differences in the natures of those
markets. First, all participants in the futures
-19-
<PAGE>
markets are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close out futures
contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity of the
futures markets depends on participants entering into offsetting transactions
rather than making or taking delivery. To the extent participants decide to make
or take delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities markets. Therefore, increased participation by speculators in the
futures markets may cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of debt
securities being hedged and movements in the price of the Hedging Instruments,
the Fund may use Hedging Instruments in a greater dollar amount than the dollar
amount of debt securities being hedged if the historical volatility of the
prices of such debt securities being hedged is more than the historical
volatility of the applicable index. It is also possible that if the Fund has
used Hedging Instruments in a short hedge, the market may advance and the value
of debt securities held in the Fund's portfolio may decline. If that occurred,
the Fund would lose money on the Hedging Instruments and also experience a
decline in value of its debt securities. However, while this could occur for a
very brief period or to a very small degree, over time the value of a
diversified portfolio of debt securities will tend to move in the same direction
as the indices upon which the Hedging Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the debt
securities markets as a temporary substitute for the purchase of individual debt
securities (long hedging) by buying Interest Rate Futures, Municipal Bond Index
Futures and/or calls on such Futures or debt securities, it is possible that the
market may decline; if the Fund then concludes not to invest in such securities
at that time because of concerns as to possible further market decline or for
other reasons, the Fund will realize a loss on the Hedging Instruments that is
not offset by a reduction in the price of the debt securities purchased.
o Repurchase Agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a U.S.
commercial bank or the U.S. branch of a foreign bank with assets of at least $1
billion or a broker-dealer with net capital of at least $50 million which has
been designated a primary dealer in government securities) for delivery on an
agreed-on future date. The resale price exceeds the purchase price by an amount
that reflects an agreed-upon interest rate effective for the period during which
the repurchase agreement is in effect. The majority of these transactions run
from day to day, and delivery pursuant to resale typically will occur within one
to five days of the purchase. Repurchase agreements are considered "loans" under
the Investment Company Act, collateralized by the underlying security. The
Fund's repurchase agreements require that at all times while the repurchase
agreement is in effect, the value of the collateral must equal or exceed the
repurchase price to fully collateralize the repayment obligation. Additionally,
the Manager will continuously monitor the collateral's value and will impose
creditworthiness requirements to confirm that the vendor is financially sound.
-20-
<PAGE>
o Diversification. For purposes of the investment restrictions set forth
in the Prospectus and above, the identification of the "issuer" of a Municipal
Security depends on the terms and conditions of the security. When the assets
and revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the subdivision,
and the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the case
of an industrial development bond, if that bond is backed only by the assets and
revenues of the nongovernmental user, then such nongovernmental user would be
deemed the sole issuer. However, if in either case the creating government or
some other entity guarantees a security, such a guarantee would be considered a
separate security and would be treated as an issue of such government or other
agency. In applying these restrictions to the Fund'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 such
bonds are Municipal Securities as to which there is no industry concentration
limitation. Although this application of the restriction is not technically a
fundamental policy of the Fund, it will not be changed without shareholder
approval. The Manager has no present intention of investing more than 25% of the
total assets of the Fund in securities paying interest from revenues of similar
type projects, or in industrial development bonds. Neither of these are
fundamental policies, and therefore may be changed without shareholder approval.
Should any such change be made, the Prospectus and/or this Statement of
Additional Information will be supplemented accordingly.
Other Investment Restrictions
The most significant investment restrictions that apply to the Fund are
described in the Prospectus. The following investment restrictions are also
fundamental policies of the Fund, and, together with the Fund's fundamental
policies and investment objective, described in the Prospectus, can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, such a "majority" vote is defined as the vote
of the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholders' meeting, if the holders of more than 50%
of the outstanding shares are present or represented by a proxy, or (ii) more
than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
o invest in real estate, but the Fund may invest in Municipal Securities
or other permitted securities secured by real estate or interests therein;
o purchase securities other than hedging instruments on margin; however,
the Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities;
o make short sales of securities;
o underwrite securities or invest in securities subject to restrictions on
resale; o invest in or hold securities of any "issuer" if officers and
Trustees or Directors of the Trust
and the Manager individually owning more than 0.5% of the securities of such
issuer together own more than 5% of the securities of such issuer; or
-21-
<PAGE>
o invest in securities of any other investment company, except in
connection with a merger, consolidation, acquisition or reorganization.
For purposes of the Fund's policy not to concentrate its assets, described
in "Other Investment Restrictions" in the Prospectus, the Fund has adopted the
industry classifications set forth in Appendix C to this Statement of Additional
Information. This is not a fundamental policy. In connection with the sale of
its shares in the State of Ohio, the Fund undertakes, as a non-fundamental
policy, that with respect to 75% of its total assets, it will purchase no more
than 10% of the outstanding voting securities of any one issuer.
How the Fund Is Managed
Organization and History. As a series of a Massachusetts business trust, the
Fund is not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the 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 shares of the Trust valued at
$25,000 or more or holding at least 1% of the Trust's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
shareholder list available to the applicants or mail their communication to all
other shareholders at the applicants' expense, or the Trustees may take such
other action as set forth under Section 16(c) of the Investment Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and officers and their
principal occupations and business affiliations during the past five years are
listed below. The address of each
-22-
<PAGE>
Trustee and officer is Two World Trade Center, New York, New York 10048-0203,
unless another address is listed below. All of the Trustees (except Ms.
Macaskill, who is not a director of Oppenheimer Money Market Fund, Inc.) are
also trustees or directors of Oppenheimer Fund, Oppenheimer Enterprise Fund,
Oppenheimer Global Fund, Oppenheimer Money Market Fund, Inc., Oppenheimer Growth
Fund, Oppenheimer Discovery Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Global Emerging Growth Fund, Oppenheimer Gold & Special Minerals
Fund, Oppenheimer Municipal Bond Fund, Oppenheimer New York Municipal Fund,
Oppenheimer California Municipal Fund, Oppenheimer Target Fund, Oppenheimer
Asset Allocation Fund, Oppenheimer U.S. Government Trust, Oppenheimer
Multi-Sector Income Trust, Oppenheimer World Bond Fund and Oppenheimer Series
Fund, Inc. (collectively the "New York-based Oppenheimer funds"). Ms. Macaskill
and Messrs. Spiro, Donohue, Bishop, Bowen, Farrar and Zack respectively hold the
same offices with the other New York-based Oppenheimer funds as with the Trust.
As of November 6, 1996, the Trustees and officers of the Trust as a group owned
of record or beneficially less than 1% of each class of shares of the Trust and
the Fund. The foregoing statement does not reflect ownership of shares held of
record by an employee benefit plan for employees of the Manager (for which plan
one of the Trustees and an officer listed below, Ms. Macaskill and one of the
officers, Mr. Donohue, are trustees) other than the shares beneficially owned
under that plan by the officers of the Fund listed above.
Leon Levy, Chairman of the Board of Trustees, Age: 71
31 West 52nd Street, New York, New York, 10019
General Partner of Odyssey Partners, L.P. (investment partnership) and
Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee*, Age: 63
Vice Chairman of OppenheimerFunds, Inc. (the "Manager"), formerly he held
the following positions: Vice President and Counsel of Oppenheimer
Acquisition Corp., the Manager's parent holding company; Executive Vice
President and General Counsel and a director of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"), Vice President and
a director of HarbourView Asset Management Corporation ("HarbourView") and
Centennial Asset Management Corporation ("Centennial"), investment adviser
subsidiaries of the Manager, a director of Shareholder Financial Services,
Inc. ("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent
subsidiaries of the Manager, and an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee, Age: 73
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a Director of Sussex Publishers,
Inc. (Publishers of Psychology Today and Mother Earth News) and of Spy
Magazine, L.P.
-23-
<PAGE>
Bridget A. Macaskill*, President and Trustee; Age 48
President, Chief Executive Officer and a Director of the Manager; Chairman
and a Director of SSI, President and a Director of OAC, HarbourView, and
of Oppenheimer Partnership Holdings, Inc. a holding company subsidiary of
the Manager; a director of Oppenheimer Real Asset Management, Inc.;
formerly an Executive Vice President of the Manager.
Elizabeth B. Moynihan, Trustee, Age: 67
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of Art,
(Smithsonian Institution), the Institute of Fine Arts (New York
University) and the National Building Museum; a member of the Trustees
Council, the Preservation League of New York State; and a member of the
Indo- U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee, Age: 69
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil and gas producer)
Enron-Dominion Cogen Corp. (cogeneration company), Kemper Corporation
(insurance and financial services company) and Fidelity Life Association
(mutual life insurance company); formerly President and Chief Executive
Officer of The Conference Board, Inc. (international economic and business
research) and a director of Lumbermens Mutual Casualty Company, American
Motorists Insurance Company and American Manufacturers Mutual Insurance
Company.
-------------------------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Edward V. Regan, Trustee, Age: 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York;
Senior Fellow of Jerome Levy Economics Institute, Bard College; a member
of the U.S. Competitiveness Policy Council; a director of GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and a trustee,
New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age: 64
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship, Inc. (consulting and publishing);
a director of XYAN Inc. (printing), Porfessional Staff Limited and
American Scientific Resources, Inc.; a trustee of Mystic Seaport Museum,
International House, Greenwich Hospital and the Greenwich Historical
Society.
Sidney M. Robbins, Trustee, Age: 84
-24-
<PAGE>
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions, Graduate
School of Business, Columbia University; Visiting Professor of Finance,
University of Hawaii; Emeritus Founding Director of The Korea Fund, Inc.
(a closed-end investment company); a member of the Board of Advisors,
Olympus Private Placement Fund, L.P.; Professor Emeritus of Finance,
Adelphi University.
Donald W. Spiro, Vice Chairman and Trustee*, Age: 70
Chairman Emeritus and a director of the Manager; formerly Chairman of the
Manager and the Distributor.
Pauline Trigere, Trustee, Age: 84
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
Clayton K. Yeutter, Trustee, Age: 65
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery), IMC
Global Inc. (Chemicals and animal feed) and Texas Instruments, Inc.
(electronics); formerly (in descending chronological order) Counsellor to
the President (Bush) for Domestic Policy, Chairman of the Republican
National Committee, Secretary of the U.S. Department of Agriculture, and
U.S. Trade Representative.
- -------------------------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Andrew J. Donohue, Secretary, Age: 46
Executive Vice President and General Counsel of the Manager and the
Distributor; President and a directror of Centennial; Executive Vice
President, General Counsel and a director of HarbourView, SSI, SFSI, and
Oppenheimer Partnership Holdings, Inc.; President and a director of
Oppenheimer Real Asset Management, Inc.; General Counsel of OAC; Executive
Vice President, Chief Legal Officer and a director of Multisource
Services, Inc. (a broker-dealer); an officer of other Oppenheimer funds;
formerly Senior Vice President and Associate General Counsel of the
Manager and the Distributor, a partner in Kraft & McManimon (a law firm),
an officer of First Investors Corporation (a broker-dealer) and First
Investors Management Company, Inc. (broker-dealer and investment adviser),
and a director and an officer of First Investors Family of Funds and First
Investors Life Insurance Company.
Robert E. Patterson, Vice President and Portfolio Manager, Age: 53
Senior Vice President of the Manager; an officer of other Oppenheimer funds.
-25-
<PAGE>
George C. Bowen, Treasurer, Age: 60
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Senior Vice
President, Treasurer, and Secretary of SSI; Vice President, Treasurer and
Secretary of SFSI; Treasurer of OAC; Vice President and Treasurer of
Oppenheimer Real Asset Management, Inc.; Chief Executive Officer,
Treasurer and a director of Multisource Services, Inc. (a broker-dealer);
an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary, Age: 48
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other Oppenheimer
funds.
Robert Bishop, Assistant Treasurer, Age: 37
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; previously a Fund Controller for the Manager, prior to
which he was an Accountant for Yale & Seffinger, P.C., an accounting firm,
and previously an Accountant and Commissions Supervisor for Stuart James
Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer, Age: 31
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; previously a Fund Controller for the Manager, prior to
which he was an International Mutual Fund Supervisor for Brown Brothers
Harriman Co., a bank, and previously a Senior Fund Accountant for State
Street Bank & Trust Company.
o Remuneration of Trustees. The officers of the Fund are affiliated with
the Manager. They and the Trustees of the Fund who are affiliated with the
Manager (Ms. Macaskill and Messrs. Galli and Spiro) receive no salary or fee
from the Fund. The remaining Trustees of the Fund received the compensation
shown below from the Fund, during its fiscal year ended December 31, 1995 and
from all of the New York-based Oppenheimer funds (including the Fund) for which
they served as Trustee or Director. Compensation is paid for services in the
positions below their names:
<TABLE>
<CAPTION>
Retirement
Benefits Total Compensation
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses OppenheimerFunds1
<S> <C> <C> <C>
Leon Levy, Chairman $3,732 $5,087 $141,000.00
and Trustee
Benjamin Lipstein, $2,281 $3,110 $ 86,200.00
Study Committee
Chairman, Audit
Committee Member
-26-
<PAGE>
and Trustee
Elizabeth B. Moynihan, $2,281 $3,110 $ 86,200.00
Study Committee
Member2 and Trustee
Kenneth A. Randall, $2,075 $2,828 $ 78,400.00
Audit Committee
Chairman and Trustee
Edward V. Regan, $1,821 $2,482 $ 68,800.00
Proxy Committee
Chairman, Audit
Committee Member2
and Trustee
Russell S. Reynolds, Jr., $1,379 $1,879 $ 52,100.00
Proxy Committee
Member and Trustee
Sidney M. Robbins, Study $3,231 $4,405 $122,100.00
Committee Advisory
Member, Audit Committee
Advisory Member and Trustee
Pauline Trigere, Trustee $1,379 $1,879 $ 52,100.00
Retirement
Benefits Total Compensation
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses OppenheimerFunds1
Clayton K. Yeutter, $1,379 $1,879 $ 52,100.00
Proxy Committee
Member and Trustee
</TABLE>
The officers of the Fund are affiliated with the Manager. They and the
Trustees of the Fund who are affiliated with the Manager (Ms. Macaskill and
Messrs. Galli and Spiro) receive no salary or fee from the Fund. The remaining
Trustees of the Fund received the compensation shown below from the Fund, during
its fiscal period January 1, 1996 to July 31, 1996, and from all of the New
York-based Oppenheimer funds (including the Fund) for which they served as
Trustee or Director. Compensation is paid for services in the positions below
their names:
-27-
<PAGE>
<TABLE>
<CAPTION>
Retirement
Benefits Total Compensation
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses OppenheimerFunds1
<S> <C> <C> <C>
Leon Levy, Chairman $768 $2,529 $141,000.00
and Trustee
Benjamin Lipstein, $470 $1,547 $ 86,200.00
Study Committee
Chairman, Audit
Committee Member
and Trustee
Elizabeth B. Moynihan, $470 $1,547 $ 86,200.00
Study Committee
Member2 and Trustee
Kenneth A. Randall, $427 $1,406 $ 78,400.00
Audit Committee
Chairman and Trustee
Edward V. Regan, $375 $1,234 $ 68,800.00
Proxy Committee
Chairman, Audit
Committee Member2
and Trustee
Retirement
Benefits Total Compensation
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses OppenheimerFunds1
Russell S. Reynolds, Jr., $284 $934 $ 52,100.00
Proxy Committee
Member and Trustee
Sidney M. Robbins, Study $665 $2,190 $122,100.00
Committee Advisory
Member, Audit Committee
Advisory Member and Trustee
Pauline Trigere, Trustee $284 $934 $ 52,100.00
-28-
<PAGE>
Clayton K. Yeutter, $284 $934 $ 52,100.00
Proxy Committee
Member and Trustee
- ----------------------
<FN>
1 For the 1995 calendar year (prior to the inception of the Proxy Committee),
during which the New York-based Oppenheimer funds, listed in the first paragraph
of this section, included Oppenheimer Mortgage Income Fund and Oppenheimer Time
Fund (which ceased operation following the acquisition of their assets by
certain other Oppenheimer funds) but excluded Oppenheimer International Growth
Fund, which had not yet commenced operations. 2 Committee position held during a
portion of the period shown. The Study and Audit Committees meet for all of the
New York-based Oppenheimer funds and the fees are allocated among the funds by
the Board.
</FN>
</TABLE>
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was received.
A Trustee must serve in that capacity for any of the New York- based Oppenheimer
funds for at least 15 years to be eligible for the maximum payment. Because each
Trustee's retirement benefits will depend on the amount of the Trustee's future
compensation and length of service, the amount of those benefits cannot be
determined at this time, nor can the Fund estimate the number of years of
credited service that will be used to determine those benefits. During the
fiscal year ended July 31, 1996, $15,481 was accrued for the Fund's projected
retirement benefit obligations.
o Major Shareholders. As of November 6, 1996, the only person who owned
of record or was known by the Fund to own beneficially 5% or more of the Fund's
outstanding Class A, Class B or Class C shares were as follows:
<TABLE>
<CAPTION>
Percentage of
Outstanding Shares
Name & Address Number of Shares of the Class
<S> <C> <C>
Class B
Merrill Lynch Pierce Fenner 97,687.000 7.19%
& Smith
For the Sole Benefit of its
Customers
Attn.: Fund Administration
4800 Deer Lake Dr. E Fl. 3
Jacksonville, FL 32246-6484
Evora K. Morgan 71,555.721 5.26%
410 Colebrook Lane
-29-
<PAGE>
Bryn Mawr, PA 19010-2904
Class C
Carol J. Bleck 7,598.831 14.59%
RR6 Box 690
Lebanon, PA 17046-9612
Victor C. Dy & Nancy F. Dy 5,550.142 10.65%
JT TEN WROS NOT TC
3417 Bridal Path Road
Easton, PA 18045-2009
Jose G. Tiongson Jr. & 4,235.199 8.13%
Eleanor S. Tiongson JT TEN
103 E. Ridley Avenue
Ridley Park, PA 19078-3025
Ronald G. Hetche & Jane W. Hetche 3,819.807 7.33%
JT TEN WROS NOT TC
79 Saint Andrews Drive
Beaver Falls, PA 15010-3011
Louise E. Tame 3,303.055 6.34%
1913 Oregon Pike, Apt. D2
Lancaster, PA 17601-6449
Joan M. Clark 3,089.582 5.93%
560 Pine Street, Apt. 17
Royersford, PA 19468-2017
Percentage of
Outstanding Shares
Name & Address Number of Shares of the Class
James H. Glass & Judith A. Glass 2,699.731 5.18%
JT TEN WROS NOT TC
168 Haldeman Road
Schwenksville, PA 19473-1113
Margaret N. Sanbe 2,606.523 5.00%
310 Donnelly Avenue
Aston, PA 19014-2714
</TABLE>
-30-
<PAGE>
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom may also serve as officers of the Fund,
and three of whom (Ms. Macaskill and Messrs. Galli and Spiro) serve as Trustees
of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees, including
portfolio managers, that would compete with or take advantage of the Fund's
portfolio transactions. Compliance with the Code of Ethics is carefully
monitored and strictly enforced by the Manager.
o The Investment Advisory Agreement. The Investment Advisory Agreement
between the Manager and the Fund requires the Manager, at its expense, to
provide the Fund with adequate office space, facilities and equipment, and to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective corporate administration for the Fund,
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and the composition
of proxy materials and registration statements for continuous public sale of
shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement are
paid by the Fund. The investment advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain printing
and registration costs and non-recurring expenses, including litigation costs.
For the fiscal years ended December 31, 1993, 1994 and 1995, and July 31, 1996,
the management fees paid by the Fund to the Manager were $316,801, $420,696,
$462,471 and $280,681, respectively. These amounts do not reflect the expense
assumption of $39,417 by the Manager for the fiscal period ended December 31,
1993 (prior to May 26, 1993).
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager has
undertaken that the total expenses of the Fund 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 the most stringent expense limitation imposed under
state law applicable to the Fund. Pursuant to the undertaking, the Manager's fee
will be reduced at the end of a month so that there will not be any accrued but
unpaid liability under this undertaking. Currently, the most stringent state
expense limitation is imposed by California, and limits the Fund's expenses
(with specified exclusions) to 2.5% of the first $30 million of average annual
net assets, 2% of the next $70 million of average annual net assets, and 1.5% of
average annual net assets in excess of $100 million. The Manager reserves the
right to terminate or amend the undertaking at any time. Any assumption of the
Fund's expenses under this limitation would lower the Fund's overall expense
ratio and increase its total return during any period in which expenses are
limited.
-31-
<PAGE>
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard for its obligations and duties under the advisory agreement,
the Manager is not liable for any loss sustained by reason of any investment of
Fund assets made with due care and in good faith. The advisory agreement permits
the Manager to act as investment adviser for any other person, firm or
corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment adviser to the
Fund, the right of the Fund to use the name "Oppenheimer" as part of its name
may be withdrawn.
o The Distributor. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares, but is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales, excluding payments under the Distribution and Service Plans but including
advertising and the cost of printing and mailing prospectuses (other than those
furnished to existing shareholders) are borne by the Distributor. During the
Fund's fiscal years ended December 31, 1993, 1994, 1995 and July 1996, the
aggregate sales charges on sales of the Fund's Class A shares was $939,991,
$470,999, $234,306 and $132,759, respectively, of which the Distributor and an
affiliated broker-dealer retained in the aggregate $252,444, $125,278, $62,669
and $42,197 in those respective years. During the Fund's fiscal period May 1,
1993 through December 31, 1993 and the fiscal years ended December 31, 1994,
1995 and July 1996, the contingent deferred sales charge collected on redemption
of the Fund's Class B shares was $24,041, $63,420, $22,836 and $13,599, all of
which the Distributor retained. During the Fund's fiscal period August 29, 1995
through December 31, 1995 and the fiscal period ended July 31, 1996, no
contingent deferred sales charges were collected on Class C shares. For
additional information about distribution of the Fund's shares and the expenses
connected with such activities, please refer to "Distribution and Service
Plans," below.
o The Transfer Agent. The Fund's Transfer Agent, OppenheimerFunds
Services, a division of the Manager, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for shareholder
servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the Investment Advisory Agreement is to arrange the portfolio
transactions for the Fund. The Investment Advisory Agreement contains provisions
relating to the employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by the Investment
Advisory Agreement to employ such broker-dealers, including "affiliated"
brokers, as that term is defined in the Investment Company Act, as may, in its
best judgment based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such transactions. The
Manager need not seek competitive commission bidding but is expected to
-32-
<PAGE>
minimize the commissions paid to the extent consistent with the interest and
policies of the Fund as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund and/or the
other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination is made by the
Manager that the commission is fair and reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may also consider
sales of shares of the Fund and other investment companies managed by the
Manager or its affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreement and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's portfolio
traders upon recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and allocate brokerage,
also subject to the provisions of the Investment Advisory Agreement and the
procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. As most purchases
made by the Fund are principal transactions at net prices, the Fund does not
incur substantial brokerage costs. The Fund usually deals directly with the
selling or purchasing principal or market maker without incurring charges for
the services of a broker on its behalf unless it is determined that a better
price or execution may be obtained by utilizing the services of a broker.
Purchases of portfolio securities from underwriters include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
include a spread between the bid and asked price. The Fund seeks to obtain
prompt execution of orders at the most favorable net price. When the Fund
engages in an option transaction, ordinarily the same broker will be used for
the purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, concurrent orders to purchase or sell
the same security by more than one of the accounts managed by the Manager or its
affiliates are combined. The transactions effected pursuant to such combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other accounts may
be useful both to the Fund and one or more of such other accounts. Such
research, which may be supplied by a third party at the instance of a broker,
includes information and analyses on particular companies and industries as well
as market or economic trends and portfolio strategy, receipt of market
quotations for portfolio evaluations, information systems, computer hardware and
similar products and services. If a research service also assists the Manager in
a non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid in commission dollars. The
Board of Trustees has permitted the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions. The Board has also permitted the Manager to use stated commissions
on secondary fixed-income agency trades to obtain research where the broker has
-33-
<PAGE>
represented to Manager that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal transaction.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the Manager
to obtain market information for the valuation of securities held in the Fund's
portfolio or being considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Trust (those Trustees of the Trust who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the Investment
Advisory Agreement or the Distribution Plans described below) annually reviews
information furnished by the Manager as to the commissions paid to brokers
furnishing such services so that the Board may ascertain whether the amount of
such commissions was reasonably related to the value or benefit of such
services.
Other funds advised by the Manager have investment objectives and
policies similar to those of the Fund. Such other funds may purchase or sell the
same securities at the same time as the Fund, which could affect the supply and
price of such securities. If two or more of such funds purchase the same
security on the same day from the same dealer, the Manager may average the price
of the transactions and allocate the average among such funds.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from time to
time the "standardized yield," "dividend yield," "tax-equivalent yield,"
"average annual total return", "cumulative total return," "average annual total
return at net asset value," and "total return at net asset value" of an
investment in a class of Fund shares may be advertised. An explanation of how
yields and total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the average
annual total returns for each advertised class of shares of the Fund for the 1,
5 and 10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its yield and total
return are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Yield and total returns for any given past period are not a prediction or
representation by the Fund of future yields or rates of return. The yield and
total returns of each class of shares of the Fund are affected by portfolio
quality, portfolio maturity, the type of investments the Fund holds and its
operating expenses allocated to the particular class.
o Standardized Yields
-34-
<PAGE>
o Yield. The Fund's "yield" (referred to as "standardized yield") for a
given 30-day period for a class of shares is calculated using the following
formula set forth in rules adopted by the Securities and Exchange Commission
that apply to all funds that quote yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period
that were entitled to receive dividends.
d = the maximum offering price per share of the class on the last
day of the period,
adjusted for undistributed net investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that the
standardized yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This standardized
yield is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments calculated for that period. The
standardized yield may differ from the "dividend yield" of that class, described
below. Additionally, because each class of shares is subject to different
expenses, it is likely that the standardized yields of the Fund's classes of
shares will differ. For the 30-day period ended December 31, 1995, the
standardized yields for the Fund's Class A, Class B and Class C shares were
4.35%, 3.82% and 3.68%, respectively. For the 30-day period ended July 31, 1996,
the standardized yields for the Fund's Class A, Class B and Class C shares were
4.87%, 4.34% and 4.24%, respectively.
o Tax-Equivalent Yield. The "tax-equivalent yield" of a class of shares
adjusts the Fund's current yield, as calculated above, by a stated combined
Federal, state and city tax rate. The tax equivalent yield is based on a 30-day
period, and is computed by dividing the tax-exempt portion of the Fund's current
yield (as calculated above) by one minus a stated income tax rate and adding the
result to the portion (if any) of the Fund's current yield that is not tax
exempt. The tax equivalent yield may be used to compare the tax effects of
income derived from the Fund with income from taxable investments at the tax
rates stated. Appendix B includes a tax equivalent yield table, based on various
effective tax brackets for individual taxpayers. Such tax brackets are
determined by a taxpayer's Federal, state and city taxable income (the net
amount subject to Federal and state income taxes after deductions and
exemptions). The tax equivalent yield table assumes that the investor is taxed
at the highest bracket, regardless of whether a switch to non-taxable
investments would cause a lower bracket to apply 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. The
Fund's tax-equivalent yields for its Class A, Class B and Class C shares for the
30- day period ended December 31, 1995, for an individual Pennsylvania resident
in the 41.29% combined tax bracket were 7.41%, 6.51% and 6.27%, respectively.
For the 30-day period ended July
-35-
<PAGE>
31, 1996, the Fund's tax-equivalent yields for its Class A, Class B and Class C
shares, for an individual Pennsylvania resident in the 41.29% combined tax
bracket were 8.30%, 7.39% and 7.22%, respectively.
o Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class. Dividend
yield is based on the dividends paid on shares of a class from dividends derived
from net investment income during a stated period. Distribution return includes
dividends derived from net investment income and from realized capital gains
declared during a stated period. Under those calculations, the dividends and/or
distributions for that class declared during a stated period of one year or less
(for example, 30 days) are added together, and the sum is divided by the maximum
offering price per share of that class on the last day of the period. When the
result is annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B and Class C shares, the maximum offering
price is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time similar yield or distribution return calculations may
also be made using the Class A net asset value (instead of its respective
maximum offering price) at the end of the period. The dividend yields on Class A
shares for the 30-day period ended December 31, 1995, were 5.35% and 5.61% when
calculated at maximum offering price and at net asset value, respectively. The
dividend yield on Class B and Class C shares for the 30-day period ended
December 31, 1995, was 4.86% and 4.74%, respectively. Distribution returns for
the 30-day period ended December 31, 1995 are the same as the above-quoted
dividend yields. No portions of the Class A, Class B or Class C dividends for
the three months ended December 31, 1995 were derived from realized capital
gains. The dividend yields on Class A shares for the 30-day period ended July
31, 1996 were 5.27% and 5.53%, when calculated at maximum offering price and at
net asset value, respectively. The dividend yields on Class B and Class C shares
for the 30-day period ended July 31, 1996 were 4.79% and 4.69%, respectively.
o Total Return Information
o Average Annual Total Returns. The "average annual total return" of
each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
-36-
<PAGE>
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
o Cumulative Total Returns. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted from
the initial investment ("P") (unless the return is shown at net asset value, as
discussed below). For Class B shares, payment of contingent deferred sales
charge of 5.0% for the first year, 4.0% for the second year, 3.0% for the third
and fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter is applied, as described in the Prospectus. For Class C shares, the
payment of the 1.0% contingent deferred sales charge for the first 12 months is
applied, as described in the Prospectus. Total returns also assume that all
dividends and capital gains distributions during the period are reinvested to
buy additional shares at net asset value per share, and that the investment is
redeemed at the end of the period.
The "average annual total returns" on an investment in Class A shares
of the Fund for the one and five year periods ended December 31, 1995 and for
the period from September 18, 1989 (commencement of operations) to December 31,
1995 were 11.39%, 6.98% and 7.04%, respectively. The cumulative "total return"
on Class A shares for the latter period was 53.35%. The average annual total
returns on an investment in Class B shares for the fiscal year ended December
31, 1995 and for the period May 1, 1993 (the date Class B shares were first
publicly offered) through December 31, 1995 were 11.06% and 3.82%, respectively.
The cumulative total return on Class B shares for the period May 1, 1993 through
December 31, 1995 was 10.53%. For the period from August 29, 1995 through
December 31, 1995, the cumulative total return as an investment in Class C
shares of the Fund was 4.55%. The "average annual total returns" on an
investment in Class A shares of the Fund for the one and five year periods ended
July 31, 1996 and for the period from September 18, 1989 (commencement of
offering) through July 31, 1996 were 1.30%, 5.91% and 6.49%, respectively. The
cumulative total return for the Class A shares for the latter period was 54.02%,
respectively. The average annual total return on an investment for Class B
shares for the fiscal year ended July 31, 1996 and for the period May 1, 1993
(the date Class B shares were first publicly offered) through July 31, 1996 were
0.55% and 3.43%, respectively. The cumulative total return on Class B shares for
the period May 1, 1993 through July 31, 1996 was 11.58%. For the period from
August 29, 1995 through July 31, 1996, the cumulative total return on an
investment in Class C shares of the Fund was 4.40%.
-37-
<PAGE>
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
The average annual total returns at net asset value for Class A shares
for the one and five year periods ended December 31, 1995, and for the period
from September 18, 1989 (commencement of operations) to December 31, 1995 were
16.94%, 8.02% and 7.87%, respectively. The average annual total returns at net
asset value for the Fund's Class A shares for the one and five year periods
ended July 31, 1996 and for the period from September 18, 1989 (commencement of
operations) to July 31, 1996 were 6.35%, 6.94% and 7.25%, respectively.
The average annual total returns at net asset value for Class B shares
for the one year period ended December 31, 1995 and for the period May 1, 1993
(the date Class B shares were first publicly offered) through December 31, 1995
were 16.06% and 4.87%, respectively. The cumulative total return at net asset
value on the Fund's Class C shares for the period from August 29, 1995
(commencement of operations) through December 31, 1995 was 5.55%. The average
annual total returns at net asset value for the Fund's Class B shares for the
one year period ended July 31, 1996 and for the period May 1, 1993 (date Class B
shares first publicly offered) through July 31, 1996 were 5.55% and 3.98%,
respectively. The cumulative total return at net asset value on the Fund's Class
C shares for the period from August 29, 1995 through July 31, 1996 was 5.40%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment in Class A, Class B or Class C shares of
the Fund, a number of factors should be considered before using such information
as a basis for comparison before using such information with other investments.
o Other Performance Comparisons. From time to time the Fund may publish
the ranking of its Class A, Class B or Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely- recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The performance of the
Fund is ranked against (i) all other bond funds, other than money market funds,
and (ii) all other Pennsylvania municipal bond funds. The Lipper performance
rankings are based on total returns that include the reinvestment of capital
gain distributions and income dividends but do not take sales charges or taxes
into consideration. From time to time the Fund may include in its advertisement
and sales literature performance information about the Fund cited in other
newspapers and periodicals such as The New York Times, which may include
performance quotations from other sources, including Lipper and Morningstar. The
performance of the Fund's Class A, Class B or Class C shares may be compared in
publications to (i) the performance of various market indices or to other
investments for which reliable performance data is available, and (ii) to
averages, performance rankings or other benchmarks prepared by recognized mutual
fund statistical services.
-38-
<PAGE>
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an independent
mutual fund monitoring service that ranks mutual funds, including the Fund,
monthly in broad investment categories (equity, taxable bond, municipal bond and
hybrid) based on risk-adjusted investment return. Investment return measures a
fund's three, five and ten-year average annual total returns (when available) in
excess of 90-day U.S. Treasury bill returns after considering sales charges and
expenses. Risk reflects fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and return are combined to produce star rankings reflecting
performance relative to the average fund in a fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next 22.5%), three
stars is "average" (next 35%), two stars is "below average" (next 22.5%) and one
star is "lowest" (bottom 10%). Morningstar ranks the Fund in relation to other
rated municipal bond funds. Rankings are subject to change.
Investors may also wish to compare the Fund's Class A, Class B or Class
C return to the returns on fixed income investments available from banks and
thrift institutions, such as certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return, and Treasury bills
are guaranteed as to principal and interest by the U.S.
government.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or Transfer Agent), or the investor services provided by them to
shareholders of the Oppenheimer funds, other than the performance rankings of
the Oppenheimer funds themselves. Those ratings or rankings of
shareholder/investor services by a third party may compare the Oppenheimer
funds' services to those of other mutual fund families selected by the rating or
ranking services, and may be based upon the opinions of the rating or ranking
service itself, based on its research or judgment, or based upon surveys of
investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and Distribution
and Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of
the Investment Company Act, pursuant to which the Fund makes payments to the
Distributor in connection with the distribution and/or servicing of the shares
of that class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on that Plan, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class. For the Distribution and
Service Plan for Class C shares, that vote was cast by the Manager as the sole
initial holder of Class C shares.
In addition, under the Plans the Manager and the Distributor, in their
sole discretion, from time to time, may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers, or other
-39-
<PAGE>
financial institutions (each is referred to as a "Recipient" under the Plans)
for distribution and administrative services they perform at no cost to the
Fund. The Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically approved
at least annually by the Trust's Board of Trustees and its Independent Trustees
by a vote cast in person at a meeting called for the purpose of voting on such
continuance. Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
No Plan may be amended to increase materially the amount of payments to be made
unless such amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically convert
into Class A shares after six years, the Fund is required to obtain the approval
of Class B as well as Class A shareholders for a proposed amendment to the Class
A Plan that would materially increase the amount to be paid by Class A
shareholders under the Class A Plan. Such approval must be by a "majority" of
the Class A and Class B shares (as defined in the Investment Company Act),
voting separately by Class. All material amendments must be approved by the
Board and the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Trust's Board of Trustees at least quarterly for
its review, detailing the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient that
received any such payment. The report for the Class B and Class C Plans shall
also include the Distributor's distribution costs for that quarter, and such
costs for previous fiscal periods that have been carried forward, as explained
in the Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the Independent
Trustees in the exercise of their fiduciary duty. Each Plan further provides
that while it is in effect, the selection and nomination of those Trustees of
the Fund who are not "interested persons" of the Fund is committed to the
discretion of the Independent Trustees. This does not prevent the involvement of
others in such selection and nomination if the final decision as to any such
selection or nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount, if any,
that may be determined from time to time by a majority of the Fund's Independent
Trustees. Initially, the Board of Trustees has set the fee at the maximum rate
allowed under the Plans and set no minimum amount.
For the fiscal year ended December 31, 1995 and July 31, 1996, payments
under the Class A Plan totaled $95,622 and $54,372, all of which was paid by the
Distributor to Recipients, including $7,550 and $3,663 paid to an affiliate of
the Distributor. Any unreimbursed expenses by the Distributor incurred with
respect to Class A shares for any fiscal year may not be recovered in subsequent
fiscal years. Payments received by the Distributor under the Class A Plan will
not be
-40-
<PAGE>
used to pay any interest expense, carrying charges, or other financial costs, or
allocation of overhead by the Distributor.
The Class B and Class C Plans allow the service fee payment to be paid
by the Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of shares sold.
An exchange of shares does not entitle the Recipient to an advance service fee
payment. In the event Class B and Class C shares are redeemed during the first
year such shares are outstanding, the Recipient will be obligated to repay a pro
rata portion of the advance of the service fee payment for those shares to the
Distributor. Pursuant to the Plans, service fee payments by the Distributor to
Recipients will be made (i) in advance for the first year Class B shares are
outstanding, following the purchase of shares, in an amount up to 0.25% of the
net asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of business each
day at an annual rate of up to 0.25% of the average daily net asset value of
Class B shares held in accounts of the Recipient or its customers. (The Board
has currently set the service fee at 0.15% per year, which amount may be
increased by the Board from time to time up to the maximum of 0.25%). For the
fiscal year ended December 31, 1995 and July 31, 1996, payments under the Class
B plan totaled $121,620 and $87,790, including $1,792 and $1,063 to an affiliate
of the broker/dealer, of which $98,080 and $69,264 was retained. For the fiscal
period from August 29, 1995 (commencement of operations) to December 31, 1995
and July 31, 1996, payments under the Class C Plan totaled $165 and $1,720, of
which $1,546 was retained. At December 31, 1995 and July 31, 1996, the
Distributor had incurred unreimbursed expenses of $473,840 and $547,290 for
Class B shares (representing 3.28% and 3.42%, respectively of Class B net assets
of such date) and $2,309 and $3,768 for Class C shares (representing 0.88% and
0.78% of Class C net assets as of such date).
Although the Class B and Class C Plans permit the Distributor to retain
both the asset-based sales charges and the service fee on such shares, or to pay
Recipients the service fee on a quarterly basis, without payment in advance, the
Distributor presently intends to pay the service fee to Recipients in the manner
described above. A minimum holding period may be established from time to time
under the Class B and Class C Plans by the Board. Initially, the Board has set
no minimum holding period. All payments under the Class B plan are subject to
the limitations imposed by the Rules of Conduct of the National Association of
Securities Dealers, Inc. on payments of asset based sales charges and service
fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. The
Distributor retains the asset-based sales charge on Class B shares. As to Class
C shares, the Distributor retains the asset-based sales charge during the first
year shares are outstanding and pays the asset-based sales charge as an ongoing
commission to the dealer on Class C shares outstanding for more than a year or
more. Such payments are made to the Distributor under the Plans in recognition
that the Distributor (i) pays sales commissions to authorized brokers and
dealers at the time of sale and pays service fees, as described in the
Prospectus, (ii) may finance such commissions and/or the advance of the service
fee payment to Recipients under those Plans, or may provide such financing from
its own resources, or from an affiliate, (iii) employs personnel to
-41-
<PAGE>
support distribution of shares, and (iv) may bear the costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders) and state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the method
of purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other person entitled
to receive compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other. The Distributor
will not accept any order for $500,000 or more of Class B shares or $1 million
or more of Class C shares on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on such Class B and Class C shares will be
reduced by incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to any
class are allocated pro rata to the shares of each class, based on the
percentage of the net assets of such class to the Fund's total net assets, and
then equally to each outstanding share within a given class. Such general
expenses include (i) management fees, (ii) legal, bookkeeping and audit fees,
(iii) printing and mailing costs of shareholder reports,
-42-
<PAGE>
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up costs,
(viii) interest, taxes and brokerage commissions, and (ix) non-recurring
expenses, such as litigation costs. Other expenses that are directly
attributable to a class are allocated equally to each outstanding share within
that class. Such expenses include (a) Distribution and/or Service Plan fees, (b)
incremental transfer and shareholder servicing agent fees and expenses, (c)
registration fees and (d) shareholder meeting expenses, to the extent that such
expenses pertain to a specific class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per share of
Class A, Class B and Class C shares of the Fund are determined as of the close
of business of The New York Stock Exchange on each day that the Exchange is
open, by dividing the value of the Fund's net assets attributable to that Class
by the number of shares of that class outstanding. The Exchange normally closes
at 4:00 P.M., New York time, but may close earlier on some days (for example, in
case of weather emergencies or on days falling before a holiday). The Exchange's
most recent annual announcement (which is subject to change) states that it will
close on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may also
close on other days. Dealers other than Exchange members may conduct trading in
Municipal Securities on certain days on which the Exchange is closed (including
weekends and holidays) or after 4:00 P.M. on a regular business day. Because the
Fund's net asset value will not be calculated on those days, the Fund's net
asset value per share of each class may be significantly affected at times when
shareholders may not purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) long-term debt
securities having a remaining maturity in excess of 60 days are valued based on
the mean between "bid" and "asked" prices determined by a portfolio pricing
service approved by the Fund's Board of Trustees or obtained by the Manager from
two active market makers in the security on the basis of reasonable inquiry;
(ii) debt instruments having a maturity of more than 397 days when issued, and
non-money market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are valued at the
mean between the "bid" and "asked" prices determined by a pricing service
approved by the Fund's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable inquiry; (iii)
money market debt securities that had a maturity of less than 397 days when
issued that have a remaining maturity of 60 days or less are valued at cost,
adjusted for amortization of premiums and accretion of discounts; and (iv)
securities (including restricted securities) not having readily-available market
quotations are valued at fair value determined under the Board's procedures. If
the Manager is unable to locate two market makers willing to give quotes (see
(i) and (ii) above), the security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "ask" price is available).
In the case of Municipal Securities, U.S. Government securities and
corporate bonds, when last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity and other special factors
involved (such as the tax-exempt status of the interest paid by Municipal
-43-
<PAGE>
Securities). The Manager may use pricing services approved by the Board of
Trustees, to price any of the types of securities described above. The Manager
will monitor the accuracy of such pricing services, which may include comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts, calls, Interest Rate Futures and Municipal Bond Index Futures are
valued at the last sales price on the principal exchange on which they are
traded or on NASDAQ, as applicable, as determined by a pricing service approved
by the Board of Trustees or by the Manager. If there were no sales that day,
value shall be the last sale price on the preceding trading day if it is within
the spread of the closing bid and asked prices on the principal exchange or on
NASDAQ on the valuation date, or, if not the value shall be the closing price on
the principal exchange or on NASDAQ on the valuation date. If the put, call or
future is not traded on an exchange or on NASDAQ, it shall be valued at the mean
between bid and asked prices obtained by the Manager from two active market
makers (which in certain cases may be the bid price, if no asked price is
available).
When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset, and
an equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the call or
put. In determining the Fund's gain on investments, if a call or put written by
the Fund is exercised, the proceeds are increased by the premium received. If a
call or put written by the Fund expires, the Fund has a gain in the amount of
the premium; if the Fund enters into a closing purchase transaction, it will
have a gain or loss, depending on whether the premium received was more or less
than the cost of the closing transaction. If the Fund exercises a put it holds,
the amount the Fund receives on its sale of the underlying investment is reduced
by the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House transfer to
buy the shares. Dividends will begin to accrue on shares purchased by the
proceeds of ACH transfers on the business day the Fund receives Federal Funds
for the purchase through the ACH system before the close of The New York Stock
Exchange. The Exchange normally closes at 4:00 p.m., but may close earlier on
certain days. If Federal Funds are received on a business day after the close of
the Exchange, the shares will be purchased and dividends will begin to accrue on
the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, grandparents, parents, parents-in- law, brothers and sisters,
sons- and daughters-in-law, a sibling's spouse, a spouse's siblings, aunts,
uncles, nieces and nephews.
o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer International Growth Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Bond Fund for Growth
-44-
<PAGE>
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Rochester Portfolio Series - Limited-Term New York Municipal Fund*
Rochester Fund Municipals*
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
- ---------------------
*Shares of the Fund are not presently exchangeable for shares of these funds.
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund shares
may be subject to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent (referred to as a "Letter") is
an investor's statement in writing to the Distributor of the intention to
purchase Class A shares or Class A and Class B shares of the Fund (and other
Oppenheimer funds) during a 13-month period (the "Letter of Intent period"),
which may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The Letter states the investor's intention to make
the aggregate amount of purchases of shares which, when added to the investor's
holdings of shares of those funds, will equal or exceed the amount specified in
the Letter. Purchases made by reinvestment of dividends or distributions of
capital gains and purchases made at net asset value without sales charge do not
count toward satisfying the amount of the Letter. A Letter enables an investor
to count the Class A and Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge) that
applies to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the
-45-
<PAGE>
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The investor agrees
that shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility of the dealer of record and/or
the investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If such difference in sales charges is not paid within twenty days after
a request from the Distributor or the dealer, the Distributor will, within sixty
days of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be
-46-
<PAGE>
released from escrow. If a request is received to redeem escrowed shares prior
to the payment of such additional sales charge, the sales charge will be
withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A or B shares acquired in
exchange for either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other Oppenheimer funds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply to shares
purchased by Asset Builder payments. An application should be obtained from the
Distributor, completed and returned, and a prospectus of the selected fund(s)
should be obtained from the Distributor or your financial advisor before
initiating Asset Builder payments. The amount of the Asset Builder investment
may be changed or the automatic investments may be terminated at any time by
writing to the Transfer Agent. A reasonable period (approximately 15 days) is
required after the Transfer Agent's receipt of such instructions to implement
them. The Fund reserves the right to amend, suspend, or discontinue offering
such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
-47-
<PAGE>
the Bank or the Fund's Custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
o Involuntary Redemptions. The Trust's Board of Trustees has the right
to cause the involuntary redemption of the Fund's shares held in any account if
the aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
o Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Trust may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Trust has
elected to be governed by Rule 18f-1 under the Investment Company Act, pursuant
to which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchase subject to an initial sales charge or Class A contingent deferred sales
charge, or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without sales
charge only in Class A shares of the Fund or any of the other Oppenheimer funds
into which shares of the Fund are exchangeable as described in "How to Exchange
Shares" below, at the net asset value next computed after the Transfer Agent
receives the reinvestment order. This reinvestment privilege does not apply to
Class C shares. The shareholder must ask the Distributor for that privilege at
the time of reinvestment. Any capital gain that was realized when the shares
were redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption, some
or all of the loss may not be tax deductible, depending on the timing and amount
of the reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale).
-48-
<PAGE>
The transferred shares will remain subject to the contingent deferred sales
charge, calculated as if the transferee shareholder had acquired the transferred
shares in the same manner and at the same time as the transferring shareholder.
If less than all shares held in an account are transferred, and some but not all
shares in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B or the Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
an order placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes (normally, that is 4:00 p.m., but may be earlier
on some days) and the order was transmitted to and received by the Distributor
prior to its close of business that day (normally 5:00 P.M.). Ordinarily, for
accounts redeemed by a broker-dealer under this procedure, payment will be made
within three business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents in proper form, with
the signature(s) of the registered owners guaranteed on the redemption document
as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of a payment on the date requested and reserves the right to
amend, suspend or discontinue offering such plans at any time without prior
notice. Because of the sales charge assessed on Class A share purchases,
shareholders should not make regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B and Class C shareholders
should not establish withdrawal plans because of the imposition of the
contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in the Prospectus under
"Waivers of Class B and Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below and
in the provisions of the OppenheimerFunds Application relating to such Plans, as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed instructions)
to exchange a pre-determined amount of shares of the Fund for shares (of the
same class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange
-49-
<PAGE>
Plan. The minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the restrictions that apply
to exchanges as set forth in "How to Exchange Shares" in the Prospectus and
below in this Statement of Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and thereafter shares acquired with reinvested dividends and
capital gains distributions will be redeemed next, followed by shares acquired
with a sales charge, to the extent necessary to make withdrawal payments.
Depending upon the amount withdrawn, the investor's principal may be depleted.
Payments made under such plans should not be considered as a yield or income on
your investment. It may not be desirable to purchase additional shares of Class
A shares while maintaining automatic withdrawals because of the sales charges
that apply to purchases when made. Accordingly, a shareholder normally may not
maintain an Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the Transfer
Agent upon receiving directions to that effect from the Fund. The Transfer Agent
will also terminate a Plan upon receipt of evidence satisfactory to it of the
death or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
-50-
<PAGE>
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated form.
Upon written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be exchanged only for
shares of the same class of other Oppenheimer funds. Shares of the Oppenheimer
funds that have a single class without a class designation are deemed "Class A"
shares for this purpose. All of the Oppenheimer funds offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust, Centennial
America Fund, L.P., and Daily Cash Accumulation Fund, Inc., which only offer
Class A shares and Oppenheimer Main Street California Municipal Fund which only
offers Class A and Class B shares, (Class B and Class C shares of Oppenheimer
Cash Reserves are generally available only by exchange from the same class of
shares of other Oppenheimer funds or through OppenheimerFunds sponsored 401(k)
plans). A current list showing which funds offer which classes can be obtained
by calling the Distributor at 1-800-525- 7048.
For accounts established on or before March 8, 1996 holding Class M
shares of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds, including Rochester Fund
Municipals and Limited Term New York Municipal Fund. Class A shares of Rochester
Fund Municipals or Limited Term New York Municipal Fund acquired on the exchange
of Class M shares of Oppenheimer Bond Fund for Growth may be exchanged for Class
M shares of that fund. For accounts of Oppenheimer Bond Fund for Growth
established after March 8, 1996, Class M shares may be exchanged for Class A
shares of other Oppenheimer funds shares except Rochester Fund Municipals and
Limited Term New York Municipals. Exchanges to Class M shares of Oppenheimer
Bond Fund for Growth are permitted from Class A shares of Oppenheimer Money
Market Fund, Inc. or Oppenheimer Cash Reserves that were acquired by exchange
from Class M shares. Otherwise no exchanges of any class of any Oppenheimer fund
into Class M shares are permitted.
However, if the Distributor receives, at the time of purchase, notice
that shares of Oppenheimer Money Market Fund, Inc. are being purchased with the
redemption proceeds of shares of other mutual funds (other than other money
market funds) that are not part of the OppenheimerFunds family, those shares of
Oppenheimer Money Market Fund, Inc. may be exchanged for shares of other
Oppenheimer funds at net asset value without paying a sales charge.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months prior
to that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial
-51-
<PAGE>
or contingent deferred sales charge, whichever is applicable. To qualify for
that privilege, the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if requested, must
supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds (except Oppenheimer Cash
Reserves) or from any unit investment trust for which reinvestment arrangements
have been made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds. No contingent deferred sales charge is
imposed on exchanges of shares of any class purchased subject to a contingent
deferred sales charge. However, when Class A shares acquired by exchange of
Class A shares of other Oppenheimer funds purchased subject to a Class A
contingent deferred sales charge are redeemed within 18 months of the end of the
calendar month of the initial purchase of the exchanged Class A shares, the
Class A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class B
contingent deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within six years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales charge is
imposed on Class C shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or Class C contingent deferred sales charge will be followed in
determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
Class must specify whether they intend to exchange Class A, Class B or Class C
shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtained and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans and Automatic Withdrawal Plans will be switched to the new account unless
the Transfer Agent is instructed otherwise. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
-52-
<PAGE>
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value, or as otherwise
described in "How to Buy Shares." Daily dividends on newly purchased shares will
not be declared or paid until such time as Federal Funds (funds credited to a
member bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Dividends
will be declared on shares repurchased by a dealer or broker for three business
days following the trade date (i.e., to and including the day prior to
settlement of the repurchase). If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will be paid
together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money Market
Fund, Inc., as promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio, and
expenses borne by the Fund or borne separately by a class, as described in
"Alternative Sales Arrangements -- Class A, Class B and Class C Shares," above.
Dividends are calculated in the same manner, at the same time and on the same
day for shares of each class. However, dividends on Class B and Class C shares
are expected to be lower as a result of the asset-based sales charge on Class B
shares and Class C shares, and Class B and Class C dividends will also differ in
amount as a consequence of any difference in net asset value between Class A,
Class B shares and Class C shares.
Dividends will be declared from net investment income, if any. Net
investment income includes the allocation of amounts of income from the
Pennsylvania Municipal Securities in the Fund's portfolio which are free from
Federal and Pennsylvania personal income taxes. This allocation will be made by
the use of one designated percentage applied uniformly to all income dividends
made during the Fund's tax year. Such designation will normally be made
following the end of each fiscal year as to income dividends paid in the prior
year. The percentage of income designated as tax-exempt may substantially differ
from the percentage of the Fund's income that was tax-exempt for a given period.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year and intends to qualify in future
years, but reserves the right not to qualify. The Internal Revenue Code contains
a number of complex tests to determine whether the Fund will qualify, and the
Fund might not meet those tests in a particular year. For example, if the Fund
derives 30% or more of its gross income from the sale of securities held less
than three months, it may fail to qualify (see "Tax Aspects of Covered Calls and
Hedging Instruments," above). If it does not qualify, the Fund will be treated
for tax purposes
-53-
<PAGE>
as an ordinary corporation and will receive no tax deduction for payments of
dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. The Manager
might determine in a particular year that it would be in the best interest of
shareholders for the Fund not to make distributions at the required levels and
to pay the excise tax on the undistributed amounts. That would reduce the amount
of income or capital gains available for distribution to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund) of
a zero coupon security accrue as income each year a portion of the discount at
which the security was purchased even though the Fund receives no interest
payment in cash on the security during the year. As an investment company, the
Fund must pay out substantially all of its net investment income each year or be
subject to excise taxes, as described above. Accordingly, when the Fund holds
zero coupon securities, it may be required to pay out as an income distribution
each year an amount which is greater than the total amount of cash interest the
Fund actually received during that year. Such distributions will be made from
the cash assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the event the
Fund realizes net capital gains from such transactions, its shareholders may
receive a larger capital gain distribution than they would have had in the
absence of such transactions. At December 31, 1995, the Fund had available for
federal income tax purposes an unused capital loss carryover of approximately
$1,133,000 which will expire in the years, 2002 and 2003.
Tax Status of the Fund's Dividends and Distributions. The Fund intends to
qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest dividends which
are derived from net investment income earned by the Fund on Municipal
Securities will be excludable from the gross income of shareholders for Federal
income tax purposes. To the extent that distributions are derived from interest
on Pennsylvania Municipal Securities, obligations of the U.S. Government and
certain of its territories, agencies and instrumentalities, such distributions
will also be exempt from Pennsylvania personal income tax and, in the case of
residents of the City of Philadelphia, the investment income tax of the School
District of Philadelphia. Dividends designated as capital gain dividends for
Federal income tax purposes will also be exempt from the investment income tax
of the School District of Philadelphia. Dividends derived from interest on
Municipal Securities other than Pennsylvania Municipal Securities will be exempt
from Federal income tax for individuals, but will be subject to the Pennsylvania
personal income tax and, in the case of residents of Philadelphia, the
investment income tax of the City of Philadelphia. All of the Fund's dividends
(excluding distributions) paid during 1995 were exempt from such Federal and
Pennsylvania income taxes. A portion of the exempt-interest dividends paid by
the Fund may be an item of tax preference for shareholders subject to the
alternative minimum tax. 15.6% of the Fund's dividends (excluding distributions)
paid during 1995 were a tax preference item for such shareholders. Corporate
shareholders and "substantial users" of facilities financed by Private Activity
Municipal Securities should read "Investment Objective and Policies" above
before purchasing shares.
For Federal income tax purposes, a shareholder receiving a dividend
from income earned by the Fund from one or more of: (i) certain taxable
temporary investments, (ii) income from securities loans, (iii) income or gains
from hedging instruments, and (iv) an excess of net short-term capital gain over
net long-term capital loss from the Fund, treats the dividend as either a
receipt of ordinary income or long-term capital gain in the computation of gross
income, regardless of whether the dividend is reinvested. The Fund's dividends
will not be eligible for the dividends-received
-54-
<PAGE>
deduction for corporations. Shareholders receiving Social Security benefits
should be aware that exempt-interest dividends are a factor in determining
whether such benefits are subject to Federal income tax. Losses realized by
shareholders on the redemption of Fund shares within six months of purchase
(which period may be shortened by regulation) will be disallowed for Federal
income tax purposes to the extent of exempt-interest dividends received on such
shares.
Shares of the Fund will be exempt from Pennsylvania county personal
property taxes to the extent that the Fund's portfolio securities consist of
Pennsylvania Municipal Securities and obligations of the U.S. Government, and
certain of its territories, agencies and instrumentalities, and certain other
obligations that are not subject to such personal property taxes on the annual
assessment date. At July 31, 1996, the Fund had available for federal income tax
purposes an unused capital loss carryover of $1,161,000, which expires between
2002 and 2004.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges"
above at net asset value without sales charge. Not all of the OppenheimerFunds
offer Class B and Class C shares. The names of the Funds that offer Class B
shares can be obtained by calling the Distributor at 1-800-525-7048. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
either have an existing account in the fund selected for reinvestment or must
obtain a prospectus for that fund and an application from the Distributor to
establish an account. The investment will be made at the net asset value per
share in effect at the close of business on the payable date of the dividend or
distribution. Dividends and/or distributions from shares of other Oppenheimer
funds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Custodian of the assets of the Fund is Citibank, N.A. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the Manager and
the Custodian have been and will continue to be unrelated to and unaffected by
the relationship between the Fund and the Custodian. It will be the practice of
the Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates. The
Fund's cash balances with the Custodian in excess of $100,000 are not protected
by Federal Deposit Insurance. Such uninsured balances may at times be
substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager and its affiliates.
<PAGE>
Independent Auditors' Report
===============================================================================
The Board of Trustees and Shareholders of Oppenheimer Pennsylvania Tax-Exempt
Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Pennsylvania Tax-Exempt Fund as of July 31, 1996, and
the statements of operations for the seven month period then ended and the year
ended December 31, 1995, the statements of changes in net assets for the seven
month period ended July 31, 1996 and the years ended December 31, 1995 and 1994,
and the financial highlights for the seven month period ended July 31, 1996 and
each of the years in the five year period ended December 31, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer Pennsylvania Tax-Exempt Fund as of July 31, 1996, the
results of its operations for the seven month period then ended and the year
ended December 31, 1995, the changes in its net assets for the seven month
period ended July 31, 1996 and the years ended December 31, 1995 and 1994, and
the financial highlights for the seven month period ended July 31, 1996 and each
of the years in the five year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
- ------------------------------------
KPMG Peat Marwick LLP
Denver, Colorado
August 21, 1996
<PAGE>
Statement of Investments July 31, 1996
<TABLE>
<CAPTION>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
====================================================================================================================================
<S> <C> <C> <C>
Municipal Bonds and Notes--98.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--90.7% Allegheny County, Pennsylvania Hospital Development
Authority Revenue Bonds:
Magee Women's Hospital, FGIC Insured, 5.375%, 10/1/13 Aaa/AAA/AAA $2,000,000 $1,909,210
Presbyterian University Hospital, Prerefunded,
Series A, MBIA Insured, 7.60%, 3/1/08 Aaa/AAA 600,000 642,715
-----------------------------------------------------------------------------------------------------------
<PAGE>
Beaver County, Pennsylvania Industrial Development
Authority Pollution Control Revenue Refunding Collateral
Bonds, Toledo Edison Project, Series A, 7.75%, 5/1/20 Ba2/BB 2,000,000 2,086,632
-----------------------------------------------------------------------------------------------------------
Berks County, Pennsylvania General Obligation Bonds,
FGIC Insured, Inverse Floater, 8.79%, 11/10/20(1) Aaa/AAA/AAA 1,000,000 1,176,792
-----------------------------------------------------------------------------------------------------------
Blair County, Pennsylvania Hospital Authority
Revenue Bonds, Altoona Hospital Project,
AMBAC Insured, Inverse Floater, 7.594%, 7/1/14(1) Aaa/AAA/AAA 700,000 730,508
-----------------------------------------------------------------------------------------------------------
Bucks County, Pennsylvania Water & Sewer Authority
Revenue Bonds, Neshaminy Interceptor System,
Prerefunded, FGIC Insured, 7.50%, 12/1/13 Aaa/AAA/AAA 1,500,000 1,610,880
-----------------------------------------------------------------------------------------------------------
Dauphin County, Pennsylvania Hospital Authority
Revenue Refunding Bonds:
Harrisburg Hospital Project, MBIA Insured, 8.25%, 7/1/14 Aaa/AAA 1,450,000 1,522,682
Polyclinic Medical Center Project,
MBIA Insured, 5.40%, 8/15/13 Aaa/AAA/NR 1,800,000 1,724,551
-----------------------------------------------------------------------------------------------------------
Delaware County, Pennsylvania Authority University
Revenue Bonds, Villanova University,
MBIA Insured, 6.90%, 8/1/16 Aaa/AAA 1,000,000 1,060,928
-----------------------------------------------------------------------------------------------------------
Delaware County, Pennsylvania Industrial Development
Authority Revenue Refunding Bonds,
Resource Recovery Project, Series A, 8.10%, 12/1/13 Aa3/AA- 3,200,000 3,348,207
-----------------------------------------------------------------------------------------------------------
Delaware River Joint Toll Bridge Commission
Revenue Bonds, Interstate 78, Prerefunded,
FGIC Insured, 7.80%, 7/1/18 Aaa/AAA/AAA 1,275,000 1,383,644
-----------------------------------------------------------------------------------------------------------
Delaware River Port Authority, Delaware River Bridges
Revenue Refunding Bonds, AMBAC Insured, 7.375%, 1/1/07 Aaa/AAA/AAA 770,000 830,724
-----------------------------------------------------------------------------------------------------------
Erie, Pennsylvania Higher Education Building Authority
College Revenue Bonds, Mercyhurst College Project,
Prerefunded, 7.85%, 9/15/19 NR/AAA 1,000,000 1,099,854
-----------------------------------------------------------------------------------------------------------
Langhorne Manor Boro, Pennsylvania Higher
Education & Health Authority Revenue Bonds,
Woods Schools Project, Prerefunded, 8.75%, 11/15/14 NR/AAA 1,000,000 1,149,403
-----------------------------------------------------------------------------------------------------------
Lehigh County, Pennsylvania General Purpose Authority
Revenue Bonds, Lehigh Valley Hospital, Inc.,
Series A, MBIA Insured, 7%, 7/1/16 Aaa/AAA 1,250,000 1,420,905
-----------------------------------------------------------------------------------------------------------
Monroeville, Pennsylvania Hospital Authority Revenue
Refunding Bonds, Forbes Health System, 6.25%, 10/1/15 Baa1/BBB+ 1,000,000 987,805
-----------------------------------------------------------------------------------------------------------
Northampton County, Pennsylvania Higher Education
Authority Revenue Refunding Bonds, Lehigh University,
7.10%, 9/1/05 NR/A 2,140,000 2,238,630
-----------------------------------------------------------------------------------------------------------
Northumberland County, Pennsylvania Authority
Commonwealth Lease Revenue Bonds, MBIA Insured,
6.25%, 10/15/09 Aaa/AAA 2,000,000 2,142,460
6 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Pennsylvania Convention Center Authority Revenue Bonds,
(continued) Escrowed to Maturity, Series A, FGIC Insured, 6.70%, 9/1/16 Aaa/AAA/AAA $1,850,000 $2,067,090
-----------------------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority:
Resource Recovery Revenue Bonds, Colver Project,
Series D, 7.15%, 12/1/18 NR/BBB- 2,000,000 2,118,094
Wastewater Treatment Revenue Bonds, Sun Co.,
Inc.-R & M Project, Series A, 7.60%, 12/1/24 Baa1/BBB+ 2,000,000 2,164,996
-----------------------------------------------------------------------------------------------------------
Pennsylvania Housing Finance Agency
Revenue Bonds, Single Family Mtg.:
Series 31C, Inverse Floater, 10.074%, 10/1/23(1) Aa/AA+ 1,000,000 1,052,081
Series 40, 6.80%, 10/1/15 Aa/AA+ 2,000,000 2,075,746
Series 44C, 6.65%, 10/1/21 Aa/AA+ 1,000,000 1,040,168
-----------------------------------------------------------------------------------------------------------
Pennsylvania State General Obligation
Refunding Bonds, First Series, 10%, 4/15/98 A1/AA-/AA- 1,880,000 2,059,070
-----------------------------------------------------------------------------------------------------------
Pennsylvania State Higher Education Assistance
Agency Student Loan Revenue Bonds,
AMBAC Insured, Inverse Floater, 8.397%, 3/1/22(1) Aaa/AAA/AAA 1,250,000 1,205,526
-----------------------------------------------------------------------------------------------------------
Pennsylvania State Higher Educational Facilities
Authority College & University Revenue Bonds:
Hahnemann University Project, MBIA Insured, 7.20%, 7/1/19 Aaa/AAA 1,500,000 1,640,571
Thomas Jefferson University, Series A, 6.625%, 8/15/09 Aa/A+ 750,000 806,665
-----------------------------------------------------------------------------------------------------------
<PAGE>
Pennsylvania State Industrial Development Authority
Economic Development Revenue Bonds, Prerefunded,
Series A, 7%, 1/1/11 NR/A-/AAA 1,300,000 1,453,569
-----------------------------------------------------------------------------------------------------------
Pennsylvania State Turnpike Commission Turnpike
Revenue Bonds, Prerefunded:
Series E, MBIA Insured, 7.50%, 12/1/09 Aaa/AAA 1,000,000 1,112,684
Series K, 7.50%, 12/1/19 Aaa/AAA 2,500,000 2,781,710
-----------------------------------------------------------------------------------------------------------
Pennsylvania State University Revenue
Refunding Bonds, Series B, 5.50%, 8/15/16 A1/AA- 2,500,000 2,420,362
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Gas Works Revenue Bonds,
15th Series, MBIA Insured, 5.25%, 8/1/15 Aaa/AAA/A- 1,000,000 939,362
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Hospitals & Higher
Educational Facilities Authority Revenue Bonds:
Albert Einstein Medical Center, 7.625%, 4/1/11 A/BBB+ 3,500,000 3,708,740
Temple University Hospital, Series A,
6.625%, 11/15/23 Baa1/A- 3,800,000 3,889,417
Refunding, Jeanes Health System Project,
6.60%, 7/1/10 NR/BBB 1,000,000 989,185
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Regional Port Authority
Lease Revenue Bonds, MBIA Insured, Inverse Floater,
8.481%, 9/1/20(1) Aaa/AAA 2,100,000 2,134,486
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Water & Sewer
Revenue Refunding Bonds, Escrowed to Maturity,
Tenth Series, 7.35%, 9/1/04 Aaa/AAA 245,000 274,412
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Water & Wastewater
Revenue Bonds, FGIC Insured, 10%, 6/15/05 Aaa/AAA/AAA 1,900,000 2,526,971
-----------------------------------------------------------------------------------------------------------
Pittsburgh, Pennsylvania Water & Sewer Authority
Revenue Refunding Bonds, Escrowed to Maturity,
FGIC Insured, 7.25%, 9/1/14 Aaa/AAA/AAA 1,200,000 1,344,230
7 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Statement of Investments (Continued)
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Schuylkill County, Pennsylvania Industrial Development
(continued) Authority Resource Recovery Revenue Refunding Bonds,
Schuylkill Energy Resources, Inc., 6.50%, 1/1/10 NR/NR $3,670,000 $ 3,663,236
-----------------------------------------------------------------------------------------------------------
St. Mary Hospital Authority Langhorne, Pennsylvania
Hospital Revenue Refunding Bonds, Franciscan Health
Project, Series B, BIG Insured, 7%, 7/1/14 Aaa/AAA 500,000 534,049
-----------------------------------------------------------------------------------------------------------
Washington County, Pennsylvania Municipal Facility
Lease Authority Revenue Bonds, Prerefunded,
AMBAC Insured, 7.45%, 12/15/12 Aaa/AAA/AAA 2,000,000 2,250,996
-----------------------------------------------------------------------------------------------------------
73,319,946
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Possessions--7.8% Puerto Rico Commonwealth General Obligation Bonds:
6.50%, 7/1/15 Baa1/A 1,200,000 1,308,716
MBIA Insured, Inverse Floater, 7.835%, 7/1/08(1) Aaa/AAA 1,000,000 1,036,583
-----------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue Bonds, Series Y, 5%, 7/1/36 Baa1/A 1,600,000 1,369,054
-----------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority
Revenue Refunding Bonds, Series N, 5%, 7/1/12 Baa1/A- 1,000,000 910,753
-----------------------------------------------------------------------------------------------------------
Puerto Rico Industrial Tourist Educational Medical &
Environmental Control Facilities Revenue Bonds,
Polytechnic University Project, Series A, 6.50%, 8/1/24 NR/BBB- 1,000,000 1,008,772
-----------------------------------------------------------------------------------------------------------
Puerto Rico Port Authority Revenue Bonds, American
Airlines Special Facilities Project, Series A, 6.25%, 6/1/26 Baa3/BBB+ 675,000 675,000
----------
6,308,878
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $78,865,306) 98.5% 79,628,824
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.5 1,249,054
--------- ----------
Net Assets 100.0% $80,877,878
========= ===========
1. Represents the current interest rate for a variable
rate bond. These bonds known as "inverse floaters" pay
interest at a rate that varies inversely with
short-term interest rates. As interest rates rise,
inverse floaters produce less current income. Their
price may be more volatile than the price of a
comparable fixed-rate security. Inverse floaters amount
to $7,335,976 or 9.07% of the Fund's net assets at July
31, 1996. As of July 31, 1996, securities subject to
the alternative minimum tax amounted to $13,994,847 or
17.30% of the Fund's net assets. Distribution of
investments by industry, as a percentage of total
investments at value, is as follows:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Industry Market Value Percent
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hospitals $18,059,768 22.7%
-----------------------------------------------------------------------------------------------------------
Utilities 16,736,145 21.0
-----------------------------------------------------------------------------------------------------------
Education 11,425,185 14.3
-----------------------------------------------------------------------------------------------------------
Transportation 9,612,301 12.1
-----------------------------------------------------------------------------------------------------------
General Obligation Bonds 7,648,251 9.7
-----------------------------------------------------------------------------------------------------------
Lease/Rental 4,393,456 5.5
-----------------------------------------------------------------------------------------------------------
Housing 4,167,995 5.2
-----------------------------------------------------------------------------------------------------------
Corporate-Backed Municipals 2,839,996 3.6
-----------------------------------------------------------------------------------------------------------
Pollution Control 2,086,632 2.6
-----------------------------------------------------------------------------------------------------------
Revenue Bonds 1,453,569 1.8
-----------------------------------------------------------------------------------------------------------
Student Loans 1,205,526 1.5
----------- -----
$79,628,824 100.0%
=========== =====
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Statement of Assets and Liabilities July 31, 1996
<TABLE>
====================================================================================================================================
<S> <C>
Assets Investments, at value (cost $78,865,306)--see accompanying statement $79,628,824
-----------------------------------------------------------------------------------------------------------
Cash 450,724
-----------------------------------------------------------------------------------------------------------
Receivables:
Interest 1,251,650
Shares of beneficial interest sold 119,197
-----------------------------------------------------------------------------------------------------------
Other 5,337
-----------
Total assets 81,455,732
====================================================================================================================================
Liabilities Payables and other liabilities:
Dividends 265,923
Shares of beneficial interest redeemed 180,171
Trustees' fees 48,271
Shareholder reports 45,703
Distribution and service plan fees 10,207
Transfer and shareholder servicing agent fees 4,893
Other 22,686
-----------
Total liabilities 577,854
====================================================================================================================================
Net Assets $80,877,878
============
====================================================================================================================================
Composition of Paid-in capital $81,437,419
Net Assets -----------------------------------------------------------------------------------------------------------
Overdistributed net investment income (161,975)
-----------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (1,161,084)
-----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 763,518
-----------
Net Assets $80,877,878
===========
====================================================================================================================================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net assets of $64,391,239
and 5,362,121 shares of beneficial interest outstanding) $12.01
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $12.61
-----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $16,004,847 and 1,332,915 shares of beneficial interest outstanding) $12.01
-----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $481,792 and 40,136 shares of beneficial interest outstanding) $12.00
<PAGE>
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Seven Months Year Ended
Ended July 31, December 31,
1996(1) 1995
====================================================================================================================================
<S> <C> <C>
Investment Income Interest $3,144,822 $ 5,156,837
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses Management fees--Note 4 280,681 462,471
-----------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 54,372 95,622
Class B 87,790 121,620
Class C 1,720 165
-----------------------------------------------------------------------------------------------------------
Shareholder reports 47,778 84,149
-----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 39,191 62,693
-----------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 20,184 22,843
-----------------------------------------------------------------------------------------------------------
Legal and auditing fees 14,069 24,550
-----------------------------------------------------------------------------------------------------------
Custodian fees and expenses 5,928 8,545
-----------------------------------------------------------------------------------------------------------
Insurance expenses 4,092 6,512
-----------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 12 --
Class B 627 1,203
Class C 165 24
-----------------------------------------------------------------------------------------------------------
Other 2,850 2,628
---------- ----------
Total expenses 559,459 893,025
Less assumption of expenses by OppenheimerFunds, Inc.--Note 4 (8,996) (12,068)
Less expenses paid indirectly--Note 4 (5,737) (8,545)
---------- ----------
Net expenses 544,726 872,412
====================================================================================================================================
Net Investment Income 2,600,096 4,284,425
====================================================================================================================================
Realized and Unrealized Net realized loss on investments (39,279) (149,202)
Gain (Loss) -----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (2,305,381) 7,766,744
---------- ----------
Net realized and unrealized gain (loss) (2,344,660) 7,617,542
====================================================================================================================================
Net Increase in Net Assets Resulting From Operations $ 255,436 $11,901,967
========== ============
====================================================================================================================================
1. The Fund changed its fiscal year end from December 31 to July 31.
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Seven Months
Ended July 31, Year Ended December 31,
1996(1) 1995 1994
====================================================================================================================================
<S> <C> <C> <C>
Operations Net investment income $ 2,600,096 $ 4,284,425 $ 3,907,127
-----------------------------------------------------------------------------------------------------------
Net realized loss (39,279) (149,202) (1,065,903)
-----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (2,305,381) 7,766,744 (8,445,048)
----------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations 255,436 11,901,967 (5,603,824)
<PAGE>
====================================================================================================================================
Dividends and Dividends from net investment income:
Distributions to Class A (2,144,352) (3,637,885) (3,639,305)
Shareholders Class B (430,663) (583,457) (367,811)
Class C (8,248) (803) --
-----------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A -- (92,297) --
Class B -- (20,449) --
====================================================================================================================================
Beneficial Interest Net increase (decrease) in net assets resulting from
Transactions beneficial interest transactions--Note 2:
Class A (191,910) (796,475) 4,897,535
Class B 1,960,511 3,839,201 4,838,266
Class C 224,120 262,069 --
====================================================================================================================================
Net Assets Total increase (decrease) (335,106) 10,871,871 124,861
-----------------------------------------------------------------------------------------------------------
Beginning of period 81,212,984 70,341,113 70,216,252
----------- ----------- ----------
End of period (including overdistributed net investment
income of $161,975, $147,080 and $62,280, respectively) $80,877,878 $81,212,984 $70,341,113
=========== ============ ============
</TABLE>
1. The Fund changed its fiscal year end from December
31 to July 31.
See accompanying Notes to Financial Statements.
11 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------
Seven Months
Ended July 31, Year Ended December 31,
1996(2) 1995 1994 1993 1992 1991
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 12.36 $ 11.19 $ 12.85 $ 12.05 $ 11.93 $ 11.43
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 .68 .67 .69 .76 .74
Net realized and unrealized gain (loss) (.35) 1.18 (1.64) .85 .17 .53
------- ------- ------- ------- ------- -------
Total income (loss) from investment operations .05 1.86 (.97) 1.54 .93 1.27
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.40) (.67) (.69) (.70) (.73) (.73)
Dividends in excess of net investment income -- (.02) -- -- -- --
Distributions from net realized gain -- -- -- (.04) (.08) (.04)
------- ------- ------- ------- ------- -------
Total dividends and distributions to shareholders (.40) (.69) (.69) (.74) (.81) (.77)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.01 $ 12.36 $ 11.19 $ 12.85 $ 12.05 $ 11.93
======= ======= ======= ======= ======= =======
===================================================================================================================================
Total Return, at Net Asset Value(4) 0.44% 16.94% (7.68)% 13.12% 8.04% 11.49%
===================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $64,391 $66,483 $60,857 $64,640 $33,290 $13,791
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $64,997 $64,901 $62,786 $50,974 $21,936 $10,717
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.71%(5) 5.68% 5.65% 5.52% 6.36% 6.30%
Expenses, before voluntary assumption by
the Manager or Distributor(6) 1.03%(5) 1.02% 0.98% 1.06% 1.39% 1.29%
Expenses, net of voluntary assumption by
the Manager or Distributor N/A N/A N/A 0.99% 1.06% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 5.8% 31.1% 37.0% 14.6% 29.9% 15.5%
</TABLE>
12 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
---------------------------------------------------- ----------------------------
Seven Months Seven Months Period Ended
Ended July 31, Year Ended December 31, Ended July 31, December 31,
1996(2) 1995 1994 1993(3) 1996(2) 1995(1)
<PAGE>
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 12.36 $ 11.19 $12.84 $12.44 $12.36 $11.91
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .35 .59 .59 .36 .34 .21
Net realized and unrealized gain (loss) (.35) 1.17 (1.65) .45 (.36) .45
------- ------- ------ ------ ------- --------
Total income (loss) from investment operations -- 1.76 (1.06) .81 (.02) .66
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.35) (.57) (.59) (.37) (.34) (.21)
Dividends in excess of net investment income -- (.02) -- -- -- --
Distributions from net realized gain -- -- -- (.04) -- --
------- ------- ------ ------ ------- --------
Total dividends and distributions to shareholders (.35) (.59) (.59) (.41) (.34) (.21)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.01 $ 12.36 $11.19 $12.84 $12.00 $12.36
======= ======= ====== ====== ======= ========
===============================================================================================================================
Total Return, at Net Asset Value(4) (0.01)% 16.06% (8.32)% 6.67% (0.15)% 5.55%
===============================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $16,005 $14,466 $9,484 $5,576 $482 $264
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $15,085 $12,183 $7,329 $2,770 $296 $ 51
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.94%(5) 4.89% 4.88% 4.26%(5) 4.83%(5) 4.40%(5)
Expenses, before voluntary assumption by
the Manager or Distributor(6) 1.89%(5) 1.89% 1.85% 1.90%(5) 1.97%(5) 2.07%(5)
Expenses, net of voluntary assumption by
the Manager or Distributor 1.79%(5) 1.78% 1.75% 1.78%(5) 1.87%(5) 1.96%(5)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 5.8% 31.1% 37.0% 14.6% 5.8% 31.1%
</TABLE>
1. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year end from December 31 to July 31.
3. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
6. Beginning in fiscal 1995, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended July 31, 1996 were $6,434,765 and $4,628,630, respectively.
See accompanying Notes to Financial Statements.
13 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Notes to Financial Statements
================================================================================
1. Significant
Accounting Policies
Oppenheimer Pennsylvania Tax-Exempt Fund (the Fund) is a separate series of
Oppenheimer Multi-State Tax-Exempt Trust, a non-diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. On June 6, 1996, the Board of Trustees elected to change the fiscal
year end of the Fund from December 31 to July 31. Accordingly, these financial
statements include information for the seven month period from January 1, 1996
to July 31, 1996. The Fund's investment objective is to seek the maximum current
income exempt from Federal and Pennsylvania personal income taxes for individual
investors that is consistent with the preservation of capital. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a front-end
sales charge. Class B and Class C shares may be subject to a contingent deferred
sales charge. All classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution and/or
service plan, expenses directly attributable to a particular class and exclusive
voting rights with respect to matters affecting a single class. Class B shares
<PAGE>
will automatically convert to Class A shares six years after the date of
purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
asked price or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio pricing
service approved by the Board of Trustees. Such securities which cannot be
valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by the
Board of Trustees to determine fair value in good faith. Short-term "money
market type" debt securities having a remaining maturity of 60 days or less are
valued at cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At July 31, 1996, the Fund
had available for federal income tax purposes an unused capital loss carryover
of $1,161,000, which expires between 2002 and 2004.
- --------------------------------------------------------------------------------
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the seven months
ended July 31, 1996, a provision of $15,481 was made for the Fund's projected
benefit obligations, and payments of $1,214 were made to retired trustees,
resulting in an accumulated liability of $45,404 at July 31, 1996.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
14 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
================================================================================
1. Significant
Accounting Policies
(continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of premium amortization for tax purposes. The character of the
distributions made during the year from net investment income or net realized
gains may differ from their ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the year that the income or
realized gain (loss) was recorded by the Fund.
During the seven months ended July 31, 1996, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly, during the seven months
ended July 31, 1996, amounts have been reclassified to reflect an increase in
overdistributed net investment income of $31,728. Accumulated net realized loss
on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Original issue discount on securities purchased
is amortized over the life of the respective securities, in accordance with
federal income tax requirements. For bonds acquired after April 30, 1993, on
disposition or maturity, taxable ordinary income is recognized to the extent of
the lesser of gain or market discount that would have accrued over the holding
period. Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes. The Fund concentrates its investments in
Pennsylvania and, therefore, may have more credit risks related to the economic
conditions of Pennsylvania than a portfolio with a broader geographical
diversification.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of
Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
<PAGE>
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Seven Months Ended July 31, 1996(2) Year Ended December 31, 1995(1) Year Ended December 31, 1994
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 444,071 $ 5,368,304 825,097 $ 9,802,254 1,479,731 $ 17,605,222
Dividends reinvested 113,937 1,371,426 199,971 2,384,211 200,372 2,359,317
Redeemed (572,992) (6,931,640) (1,088,358) (12,982,940) (1,270,347) (15,067,004)
-------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) (14,984) $ (191,910) (63,290) $ (796,475) 409,756 $ 4,897,535
======== =========== ========== ============ ========== ============
- -----------------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 224,245 $ 2,699,403 359,124 $ 4,282,282 442,928 $ 5,204,609
Dividends reinvested 21,125 254,088 30,661 366,174 19,685 230,132
Redeemed (82,510) (992,980) (67,574) (809,255) (48,897) (596,475)
-------- ----------- ---------- ------------ ---------- ------------
Net increase 162,860 $ 1,960,511 322,211 $ 3,839,201 413,716 $ 4,838,266
======== =========== ========== ============ ========== ============
- -----------------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 29,594 $ 355,700 21,431 $ 263,229 -- $ --
Dividends reinvested 608 7,281 31 377 -- --
Redeemed (11,403) (138,861) (125) (1,537) -- --
-------- ----------- ---------- ------------ ---------- ------------
Net increase 18,799 $ 224,120 21,337 $ 262,069 -- $ --
======== =========== ========== ============ ========== ============
</TABLE>
1. For the year ended December 31, 1995 for Class A and Class B shares and for
the period from August 29, 1995 (inception of offering) to December 31, 1995 for
Class C shares. 2. The Fund changed its fiscal year end from December 31 to July
31.
15 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Notes to Financial Statements (Continued)
================================================================================
3. Unrealized Gains and
Losses on Investments
At July 31, 1996, net unrealized appreciation on investments of $763,518 was
composed of gross appreciation of $1,613,230, and gross depreciation of
$849,712.
================================================================================
4. Management Fees
And Other Transactions
With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.60% on the first
$200 million of average annual net assets, 0.55% on the next $100 million, 0.50%
on the next $200 million, 0.45% on the next $250 million, 0.40% on the next $250
million and 0.35% on net assets in excess of $1 billion. The Manager has agreed
to assume Fund expenses (with specified exceptions) in excess of the most
stringent applicable regulatory limit on Fund expenses.
For the seven months ended July 31, 1996, commissions (sales charges
paid by investors) on sales of Class A shares totaled $132,759, of which $42,197
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $90,813 and $2,794, of which $7,675 was paid to an
affiliated broker/dealer for Class B. During the seven months ended July 31,
1996, OFDI received contingent deferred sales charges of $13,599 upon redemption
of Class B shares as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
Expenses paid indirectly represent a reduction of custodian fees for
earnings on cash balances maintained by the Fund.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate that may not exceed 0.15% of the average annual net
assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
<PAGE>
A shares. During the seven months ended July 31, 1996, OFDI paid $3,663 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted compensation type Distribution and Service Plans
for Class B and Class C shares to compensate OFDI for its services and costs in
distributing Class B and Class C shares and servicing accounts. Under the Plans,
the Fund pays OFDI an annual asset-based sales charge of 0.75% per year on Class
B shares that are outstanding for 6 years or less and on Class C shares, as
compensation for sales commissions paid from its own resources at the time of
sale and associated financing costs. If the Plans are terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it incurred before the Plans were
terminated. OFDI also receives a service fee of 0.25% (voluntarily reduced to
0.15% by the Fund's Board) per year as compensation for costs incurred in
connection with the personal service and maintenance of accounts that hold
shares of the Fund, including amounts paid to brokers, dealers, banks and other
financial institutions. Both fees are computed on the average annual net assets
of Class B and Class C shares, determined as of the close of each regular
business day. During the seven months ended July 31, 1996, OFDI paid $1,063 to
an affiliated broker/dealer as compensation for Class B personal service and
maintenance expenses and retained $69,264 and $1,546, respectively, as
compensation for Class B and Class C sales commissions and service fee advances,
as well as financing costs. At July 31, 1996, OFDI had incurred unreimbursed
expenses of $547,290 for Class B and $3,768 for Class C.
<PAGE>
APPENDIX A
Descriptions of Ratings Categories
Municipal Bonds
o Moody's Investor Services, Inc. The ratings of Moody's Investors Service, Inc.
("Moody's") for Municipal Bonds are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C.
Municipal Bonds rated "Aaa" are judged to be of the "best quality." The rating
of Aa is assigned to bonds which are of "high quality by all standards," but as
to which margins of protection or other elements make long-term risks appear
somewhat larger than "Aaa" rated Municipal Bonds. The "Aaa" and "Aa" rated bonds
comprise what are generally known as "high grade bonds." Municipal Bonds which
are rated "A" by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A rated bonds are considered adequate, but elements
may be present which suggest a susceptibility to impairment at some time in the
future. Municipal Bonds rated "Baa" are considered "medium grade" obligations.
They are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated "Ba" are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Bonds which are rated
"Caa" are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Bonds which
are rated "Ca" represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Bonds which
are rated "C" are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated Aa1,
A1, Baa1, Ba1 and B1 respectively.
In addition to the alphabetic rating system described above, Municipal
Bonds rated by Moody's which have a demand feature that provides the holder with
the ability to periodically tender ("put") the portion of the debt covered by
the demand feature, may also have a short-term rating assigned to such demand
feature. The short-term rating uses the symbol VMIG to distinguish
characteristics which include payment upon periodic demand rather than fund or
scheduled maturity dates and potential reliance upon external liquidity, as well
as other factors. The highest investment quality is designated by the VMIG 1
rating and the lowest by VMIG 4.
o Standard & Poor's Corporation. The ratings of Standard & Poor's Corporation
("S&P") for Municipal Bonds are AAA (Prime), AA (High Grade), A (Good Grade),
BBB (Medium Grade), BB, B, CCC, CC, and C (speculative grade). Bonds rated in
the top four categories (AAA, AA, A, BBB) are commonly referred to as
"investment grade." Municipal Bonds rated AAA are "obligations of the highest
quality." The rating of AA is accorded issues with investment characteristics
"only slightly less marked than those of the prime quality issues." The rating
of A describes "the third strongest capacity for payment of debt service."
Principal and interest payments on bonds in this category are regarded as safe.
It differs from the two higher ratings because, with respect to general
obligations bonds, there is some weakness, either in the local economic base, in
debt burden, in the balance between revenues and expenditures, or in quality of
management. Under certain adverse circumstances, any one such weakness might
impair the ability of the issuer to meet debt obligations at some future date.
With respect to revenue bonds, debt service coverage is good, but not
A-1
<PAGE>
exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate. The BBB rating is the lowest "investment grade"
security rating. The difference between A and BBB ratings is that the latter
shows more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered. With respect to revenue bonds, debt coverage is only fair. Stability
of the pledged revenues could show variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger. Bonds rated "BB" have less
near-term vulnerability to default than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which would lead to inadequate capacity to meet timely
interest and principal payments. Bonds rated "B" have a greater vulnerability to
default, but currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. Bonds rated
"CCC" have a current identifiable vulnerability to default, and is dependent
upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. Bonds noted "CC" typically are
debt subordinated to senior debt which is assigned on actual or implied "CCC"
debt rating. Bonds rated "C" typically are debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued. Bonds rated "D" are in payment default. The "D"
rating category is used when interest payments or principal payments are not
made on the date due even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during the grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
o Fitch. The ratings of Fitch Investors Service, Inc. for Municipal Bonds are
AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, and D. Municipal Bonds rated AAA
are judged to be of the "highest credit quality." The rating of AA is assigned
to bonds of "very high credit quality." Municipal Bonds which are rated A by
Fitch are considered to be of "high credit quality." The rating of BBB is
assigned to bonds of "satisfactory credit quality." The A and BBB rated bonds
are more vulnerable to adverse changes in economic conditions than bonds with
higher ratings. Bonds rated AAA, AA, A and BBB are considered to be of
investment grade quality. Bonds rated below BBB are considered to be of
speculative quality. The ratings of "BB" is assigned to bonds considered by
Fitch to be "speculative." The rating of "B" is assigned to bonds considered by
Fitch to be "highly speculative." Bonds rated "CCC" have certain identifiable
characteristics which, if not remedied, may lead to default. Bonds rated "CC"
are minimally protected. Default in payment of interest and/or principal seems
probable over time. Bonds rated "C" are in imminent default in payment of
interest or principal. Bonds rated "DDD", "DD" and "D" are in default on
interest and/or principal payments. DDD represents the highest potential for
recovery on these bonds, and D represents the lowest potential for recovery.
o Duff & Phelps. The ratings of Duff & Phelps are as follows: AAA which
are judged to be the "highest credit quality". The risk factors are negligible,
being only slightly more than for risk- free US Treasury debt. AA+, AA & AA-
High credit quality protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions. A+, A & A- Protection
factors are average but adequate. However, risk factors are more variable and
greater in periods of economic stress. BBB+, BBB & BBB- Below average protection
factors but still
A-2
<PAGE>
considered sufficient for prudent investment. Considerable variability in risk
during economic cycles. BB+, BB & BB- Below investment grade but deemed to meet
obligations when due. Present or prospective financial protection factors
fluctuate according to industry conditions or company fortunes. Overall quality
may move up or down frequently within the category. B+, B & B- Below investment
grade and possessing risk that obligations will not be met when due. Financial
protection factors will fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher of lower rating grade. CCC Well
below investment grade securities. Considerable uncertainty exists as to timely
payment of principal interest or preferred dividends. Protection factors are
narrow and risk can be substantial with unfavorable economic industry
conditions, and/or with unfavorable company developments. DD Defaulted debt
obligations issuer failed to meet scheduled principal and/or interest payments.
DP Preferred stock with dividend arreages.
Municipal Notes
o Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG"). Notes bearing the
designation MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for financing. Notes bearing the designation
"MIG-2" are of high quality with ample margins of protection, although not as
large as notes rated "MIG." Such short-term notes which have demand features may
also carry a rating using the symbol VMIG as described above, with the
designation MIG-1/VMIG 1 denoting best quality, with superior liquidity support
in addition to those characteristics attributable to the designation MIG-1.
o S&P's rating for Municipal Notes due in three years or less are SP-1,
SP-2, and SP-3. SP- 1 describes issues with a very strong capacity to pay
principal and interest and compares with bonds rated A by S&P; if modified by a
plus sign, it compares with bonds rated AA or AAA by S&P. SP-2 describes issues
with a satisfactory capacity to pay principal and interest, and compares with
bonds rated BBB by S&P. SP-3 describes issues that have a speculative capacity
to pay principal and interest.
o Fitch's rating for Municipal Notes due in three years or less are
F-1+, F-1, F-2, F-3, F-S and D. F-1+ describes notes with an exceptionally
strong credit quality and the strongest degree of assurance for timely payment.
F-1 describes notes with a very strong credit quality and assurance of timely
payment is only slightly less in degree than issues rated F-1+. F-2 describes
notes with a good credit quality and a satisfactory assurance of timely payment,
but the margin of safety is not as great for issues assigned F-1+ or F-1
ratings. F-3 describes notes with a fair credit quality and an adequate
assurance of timely payment, but near-term adverse changes could cause such
securities to be rated below investment grade. F-S describes notes with weak
credit quality. Issues rated D are in actual or imminent payment default.
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations. The
Moody's, S&P and Fitch corporate debt ratings shown do not differ materially
from those set forth above for Municipal Bonds.
A-3
<PAGE>
Commercial Paper
o Moody's The ratings of commercial paper by Moody's are Prime-1,
Prime-2, Prime-3 and Not Prime. Issuers rated Prime-1 have a superior capacity
for repayment of short-term promissory obligations. Issuers rated Prime-2 have a
strong capacity for repayment of short-term promissory obligations. Issuers
rated Prime-3 have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime rating
categories.
o S&P The ratings of commercial paper by S&P are A-1, A-2, A-3, B, C,
and D. A-1 indicates that the degree of safety regarding timely payment is
strong.A-2 indicates capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1. A-3
indicates an adequate capacity for timely payments. They are, however, more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. B indicates only speculative capacity for
timely payment. C indicates a doubtful capacity for payment. D is assigned to
issues in default.
o Fitch The ratings of commercial paper by Fitch are similar to its
ratings of Municipal Notes, above.
A-4
<PAGE>
APPENDIX B
TAX EQUIVALENT YIELD TABLES
The equivalent yield table above compares tax-free income with taxable income
under Federal tax rates effective January 1, 1996 and Commonwealth of
Pennsylvania personal income tax rates effective January 1, 1996. Combined
taxable income refers to the net amount subject to Federal and Pennsylvania
personal income tax after deductions and exemptions. The table assumes 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 investment
is not subject to the Alternative Minimum Tax and that Pennsylvania personal
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. The income tax brackets are subject to indexing in future years to
reflect changes in the Consumer Price Index. The table does not include the
effect of exemption from Pennsylvania personal property taxes or school district
taxes.
<TABLE>
<CAPTION>
Federal Effective A tax-exempt yield of:
Taxable Tax
Income Bracket Is Approximately Equivalent To a Taxable Yield of:
JOINT RETURN
Over Not over Federal PA Combined 2.00% 2.50% 3.00% 3.50% 3.68% 3.82%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 40,100 15.00% 2.80% 17.38% 2.42% 3.03% 3.63% 4.24% 4.45% 4.62%
$ 40,100 $ 96,900 28.00% 2.80% 30.02% 2.86% 3.57% 4.29% 5.00% 5.26% 5.46%
$ 96,900 $147,700 31.00% 2.80% 32.93% 2.98% 3.73% 4.47% 5.22% 5.49% 5.70%
$147,700 $263,750 36.00% 2.80% 37.79% 4.22% 4.92% 4.82% 5.63% 5.92% 6.14%
$263,750 and above 39.60% 2.80% 41.29% 3.41% 4.26% 5.11% 5.96% 6.27% 6.51%
4.00% 4.35% 4.50% 5.00% 5.50% 6.00% 6.50%
4.84% 5.27% 5.45% 6.05% 6.66% 7.26% 7.87%
5.72% 6.22% 6.43% 7.14% 7.86% 8.57% 9.29%
5.96% 6.49% 6.71% 7.46% 8.20% 8.95% 9.69%
6.43% 6.99% 7.23% 8.04% 8.84% 9.65% 10.45%
6.81% 7.41% 7.66% 8.52% 9.37% 10.22% 11.07%
SINGLE RETURN
Over Not over Federal PA Combined 2.00% 2.50% 3.00% 3.50% 3.68% 3.82%
$ 0 $ 24,000 15.00% 2.80% 17.38% 2.42% 3.03% 3.63% 4.24% 4.45% 4.62%
$ 24,000 $ 58,150 28.00% 2.80% 30.02% 2.86% 3.57% 4.29% 5.00% 5.26% 5.46%
$ 58,150 $121,300 31.00% 2.80% 32.93% 2.98% 3.73% 4.47% 5.22% 5.49% 5.70%
$121,300 $263,750 36.00% 2.80% 37.79% 3.22% 4.02% 4.82% 5.63% 5.92% 6.14%
$263,750 and above 36.60% 2.80% 41.29% 3.41% 4.26% 5.11% 5.96% 6.27% 6.51%
B-1
<PAGE>
4.00% 4.35% 4.50% 5.00% 5.50% 6.00% 6.50%
4.84% 5.27% 5.45% 6.05% 6.66% 7.26% 7.87%
5.72% 6.22% 6.43% 7.14% 7.86% 8.57% 9.29%
5.96% 6.49% 6.71% 7.46% 8.20% 8.95% 9.69%
6.43% 6.99% 7.23% 8.04% 8.84% 9.65% 10.45%
6.81% 7.41% 7.66% 8.52% 9.37% 10.22% 11.07%
</TABLE>
B-2
<PAGE>
Appendix C
Municipal Bond Industry Classifications
Electric Resource Recovery
Gas
Water Higher Education
Sewer Education
Telephone
Lease Rental
Adult Living Facilities
Hospital Non Profit Organization
General Obligation Highways
Special Assessment Marine/Aviation Facilities
Sales Tax
Multi Family Housing
Manufacturing, Non Durables Single Family Housing
Manufacturing, Durables
Pollution Control
C-1
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
C-2
<PAGE>
Oppenheimer
Florida Municipal Fund
Prospectus dated November 25, 1996
Oppenheimer Florida Municipal Fund is a mutual fund that seeks as high a level
of current interest income exempt from Federal income tax for individual
investors as is available from municipal securities and consistent with
preservation of capital. The Fund also seeks to offer investors the opportunity
to own securities exempt from Florida intangible personal property taxes. The
Fund will invest primarily in securities issued by the State of Florida and
local governments and governmental agencies, but may also invest in securities
of other issuers. The Fund may use certain hedging instruments to try to reduce
the risks of market fluctuations that affect the value of the securities the
Fund holds. The Fund is not intended to be a complete investment program and
there is no assurance that it will achieve its objective. Please refer to
"Investment Objective and Policies" for more information about the types of
securities the Fund invests in and refer to "Investment Risks" for a discussion
of the risks of investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it for
future reference. You can find more detailed information about the Fund in the
November 25, 1996 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Contents
Page
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks Investment
Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements
-2-
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during the fiscal period January 1, 1996 to July
31, 1996 (the Fund's new fiscal year end).
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account" starting on page
__ for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge
on Purchases (as a %
of offering price) 4.75% None None
Maximum Deferred Sales
Charge (as a % of the
lower of the original
offering price or
redemption proceeds) None(1) 5% in the first 1% if shares
year, declining are redeemed
to 1% in the within 12
sixth year and months of
eliminated purchase(2)
thereafter(2)
Maximum Sales Charge on
Reinvested Dividends None None None
Exchange Fee None None None
<FN>
(1) If you invest $1 million or more in Class A shares, you may have to pay a
sales charge of up to 1% if you sell your shares within 18 calendar months from
the end of the calendar month in
-3-
<PAGE>
which you purchased those shares. See "How to Buy Shares - Buying Class A
Shares", below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to
Buy Shares - Buying Class C Shares," below for more information on the
contingent deferred sales charges.
</FN>
</TABLE>
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (referred
to in this Prospectus as the "Manager"). The rates of the Manager's fees are set
forth in "How the Fund is Managed," below. The Fund has other regular expenses
for services, such as transfer agent fees, custodial fees paid to the bank that
holds the Fund's portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement of
Additional Information.
Annual Fund Operating Expenses as a Percentage of Average Net
Assets
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees
(after expense reimbursement) 0.46% 0.46% 0.46%
12b-1 Plan Fees 0.15% 0.90% 0.90%
Other Expenses (after expense
reimbursement) 0.48% 0.47% 0.51%
Total Fund Operating Expenses
(after expense reimbursement) 1.09% 1.83% 1.87%
</TABLE>
The numbers in the table above are based on the Fund's expenses for the
fiscal period January 1, 1996 to July 31, 1996 (the Fund's new fiscal year).
These amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan Fees for Class A
shares are service fees. For Class B and Class C shares, the 12b-1 Distribution
Plan Fees are service fees and asset-based sales charges. The service fee for
each class is a maximum of 0.25% (currently set at 0.15%) of average annual net
assets of the class and the asset-based sales charge for Class B and Class C
shares is 0.75%. These plans are described in greater detail in "How to Buy
Shares," below.
-4-
<PAGE>
The Total Fund Operating Expenses shown are net of a voluntary expense
assumption by the Manager. The expense assumption lowered the Fund's overall
expense ratio. Without such expense assumption by the Manager, the "Management
Fees" for each class of the Fund's shares would have been 0.60% of the Fund's
average net assets, and the "Total Fund Operating Expenses" for the Fund's Class
A, Class B and Class C shares would have been 1.23%, 1.97% and 1.99%,
respectively. The expense assumption is described in the Statement of Additional
Information and may be modified or withdrawn by the Manager at any time.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of factors,
including changes in the actual value of the Fund's assets represented by each
class of shares.
o Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown below.
Assume that you make a $1,000 investment in each class of shares of the Fund,
and that the Fund's annual return is 5%, and that its operating expenses for
each class are the ones shown in the Annual Fund Operating Expenses table above.
If you were to redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3, 5 and 10
years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
Class A Shares $58 $81 $105 $174
Class B Shares $69 $88 $119 $178
Class C Shares $29 $59 $101 $219
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
Class A Shares $58 $81 $105 $174
Class B Shares $19 $58 $ 99 $178
Class C Shares $19 $59 $101 $219
</TABLE>
* In the first example, expenses include the Class A initial sales charge and
the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not
-5-
<PAGE>
include contingent deferred sales charges. The Class B expenses in years 7
through 10 are based on the Class A expenses shown above, because the Fund
automatically converts your Class B shares into Class A shares after 6 years.
Because of the effect of the asset-based sales charge and contingent deferred
sales charge, long-term holders of Class B and Class C shares could pay the
economic equivalent of more than the maximum front-end sales charge allowed
under applicable regulations. For Class B shareholders, the automatic conversion
of Class B shares to Class A shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares" on page ___ for more
information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment returns of
the Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete information can
be found. You should carefully read the entire Prospectus before making a
decision about investing in the Fund. Keep the Prospectus for reference after
you invest, particularly for information about your account, such as how to sell
or exchange shares.
o What Is The Fund's Investment Objective? The Fund's investment
objective is to seek as high a level of current interest income exempt from
Federal income taxes for individual investors as is available from Municipal
Securities (as described in "Investment Objective and Policies") and consistent
with preservation of capital. Investment in securities exempt from Florida's
intangible personal property taxes is also sought.
o What Does the Fund Invest In? Under normal market conditions, the
Fund will invest at least 80% (and will attempt to invest 100%) of its total
assets in Municipal Securities, and invest at least 65% of its total assets in
Florida Municipal Securities (described below), the interest on which is exempt
from Federal income tax. The Fund may invest up to 20% of its assets in
investments the income from which may be taxable. The Fund may also use hedging
instruments and some derivative investments in an
-6-
<PAGE>
effort to protect against market risks. These investments are more fully
explained in "Investment Objective and Policies," starting on page __.
o Who Manages the Fund? The Fund's investment adviser (the "Manager")
is OppenheimerFunds, Inc. The Manager (including a subsidiary) advises
investment company portfolios having over $55 billion in assets at September 30,
1996. The Manager is paid an advisory fee by the Fund, based on its assets. The
Fund's portfolio manager who is primarily responsible for the selection of the
Fund's securities is Robert E. Patterson. The Board of Trustees, elected by
shareholders, oversees the investment adviser and the portfolio manager. Please
refer to "How the Fund is Managed," starting on page __ for more information
about the Manager and its fees.
o How Risky is the Fund? All investments carry risks to some degree.
The Fund's bond investments are subject to changes in their value from a number
of factors such as changes in general bond market movements, the change in value
of particular bonds because of an event affecting the issuer, or changes in
interest rates that can affect bond prices. These changes affect the value of
the Fund's investments and its price per share. The fact that the Fund
concentrates its investments in Florida Municipal Securities or is able to
invest its assets in a single issuer or limited number of issuers entails
greater risk than an investment in a diversified investment company. The Fund's
investment in certain derivative investments may add a degree of risk not
present in a fund that does not invest in such securities.
While the Manager tries to reduce risks by carefully researching
securities before they are purchased for the portfolio, and in some cases by
using hedging techniques, there is no guarantee of success in achieving the
Fund's objective and your shares may be worth more or less than their original
cost when you redeem them. Please refer to "Investment Risks" starting on page
__ for a more complete discussion of the Fund's investment risks.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the Fund's
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How To Buy Shares" starting on page
-7-
<PAGE>
_ for more details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has three classes
of shares. All classes have the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge, starting at
4.75%, and reduced for larger purchases. Class B and Class C shares are offered
without a front-end sales charge, but may be subject to a contingent deferred
sales charge if redeemed within 6 years or 12 months, respectively, of purchase.
There is also an annual asset-based sales charge on Class B and Class C shares.
Please review "How To Buy Shares" starting on page __ for more details,
including a discussion about which class may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail, by
telephone call to the Transfer Agent on any business day, or through your
dealer, by writing a check against your Fund account (available for Class A
shares only). Please refer to "How To Sell Shares" on page __. The Fund also
offers exchange privileges to other Oppenheimer funds, described in "How to
Exchange Shares" on page ___.
o How Has the Fund Performed? The Fund measures its performance by
quoting its yield, tax equivalent yield, average annual total return and
cumulative total return, which measure historical performance. Those yields and
returns can be compared to the yields and returns (over similar periods) of
other funds. Of course, other funds may have different objectives, investments,
and levels of risk. The Fund's performance can also be compared to a broad
market index, which we have done on page __. Please remember that past
performance does not guarantee future results.
Financial Highlights
The table on the following page presents selected financial information about
the Fund, including per share data and expense ratios and other data based on
the Fund's average net assets. This information has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, whose report on the Fund's
financial statements for the fiscal year ended December 31, 1995 and for the
fiscal period January 1, 1996 to July 31, 1996 (the Fund's new fiscal year end),
are included in the Statement of Additional Information. Class C shares were
publicly offered only during a portion of the fiscal year ended December 31,
1995, commencing on August 29, 1995.
-8-
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
--------------------------------------- -----------------------------------------------
SEVEN MONTHS SEVEN MONTHS
ENDED ENDED
JULY 31, YEAR ENDED DECEMBER 31, JULY 31, YEAR ENDED DECEMBER 31,
1996(2) 1995 1994 1993(3) 1996(2) 1995 1994 1993(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.40 $ 10.26 $ 11.79 $11.43 $ 11.42 $ 10.27 $11.81 $11.43
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 .63 .64 .14 .31 .55 .56 .12
Net realized and unrealized gain (loss) (.34) 1.14 (1.53) .36 (.34) 1.15 (1.54) .38
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .02 1.77 (.89) .50 (.03) 1.70 (.98) .50
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (.35) (.63) (.64) (.14) (.30) (.55) (.56) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.07 $ 11.40 $ 10.26 $11.79 $ 11.09 $ 11.42 $10.27 $11.81
==========================================================================================
====================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 0.25% 17.60% (7.66)% 4.39% (0.19)% 16.81% (8.42)% 4.35%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $19,366 $19,377 $11,992 $7,062 $12,865 $12,658 $7,992 $4,874
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $18,415 $14,508 $9,741 $2,471 $12,843 $10,772 $6,987 $2,304
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.50%(5) 5.71% 5.90% 5.08%(5) 4.75%(5) 4.92% 5.13% 4.20%(5)
Expenses, before reimbursement and
voluntary assumption by the Manager
or Distributor(6) 1.23%(5) 1.36% 1.25% 1.89%(5) 1.97%(5) 2.11% 1.99% 2.20%(5)
Expenses, net of reimbursement and
voluntary assumption by the Manager
or Distributor 1.09%(5) 0.53% 0.29% -- 1.83%(5) 1.29% 1.03% 0.38%(5)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 21.2% 18.4% 30.4% -- 21.2% 18.4% 30.4% --
</TABLE>
<TABLE>
<CAPTION>
============================================================
FINANCIAL HIGHLIGHTS
CLASS C
--------------------------------------
SEVEN MONTHS
ENDED PERIOD ENDED
JULY 31, DECEMBER 31,
1996(2) 1995(1)
================================================================================
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.40 $10.96
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .31 .20
Net realized and unrealized gain (loss) (.34) .44
- --------------------------------------------------------------------------------
Total income (loss) from investment
operations (.03) .64
- --------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (.30) (.20)
- --------------------------------------------------------------------------------
Net asset value, end of period $11.07 $11.40
======================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) (0.22)% 5.86%
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $72 $39
- --------------------------------------------------------------------------------
Average net assets (in thousands) $78 $ 5
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.68%(5) 4.68%(5)
Expenses, before reimbursement and
voluntary assumption by the Manager
or Distributor(6) 1.99%(5) 1.92%(5)
Expenses, net of reimbursement and
voluntary assumption by the Manager
or Distributor 1.87%(5) 1.43%(5)
- --------------------------------------------------------------------------------
Portfolio turnover rate(7) 21.2% 18.4%
<FN>
1. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year from December 31 to July 31.
3. For the period from October 1, 1993 (commencement of operations) to
December 31, 1993.
4. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
5. Annualized.
6. Beginning in fiscal 1995, the expense ratio reflects the effect
of gross expenses paid indirectly by the Fund. Prior year expense ratios have
not been adjusted.
7. The lesser of purchases or sales of portfolio securities
for a period, divided by the monthly average of the market value of portfolio
securities owned during the period. Securities with a maturity or expiration
date at the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-term
securities) for the period ended July 31, 1996 were $8,561,554 and $6,588,824,
respectively.
</FN>
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks as high a level of current interest income exempt from
Federal income tax for individual investors as is available from Municipal
Securities (which are described below) and consistent with preservation of
capital. The Fund also seeks to offer investors the opportunity to own
securities exempt from Florida intangible personal property taxes.
Investment Policies and Strategies. The Fund seeks its objective by following
the fundamental policy of investing, under normal market conditions, at least
80% (and attempting to invest, as a non-fundamental policy, 100%) of its total
assets in Municipal Securities and investing at least 65% of its total assets in
Florida Municipal Securities (which are described below).
Dividends paid by the Fund derived from interest attributable to
Municipal Securities, including Florida Municipal Securities, will be exempt
from Federal individual income taxes. Although exempt-interest dividends will
not be subject to Federal income tax for Fund shareholders, a portion of such
dividends which is derived from interest on certain "private activity" bonds may
be an item of tax preference if you are subject to the Federal alternative
minimum tax. Dividends and distributions paid by the Fund to individuals who are
residents of Florida are not taxable by Florida, because Florida does not impose
a personal income tax. Florida does, however, impose an intangible personal
property tax. Shares of the Fund will be exempt from the Florida intangible
personal property tax to the extent that the Fund's assets consist of Florida
Municipal Securities and obligations of the U.S. Government, its agencies,
instrumentalities and territories on the last business day of each calendar
year. The Fund will attempt not to hold any investments on the last business day
of each calendar year to the extent such investments may result in shares of the
Fund being subject to the Florida intangible personal property tax. Any net
interest income on taxable investments and repurchase agreements will be taxable
as ordinary income when distributed to shareholders.
o Can the Fund's Investment Objective and Policies Change?
-9-
<PAGE>
The Fund has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective. Additionally,
the Fund uses certain investment techniques and strategies in carrying out those
investment policies. The Fund's investment policies and techniques are not
"fundamental" unless this Prospectus or the Statement of Additional Information
says that a particular policy is "fundamental." The Fund's investment objective
is a fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
percentage of outstanding voting shares (and this term is explained in the
Statement of Additional Information). The Board of Trustees of the Trust (as
defined below) (the Board of Trustees") may change non-fundamental policies
without shareholder approval, although significant changes will be described in
amendments to this Prospectus.
o Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund generally will not engage in the trading
of securities for the purpose of realizing short-term gains, but the Fund may
sell securities as the Manager deems advisable to take advantage of
differentials in yield. The "Financial Highlights" table above, shows the Fund's
portfolio turnover rate during past fiscal years. Portfolio turnover affects
brokerage costs, dealer markups and other transaction costs, and results in the
Fund's realization of capital gains or losses for tax purposes.
Investment Risks
All investments carry risks to some degree, whether they are risks that
market prices of the investment will fluctuate (this is known as "market risk")
or that the underlying issuer will experience financial difficulties and may
default on its obligation under a fixed-income investment to pay interest and
repay principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
-10-
<PAGE>
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for investors who are
investing for the long term. It is not intended for investors seeking assured
income. While the Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased, and in some cases by
using hedging techniques, changes in overall market prices can occur at any
time, and because the income earned on securities is subject to change, there is
no assurance that the Fund will achieve its investment objective. When you
redeem your shares, they may be worth more or less than what you paid for them.
o Special Considerations - Florida Municipal Securities. The Fund
concentrates its investments in Municipal Securities issued by the State of
Florida and its agencies, authorities, instrumentalities and subdivisions making
the Fund more susceptible to factors adversely affecting issuers of Florida
Municipal Securities than a tax-exempt mutual fund that is not concentrated in
Florida Municipal Securities than a tax-exempt mutual fund that is not
concentrated in Florida Municipal Securities. The risks and special
considerations involved in such investments vary with the types of instruments
being acquired. The ability of Florida and its agencies, authorities,
instrumentalities and subdivisions to meet their obligations will depend
primarily on the availability of tax and other revenues to those governments and
on their fiscal conditions generally. The financial condition of Florida and its
agencies, authorities, instrumentalities and subdivisions may be affected from
time to time by economic, political, geographic and demographic conditions. In
addition, constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives may limit a government's power
to raise revenues or increase taxes and thus could adversely affect an issuer's
ability to meet financial obligations. The market value and marketability of
Florida Municipal Securities and the interest income and repayment of principal
to the Fund from them could be adversely affected by a default or a financial
crisis relating to Florida and its agencies, authorities, instrumentalities and
subdivisions. Investors should consider these matters as well as economic trends
in Florida, some of which are briefly discussed in the Statement of Additional
Information.
o Interest Rate Risk. The values of Municipal Securities
change in response to changes in prevailing interest rates. Should
interest rates rise, the values of outstanding Municipal Securities
-11-
<PAGE>
will probably decline and (if purchased at principal amount) would sell at a
discount. If interest rates fall, the values of outstanding Municipal Securities
will probably increase and (if purchased at principal amount) would sell at a
premium. Changes in the values of Municipal Securities owned by the Fund from
these or other factors will not affect interest income derived from these
securities but will affect the Fund's net asset value per share.
o There are special risks in investing in derivative investments. The
risks of investing in derivative investments include not only the ability of the
issuer of the derivative investment to pay the amount due on the maturity of the
investment, but also the risk that the underlying security or investment might
not perform the way the Manager expected it to perform. That can mean that the
Fund will realize less income than expected. Another risk of investing in
derivative investments is that their market value could be expected to vary to a
much greater extent than the market value of municipal securities that are not
derivative investments but have similar credit quality, redemption provisions
and maturities.
o Non-diversification. The Trust is a "non-diversified" investment
company under the Investment Company Act. As a result, the Fund may invest its
assets in a single issuer or limited number of issuers without limitation by the
Investment Company Act. However, the Fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), pursuant to which (i) not more than 25% of the market
value of the Fund's total assets will be invested in the securities of a single
issuer, and (ii) 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 Fund must not own more than 10% of the
outstanding voting securities of a single issuer.
An investment in the Fund will 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 Fund's portfolio, and economic, political or regulatory developments may
have a greater impact on the value of the Fund's portfolio than would be the
case if the portfolio were diversified among more issuers.
-12-
o Hedging instruments can be volatile investments and may
involve special risks. The use of hedging instruments requires
-13-
<PAGE>
special skills and knowledge of investment techniques that are different from
what is required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly, hedging
strategies may reduce the Fund's return. The Fund could also experience losses
if the prices of its futures and options positions were not correlated with its
other investments or if it could not close out a position because of an illiquid
market for the future or option. Such losses might cause previously distributed
short-term capital gains to be re-characterized as a non-taxable return of
capital to shareholders.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment at
the call price and will not be able to realize any profit if the investment has
increased in value above the call price. Interest rate swaps are subject to
credit risks (if the other party fails to meet its obligations) and also to
interest rate risks. The Fund could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate changes.
These risks are described in greater detail in the Statement of Additional
Information.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies
described below. These techniques involve certain risks. The Statement of
Additional Information contains more information about these practices,
including limitations on their use that are designed to reduce some of the
risks.
o Municipal Securities and Florida Municipal Securities. Municipal
Securities consist of municipal bonds, municipal notes (including tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other short-term loans), tax-exempt commercial paper
and other debt obligations issued by or on behalf of the State of Florida or its
political subdivisions, other states and the District of Columbia, their
-14-
<PAGE>
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 income tax, in the opinion of bond counsel
to the respective issuer, at the time of issue. Florida Municipal Securities are
Municipal Securities that would enable shares of the Fund to be exempt from
Florida intangible personal property taxes. No independent investigation has
been made by the Manager as to the users of proceeds of bond offerings or the
application of such proceeds.
"Municipal bonds" are Municipal Securities that have a maturity when
issued of one year or more and "municipal notes" are Municipal Securities that
have a maturity when issued of less than one year. The two principal
classifications of Municipal Securities are "general obligations" (secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest) and "revenue obligations" (payable only from the
revenues derived from a particular facility or class of facilities, or specific
excise tax or other revenue source). The Fund may invest in Municipal Securities
of both classifications. See "Investment Objective and Policies" in the
Statement of Additional Information for further information about the Fund's
investment policies and Municipal Securities.
o Investments in Taxable Securities and Temporary Defensive Investment
Strategy. Under normal market conditions, the Fund may invest up to 20% of its
assets in taxable investments, including (i) certain "Temporary Investments"
(described immediately below); (ii) hedging instruments (described in "Hedging,"
below), and (iii) repurchase agreements (explained below).
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary "defensive"
position by investing some or all of its assets (there is no limit on the
amount) in short-term money market instruments. These include the taxable
obligations described above, U.S. Government Securities, bank obligations,
commercial paper, corporate obligations and other instruments approved by the
Board of Trustees. This strategy would be implemented to attempt to reduce
fluctuations in the value of the Fund's assets. The Fund may hold temporary
investments pending the investment of proceeds from the sale of Fund shares or
portfolio securities, pending
-15-
<PAGE>
settlement of purchases of Municipal Securities, or to meet anticipated
redemptions. To the extent the Fund assumes a temporary defensive position, a
portion of the Fund's distributions may be subject to Federal and state income
taxes and the Fund may not achieve its objective.
o Municipal Lease Obligations. Municipal leases may take the form of a
lease or an installment purchase contract issued by state and local government
authorities to obtain funds to acquire a wide variety of equipment and
facilities. The Fund may invest in certificates of participation that represent
a proportionate interest in, or right to, the lease-purchase payments made under
municipal lease obligations. Certain of these securities may be deemed to be
"illiquid" securities and their purchase would be limited as described below in
"Illiquid and Restricted Securities". Investment in certificates of
participation that the Manager has determined to be liquid (under guidelines set
by the Board of Trustees) will not be subject to such limitations.
o Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest rates.
Variable rates are adjustable at stated periodic intervals. Floating rates are
automatically adjusted according to a specified market rate for such
investments, such as the percentage of the prime rate of a bank, or the 91-day
U.S. Treasury Bill rate. Such obligations may be secured by bank letters of
credit or other credit support arrangements.
o Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments". The Fund may use some
derivative investments for hedging purposes, and may invest in others because
they offer the potential for increased income and principal value. In general, a
"derivative investment" is a specially-designed investment. It's performance is
linked to the performance of another investment or security, such as an option,
future or index. In the broadest sense, derivative investments include
exchange-traded options and futures contracts (please refer to "Hedging,"
below).
The Fund may invest in "inverse floater" variable rate bonds,
a type of derivative investment whose yields move in the opposite
direction from changes in short-term interest rates. As interest
rates rise, inverse floaters produce less current income. Their
-16-
<PAGE>
price may be more volatile than the price of a comparable fixed-rate security.
Some inverse floaters have a "cap" whereby if interest rates rise above the
"cap," the security pays additional interest income. If rates do not rise above
the "cap," the Fund will have paid an additional amount for a feature that
proves worthless. The Fund may also invest in municipal securities that pay
interest that depends on an external pricing mechanism, also a type of
derivative investment. Examples of external pricing mechanisms are interest rate
swaps or caps and municipal bond or swap indices. The Fund anticipates that
under normal circumstances it will invest no more than 10% of its net assets in
inverse floaters.
o Ratings of Municipal Securities; Special Risks of Lower Rated
Municipal Securities. No more than 25% of the Fund's total assets will be
invested in Municipal Securities that at the time of purchase are not
"investment grade," that is, rated below the four highest rating categories of
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), and Fitch Investors Service, Inc. ("Fitch") and Duff & Phelps. If the
securities are not rated, the Manager will determine the equivalent rating
category for purposes of this limitation. (See Appendix A to the Statement of
Additional Information for a description of those ratings). A reduction in the
rating of a security after its purchase by the Fund will not require the Fund to
dispose of such security.
Lower-grade Municipal Securities (sometimes called "municipal junk
bonds") may be subject to greater market fluctuations and are subject to greater
risks of loss of income and principal than higher-rated Municipal Securities,
and may be considered to have some speculative characteristics. Securities that
are or that have fallen below investment grade entail a greater risk that the
ability of the issuers of such securities to meet their debt obligations will be
impaired. There may be less of a market for lower-grade Municipal Securities and
therefore they may be harder to sell at an acceptable price. These risks mean
that the Fund may not achieve the expected income from lower-grade Municipal
Securities, and that the Fund's income and net asset value per share may be
affected by declines in value of these securities. However, the Fund's
limitations on investments in non-investment grade Municipal Securities may
reduce some of these risks.
-17-
<PAGE>
o When-Issued and Delayed Delivery Transactions. The Fund may purchase
Municipal Securities on a "when-issued" basis and may purchase or sell such
securities on a "delayed delivery" basis. These terms refer to securities that
have been created and for which a market exists, but which are not available for
immediate delivery. There may be a risk of loss to the Fund if the value of the
security declines prior to the settlement date.
o Puts and Stand-By Commitments. The Fund may acquire "stand-by
commitments" or "puts" with respect to municipal obligations held in its
portfolio. Under a stand-by commitment or put option, the Fund would have the
right to sell specified securities at a specific price on demand to the issuing
broker-dealer or bank. The Fund will acquire stand-by commitments or puts solely
to facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
o Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. They are used primarily for cash liquidity purposes.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may incur
costs in disposing of the collateral and may experience losses if there is any
delay in its ability to do so. The Fund will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days. There is no limit on
the amount of the Fund's net assets that may be subject to repurchase agreements
of seven days or less.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Board of Trustees, the Manager determines the liquidity of
certain of the Fund's investments. Investments may be illiquid because of the
absence of an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. The Fund will not invest more
than 10% of its net assets in illiquid investments (the Board may increase that
limit to 15%). The Fund may not invest any portion of its assets in restricted
securities. A restricted security is one that has a contractual restriction on
its resale or that cannot be sold publicly until registered under the Securities
-18-
<PAGE>
Act of 1933, as amended. The Manager monitors holdings of illiquid securities on
an ongoing basis and at times the Fund may be required to sell some holdings to
maintain adequate liquidity.
o Loans of Portfolio Securities. To attempt to increase its income, the
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions. The Fund must receive collateral for a loan. These loans are
limited to not more than 25% of the Fund's net assets, and are subject to other
conditions described in the Statement of Additional Information. The Fund
presently does not intend to lend its portfolio securities, but if it does, the
value of securities loaned is not expected to exceed 5% of the value of its
total assets in the coming year.
o Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, and options on futures and
broadly-based municipal bond indices, or enter into interest rate swap
agreements. These are all referred to as "hedging instruments." The Fund does
not use hedging instruments for speculative purposes, and has limits on the use
of them, described below. The hedging instruments the Fund may use are described
below and in greater detail in "Other Investment Techniques and Strategies" in
the Statement of Additional Information.
The Fund may buy and sell options and futures for a number of purposes.
It may do so to try to manage its exposure to the possibility that the prices of
its portfolio securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. It may do so to try to manage its exposure to changing interest
rates. Some of these strategies, such as selling futures, buying puts and
writing covered calls, hedge the Fund's portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options, tend
to increase the Fund's exposure to the securities market. Writing covered call
options may also provide income to the Fund for liquidity purposes, defensive
reasons, or to raise cash to distribute to shareholders.
o Futures. The Fund may buy and sell futures contracts that
relate to (1) broadly-based municipal bond indices (these are
-19-
<PAGE>
referred to as Municipal Bond Index Futures) and (2) interest rates (these are
referred to as Interest Rate Futures). These types of Futures are described in
"Hedging" in the Statement of Additional Information.
o Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).
The Fund may buy calls only on securities, broadly-based municipal bond
indices, Municipal Bond Index Futures or Interest Rate Futures, or to terminate
its obligation on a call the Fund previously wrote. The Fund may write (that is,
sell) covered call options. When the Fund writes a call, it receives cash
(called a premium). The call gives the buyer the ability to buy the investment
on which the call was written from the Fund at the call price during the period
in which the call may be exercised. If the value of the investment does not rise
above the call price, it is likely that the call will lapse without being
exercised, while the Fund keeps the cash premium (and the investment).
The Fund may purchase puts. Buying a put on an investment gives the
Fund the right to sell the investment at a set price to a seller of a put on
that investment. The Fund can buy only those puts that relate to (1) securities
that the Fund owns, (2) broadly- based municipal bond indices, (3) Municipal
Bond Index Futures or (4) Interest Rate Futures. The Fund can buy a put on a
Municipal Bond Index Future or Interest Rate Future whether or not the Fund owns
the particular Future in its portfolio. The Fund may not sell a put other than a
put that it previously purchased.
The Fund may buy and sell puts and calls only if certain conditions are
met: (1) after the Fund writes a call, not more than 25% of the Fund's total
assets may be subject to calls; (2) calls the Fund buys or sells must be listed
on a securities or commodities exchange, or quoted on the Automated Quotation
System ("NASDAQ") of the Nasdaq Stock Market, Inc., or traded in the
over-the-counter market; (3) each call the Fund writes must be "covered" while
it is outstanding (that means the Fund must own the investment on which the call
was written); (4) the Fund may write calls on Futures contracts it owns, but
these calls must be covered by securities or other liquid assets the Fund owns
and segregates to enable it to satisfy its obligations if the call is exercised;
(5) a call or put option may not be purchased if the value of all
-20-
<PAGE>
of the Fund's put and call options would exceed 5% of the Fund's total assets;
and (6) the aggregate premiums paid on all such options which the Fund holds at
any time will be limited to 20% of the Fund's total assets, and the aggregate
margin deposits on all such futures or options thereon at any time will be
limited to 5% of the Fund's total assets.
o Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest on a
security. For example, they may swap a right to receive floating rate payments
for fixed rate payments. The Fund enters into swaps only on securities it owns.
The Fund may not enter into swaps with respect to more than 25% of its total
assets. Also, the Fund will segregate liquid assets (such as cash or U.S.
Government securities) to cover any amounts it could owe under swaps that exceed
the amounts it is entitled to receive, and it will adjust that amount daily, as
needed. Income from interest rate swaps may be taxable.
Other Investment Restrictions. The Fund has other investment restrictions which
are fundamental policies. Under these fundamental policies, the Fund cannot
concentrate investments to the extent of more than 25% of its total assets in
any industry; however, there is no limitation as to investment in Municipal
Securities, Florida Municipal Securities or U.S. Government obligations.
As a matter of non-fundamental policy, changeable without a shareholder
vote, the Fund will not:
o Invest in securities or any other investment other than the Municipal
Securities, temporary investments, taxable investments and hedging instruments
described in "Investment Objective and Policies" above.
o Make loans, except through the purchase of portfolio securities subject to
repurchase agreements or through loans of portfolio securities as described
under "Loans of Portfolio Securities".
o Borrow money in excess of 10% of the value of its total assets, or make any
investments whenever borrowings exceed 5% of the Fund's total assets; it may
borrow only from banks as a temporary measure for extraordinary or emergency
purposes (not for the purpose of
-21-
<PAGE>
leveraging its investments).
o Pledge, mortgage or otherwise encumber, transfer or assign any of its assets
to secure a debt; collateral arrangements for premium and margin payments in
connection with hedging instruments are not deemed to be a pledge of assets
o Buy or sell futures contracts other than interest rate futures or municipal
bond index futures.
Unless the prospectus states that a percentage restrictions applies on
an ongoing basis, it applies only at the time the Fund purchases an investment,
and the Fund need not sell securities to meet the percentage limits if the value
of the investment increases in proportion to the size of the Fund. Other
investment restrictions are listed in "Investment Restrictions" in the Statement
of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized on June 10, 1993 and is one of
three investment portfolios or "series" of Oppenheimer Multi-State Municipal
Trust (the "Trust"). The Trust is an open-end, non-diversified management
investment company organized in 1989 as a Massachusetts business trust, with an
unlimited number of authorized shares of beneficial interest. Each of the three
series of the Trust is a fund that issues its own shares, has its own investment
portfolio, and its own assets and liabilities.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Trust" in the Statement of Additional Information names the Trustees and
officers of the Trust and provides more information about them. Although the
Trust will not normally hold annual meetings of Fund shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Trust's Declaration of Trust.
-22-
<PAGE>
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of this Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All classes invest in the same investment portfolio. Each class has its
own dividends and distributions and pays certain expenses which may be different
for the different classes. Each class may have a different net asset value. Each
share has one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a particular class vote as a class on matters
that affect that class alone. Shares are freely transferrable. Please refer to
"How the Fund is Managed" in the Statement of Additional Information on voting
of shares.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out its
duties, subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement which states the Manager's responsibilities. The
Agreement sets forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $55 billion as of
September 30, 1996, and with more than 3 million shareholder accounts. The
Manager is owned by Oppenheimer Acquisition Corp., a holding company that is
owned in part by senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
o Portfolio Manager. The portfolio manager of the Fund (who
is also a Vice President of the Fund) is Robert E. Patterson who is
also a Senior Vice President of the Manager. He has been the
person principally responsible for the day-to-day management of the
Fund's portfolio since October 7, 1993, the commencement of the
Fund's operations. Mr. Patterson has also served as an officer and
portfolio manager for other Oppenheimer funds.
o Fees and Expenses. Under the Investment Advisory
Agreement, the Fund pays the Manager the following annual fees,
-23-
<PAGE>
which decline on additional assets as the Fund grows: 0.60% of the first $200
million of average annual net assets; 0.55% of the next $100 million; 0.50% of
the next $200 million; 0.45% of the next $250 million; 0.40% of the next $250
million and 0.35% of average annual net assets in excess of $1 billion. The
Fund's management fee for its last fiscal year was 0.60% of average annual net
assets (before expense reimbursement) for Class A shares, Class B shares and
Class C which may be higher than the rate paid by some other mutual funds. After
taking the voluntary expense assumption (which is described in the Statement of
Additional Information under "The Investment Advisory Agreement" into effect, no
management fees were due and payable by the Fund for its last fiscal year.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal fees and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset value of
shares, and therefore are indirectly borne by shareholders through their
investment. More information about the Investment Advisory Agreement and the
other expenses paid by the Fund is contained in the Statement of Additional
Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it therefore
incurs relatively little expense for brokerage. From time to time, however, it
may use brokers when buying portfolio securities. When deciding which brokers to
use, the Manager is permitted by the Investment Advisory Agreement to consider
whether brokers have sold shares of the Fund or any other funds for which the
Manager serves as investment adviser.
o The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with OppenheimerFunds Distributor, Inc., a
subsidiary of the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of other "Oppenheimer funds" and is sub- distributor
for funds managed by a subsidiary of the Manager.
-24-
<PAGE>
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for the other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return,"
"average annual total return," "standardized yield," "dividend yield," "yield"
and "tax-equivalent yield" to illustrate its performance. The performance of
each class of shares is shown separately, because the performance of each class
of shares will usually be different, as a result of the different kinds of
expenses each class bears. These returns and yields measure the performance of a
hypothetical account in the Fund over various periods, and do not show the
performance of each shareholder's account (which will vary if dividends are
received in cash, or shares are sold or purchased). The Fund's performance may
help you see how well your Fund has done over time and to compare it to other
funds or to a market index.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions of
future returns or performance. This performance data is described below, but
more detailed information about how total returns and yields are calculated is
contained in the Statement of Additional Information, which also contains
information about indices and other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time, depending on
market conditions, the composition of the portfolio, expenses and which class of
shares you purchase.
o Total Returns. There are different types of "total returns" used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce
-25-
<PAGE>
the cumulative total return over the entire period. However, average annual
total returns do not show the Fund's actual year-by- year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted.
However, total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be less if
sales charges were deducted.
o Yield. Each class of shares calculates its yield by dividing the
annualized net investment income per share from the portfolio during a 30-day
period by the maximum offering price on the last day of the period. The yield of
each class will differ because of the different expenses of each class of
shares. The yield data represents a hypothetical investment return on the
portfolio, and does not measure an investment return based on dividends actually
paid to shareholders. To show that return, a dividend yield may be calculated.
Dividend yield is calculated by dividing the dividends of a class derived from
net investment income during a stated period by the maximum offering price on
the last day of the period. Yields and dividend yields for Class A shares
reflect the deduction of the maximum initial sales charge, but may also be shown
based on the Fund's net asset value per share. Yields for Class B and Class C
shares do not reflect the deduction of the contingent deferred sales charge. The
tax- equivalent yield is the equivalent yield that would be earned in the
absence of Federal income tax and Florida intangible tax. It is calculated by
dividing that portion of the yield that is tax exempt by a factor equal to one
minus the applicable tax rate.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended July 31, 1996, followed by a graphical
comparison of the Fund's performance to an appropriate broad-based market index.
o Management's Discussion of Performance. During the Fund's fiscal year
ended July 31, 1996, the Fund's performance was affected by several economic and
market factors. A major factor in the Fund's performance was the portfolio
manager's emphasis on pre- refunded bonds, with shorter maturities, which
performed well compared to other municipal bonds. Holdings in long-term
municipal bonds underperformed other municipal bond sectors. Weighting in this
sector was lowered which has helped the Fund's performance.
o Comparing the Fund's Performance to the Market. The graphs below show
the performance of a hypothetical $10,000 investment in each class of shares of
the Fund held until July 31, 1996. In the case of Class A and Class B shares,
performance is measured from the Fund's inception on October 1, 1993, and in the
case of Class C shares, from the inception of the Class on August 29, 1995.
The Fund's performance is compared to that of the Lehman Brothers
Municipal Bond Index, an unmanaged index of a broad range of investment grade
municipal bonds that is widely regarded as a measure of the performance of the
general municipal bond market. Index performance reflects the reinvestment of
income but does not consider the effect of capital gains or transaction costs,
and none of the data below shows the effect of taxes. Also, the Fund's
performance data reflects the effect of Fund business and operating expenses.
While index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
securities in any one index. Moreover, the index performance data does not
reflect any assessment of the risk of the investments included in the index.
Comparison of Change
In Value of $10,000
Hypothetical Investments in
Oppenheimer Florida Municipal Fund and the
Lehman Brothers Municipal Bond Index
<TABLE>
<CAPTION>
[Graph]
Oppenheimer Florida Municipal Fund
Average Annual Total Returns of the Fund at 7/31/96
1 Year Life of Class
<S> <C> <C>
Class A: 1.52% 2.84%(1)
Class B: 0.78% 2.92%(2)
-26-
<PAGE>
Class C: N/A 4.63%(3)
- ---------------
Total returns and the ending account values in the graph show change in share
value and include reinvestment of all dividends and capital gains distributions.
The Fund's fiscal year end has changed from 12/31 to 7/31.
<FN>
(1) The inception of
the Fund (Class A and B shares) was 10/1/93. Class A returns are shown net of
the current applicable 4.75% maximum initial sales charge.
(2) Returns for Class
B shares of the Fund are shown net of the applicable 5% and 3% contingent
deferred sales charges, respectively, for the one year period and
life-of-the-class. The ending account value in the graph is net of the
applicable 3% contingent deferred sales charge.
(3) Class C shares of the Fund
were first publicly offered on 8/29/95. The cumulative total return and the
ending account value are shown net of the applicable 1% contingent deferred
sales charge.
</FN>
</TABLE>
A B O U T Y O U R A C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
o Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million). If you purchase Class A shares as part
of an investment of at least $1 million in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 18 months of buying them, you may pay a contingent deferred sales
charge. The amount of that sales charge will vary depending on the amount you
invested. Sales charge rates are described in "Buying Class A Shares," below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how
-27-
<PAGE>
long you own your shares, as described in "Buying Class B Shares"
below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
described in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decisions as to which class of shares is
best suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, and considered the effect of the annual
asset-based sales charge on Class B and Class C expenses (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns, and the operating
expenses borne by each class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
-28-
<PAGE>
o How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you expect
to hold your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will also
depend on how much you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time, offset the
effect of paying an initial sales charge on your investment (which reduces the
amount of your investment dollars used to buy shares for your account), compared
to the effect over time of higher class-based expenses on Class B or Class C
shares for which no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than seven years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C shares (as well as Class
B shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C shares (and
Class B shares). If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
-29-
<PAGE>
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C shares from a single investor.
o Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to your
money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to invest
more than $100,000 over the long term, Class A shares will likely be more
advantageous than Class B shares or C shares, as discussed above, because of the
effect of the expected lower expenses for Class A shares and the reduced initial
sales charges available for larger investments in Class A shares under the
Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore you should
analyze your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features such as checkwriting may not be available to Class B or
Class C shareholders, or other features (such as Automatic Withdrawal Plans) may
not be advisable (because of the effect of the contingent deferred sales charge)
for Class B and Class C shareholders, you should carefully review how you plan
to use your investment account before deciding which class of shares to buy.
Additionally, dividends payable to Class B and Class C shareholders will be
reduced by the additional expenses borne by those classes that are not borne by
Class A, such as the Class B and Class C asset-based sales charges described
below and in the Statement of Additional Information. Share certificates are not
available for Class B and Class C shares, and if you are considering using your
shares as collateral for a loan, that may be a factor to consider.
o How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
-30-
<PAGE>
compensation for selling one class of shares than for selling another class. It
is important that investors understand that the purpose of the Class B and Class
C contingent deferred sales charge and asset-based sales charges is the same as
the purpose of the front-end sales charge on sales of Class A shares: that is,
to compensate the Distributor for commissions it pays to dealers and financial
institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
With Asset Builder Plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments for as
little as $25; and subsequent purchases of at least $25 can be made by telephone
through AccountLink.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer funds (a list
of them appears in the Statement of Additional Information, or you can ask your
dealer or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
-31-
<PAGE>
application, the Distributor will act as your agent in buying the shares.
However, it is recommended that you discuss your investment first with a
financial advisor, to be sure that it is appropriate for you.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to have the Transfer
Agent send redemption proceeds, or to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions used to
establish your account. Please refer to "AccountLink" below for more details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to
four other Oppenheimer funds) automatically each month from your account at a
bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of Additional
Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado. In most cases, to enable you to receive that day's offering
price, the Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally 4:00 P.M., New
York time, but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each class of shares is
determined as of that time on each day The New York Stock Exchange is open
(which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your order
by the close of The New York Stock Exchange on a regular
-32-
<PAGE>
business day and transmit it to the Distributor so that it is received before
the Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its sole
discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A in this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the former Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, where purchases are not subject to an initial sales charge, and
the offering price will be the net asset value. In some cases, reduced sales
charges may be available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The sales charge
varies depending on the amount of your purchase. A portion of the sales charge
may be retained by the Distributor and allocated to your dealer as commission.
The current sales charge rates and commissions paid to dealers and brokers are
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Percentage Percentage of Offering
of Offering of Amount Price
Amount of Purchase Price Invested
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- -------------------------------------------------------------------------------------------------------------------
$50,000 or more
but less than
$100,000 4.50% 4.71% 4.00%
- -------------------------------------------------------------------------------------------------------------------
$100,000 or more
but less than
$250,000 3.50% 3.63% 3.00%
- -------------------------------------------------------------------------------------------------------------------
$250,000 or more
but less than
-33-
<PAGE>
$500,000 2.50% 2.56% 2.25%
- -------------------------------------------------------------------------------------------------------------------
$500,000 or more
but less than
$1 million 2.00% 2.04% 1.80%
</TABLE>
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter" under
Federal securities laws.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more.
The Distributor pays dealers of record commissions on those
non-retirement plan purchases in an amount equal to the sum of 1.0%. That
commission will be paid only on the amount of those purchases that were not
previously subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge (called the
"Class A contingent deferred sales charge") may be deducted from the redemption
proceeds. That sales charge may be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gain distributions) or (2) the original
offering price (which is the original net asset value) of the redeemed shares.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer on all
Class A shares of all Oppenheimer funds you purchased subject to the Class A
contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described
-34-
<PAGE>
below). However, if the shares acquired by exchange are redeemed within 18
months of the end of the calendar month of the purchase of the exchanged shares,
the sales charge will apply.
o Special Arrangements With Dealers. The Distributor may advance up to
13 months' commissions to dealers that have established special arrangements
with the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can also
include Class A and Class B shares of Oppenheimer funds you previously purchased
subject to an initial contingent deferred sales charge to reduce the sales
charge rate for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of those shares
will be based on the greater of the amount you paid for the shares or their
current value (at offering price). The Oppenheimer funds are listed in "Reduced
Sales Charges" in the Statement of Additional Information, or a list can be
obtained from the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of your intended purchases of
both Class A and
-35-
<PAGE>
Class B shares will determine the reduced sales charge rate for the Class A
shares purchased during that period. This can include purchases made up to 90
days before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker, bank or adviser for the purchase or sale of Fund shares);
o directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
-36-
<PAGE>
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts; or
o any unit investment trust that has entered into an appropriate
agreement with the Distributor.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the past 12 months from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
-37-
<PAGE>
Rules and Policies," below); or
o if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales charge, the
dealer agrees in writing to accept the dealer's portion of the commission
payable on the sale in installments of 1/18th of the commission per month (and
no further commission will be payable if the shares are redeemed within 18
months of purchase).
o Service Plan for Class A Shares. The Fund has adopted a Service Plan
for Class A shares to reimburse the Distributor for a portion of its costs
incurred in connection with the personal service and maintenance of shareholder
accounts that hold Class A shares. Under the Plan, reimbursement is to be made
quarterly at an annual rate that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. The Board of Trustees has currently set
the service fee rate at 0.15% per year, which amount may be increased by the
Board from time to time up to the maximum of 0.25%. The Distributor uses all of
those fees to compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares and to reimburse itself (if
the Board of Trustees authorizes such reimbursements, which it has not yet done)
for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% (currently set at
0.15% as described above) of the average annual net assets of Class A shares
held in accounts of the service providers or their customers. The payments under
the Plan increase the annual expenses of Class A shares. For more details,
please refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by
-38-
<PAGE>
the reinvestment of dividends or capital gains distributions. The contingent
deferred sales charge will be based on the lesser of the net asset value of the
redeemed shares at the time of redemption or the original offering price (which
is the original net asset value). The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase in net
asset value over the initial purchase price. The Class B contingent deferred
sales charge is paid to compensate the Distributor to reimburse its expenses of
providing distribution- related services to the Fund in connection with the sale
of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge
<S> <C>
- -------------------------------------------------------------------------------
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the month in
which the purchase was made.
-39-
<PAGE>
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
o Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate the
Distributor for distributing Class B shares and servicing accounts. This Plan is
described below under "Buying Class C Shares - Distribution and Service Plans
for Class B and Class C Shares".
o Waivers of Class B Sales Charges. The Class B contingent deferred
sales charge will not apply to shares purchased in certain types of
transactions, nor will it apply to shares redeemed in certain circumstances, as
described below under "Buying Class C Shares - Waivers of Class B and Class C
Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if the Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales charge
of 1.0% will be deducted from the redemption proceeds. That sales charge will
not apply to shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
-40-
<PAGE>
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays the Distributor an annual
"asset-based sales charge" of 0.75% per year on Class B shares and on Class C
shares. The Distributor also receives a service fee of 0.25% per year under each
plan. The Board of Trustees has currently set the service fee at 0.15% per year,
which amount may be increased by the Board from time to time up to the maximum
of 0.25%.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class C shares.
Those services are similar to those provided under the Class A Service Plan,
described above. The Distributor pays the 0.25% service fees to dealers in
advance for the first year after Class B or Class C shares have been sold by the
dealer and retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B
-41-
<PAGE>
and Class C shares.
The Distributor currently pays sales commissions of 3.85% of the
purchase price of Class B shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class B shares is 4.00% of the
purchase price. The Distributor retains the Class B asset-based sales charge
The Distributor currently pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale of Class C
shares. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is 0.90% of the
purchase price. The Distributor plans to pay the asset-based sales charge as an
ongoing commission to the dealer on Class C shares that have been outstanding
for a year or more.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and Class C shares. If the Fund terminates either
Plan, the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for distributing shares before the
Plan was terminated. At December 31, 1996 and July 31, 1996, the end of the
Class B Plan years, the Distributor had incurred unreimbursed expenses under the
Class B Plan of $438,657 and $484,148, respectively (equal to 3.47% and 3.76%,
respectively, of the Fund's net assets represented by Class B shares), which
have been carried over into the present plan year. At December 31, 1995 and July
31, 1996, the end of the Class C Plan years, the Distributor had incurred
unreimbursed expenses under the Class C Plan of $0, of the Fund's net assets
represented by Class C shares.
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances, as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information.
-42-
<PAGE>
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemption of shares in the
following cases:
o redemption from accounts following the death or disability of the
last surviving shareholder, including a trustee of a "grantor" trust or
revocable living trust for which the trustee is also the sole beneficiary (the
death or disability must have occurred after the account was established, and
for disability you must provide evidence of a determination of disability by the
Social Security Administration); or
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C shares
sold or issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund
is a party
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please refer to the
Application for details or call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can request
AccountLink privileges by sending
-43-
<PAGE>
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature- guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone
only after your account has been established. To purchase shares in amounts up
to $250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer fund account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis:
-44-
<PAGE>
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Application and Statement of Additional
Information for more details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
automatically exchange an amount you establish in advance for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer fund account is $25. These exchanges are subject to the terms of the
Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C shares. You must be sure to ask
the Distributor for this privilege when you send your payment. Please consult
the Statement of Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming) some or
all of your shares on any regular business day. Your shares will be sold at the
next net asset value calculated after your order is received and accepted by the
Transfer Agent. The Fund offers you a number of ways to sell your shares: in
writing, by using the Fund's checkwriting privilege or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular basis, as
described above. If you have questions about any of these procedures, and
especially if you are redeeming shares in a special situation, such as due to
the death
-45-
<PAGE>
of the owner, please call the Transfer Agent first, at 1-800-525-
7048, for assistance.
o Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and must
include a signature guarantee in the following situations (there may be other
situations also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o The redemption check is not payable to all shareholders
listed on the account statement
o The redemption check is not sent to the address of record on
your account statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are redeemed by someone other than the owners (such
as an Executor)
o Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the
account is registered, and
o Any special requirements or documents requested by the
-46-
<PAGE>
Transfer Agent to assure proper authorization of the person asking to
sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but which may
be earlier on some days. You may not redeem shares held under a share
certificate by telephone.
o To redeem shares through a service representative, call 1-
800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that account.
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone, in any 7-day period. The check must be payable to all owners of
record of the shares and must be sent to the address on the account statement.
This service is not available within 30 days of changing the address on an
account.
o Telephone Redemptions Through AccountLink. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
-47-
<PAGE>
Checkwriting. To be able to write checks against your Fund account, you may
request that privilege on your account Application, or you can contact the
Transfer Agent for signature cards, which must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If you
previously signed a signature card to establish Checkwriting in another
Oppenheimer fund, simply call 1-800-525- 7048 to request Checkwriting for an
account in this Fund with the same registration as the previous Checkwriting
account.
o Checks can be written to the order of whomever you wish, but may not
be cashed at the Fund's bank or custodian.
o Checkwriting privileges are not available for accounts holding Class
B shares or Class C shares, or Class A shares that are subject to a contingent
deferred sales charge.
o Checks must be written for at least $100.
o Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you
should not write a check close to the total account value.
o You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within the
prior 10 days.
o Don't use your checks if you changed your Fund account
number.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for more
information about this procedure. Please refer to "Special Arrangements for
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. To
exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available
-48-
<PAGE>
for sale in your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them; after the account is open 7 days,
you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
o Before exchanging into a fund, you should obtain and read
its prospectus.
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another fund. At
present Oppenheimer Money Market Fund, Inc. offers only one class of shares,
which are considered to be "Class A shares" for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852- 8457 or by using
PhoneLink for automated exchanges, by calling 1- 800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or you can obtain one by
calling a service representative at 1-800-525-7048.
That list can change from time to time.
There are certain exchange policies you should be aware of:
-49-
<PAGE>
o Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that is in proper form by the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to seven days if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy shares. For
example, the receipt of multiple exchange requests from a dealer in a
"market-timing" strategy might require the sale of portfolio securities at a
time or price disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the
shares of the Fund you own and a purchase of the shares of the other fund, which
may result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 p.m. but may be earlier on some days, on each day the
Exchange is open by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that
are outstanding. The Fund's Board of Trustees has established
-50-
<PAGE>
procedures to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are special
procedures for valuing illiquid and restricted securities and obligations for
which market values cannot be readily obtained. These procedures are described
more completely in the Statement of Additional Information.
o The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is in the
Fund's best interest to do so.
o Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless and
until the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time to
time, the Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
-51-
<PAGE>
Securities Clearing Corporation are responsible for obtaining their clients'
permission to perform those transactions, and are responsible to their clients
who are shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and Class C shares. Therefore, the redemption value of your
shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within seven days after the Transfer
Agent receives redemption instructions in proper form, except under unusual
circumstances determined by the Securities and Exchange Commission delaying or
suspending such payments. For accounts registered in the name of a
broker-dealer, payment will be forwarded within three business days. The
Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase payment
has cleared. That delay may be as much as 10 days from the date the shares were
purchased. That delay may be avoided if you purchase shares by certified check
or arrange with your bank to provide telephone or written assurance to the
Transfer Agent that your purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if
the account value has fallen below $500 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at
the rate of 31% from taxable dividends, distributions and
-52-
<PAGE>
redemption proceeds (including exchanges) if you fail to furnish the Fund a
certified Social Security or Employer Identification Number when you sign your
application, or if you violate Internal Revenue Service regulations on tax
reporting of income.
o The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be avoided
by redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charges when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask
that copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net tax-exempt income and/or net investment income each regular
business day and pays such dividends to shareholders monthly. Normally,
dividends are paid on or about the tenth business day of each month, but the
Board of Trustees can change that date. It is expected that distributions paid
with respect to Class A shares will generally be higher than for Class B and
Class C shares because expenses allocable to Class B and Class C shares will
generally be higher.
For the fiscal year ended July 31, 1996, the Fund maintained the
practice, to the extent consistent with the amount of the Fund's net investment
income and other distributable income, of attempting to pay dividends on Class A
shares at a constant level, although the amount of such dividends was subject to
change from time to time depending on market conditions, the composition of the
Fund's portfolio and expenses borne by the Fund or borne separately by that
Class. The practice of attempting to pay dividends on Class A shares at a
constant level requires the Manager, consistent with the Fund's investment
objective and investment restrictions, to monitor the Fund's portfolio and
select higher yielding
-53-
<PAGE>
securities when deemed appropriate to maintain necessary net investment income
levels. The Fund anticipates paying dividends at the targeted dividend level
from net investment income and other distributable income without any impact on
the Fund's net asset value per share. The Board of Trustees may change the
Fund's targeted dividend level at any time, without prior notice to
shareholders; the Fund does not otherwise have a fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of any
capital gains.
Capital Gains. Although the Fund does not seek capital gains, it may realize
capital gains on the sale of portfolio securities. If it does, it may make
distributions out of any net short-term or long-term capital gains in December.
The Fund may make supplemental distributions of dividends and capital gains
following the end of its fiscal year (which ends July 31st). Long-term capital
gains will be separately identified in the tax information the Fund sends you
after the end of the year. Short-term capital gains are treated as dividends for
tax purposes. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. You have
four options:
o Reinvest all distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains distributions in additional shares of the
Fund.
o Reinvest long-term capital gains only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or sent
to your bank account on AccountLink.
o Receive all distributions in cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them sent to
your bank account on AccountLink.
o Reinvest your distributions in another Oppenheimer Fund account. You
can reinvest all distributions in another Oppenheimer fund account you have
established.
Taxes. Long-term capital gains are taxable as long-term capital
gains when distributed to shareholders for Federal income tax
purposes. It does not matter how long you hold your shares.
Dividends paid from short-term capital gains and net investment
-54-
<PAGE>
income are taxable as ordinary income. Dividends paid from net investment income
earned by the Fund on Municipal Securities will be excludable from your gross
income for Federal income tax purposes. A portion of the dividends paid by the
Fund may be an item of tax preference if you are subject to the alternative
minimum tax. Certain distributions are subject to Federal income tax and may be
subject to state and/or local taxes. Such distributions are taxable when paid,
whether you reinvest them in additional shares or take them in cash. Every year
the Fund will send you and the IRS a statement showing the amount of each
taxable distribution you received in the previous year.
o "Buying a Dividend". When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain.
o Taxes on Transactions. Even though the Fund seeks tax-exempt income
for distribution to shareholders, you may have a capital gain or loss when you
sell or exchange your shares. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking, a capital gain
or loss is the difference between the price you paid for the shares and the
price you receive when you sell them.
|X| Florida Intangible Taxes. Florida currently imposes an "intangible
tax" on certain securities and other tangible assets owned by Florida residents
on the first day of each calendar year. The Fund anticipates that on the close
of the last business day of each calendar year, the Fund's assets will consist
solely of assets exempt from Florida's intangible personal property tax, but
there is no guarantee that in a given year no taxable assets of the Fund shall
be held. Please see the Statement of Additional Information for further
information regarding these issues.
o Returns of Capital. In certain cases distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If that
occurs, it will be identified in notices to shareholders. A non-taxable return
of capital may reduce your tax basis in your Fund shares.
-55-
<PAGE>
This information is only a summary of certain Federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
-56-
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER FLORIDA MUNICIPAL FUND
Graphic material included in Prospectus of Oppenheimer Florida
Municipal Fund: "Comparison of Change in Value of $10,000
Hypothetical Investments in Oppenheimer Florida Municipal Fund and
the Lehman Brothers Municipal Bond Index."
A linear graph will be included in the Prospectus of Oppenheimer Florida
Municipal Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in the Fund since the
commencement of the Fund's operations (October 7, 1993) as to Class A and Class
B shares and since August 29, 1995 (inception of Class C shares) as to Class C
shares of the Fund through to July 31, 1996, and comparing such values with the
same investments over the same time periods with The Lehman Brothers Municipal
Bond Index. Set forth below are the relevant data points that will appear on the
linear graph. Additional information with respect to the foregoing, including a
description of The Lehman Brothers Municipal Bond Index, is set forth in the
Prospectus under "Performance of the Fund - How Has the Fund Performed?"
<TABLE>
<CAPTION>
Oppenheimer
Fiscal/Year Florida Lehman Brothers
Period Ended Municipal Fund A Municipal Bond Index
<S> <C> <C>
10/7/93(1) $9,525 $10,000
12/31/93 $9,944 $10,140
12/31/94 $9,182 $ 9,616
12/31/95 $10,798 $11,296
7/31/96 $10,825 $11,347
Oppenheimer
Fiscal/Year Florida Lehman Brothers
Period Ended Municipal Fund B Municipal Bond Index
10/7/93(1) $10,000 $10,000
12/31/93 $10,435 $10,140
12/31/94 $ 9,556 $ 9,616
12/31/95 $11,162 $11,296
7/31/96 $10,850 $11,347
-57-
<PAGE>
Oppenheimer
Fiscal/Year Florida Lehman Brothers
Period Ended Municipal Fund C Municipal Bond Index
8/29/95(2) $10,000 $10,000
12/31/95 $10,586 $10,478
7/31/96 $10,463 $10,525
- ----------------------
<FN>
(1) The Fund commenced operations on October 7, 1993.
(2) Class C shares of the Fund were first publicly offered on August
29, 1995.
</FN>
</TABLE>
-58-
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for
Class A, Class B and Class C shares of the Fund described elsewhere in this
Prospectus are modified as described below for those shareholders of (i) Quest
for Value Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value
Opportunity Fund, Quest for Value Small Capitalization Fund and Quest for Value
Global Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc.
became the investment adviser to those funds, and (ii) Quest for Value U.S.
Government Income Fund, Quest for Value Investment Quality Income Fund, Quest
for Value Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest
for Value National Tax-Exempt Fund and Quest for Value California Tax- Exempt
Fund when those funds merged into various Oppenheimer funds on November 24,
1995. The funds listed above are referred to in this Prospectus as the "Former
Quest for Value Funds." The waivers of initial and contingent deferred sales
charges described in this Appendix apply to shares of the Fund (i) acquired by
such shareholder pursuant to an exchange of shares of one of the Oppenheimer
funds that was one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
o Purchases by Groups and Associations. The following table sets forth the
initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of securities if
that Association purchased shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995.
A-1
<PAGE>
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described on pages __ to __ of this Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of members of an Association
or the sales charge rate that applies under the Rights of Accumulation described
above in the Prospectus. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase shares
for their individual or custodial accounts at these reduced sales charge rates,
upon request to the Fund's Distributor.
o Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other Oppenheimer
funds that were acquired as a result of the merger of Former Quest for Value
Funds into those Oppenheimer Funds, and which shares were subject to a Class A
contingent deferred sales charge prior to November 24, 1995 will be subject to a
contingent deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they were purchased,
at a rate equal to 1.0% if the redemption occurs within 12 months of their
initial purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the
subsequent six months. Class A shares of any of the Former Quest Fund for Value
Funds purchased without an initial sales charge on or before November 22, 1995
will continue to be subject to the applicable contingent deferred sales charge
in effect as of that date as set forth in the then-current prospectus for such
fund.
A-2
<PAGE>
o Waiver of Class A Sales Charges for Certain Shareholders.
Class A shares of the Fund purchased by the following investors are not subject
to any Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions.
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6,
1995.
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by the
merger of a Former Quest For Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest for Value Fund or into which such fund
merged, if those shares were purchased prior to March 6, 1995: in connection
with (i) withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and
A-3
<PAGE>
(ii) liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum value of such
accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by the
merger of a Former Quest For Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such fund
merged, if those shares were purchased on or after March 6, 1995, but prior to
November 24, 1995: (1) redemptions following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability by the U.S.
Social Security Administration); (2) withdrawals under an automatic withdrawal
plan (but only for Class B or Class C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and (3) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, Class B or Class C shares of the Fund described
in this section if within 90 days after that redemption, the proceeds are
invested in the same Class of shares in this Fund or another Oppenheimer fund.
A-4
<PAGE>
Oppenheimer Florida Municipal Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
One Citicorp Center
New York, New York 10154
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds, Inc., OppenheimerFunds
Distributor, Inc., or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
PR0795.001.1196 * Printed on recycled paper
<PAGE>
Oppenheimer Florida Municipal Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated November 25, 1996
This Statement of Additional Information of Oppenheimer Florida
Municipal Fund (the "Fund") is not a Prospectus. This document contains
additional information about the Fund and supplements information in the
Prospectus dated April 15, 1996. It should be read together with the Prospectus,
which may be obtained by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer
Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies...........................................
Investment Policies and Strategies.....................................
Special Investment Considerations - Florida Municipal Securities.......
Other Investment Techniques and Strategies.............................
Other Investment Restrictions.............................................
How the Fund is Managed ....................................................
Organization and History...............................................
Trustees and Officers of the Trust.....................................
The Manager and Its Affiliates.........................................
Brokerage Policies of the Fund..............................................
Performance of the Fund.....................................................
Distribution and Service Plans..............................................
About Your Account
How To Buy Shares...........................................................
How To Sell Shares..........................................................
How To Exchange Shares......................................................
Dividends, Capital Gains and Taxes..........................................
Additional Information About the Fund.......................................
Financial Information About the Fund
Independent Auditors' Report ...............................................
Financial Statements........................................................
Appendix A: Description of Ratings Categories...............................A-1
Appendix B: Tax-Equivalent Yield Tables.....................................B-1
Appendix C: Industry Classifications .......................................C-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
invests, as well as the strategies the Fund may use to try to achieve its
objective. Certain capitalized terms used in this Statement of Additional
Information have the same meaning as those terms used in the Prospectus.
The Fund will not make investments with the objective of seeking capital
growth. However, the value of the securities held by the Fund 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 normally rise. Thus, the Fund may realize a capital gain or loss
upon disposition of a portfolio security. There are, of course, variations in
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 market conditions, general
conditions of the Municipal Securities market, the size of a particular
offering, the maturity of the obligation and the 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 and Florida Municipal Securities. The types of Municipal
Securities in which the Fund may invest are described in the Prospectus under
"Investment Objective and Policies." A discussion of the general characteristics
of types of Municipal Securities follows.
o Municipal Bonds. The principal classifications of long-term municipal
bonds in which the Fund may invest are "general obligation" and "revenue" or
"industrial development" bonds.
o General Obligation Bonds. Issuers of general obligation bonds
include states, counties, cities, towns, and regional districts. The proceeds of
these obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
o Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects including: electric, gas, water and sewer systems; highways,
bridges, and tunnels; port and airport facilities; colleges and universities;
and hospitals. Although the principal security behind these bonds may vary, many
provide additional security in the form of a debt service reserve fund the money
from which 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
-2-
<PAGE>
housing or other public projects. Some authorities provide further security in
the form of a state's ability (without obligation) to make up deficiencies in
the debt service reserve fund.
o Industrial Development Bonds. Industrial development bonds, which
are considered municipal bonds if the interest paid is exempt from federal
income tax, are issued by or on behalf of public authorities to raise money to
finance various privately operated facilities for business and manufacturing,
housing, sports, and pollution control. These bonds are also used to finance
public facilities such as airports, mass transit systems, ports, and parking.
The payment of the principal and interest on such bonds is dependent solely on
the ability of the facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment.
o Municipal Notes. Municipal Securities having a maturity when issued of
less than one year are generally known as municipal notes. Municipal notes
generally are used to provide for short-term working capital needs and include:
o Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use of
business taxes, and are payable from these specific future taxes.
o Revenue Anticipation Notes. Revenue anticipation notes are issued
in expectation of receipt of other types of revenue, such as federal revenues
available under the Federal revenue sharing programs.
o Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In most
cases, the long-term bonds then provide the money for the repayment of the
notes.
o Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and acceptance,
many projects receive permanent financing through the Federal Housing
Administration.
o Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is issued
by state and local governments or their agencies to finance seasonal working
capital needs or as short-term financing in anticipation of longer-term
financing.
o 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 at specified intervals not
exceeding one year and upon no more than 30 days' notice. 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 a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or some other standard,
and is adjusted automatically each time such
-3-
<PAGE>
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 less than one year. Generally, the changes in the interest rate
on such securities reduce the fluctuation in their market value. As interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than that for fixed-rate obligations of the same maturity.
The Manager may determine that an unrated floating rate or variable rate demand
obligation meets the Fund's quality standards by reason of being backed by a
letter of credit or guarantee issued by a bank that meets those quality
standards. Floating rate or variable rate obligations which do not provide for
recovery of principal and interest within seven days will be subject to the
limitations applicable to illiquid securities described in "Investment Objective
and Policies - Illiquid Securities" in the Prospectus. Otherwise there is on the
amount of the Fund's assets that may be invested in floating rate and variable
rate obligations.
o Municipal Lease Obligations. From time to time the Fund may invest in
municipal lease obligations, some of which may be illiquid and others which the
Manager has determined to be liquid under guidelines set by the Board of
Trustees. Those guidelines require the Manager to evaluate (1) the frequency of
trades and price quotations for such securities; (2) the number of dealers or
other potential buyers willing to purchase or sell such securities; (3) the
availability of market-makers; and (4) the nature of the trades for such
securities. The Manager will also evaluate the likelihood of a continuing market
for such securities throughout the time they are held by the Fund, and the
credit quality of the instrument. Municipal leases may take the form of a lease
or an installment purchase contract issued by a state or local government
authority to obtain funds to acquire a wide variety of equipment and facilities.
Although lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the risk of such "non-appropriation," municipal
lease securities do not yet have a highly developed market to provide the same
degree of liquidity as conventional municipal bonds. Municipal leases, like
other municipal debt obligations, are subject to the risk of non-payment. The
ability of issuers of municipal leases to make timely lease payments may be
adversely affected in general economic downturns and as relative governmental
cost burdens are reallocated among federal, state and local governmental units.
Such non-payment would result in a reduction of income to the Fund, and could
result in a reduction in the value of the municipal lease experiencing
non-payment and a potential decrease in the net asset value of the Fund.
o Private Activity Municipal Securities. The Tax Reform Act of 1986 (the
"Tax Reform Act") reorganized, as well as amended, the rules governing tax
exemption for interest on Municipal Securities. The Tax Reform Act generally
does not change the tax treatment of bonds issued in order to finance
governmental operations. Thus, interest on obligations issued by or on behalf of
state or local governments, 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 (i.e., 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
-4-
<PAGE>
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. Furthermore, a private activity bond which would
otherwise be a qualified tax-exempt private activity bond will not, under
Internal Revenue Code Section 147(a), be a qualified bond for any period during
which it is held by a person who is a "substantial user" of the facilities or by
a "related person" of such a substantial user. This "substantial user" provision
is applicable primarily to exempt facility bonds, including industrial
development bonds. The Fund may not be an appropriate investment for entities
which are "substantial users" (or persons related thereto) of such exempt
facilities, and such persons should consult their own tax advisers before
purchasing shares. A "substantial user" of such facilities is defined generally
as a "non-exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be a
"related person" under the Internal Revenue Code unless such investor or the
investor's immediate family (spouse, brothers, sisters and immediate
descendants) own directly or indirectly in the aggregate more than 50% in value
of the equity of a corporation or partnership which is a "substantial user" of a
facility financed from the proceeds of exempt facility bonds. In addition, the
Tax Reform Act revised downward the limitations as to the amount of private
activity bonds which each state may issue, which will reduce the supply of such
bonds. The value of the Fund's portfolio could be affected if there is a
reduction in the availability of such bonds. That value may also be affected by
a 1988 U.S. Supreme Court decision upholding the constitutionality of the
imposition of a Federal tax on the interest earned on Municipal Securities
issued in bearer form.
A Municipal Security is treated as a taxable private activity bond under a
test for: (a) a trade or business use and security interest, or (b) a private
loan restriction. Under the trade or business use and security interest test, an
obligation is a private activity bond if: (i) more than 10% of bond proceeds are
used for private business purposes and (ii) 10% or more of the payment of
principal or interest on the issue is directly or indirectly derived from such
private use or is secured by the privately used property or the payments related
to the use of the property. For certain types of uses, a 5% threshold is
substituted for this 10% threshold. (The term "private business use" means any
direct or indirect use in a trade or business carried on by an individual or
entity other than a state of 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 Fund makes no independent investigation of the users of such bonds or their
use of proceeds. If the Fund should hold a bond that loses its tax-exempt status
retroactively, there might be an adjustment to the tax-exempt income previously
paid to shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is accomplished
in part by including in taxable income certain tax preference items in arriving
at alternative minimum taxable income. The Tax Reform Act made tax-exempt
interest from certain private activity bonds a tax preference item for purposes
of the alternative minimum tax on individuals and corporations. Any
exempt-interest dividend paid by a regulated
-5-
<PAGE>
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, be
required to include exempt-interest dividends in calculating their alternative
minimum taxable income in situations where the amount of "adjusted current
earnings" of the corporation exceeds its alternative minimum taxable income. The
Fund may hold Municipal Securities the interest on which (and thus a
proportionate share of the exempt-interest dividends paid by the Fund) will be
subject to the Federal alternative minimum tax on individuals and corporations.
o Ratings of Municipal Securities. Moody's, S&P's, Fitch's and Duff &
Phelps' ratings (see Appendix A) represent their respective opinions of the
quality of the Municipal Securities they undertake to rate. However, such
ratings are general and are not absolute standards of quality. Consequently,
Municipal Securities with the same maturity, coupon and rating may have
different yields, while Municipal Securities of the same maturity and coupon
with different ratings may have the same yield. Investment in lower quality
securities may produce a higher yield than securities rated in the higher rating
categories described in the Prospectus (or judged by the Manager to be of
comparable quality). However, the added risk of lower quality securities might
not be consistent with a policy of preservation of capital.
Special Investment Considerations - Florida Municipal Securities. As explained
in the Prospectus, the Fund is highly sensitive to the fiscal stability of the
State of Florida (the "State") and its subdivisions, agencies, instrumentalities
or authorities which issue the Florida Municipal Securities in which the Fund
concentrates its investments. Investors should also consider the factors
discussed below under "Hedging With Options and Futures Contracts."
The following information as to the fiscal condition of the State is
provided in view of the Fund's policy to invest primarily in securities of
Florida issuers. The following is intended to provide prospective investors with
a summary of certain elements of the State economy which are generally deemed
material in an analysis of the State's economic condition. It is not intended to
be a comprehensive presentation of the aspects of the financial condition of the
State which a prospective investor may consider important or a complete
description of the aspects which are presented. The information set forth below
is based on information which is generally available to the public and official
statements relating to securities offerings of Florida issuers. Although the
Fund has not independently verified any of this information, it is not aware of
any inaccuracies.
From 1980 to 1989, the State's unemployment rate generally tracked below
that of the nation. Since 1989, the State's jobless rate has generally moved
ahead of the national average. The State's unemployment rate was 7.0% for 1993,
6.6% for 1994 and an estimated 5.5% for 1995. The 1996 unemployment rate is
anticipated to be 5.9%. The national unemployment rate was 6.8% for 1993, 6.1%
for 1994 and 5.6% for 1995. The 1996 unemployment rate is anticipated to be
5.7%. Nevertheless, the average rate of unemployment for the State and for the
nation from 1986 through 1995 are both 6.2%.
-6-
<PAGE>
Personal income in the State has been growing steadily the last several
years and has generally outperformed the nation as a whole. State personal
income growth is forecast at 5.4% for 1996 following an estimated increase of
7.5% in 1995. The rate of personal income growth in the State is expected to
continue to remain steady or decline, reaching an estimated 5.8% in 1998.
The State's strong population growth is one reason why aspects of its
economy are performing better than the nation as a whole. In 1980, the State was
ranked seventh among the 50 states with a population of 9.7 million people. The
State has experienced steady growth since then and, as of 1994, ranked fourth
with an estimated population of 13.9 million. Population increased to 14.2
million in 1995 and residents are expected to number 14.4 million in 1996, 14.7
million in 1997 and 15.0 million in 1998. The forecasted population growth rates
of 1.9%, 1.8% and 1.7% for 1996, 1997 and 1998, respectively, almost double the
national population growth which is forecast at 0.9% for each of these years.
Tourism is one of the State's most important industries. An estimated
42.4 million tourists visited the State in 1995. 43.5 million are expected to
visit the State in 1996.
Another important industry in the state, the construction industry,
accounted for 5.1% of the State's nonagricultural employment industry in 1994,
down from 5.2% in 1993. Single-family construction starts dropped from an
estimated 94,388 units in 1994 to an estimated 87,530 units in 1995. Multi-
family construction starts, however, increased from an estimated 30,719 units in
1994 to an estimated 34,159 units in 1995. Single-family construction starts are
predicted to drop to an estimated 84,403 units in 1996, and 79,226 units in 1997
and 77,705 units in 1998. Multi-family construction starts are also predicted to
drop to an estimated 30,687 units in 1996, 30,318 units in 1997, but then to
increase to 32,514 units in 1998.
Financial operations of the State are funded and maintained through the
use of three funds--the General Revenue Fund, Trust Funds, and the Working
Capital Trust Fund -- through which generally all revenues and expenditures of
the state flow. General Revenue plus Working Capital funds available to the
State for fiscal year 1991-92 totalled $11,231.1 million. Compared to effective
appropriations from the General Revenues Fund and the Working Capital Trust Fund
for fiscal year 1991-92 of $11,046.5 million, this results in unencumbered
reserves of $184.6 million at the end of fiscal year 1991- 92.
Estimated General Revenue plus Working Capital funds available to the
State for fiscal year 1992- 93 total $12,100.0 million. Compared to estimated
effective appropriations from the General Revenues Fund and the Working Capital
Trust Fund for fiscal year 1992-93 of $11,913.7 million, this results in
unencumbered reserves of $186.3 million at the end of fiscal year 1992-93.
Estimated fiscal year 1993-94 General Revenue plus Working Capital funds
available are expected to total $13,108.4 million, an 8.3% increase over fiscal
year 1991-92.
The Sales and Use Tax is the greatest single source of tax revenues in the
State. Receipts from this source were $9,928 million for fiscal year 1993-94,
$9,295 million for fiscal year 1992-1993 and $8,250 million for fiscal year
1991-92. The second largest source of State-tax revenues is the Motor Fuel Tax.
-7-
<PAGE>
The estimated collections from this source were $1,186 million for fiscal year
1992-1993 and $1,085 million for fiscal year 1991-1992.
Some of the other sources of revenue for the State include alcoholic
beverages and tobacco products tax revenues, corporate income tax revenues,
documentary stamp tax collections and lottery ticket sales. Revenues from
alcoholic beverages and tobacco products totalled $987 million for fiscal year
1992-1993 up from $962 million for fiscal year 1991-1992. Receipts of corporate
income tax increased from $695 million for fiscal year 1991-1992 to $756 million
for fiscal year 1992-1993. Documentary stamp taxes were $723 million for fiscal
year 1993-1994, $589 million for fiscal year 1992-1993 and $466 million for
fiscal year 1991-1992. In November, 1986, the voters of the State approved a
constitutional amendment to allow the State to operate a lottery. Fiscal year
1992-1993 produced ticket sales of $2.17 billion, 1993-94 produced ticket sales
of $2.21 billion and fiscal year 1994-1995 produced ticket sales of $2.30
billion.
The State Constitution does not permit a state of local or personal income
tax. An amendment to the State Constitution by electors of the State is required
to impose a personal income tax in the State.
An amendment to the Florida Constitution was approved by statewide ballot
in the November 5, 1996 general election, requiring voter approval of
constitutionally imposed taxes. Although the impact of such constitutional
amendment cannot be determined, it may have the effect of limiting the state's
ability to raise revenue.
According to the Division of Bond Finance of the Department of General
Services of the State the State maintains a high bond rating from both Moody's
Investors Service, Inc. (AA) and Standard & Poor's Corporation (AA) on the
majority of its general bonds.
Other Investment Techniques and Strategies
o When-Issued and Delayed Delivery Securities. As stated in the
Prospectus, the Fund may purchase securities on a "when-issued" basis, and may
purchase or sell such securities on a "delayed delivery" basis. Although the
Fund will enter into such transactions for the purpose of acquiring securities
for its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-issued" or
"delayed delivery" refers to securities whose terms and indenture are available
and for which a market exists, but which are not available for immediate
delivery. When such transactions are negotiated the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date. During the
period between commitment by the Fund and settlement (generally within two
months but not to exceed 120 days), no payment is made for the securities
purchased by the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation; the value at
delivery may be less than the purchase price. The Fund will maintain a
segregated account with its Custodian, consisting of cash, U.S. Government
securities or other high grade debt obligations at least equal to the value of
purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure what
is considered to be an advantageous price and yield at the time of entering into
the obligation. When the Fund engages in
-8-
<PAGE>
when-issued or delayed delivery transactions, it relies on the buyer or seller,
as the case may be, to consummate the transaction. Failure to do so may result
in the Fund losing the opportunity to obtain a price and yield considered to be
advantageous. If the Fund chooses to (i) dispose of the right to acquire a
when-issued security prior to its acquisition or (ii) dispose of its right to
deliver or receive against a forward commitment, it may incur a gain or loss. At
the time the Fund makes a commitment to purchase or sell a security on a
when-issued or forward commitment basis, it records the transaction and reflects
the value of the security purchased, or if a sale, the proceeds to be received
in determining its net asset value.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objective and policies and not for the purposes
of investment leverage. The Fund enters into such transactions only with the
intention of actually receiving or delivering the securities, although (as noted
above), when-issued securities and forward commitments may be sold prior to
settlement date. In addition, changes in interest rates in a direction other
than that expected by the Manager before settlement will affect the value of
such securities and may cause loss to the Fund.
When-issued transactions and forward commitments can be used by the Fund
as a defensive technique to use against anticipated changes in interest rates
and prices. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities in its portfolio on a forward commitment
basis to attempt to limit its exposure to anticipated falling prices. In periods
of falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
forward commitment basis, thereby obtaining the benefit of currently higher cash
yields.
o Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the market value of
the loaned securities and must consist of cash, bank letters of credit,
securities of the U.S. Government (or its agencies or instrumentalities) or
other cash equivalents in which the Fund is permitted to invest. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter. Such terms and
the issuing bank must be satisfactory to the Fund. When it lends securities, the
Fund receives an amount equal to the dividends or interest on loaned securities
and also receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such loan collateral. Either type of interest may be shared with
the borrower. The Fund may also pay reasonable finder's, custodian and
administrative fees. The terms of the Fund's loans must meet certain tests under
the Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important matter.
Income from securities loans is not included in the exempt-interest dividends
paid by the Fund.
o Inverse Floaters and Other Derivative Securities. The Fund will invest
in inverse floaters in the expectation that they will provide higher expected
tax-exempt yields than are available for fixed-rate bonds having comparable
credit ratings and maturity. In certain instances, the holder of an inverse
floater may have an option to convert it into a fixed-rate bond pursuant to a
"rate lock option." Inverse
-9-
<PAGE>
floaters may produce relatively high current income, reflecting the spread
between short-term and long-term tax-exempt interest rates. As long as the
municipal yield curve remains relatively steep and short-term rates remain
relatively low, owners of inverse floaters will continue to earn above-market
interest rates because they are receiving the higher long-term rates and have
paid for bonds with lower short-term rates. If the yield curve flattens and
shifts upward, an inverse floater will lose value more quickly than conventional
long-term municipal bonds.
Investing in inverse floaters that have interest rate caps might be a part
of a portfolio strategy to try to maintain a high current yield for the Fund
when the Fund has invested in inverse floaters that expose the Fund to the risk
of short-term interest rate fluctuation. Embedded caps may be used to hedge a
portion of the Fund's exposure to rising interest rates. When interest rates
exceed the "strike" price the "cap" generates additional cash flows that offset
the decline in interest rates on the inverse floater, and the hedge is
successful. However, the Fund bears the risk that if interest rates do not rise
above the strike price, the cap (which is purchased for additional cost) will
not provide additional cash flows and will expire worthless.
o Puts and Standby Commitments. When the Fund buys Municipal Securities,
it may obtain a standby commitment to repurchase the securities that entitles it
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 Fund to sell the underlying security within a
specified period of time at a fixed exercise price. The Fund may pay for a
standby commitment or put either separately in cash or by paying a higher price
for the securities acquired subject to the standby commitment or put. The Fund
will enter into these transactions only with banks and dealers which, in the
Manager's opinion, present minimal credit risks. The Fund's ability to exercise
a put or standby commitment will depend on the ability of the bank or dealer to
pay for the securities if the put or standby commitment is exercised. If the
bank or dealer should default on its obligation, the Fund might not be able to
recover all or a portion of any loss sustained from having to sell the security
elsewhere. Puts and standby commitments are not transferable by the Fund, and
therefore terminate if the Fund sells the underlying security to a third party.
The Fund intends to enter into these arrangements to facilitate portfolio
liquidity, although such arrangements may enable the Fund to sell a security at
a pre-arranged price which may be higher than the prevailing market price at the
time the put or standby commitment is exercised. However, the Fund might refrain
from exercising a put or standby commitment if the exercise price is
significantly higher than the prevailing market price, to avoid imposing a loss
on the seller which could jeopardize the Fund's business relationships with the
seller. Any consideration paid by the Fund for the put or standby commitment
(which increases the cost of the security and reduces the yield otherwise
available from the security) will be reflected on the Fund's books as unrealized
depreciation while the put or standby commitment is held, and a realized gain or
loss when the put or commitment is exercised or expires. Interest income
received by the Fund from Municipal Securities subject to puts or standby
commitments may not qualify as tax exempt in its hands if the terms of the put
or standby commitment cause the Fund not to be treated as the tax owner of the
underlying Municipal Securities.
o Hedging. As described in the Prospectus, the Fund may employ one or more
types of hedging instruments. When hedging to attempt to protect against
declines in the market value of the Fund's portfolio, to permit the Fund to
retain unrealized gains in the value of portfolio securities which have
-10-
<PAGE>
appreciated, or to facilitate selling securities for investment reasons, the
Fund may: (i) sell Interest Rate Futures or Municipal Bond Index Futures, (ii)
buy puts on such Futures or securities, or (iii) write covered calls on
securities, Interest Rate Futures or Municipal Bond Index Futures (as described
in the Prospectus). Covered calls may also be written on debt securities to
attempt to increase the Fund's income. When hedging to permit the Fund to
establish a position in the debt securities market as a temporary substitute for
purchasing individual debt securities (which the Fund will normally purchase,
and then terminate that hedging position), the Fund may: (i) buy Interest Rate
Futures or Municipal Bond Index Futures, or (ii) buy calls on such Futures or on
securities.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's investment activities in the underlying cash market. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective and are legally
permissible and disclosed in the Prospectus. Additional information about the
hedging instruments the Fund may use is provided below.
o Writing Covered Call Options. When the Fund writes a call on a security,
it receives a premium and agrees to sell the underlying investment to a
purchaser of a corresponding call on the same security during the call period
(usually not more than nine months) at a fixed exercise price (which may differ
from the market price of the underlying investment) regardless of market price
changes during the call period. The Fund has retained the risk of loss should
the price of the underlying security decline during the call period, which may
be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call written was more
or less than the price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Any such profits are considered short-term
capital gains for Federal tax purposes, as are premiums on lapsed calls, and
when distributed by the Fund are taxable as ordinary income. An option position
may be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary market
will exist for a particular option. If the Fund could not effect a closing
purchase transaction due to a lack of a market, it would have to hold the
underlying investment until the call lapsed or were exercised.
o Interest Rate Futures. The Fund may buy and sell futures contracts
relating to debt securities ("Interest Rate Futures") and municipal bond indices
("Municipal Bond Index Futures," discussed below). An Interest Rate Future
obligates the seller to deliver and the purchaser to take the related debt
securities at a specified price on a specified date. No amount is paid or
received upon the purchase or sale of an Interest Rate Future.
The Fund may concurrently buy and sell Futures contracts in the
expectation that the Future purchased will outperform the Future sold. For
example, the Fund might simultaneously buy Municipal Bond Futures and sell U.S.
Treasury Bond Futures. This type of transaction would be profitable to the Fund
if municipal bonds, in general, outperform U.S. Treasury bonds. Risks of this
type of Futures
-11-
<PAGE>
strategy include the possibility that the Manager does not correctly assess the
relative durations of the investments underlying the Futures, with the result
that the strategy changes the overall duration of the Fund's portfolio in a
manner that increases the volatility of the Fund's price per share. Duration is
a volatility measure that refers to the expected percentage change in the value
of a bond resulting from a change in general interest rates (measured by each 1%
change in the rates on U.S. Treasury securities). For example, if a bond has an
effective duration of three years, a 1% increase in general interest rates would
be expected to cause the bond to decline about 3%.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, equal to a specified percentage of the
contract amount, with the futures commission merchant (the "futures broker").
The initial margin will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures broker can gain
access to that account only under specified conditions. As the Future is marked
to market to reflect changes in its market value, subsequent margin payments,
called variation margin, will be made to and from the futures broker on a daily
basis. At any time prior to the expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required to be
paid by or released to the Fund. Any gain or loss is then realized. Although
Interest Rate Futures by their terms call for settlement by the delivery of debt
securities, in most cases the obligation is fulfilled by entering into an
offsetting transaction. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are traded.
o Municipal Bond Index Futures. A "municipal bond index" assigns relative
values to the municipal bonds in the index, and is used as the basis for trading
long-term municipal bond futures contracts. Municipal Bond Index Futures are
similar to Interest Rate Futures except that settlement is made in cash. The
obligation under such contracts may also be satisfied by entering into an
offsetting contract to close out the futures position. Net gain or loss on
options on Municipal Bond Index Futures depends on the price movements of the
securities included in the index. The strategies which the Fund employs
regarding Municipal Bond Index Futures are similar to those described above with
regard to Interest Rate Futures.
o Purchasing Calls and Puts. When the Fund purchases a call (other than in
a closing purchase transaction), it pays a premium and, except as to calls on
Municipal Bond Index Futures, has the right to buy the underlying investment
from a seller of a corresponding call on the same investment during the call
period at a fixed exercise price. The Fund benefits only if the call is sold at
a profit or if, during the call period, the market price of the underlying
investment is above the sum of the exercise price plus the transaction costs and
premium paid for the call, and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right to
purchase the underlying investment.
When the Fund purchases a call or put on a municipal bond index, Municipal
Bond Index Future or Interest Rate Future, it pays a premium, but settlement is
in cash rather than by delivery of the underlying investment to the Fund. Gain
or loss depends on changes in the index in question (and thus on price movements
in the debt securities market generally) rather than on price movements in
individual futures contracts.
-12-
<PAGE>
When the Fund purchases a put, it pays a premium and, except as to puts on
municipal bond indices, has the right to sell the underlying investment to a
seller of a corresponding put on the same investment during the put period at a
fixed exercise price. Buying a put on a debt security, Interest Rate Future or
Municipal Bond Index Future the Fund owns enables the Fund to protect itself
during the put period against a decline in the value of the underlying
investment below the exercise price by selling such underlying investment at the
exercise price to a seller of a corresponding put. If the market price of the
underlying investment is equal to or above the exercise price and as a result
the put is not exercised or resold, the put will become worthless at its
expiration date and the Fund will lose its premium payment and the right to sell
the underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit).
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund's
option activities may affect its turnover rate and brokerage commissions. The
exercise of calls written by the Fund may cause it to sell underlying
investments, thus increasing its turnover rate in a manner beyond its control.
The exercise by the Fund of puts may also cause the sale of underlying
investments, also causing turnover, since the underlying investment might be
sold for reasons which would not exist in the absence of the put. The Fund will
pay a brokerage commission each time it buys a call or a put or sells a call.
Premiums paid for options are small in relation to the market value of the
related investments and, consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could cause the Fund's
net asset value to be more sensitive to changes in the value of the underlying
investments.
o Interest Rate Swap Transactions. Swap agreements entail both interest
rate risk and credit risk. There is a risk that, based on movements of interest
rates in the future, the payments made by the Fund under a swap agreement will
have been greater than those received by it. Credit risk arises from the
possibility that the counterparty will default. If the counterparty to an
interest rate swap defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Manager
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done between the
Fund and that counterparty under the master agreement shall be regarded as parts
of an integral agreement. If on any date amounts are payable in the same
currency in respect of one or more swap transactions, the net amount payable on
that date in that currency shall be paid. In addition, the master netting
agreement may provide that if one party defaults generally or on one swap, the
counterparty may terminate the swaps with that party. Under such agreements, if
there is a default resulting in a loss to one party, the measure of that party's
damages is calculated by reference to the average cost of a replacement swap
with respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then netted,
and the result is the counterparty's gain or loss on termination. The
termination of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation."
o Additional Information about Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written calls
-13-
<PAGE>
traded on exchanges, or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release the securities
on the expiration of the calls or upon the Fund's entering into a closing
purchase transaction. An option position may be closed out only on a market
which provides secondary trading for options of the same series and there is no
assurance that a liquid secondary market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it intends to
enter into an arrangement with a primary U.S. Government securities dealer,
which would establish a formula price at which the Fund would have the absolute
right to repurchase that OTC option. This formula price would generally be based
on a multiple of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying security
("in-the-money"). For any OTC option the Fund writes, it will treat as illiquid
(for purposes of its restriction on illiquid securities, stated in the
Prospectus) the mark-to-market value of any OTC option held by it. The
Securities and Exchange Commission is evaluating the general issue of whether or
not OTC options should be considered as liquid securities, and the procedure
described above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its portfolio
turnover rate. The exercise by the Fund of puts on securities will cause the
sale of related investments, increasing portfolio turnover. Although such
exercise is within the Fund's control, holding a put might cause the Fund to
sell the related investments for reasons which would not exist in the absence of
the put. The Fund will pay a brokerage commission each time it buys a call or
put, sells a call, or buys or sells an underlying investment in connection with
the exercise of a call or put. Such commissions may be higher on a relative
basis than those which would apply to direct purchases or sales of such
underlying investments. Premiums paid for options as to underlying investments
are small in relation to the market value of such investments and consequently,
put and call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investment.
o Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
futures and options on futures as established by the Commodity Futures Trading
Commission ("CFTC"). In particular, the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. Under the Rule, the Fund also must
use short futures and options on futures positions solely for "bona fide hedging
purposes" within the meaning and intent of the applicable provisions of the
Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by the Option Exchanges governing the maximum number of options that may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
different exchanges or through one or more brokers. Thus, the number of options
which the Fund may write or hold may be affected by options written or held by
other entities, including other investment companies having the same adviser as
the Fund (or an adviser that is an affiliate of the Fund's adviser). The
exchanges also
-14-
<PAGE>
impose position limits on futures transaction. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases an Interest Rate Future or Municipal Bond Index Future, the Fund will
maintain, in a segregated account or accounts with its Custodian, cash or
readily marketable short-term (maturing in one year or less) debt instruments in
an amount equal to the market value of the investments underlying such Future,
less the margin deposit applicable to it.
o Tax Aspects of Hedging Instruments and Covered Calls. The Fund intends
to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). One of the tests for such
qualification is that less than 30% of its gross income (irrespective of losses)
must be derived from gains realized on the sale of securities held for less than
three months. To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be precluded from
them: (i) selling investments, including Interest Rate Futures and Municipal
Bond Index Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii) writing calls on
investments held less than three months; (iii) purchasing calls or puts which
expire in less than three months; (iv) effecting closing transactions with
respect to calls or puts purchased less than three months previously; and (v)
exercising puts or calls held by the Fund for less than three months.
o Possible Risk Factors in Hedging. In addition to the risks with respect
to Futures and options discussed in the Prospectus and above, there is a risk in
using short hedging by selling Interest Rate Futures and Municipal Bond Index
Futures that the prices of such Futures or the applicable index will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of the
Fund's securities. The ordinary spreads between prices in the cash and futures
markets are subject to distortions due to differences in the natures of those
markets. First, all participants in the futures markets are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship between the
cash and futures markets. Second, the liquidity of the futures markets depends
on participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures markets could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit requirements in the
futures markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of debt
securities being hedged and movements in the price of the Hedging Instruments,
the Fund may use Hedging Instruments in a greater dollar amount than the dollar
amount of debt securities being hedged if the historical volatility of the
prices of such debt securities being hedged is more than the historical
volatility of the applicable index. It is also possible that if the Fund has
used Hedging Instruments in a short hedge, the market may advance and the value
of debt securities held in the Fund's portfolio may decline. If that occurred,
the Fund would lose money on the Hedging
-15-
<PAGE>
Instruments and also experience a decline in value of its debt securities.
However, while this could occur for a very brief period or to a very small
degree, over time the value of a diversified portfolio of debt securities will
tend to move in the same direction as the indices upon which the Hedging
Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the debt
securities markets as a temporary substitute for the purchase of individual debt
securities (long hedging) by buying Interest Rate Futures, Municipal Bond Index
Futures and/or calls on such Futures or debt securities, it is possible that the
market may decline; if the Fund then concludes not to invest in such securities
at that time because of concerns as to possible further market decline or for
other reasons, the Fund will realize a loss on the Hedging Instruments that is
not offset by a reduction in the price of the debt securities purchased.
o Repurchase Agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a U.S.
commercial bank or the U.S. branch of a foreign bank with assets of at least $1
billion or a broker-dealer with net capital of at least $50 million which has
been designated a primary dealer in government securities) for delivery on an
agreed-on future date. The resale price exceeds the purchase price by an amount
that reflects an agreed-upon interest rate effective for the period during which
the repurchase agreement is in effect. The majority of these transactions run
from day to day, and delivery pursuant to resale typically will occur within one
to five days of the purchase. Repurchase agreements are considered "loans" under
the Investment Company Act, collateralized by the underlying security. The
Fund's repurchase agreements require that at all times while the repurchase
agreement is in effect, the value of the collateral must equal or exceed the
repurchase price to fully collateralize the repayment obligation. Additionally,
the Manager will continuously monitor the collateral's value and will impose
creditworthiness requirements to confirm that the vendor is financially sound.
o Diversification For purposes of the investment restrictions set forth in
the Prospectus and above, the identification of the issuer of a Municipal
Security depends on the terms and conditions of the security. When the assets
and revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the subdivision
and the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the case
of an industrial development bond, if that bond is backed only by the assets and
revenues of the nongovernmental user, then such nongovernmental user would be
deemed the sole issuer. However, if in either case the creating government or
some other entity guarantees a security, such a guarantee would be considered a
separate security and would be treated as an issue of such government or other
agency. In applying these restrictions to the Fund'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 such
bonds are Municipal Securities as to which there is no industry concentration
limitation. Although this application of the restriction is not technically a
fundamental policy of the Fund, it will not be changed without shareholder
approval. The Manager has no present intention of investing more than 25% of the
total assets of the Fund in securities paying interest from revenues of similar
type projects, or in industrial development bonds. Neither of these are
fundamental policies, and therefore may be changed without shareholder approval.
Should any such change be made, the Prospectus and/or this Statement of
Additional Information will be supplemented accordingly.
-16-
<PAGE>
Other Investment Restrictions
The most significant investment restrictions that apply to the Fund are
described in the Prospectus. The following investment restrictions are also
fundamental policies of the Fund, and, together with the Fund's fundamental
policies and investment objective, described in the Prospectus, can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, such a "majority" vote is defined as the vote
of the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholders' meeting, if the holders of more than 50%
of the outstanding shares are present or represented by a proxy, or (ii) more
than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
(1) invest in real estate, the Fund may invest in Municipal Securities or
other permitted securities secured by real estate or interests therein;
(2) purchase securities other than hedging instruments on margin; however,
the Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities;
(3) make short sales of securities;
(4) underwrite securities or invest in securities subject to restrictions
on resale; (5) invest in or hold securities of any "issuer" if officers
and Trustees or Directors of the Trust and
the Manager individually owning more than 0.5% of the securities of such issuer
together own more than 5% of the securities of such issuer; or
(6) invest in securities of any other investment company, except in
connection with a merger, consolidation, acquisition or reorganization.
For purposes of the Fund's policy not to concentrate its assets, described
in the "Other Investment Restrictions" in the Prospectus, the Fund has adopted
the industry classifications set forth in Appendix C to this Statement of
Additional Information. This is not a fundamental policy. In connection with the
sale of its shares in the State of Ohio, the Fund undertakes, as a
non-fundamental policy, that with respect to 75% of its total assets, it will
purchase no more than 10% of the outstanding voting securities of any one
issuer.
How the Fund Is Managed
Organization and History. As a series of a Massachusetts business trust, the
Fund is not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the 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 shares of the Trust valued at
$25,000 or more or holding at least 1% of the Trust's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
shareholder list available
-17-
<PAGE>
to the applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set forth
under Section 16(c) of the Investment Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and officers and their
principal occupations and business affiliations during the past five years are
listed below. The address of each Trustee and officer is Two World Trade Center,
New York, New York 10048-0203, unless another address is listed below. All of
the Trustees (except Ms. Macaskill, who is not a director of Oppenheimer Money
Market, Inc.) are also trustees or directors of Oppenheimer Fund, Oppenheimer
Enterprise Fund, Oppenheimer Global Fund, Oppenheimer Money Market Fund, Inc.,
Oppenheimer Growth Fund, Oppenheimer International Growth Fund, Oppenheimer
Discovery Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer Global
Emerging Growth Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer
Municipal Bond Fund, Oppenheimer New York Municipal Fund, Oppenheimer California
Municipal Fund, Oppenheimer Target Fund, Oppenheimer Asset Allocation Fund,
Oppenheimer U.S. Government Trust, Oppenheimer Multi-Sector Income Trust,
Oppenheimer World Bond Fund and Oppenheimer Series Fund, Inc. (collectively the
"New York-based Oppenheimer funds"). Ms. Macaskill and Messrs. Spiro, Donohue,
Bishop, Bowen, Farrar and Zack respectively hold the same offices with the other
New York-based Oppenheimer funds as with the Trust. As of November 1, 1996, the
Trustees and officers of the Trust as a group owned of record or beneficially
less than 1% of the outstanding Class A and Class B and Class C shares of the
Trust and the Fund. The foregoing statement does not reflect ownership of shares
held of record by an employee benefit plan for employees of the Manager (for
which plan one of the Trustees and an officer listed below, Ms Macaskill and one
of the officers, Mr. Donohue, are trustees) other than the shares beneficially
owned under that plan by the officers of the Fund listed above.
Leon Levy, Chairman of the Board of Trustees, Age: 71
31 West 52nd Street, New York, New York, 10019
General Partner of Odyssey Partners, L.P. (investment partnership) and
Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee*, Age: 63
Vice Chairman of OppenheimerFunds, Inc. (the "Manager"), formerly he
held the following positions: Vice President and Counsel of Oppenheimer
Acquisition Corp., the Manager's parent
-18-
<PAGE>
holding company; Executive Vice President and General Counsel and a
director of the Manager and OppenheimerFunds Distributor, Inc. (the
"Distributor"), Vice President and a director of HarbourView Asset
Management Corporation ("HarbourView") and Centennial Asset Management
Corporation ("Centennial"), investment advisory subsidiaries of the
Manager, a director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of the
Manager, and an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee, Age: 73
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a Director of Sussex Publishers,
Inc. (Publishers of Psychology Today and Mother Earth News) and of Spy
Magazine, L.P.
Bridget A. Macaskill*, President and Trustee; Age 48
President, Chief Executive Officer and a Director of the Manager; Chairman
and a Director of SSI, President and a Director of OAC, HarbourView, and a
Director of Oppenheimer Partnership Holdings, Inc. a holding company
subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc.; formerly an Executive Vice President of the Manager.
Elizabeth B. Moynihan, Trustee, Age: 67
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of Art,
(Smithsonian Institution), the Institute of Fine Arts (New York
University) and the National Building Museum; a member of the Trustees
Council, the Preservation League of New York State; and a member of the
Indo- U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee, Age: 69
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil and gas producer)
Enron-Dominion Cogen Corp. (cogeneration company), Kemper Corporation
(insurance and financial services company) and Fidelity Life Association
(mutual life insurance company); formerly President and Chief Executive
Officer of The Conference Board, Inc. (international economics and
business research) and a director of Lumbermens Mutual Casualty Company,
American Motorists Insurance Company and American Manufacturers Mutual
Insurance Company.
- -------------------------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Edward V. Regan, Trustee, Age: 66
40 Park Avenue, New York, New York 10016
-19-
<PAGE>
Chairman of Municipal Assistance Corporation for the City of New York;
Senior Fellow of Jerome Levy Economics Institute Bard College; a member of
the U.S. Competitiveness Policy Council; a director of GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and a trustee,
New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age: 64
200 Park Avenue, New York, New York 10166
Founder, Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship, Inc. (consulting and publishing);
a director of XYAN Inc. (printing), Porfessional Staff Limited and
American Scientific Resources, Inc.; a trustee of Mystic Seaport Museum,
International House, Greenwich Hospital and the Greenwich Historical
Society.
Sidney M. Robbins, Trustee, Age: 84
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions, Graduate
School of Business, Columbia University; Visiting Professor of Finance,
University of Hawaii; Emeritus Founding Director of The Korea Fund, Inc.
(a closed-end investment company); a member of the Board of Advisors,
Olympus Private Placement Fund, L.P.; Professor Emeritus of Finance,
Adelphi University.
Donald W. Spiro, Vice Chairman and Trustee*, Age: 70
Chairman Emeritus and a director of the Manager; formerly Chairman of the
Manager and the Distributor.
Pauline Trigere, Trustee, Age: 84
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
Clayton K. Yeutter, Trustee, Age: 65
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery), IMC
Global Inc. (Chemicals and animal feed) and Texas Instruments, Inc.
(electronics); formerly (in descending chronological order) Counsellor to
the President (Bush) for Domestic Policy, Chairman of the Republican
National Committee, Secretary of the U.S. Department of Agriculture, and
U.S. Trade Representative.
- -------------------------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Andrew J. Donohue, Secretary, Age: 46
-20-
<PAGE>
Executive Vice President and General Counsel of the Manager and the
Distributor; President and a directror of Centennial; Executive Vice
President, General Counsel and a director of HarbourView, SSI, SFSI, and
Oppenheimer Partnership Holdings, Inc.; President and a director of
Oppenheimer Real Asset Management, Inc.; General Counsel of OAC; Executive
Vice President, Chief Legal Officer and a director of Multisource
Services, Inc. (a broker-dealer); an officer of other Oppenheimer funds;
formerly Senior Vice President and Associate General Counsel of the
Manager and the Distributor, a partner in Kraft & McManimon (a law firm),
an officer of First Investors Corporation (a broker-dealer) and First
Investors Management Company, Inc. (broker-dealer and investment adviser),
and a director and an officer of First Investors Family of Funds and First
Investors Life Insurance Company.
Robert E. Patterson, Vice President and Portfolio Manager, Age: 53
Senior Vice President of the Manager; an officer of other Oppenheimer funds.
George C. Bowen, Treasurer, Age: 60
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Senior Vice
President, Treasurer, and Secretary of SSI; Vice President, Treasurer and
Secretary of SFSI; Treasurer of OAC; Vice President and Treasurer of
Oppenheimer Real Asset Management, Inc.; Chief Executive Officer,
Treasurer and a director of Multisource Services, Inc. (a broker-dealer);
an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary, Age: 48
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other Oppenheimer
funds.
Robert Bishop, Assistant Treasurer, Age: 37
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; previously a Fund Controller for the Manager, prior to
which he was an Accountant for Yale & Seffinger, P.C., an accounting firm,
and previously an Accountant and Commissions Supervisor for Stuart James
Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer, Age: 31
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager, 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.
o Remuneration of Trustees. The officers of the Fund are affiliated with
the Manager. They and the Trustees of the Fund who are affiliated with the
Manager (Ms. Macaskill and Messrs. Galli and Spiro) receive no salary or fee
from the Fund. The remaining Trustees of the Fund received the compensation
shown below (i) from the Fund, during its fiscal year ended December 31, 1995
and (ii) from all of the New York-based Oppenheimer funds (including the Fund)
for which they served as Trustee or Director. Compensation is paid for services
in the positions below their names:
-21-
<PAGE>
<TABLE>
<CAPTION>
Retirement
Benefits Total Compensation
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses OppenheimerFunds1
<S> <C> <C> <C>
Leon Levy, Chairman $6,757 $4,137 $141,000.00
and Trustee
Benjamin Lipstein, $4,131 $2,530 $ 86,200.00
Study Committee Chairman,
Audit Committe Member and Trustee
Elizabeth B. Moynihan, $4,131 $2,530 $86,200.00
Study Committee
Member2 and Trustee
Kenneth A. Randall, $3,757 $2,301 $ 78,400.00
Audit Committee Chairman
and Trustee
Edward V. Regan, $3,297 $2,019 $ 68,800.00
Proxy Committee Chairman,
Audit Committee
Member2 and Trustee
Russell S. Reynolds, Jr., $2,497 $1,529 $ 52,100.00
Proxy Committee
Member and Trustee
Sidney M. Robbins, $5,852 $3,583 $122,100.00
Study Committee
Advisory Member, Audit
Committee Advisory Member
and Trustee
Pauline Trigere, $2,497 $1,529 $ 52,100.00
Trustee
Clayton K. Yeutter, $2,497 $1,529 $ 52,100.00
Proxy Committe Member and
Trustee(2)
</TABLE>
The officers of the Fund are affiliated with the Manager. They the
Trustees of the Fund who are affiliated with the Manager (Ms. Macaskill and
Messrs. Galli and Spiro) receive no salary or fee from
-22-
<PAGE>
the Fund. The remaining Trustees of the Fund received the compensation shown
below from the Fund, during its fiscal period January 1, 1996 to July 31, 1996,
and from all of the New York-based Oppenheimer funds (including the Fund) for
which they served as Trustee or Director. Compensation is paid for services in
the positions below their names:
<TABLE>
<CAPTION>
Benefits Total Compensation
Aggregate Accrued as From All
Compensation Part of New York-based
Name and Position From Fund Fund Expenses OpenheimerFunds1
<S> <C> <C> <C>
Leon Levy, Chairman $646 $2,400 $141,000.00
and Trustee
Benjamin Lipstein, $395 $1,467 $ 86,200.00
Study Committee Chairman,
Audit Committe Member and Trustee
Elizabeth B. Moynihan, $395 $1,467 $ 86,200.00
Study Committee
Member2 and Trustee
Kenneth A. Randall, $359 $1,334 $ 78,400.00
Audit Committee Chairman
and Trustee
Edward V. Regan, $315 $1,171 $ 68,800.00
Proxy Committee Chairman,
Audit Committee
Member2 and Trustee
Russell S. Reynolds, Jr., $239 $887 $ 52,100.00
Proxy Committee
Member and Trustee
Sidney M. Robbins, $559 $2,078 $122,100.00
Study Committee Advisory
Member, Audit Committee
Advisory Member
and Trustee
Pauline Trigere, $239 $887 $ 52,100.00
Trustee
Benefits Total Compensation
Aggregate Accrued as From All
-23-
<PAGE>
Compensation Part of New York-based
Name and Position From Fund Fund Expenses OpenheimerFunds1
Clayton K. Yeutter, $239 $887 $ 52,100.00
Proxy Committe Member and
Trustee(2)
- --------------------------
<FN>
(1) For the 1995 Calendar year.
(2) Committee position held during a portion of the period shown. The Study and
Audit committees meet for all of the New York-based Oppenheimer Funds and the
fees are allocated among the funds by the Board.
</FN>
</TABLE>
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was rec a
member of the Indo-U.S. Sub-Commission on Education and Culture; a member of the
Indo-U.S. Sub-Commission on Education and Culture; a member of the Indo-U.S.
SubCommission on Education and Culture;eived. A Trustee must serve in that
capacity for any of the New York-based Oppenheimer funds for at least 15 years
to be eligible for the maximum payment. Because each Trustee's retirement
benefits will depend on the amount of the Trustee's future compensation and
length of service, the amount of those benefits cannot be determined at this
time, nor can the Fund estimate the number of years of credited service that
will be used to determine those benefits. During the fiscal year ended July 31,
1996, $14,690 was accrued for the Fund's projected retirement benefit
obligations.
o Major Shareholders. As of November 1, 1996, the only person who owned
of record or was known by the Trust or the Fund to own beneficially 5% or more
of the outstanding Class A shares, Class B or Class C shares of the Fund, were
as follows:
<TABLE>
<CAPTION>
Percentage of
Outstanding Shares
Name & Address Number of Shares of the Class
<S> <C> <C>
Class B
Merrill Lynch Pierce Fenner 101,235.000 8.60%
& Smith
For the Sole Benefit of its
Customers
Attn.: Fund Administration
4800 Deer Lake Dr. E Fl. 3
Jacksonville, FL 32246-6484
Class C
-24-
<PAGE>
Merrill Lynch Pierce Fenner 4,663.000 39.86%
& Smith
For the Sole Benefit of its
Customers
Attn.: Fund Administration
4800 Deer Lake Dr. E Fl. 3
Jacksonville, FL 32246-6484
PaineWebber For the Benefit of 1,821.483 15.57%
Gladys Jean Kotler TTEE
Gladys J. Kotler Trust
UAD 2/23/89
7005 Ocean Blvd., Apt. 701
Boca Raton, FL 33432-6339
Jacqueline Sherman & Hedy First 1,376.554 11.76%
& Richard Sherman
JT TEN WROS NOT TC
8415 SW 107th Ave., Apt. 109-W
Miami, FL 33173-4315
William J. Petry & Joanne Petry 1,369.619 11.70%
JT TEN WROS NOT TC
5352 Sanders Road
Jacksonville, FL 32277-1334
Samuel P. & Vera M. Palermo TRS 1,003.773 8.58%
UA June 24 92
Samuel P. Palermo & Vera M.
Palermo Trust
1984 E. Chapel Drive
Deltona, FL 32738-3807
Kenneth E. Klein 927.644 7.93%
1595 N. Highway A1A #101
Indialantic, FL 32903-2713
</TABLE>
The Manager and Its Affiliates. The Manager is wholly owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom may also serve as officers of the Fund,
and three of whom (Ms. Macaskill and Messrs. Galli and Spiro) serve as Trustees
of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees, including
portfolio managers, that would compete with or take
-25-
<PAGE>
advantage of the Fund's portfolio transactions. Compliance with the Code of
Ethics is carefully monitored and strictly enforced by the Manager.
o The Investment Advisory Agreement. The Investment Advisory Agreement
between the Manager and the Fund requires the Manager, at its expense, to
provide the Fund with adequate office space, facilities and equipment, and to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective corporate administration for the Fund,
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and one composition
of proxy materials and registration statements for continuous public sale of
shares of the Fund.
Expenses not expressly assumed by the Manager under the investment
advisory agreement or by the Distributor under the General Distributor's
Agreement are paid by the Fund. The advisory agreement lists examples of
expenses paid by the Fund, the major categories of which relate to interest,
taxes, brokerage commissions, fees to certain trustees, legal and audit
expenses, custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including litigation
costs. For the fiscal period from October 1, 1993 to December 31, 1993 and the
fiscal years ended December 31, 1994, 1995, and July 31, 1996, the management
fees paid by the Fund to the Manager were $19,305, $100,261, $151,497 and
$109,426, respectively. These amounts do not reflect the expense assumption of
$6,015, $144,023, $209,449, and $20,298 by the Manager for such periods.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager has
undertaken that the total expenses of the Fund 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 the most stringent expense limitation imposed under
state law applicable to the Fund. Pursuant to the undertaking, the Manager's fee
will be reduced at the end of a month so that there will not be any accrued but
unpaid liability under this undertaking. Currently, the most stringent state
expense limitation is imposed by California, and limits the Fund's expenses
(with specific exclusions) to 2.5% of the first $30 million of average annual
net assets, 2% of the next $70 million of average annual net assets, and 1.5% of
average annual net assets in excess of $100 million. In addition, effective
September 11, 1995, the Manager has voluntarily agreed to assume the expenses of
the Fund to the extent required to enable the Fund to pay dividends per Class A
share at the rate of $.607 per fiscal year. Prior to September 11, 995, the
Manager voluntarily agreed to assume expenses of the Fund to the extent required
to enable the Fund to pay dividends per Class A share at the rate of $.636 per
fiscal year. The payment of the management fee and other expenses will be
reduced monthly to the extent necessary so that there will not be any accrued
but unpaid liability under this expense assumption undertaking. To enable the
Fund to pay dividends per Class A share at a set rate, the Manager will assume
certain Fund level expenses as well as Class A expenses. Therefore, Class B and
Class C shareholders will benefit from the expense assumption. The Manager
reserves the right to modify or terminate a voluntary expense assumption
undertaking at any time. Any assumption of the Fund's expenses under a voluntary
undertaking would lower the Fund's overall expense ratio and increase its total
return during any period in which expenses are limited.
-26-
<PAGE>
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties thereunder, the Manager is not liable for any loss
sustained by reason of any investment of Fund assets made with due care and in
good faith. The advisory agreement permits the Manager to act as investment
adviser for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with other investment companies for which it may act
as investment adviser or general distributor. If the Manager shall no longer act
as investment adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
o The Distributor. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares, but is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales, excluding payments under the Distribution and Service Plan, but including
advertising and the cost of printing and mailing prospectuses, (other than those
furnished to existing shareholders), are borne by the Distributor. During the
fiscal period from October 1, 1993 to December 31, 1993 and the fiscal years
ended December 31, 1994, 1995 and July 31, 1996, the aggregate sales charges on
sales of the Fund's Class A shares was $159,560, $145,115, $131,060 and $61,836,
respectively, of which the Distributor and an affiliated broker-dealer retained
$43, $24,662, $21,670 and $21,269. During the same periods, the contingent
deferred sales charges on the redemption of the Fund's Class B shares totaled
$2,411, $39,328, $42,273 and $26,038, all of which the Distributor retained.
During the Fund's fiscal period August 29, 1995 through December 31, 1995 and
the fiscal period ended July 31, 1996, no contingent deferred sales charges were
collected on Class C shares. For additional information about distribution of
the Fund's shares and the expenses connected with such activities, please refer
to "Distribution and Service Plans," below.
o The Transfer Agent. The Fund's Transfer Agent, OppenheimerFunds
Services, a division of the Manager, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for shareholder
servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the Investment Advisory Agreement is to arrange the portfolio
transactions for the Fund. The Investment Advisory Agreement contains provisions
relating to the employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by the Investment
Advisory Agreement to employ such broker-dealers, including "affiliated"
brokers, as that term is defined in the Investment Company Act, as may, in its
best judgment based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such transactions. The
Manager need not seek competitive commission bidding, but it is expected to
minimize the commissions paid to the extent consistent with the interest and
policies of the Fund as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund and/or the
other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than
-27-
<PAGE>
another qualified broker would have charged if a good faith determination is
made by the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment companies managed
by the Manager or its affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreement and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's portfolio
traders upon recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and allocate brokerage,
also subject to the provisions of the Investment Advisory Agreement and the
procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. As most purchases
made by the Fund are principal transactions at net prices, the Fund does not
incur substantial brokerage costs. The Fund usually deals directly with the
selling or purchasing principal or market maker without incurring charges for
the services of a broker on its behalf unless it is determined that a better
price or execution may be obtained by utilizing the services of a broker.
Purchases of portfolio securities from underwriters include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
include a spread between the bid and asked price. The Fund seeks to obtain
prompt execution of orders at the most favorable net price. When the Fund
engages in an option transaction, ordinarily the same broker will be used for
the purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, concurrent orders to purchase or sell
the same security by more than one of the accounts managed by the Manager or its
affiliates are combined. The transactions effected pursuant to such combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other accounts may
be useful both to the Fund and one or more of such other accounts. Such
research, which may be supplied by a third party at the instance of a broker,
includes information and analyses on particular companies and industries as well
as market or economic trends and portfolio strategy, receipt of market
quotations for portfolio evaluations, information systems, computer hardware and
similar products and services. If a research service also assists the Manager in
a non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid in commission dollars. The
Board of Trustees has permitted the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions. The Board has also permitted the Manager to use stated commissions
on secondary fixed-income agency trades to obtain research where the broker has
represented to the Manager that: (i) the trade is not from or for the broker's
own inventory, (ii) the trade was executed by the broker on an agency basis at
the stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the Manager
to obtain market information for the valuation of securities held in the Fund's
portfolio or being considered for purchase. The Board of Trustees, including the
"independent" Trustees
-28-
<PAGE>
of the Trust (those Trustees of the Trust who are not "interested persons" as
defined in the Investment Company Act, and who have no direct or indirect
financial interest in the operation of the Investment Advisory Agreement or the
Distribution Plans described below) annually reviews information furnished by
the Manager as to the commissions paid to brokers furnishing such services so
that the Board may ascertain whether the amount of such commissions was
reasonably related to the value or benefit of such services.
Other funds advised by the Manager have investment objectives and
policies similar to those of the Fund. Such other funds may purchase or sell the
same securities at the same time as the Fund, which could affect the supply and
price of such securities. If two or more of such funds purchase the same
security on the same day from the same dealer, the Manager may average the price
of the transactions and allocate the average among such funds.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from time to
time the "standardized yield," "tax-equivalent yield," "dividend yield,"
"average annual total return", "cumulative total return," and "average annual
total return at net asset value" and "total return at net asset value" of an
investment in a class of Fund shares may be advertised. An explanation of how
yields and total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the average
annual total returns for each advertised class of shares of the Fund for the 1,
5 and 10-year periods (or the life of the class, if less) ending as of the most
recently- ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its yield and total
returns are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Yield and total returns for any given past period are not a prediction or
representation by the Fund of future yields or rates of return. The yield and
total returns of the each class of shares of the Fund are affected by portfolio
quality, portfolio maturity, the type of investments the Fund holds and its
operating expenses allocated to the particular class.
o Standardized Yields.
o Yield. The Fund's "yield" (referred to as "standardized yield") for a
given 30-day period for a class of shares is calculated using the following
formula set forth in rules adopted by the Securities and Exchange Commission
that apply to all funds that quote yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
-29-
<PAGE>
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense reimbursements).
c = the average daily number of shares of that class outstanding during the
30-day period that were entitled to receive dividends.
d = the maximum offering price per share of the class on the last day of the
period, adjusted for undistributed net investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that the
standardized yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This standardized
yield is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments calculated for that period. The
standardized yield may differ from the "dividend yield" of that class, described
below. Additionally, because each class of shares is subject to different
expenses, it is likely that the standardized yields of the Fund's classes of
shares will differ. For the 30-day period ended December 31, 1995, the
standardized yields for the Fund's Class A, Class B and Class C shares were
4.25%, 3.77% and 3.75%, respectively. For the 30-day period ended July 31, 1996,
the standardized yield for the Fund's Class A, Class B and Class C shares were
4.28%, 3.76% and 3.77%, respectively.
o Tax-Equivalent Yield. The "tax-equivalent yield" of a class of shares
adjusts the Fund's current yield, as calculated above, by a stated combined
Federal, state and city tax rate. The tax- equivalent yield is based on a 30-day
period, and is computed by dividing the tax-exempt portion of the Fund's current
yield (as calculated above) by one minus a stated income tax rate and adding the
result to the portion (if any) of the Fund's current yield that is not tax
exempt. The tax equivalent yield may be used to compare the tax effects of
income derived from the Fund with income from taxable investments at the tax
rates stated. Appendix B includes a tax-equivalent yield table, based on various
effective Federal tax brackets for individual taxpayers. Such tax brackets are
determined by a taxpayer's Federal and state taxable income (the net amount
subject to Federal and state income tax after deductions and exemptions). The
tax-equivalent yield table assumes that the investor is taxed at the highest
bracket, regardless of whether a switch to non-taxable investments would cause a
lower bracket to apply, 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. The Fund's tax- equivalent
yields for its Class A, Class B and Class C shares for the 30-day period ended
December 31, 1995, for a taxpayer in the 39.6% tax bracket were 7.04%, 6.24%,
and 6.21% respectively. For the 30- day period ended July 31, 1996, the Fund's
tax-equivalent yield for its Class A, Class B and Class C shares was 7.09%,
6.23% and 6.24%, respectively.
o Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class. Dividend
yield is based on the dividends paid on shares of a Class from share dividends
derived from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized capital
gains declared during a stated period. Under those calculations, the dividends
and/or distributions for that class declared during a stated period of one year
or less (for example, 30 days) are added together, and the sum is divided by the
maximum offering price per share of that class) on the last day of the
-30-
<PAGE>
period. When the result is annualized for a period of less than one year, the
"dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B and Class C shares, the maximum offering
price is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time similar yield or distribution return calculations may
also be made using the Class A net asset value (instead of its respective
maximum offering price) at the end of the period. The dividend yields on Class A
shares for the 30-day period ended December 31, 1995 were 5.14% and 5.39% when
calculated at maximum offering price and at net asset value, respectively. The
dividend yield on Class B shares for the 30-day period ended December 31, 1995
was 4.70% when calculated at net asset value. The dividend yield on Class C
shares for the 30-day period ended December 31, 1995 was 5.01% when calculated
at net asset value. The dividend yields on Class A shares for the 30-day period
ended July 31, 1996 were 5.07% and 5.32% when calculated at maximum offering
price and at net asset value, respectively. The dividend yields in Class B and
Class C shares for the 30-day period ended July 31, 1996 were 4.58% and 4.60%,
respectively, when calculated at net asset value.
o Total Returns Information
o Average Annual Total Returns. The "average annual total return" of
each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
o Cumulative Total Returns. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
- ------- = Total Return
P
-31-
<PAGE>
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted from
the initial investment ("P") (unless the return is shown at net asset value, as
discussed below). For Class B shares, the payment of the applicable contingent
deferred sales charge of (5.0% for the first year, 4.0% for the second year,
3.0% for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth
year and none thereafter is applied as described in the prospectus. For Class C
shares, the payment of the 1.0% contingent deferred sales charge for the first
12 months is applied as described in the prospectus. Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that the
investment is redeemed at the end of the period.
For the one year period ended July 31, 1996 and for the period from
October 7, 1993 (commencement of offering) through July 31, 1996, the average
annual total returns on an investment in Class A shares of the Fund were 1.52%
and 2.84%, respectively, and in Class B shares of the Fund over those periods
were 0.79% and 2.92% respectively. The cumulative total returns for Class A and
Class B shares for the latter period were 8.25% and 8.50%, respectively. For the
period from August 29, 1995 through July 31, 1996, the cumulative total return
on an investment in Class C shares of the Fund was 4.64%.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an "average annual total return at net asset value" for Class A, Class B
or Class C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends and capital
gains distributions. The average annual total return at net asset value on the
Fund's Class A shares for the period from October 7, 1993 (commencement of
offering) through December 31, 1995, and for the one-year period ended December
31, 1995, were 5.73% and 17.60% respectively. The average annual total return at
the net asset value of the Fund's Class A shares for the period from October 7,
1993 (commencement of operations) through July 31, 1996, and for the one-year
period ended July 31, 1996 were 4.62% and 6.58%, respectively. The average
annual total return at net asset value on the Fund's Class B shares for the
fiscal period from October 1, 1993 (commencement of offering) through December
31, 1995, and for the one-year period ended December 31, 1995, were 5.01% and
16.81%, respectively. Further, the average annual total return at the net asset
value on the Fund's Class B shares for the fiscal year ended July 31, 1996 and
for the period from October 1, 1993 (date Class B shares were first publicly
offered) through July 31, 1996 were 5.79% and 3.89%, respectively. The
cumulative total return at the net asset value on the Fund's Class C shares for
the period from August 29, 1995 (commencement of operations) through December
31, 1995 was 5.86%. The cumulative total return at net asset value on Class C
shares for the period from August 29, 1995 (date Class C shares were first
publicly offered) through July 31, 1996 was 5.64%. Total return information may
be useful to investors in reviewing the performance of the Fund's Class A, Class
B or Class C shares. However, when comparing total return of an investment in
Class A, Class B or Class C shares of the Fund, a number of factors should be
considered before using such information as a basis for comparisobn before using
such information with other investments.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of the performance of its Class A, Class B or Class C shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent mutual
fund monitoring service. Lipper monitors the performance of
-32-
<PAGE>
regulated investment companies, including the Fund, and ranks their performance
for various periods based on categories relating to investment objectives. The
performance of the Fund's classes is ranked against (i) all bond funds excluding
money market funds and (ii) Florida municipal bond funds. The Lipper performance
rankings are based on total returns that include the reinvestment of capital
gains distributions and income dividends but not take sales charges or taxes
into consideration. From time to time the Fund may include in its advertisement
and sales literature performance information about the Fund cited in other
newspapers and periodicals such as The New York Times, which may include
performance quotations from other sources, including Lipper and Morningstar.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an independent
mutual fund monitoring service that ranks mutual funds, including the Fund,
monthly in broad investment categories (equity, taxable bond, municipal bond and
hybrid) based upon risk-adjusted investment returns. Investment return measures
a fund's three, five and ten-year average annual total returns (when available)
in excess of 90-day U.S. Treasury bill returns after considering sales charges
and expenses. Risk reflects fund performance below 90-day U.S. Treasury bill
returns. Risk and return are combined to produce star rankings reflecting
performance relative to the average fund in a given fund's category. Five stars
is the "highest" ranking (top 10%), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average" (next 22.5%)
and one star is "lowest" (bottom 10%). Morningstar ranks the Fund in relation to
other rated municipal bond funds. Rankings are subject to change.
From time to time the Fund may include in its advertisements and sales
literature performance information about the fund cited in ewspapers and other
periodicals such as The New York Times, which may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's Class A, Class B or Class C shares may be compared in publications to (i)
the perfornmance of various market indices or to other investments for which
reliable performance data is available, and (ii) to averages, performance
rankings or other benchmarks prepared by recognized mutual fund statistical
services.
Investors may also wish to compare the Fund's Class A, Class B or Class
C return to the returns on fixed income investments available from banks and
thrift institutions, such as certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed nor insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return, and Treasury bills
are guaranteed as to principal and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or Transfer Agent), or the investor services provided by them to
shareholders of the Oppenheimer funds, other than the performance rankings of
the Oppenheimer funds themselves. Those ratings or rankings of
shareholder/investor services by a third party may compare the Oppenheimer
funds' services to those of other mutual fund families selected by the rating or
ranking services, and may be based upon the opinions of the rating or ranking
service itself, based on its research or judgment, or based upon surveys of
investors, brokers, shareholders or others.
-33-
<PAGE>
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plans for Class B and Class C shares of the Fund under
Rule 12b-1 of the Investment Company Act, pursuant to which the Fund makes
payments to the Distributor in connection with the distribution and/or servicing
of the shares of that class, as described in the Prospectus. Each Plan has been
approved by a vote of (i) the Board of Trustees of the Trust, including a
majority of the Independent Trustees, cast in person at a meeting called for the
purpose of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class. For the Distribution
and Service Plan for Class C shares that vote was cast by the Manager as the
sole initial holder of Class C shares.
In addition, under the Plans the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. The Distributor and
the Manager may, in their sole discretion, increase or decrease the amount of
payments they make from their own resources to Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically approved
at least annually by the Trust's Board of Trustees and its Independent Trustees
by a vote cast in person at a meeting called for the purpose of voting on such
continuance. Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
No Plan may be amended to increase materially the amount of payments to be made
unless such amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically convert
into Class A shares after six years, the Fund is required to obtain the approval
of Class B as well as Class A shareholders for a proposed amendment to the Class
A Plan that would materially increase the amount to be paid by Class A
shareholders under that Class A Plan. Such approval must be by a "majority" of
the Class A and Class B shares (as defined in the Investment Company Act),
voting separately by class. All material amendments must be approved by the
Board and the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Trust's Board of Trustees at least quarterly for
its review, detailing the amount of all payments made pursuant to each Plan, the
identity of each Recipient that received any such payment and the purpose of the
payment. The report for the Class B and Class C Plans shall also include the
Distributor's distribution costs for that quarter, and such costs for previous
fiscal periods that have been carried forward, as explained in the Prospectus
and below. Those reports, including the allocations on which they are based,
will be subject to the review and approval of the Independent Trustees in the
exercise of their fiduciary duty. Each Plan further provides that while it is in
effect, the selection and nomination of those Trustees of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in such
selection and nomination if the final decision as to any such selection or
nomination is approved by a majority of the Independent Trustees.
-34-
<PAGE>
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount, if any,
that may be determined from time to time by a majority of the Fund's Independent
Trustees. Initially, the Board of Trustees has set the fees at the maximum rate
allowed under the Plans and set no minimum amount.
For the fiscal years ended December 31, 1995 and July 31, 1996,
payments under the Class A Plan totaled $36,538 and $26,792, respectively, all
of which was paid by the Distributor's recipients, including $301 and $0 was
paid to an affiliate of the Distributor. Any unreimbursed expenses by the
Distributor incurred with respect to Class A shares for any fiscal year may not
be recovered in subsequent years. Payments received by the Distributor under the
Class A Plan will not be used to pay any interest expense, carrying charge, or
other financial costs, or allocation of overhead by the Distributor. At December
31, 1995 and July 31, 1996, the Distributor had incurred unreimbursed expenses
of $438,657 and $484,148 (equal to 3.47% and 3.76% of the Fund's net assets) for
Class B shares.
The Class B Plan and the Class C Plan allow the service fee payments to
be paid by the Distributor to Recipients in advance for the first year such
shares are outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of shares sold.
An exchange of shares does not entitle the Recipient to an advance service fee
payment. In the event Class B and Class C shares are redeemed during the first
year that such shares are outstanding, the Recipient will be obligated to repay
a pro rata portion of the advance of the service fee payment for those shares to
the Distributor. Service fee payments by the Distributor to Recipients will be
made (i) in advance for the first year Class B shares are outstanding, following
the purchase of shares in an amount up to 0.25% of the net asset value of the
shares purchased by the Recipient or its customers (the Board has currently set
the service fee at 0.15% per year, which amount may be increased by the Board
from time to time up to the maximum rate of 0.25%) and (ii) thereafter, on a
quarterly basis, computed as of the close of business each day at an annual rate
of up to 0.25% (currently set at 0.15% as described above) of the average daily
net asset value of Class B shares held in accounts of the Recipient or its
customers. For the fiscal years ended December 31, 1995 and July 31, 1996,
payments under the Class B plan totaled $107,478 and $74,744, of which $275 and
$0 was paid to an affiliate of the Distributor and $86,852 and $59,299 was
retained by the Distributor. For the fiscal years ended December 31, 1995 and
July 31, 1996, payments under the Class C Plan totaled $13 and $455.
Although the Class B Plan and the Class C Plan permit the Distributor
to retain both the asset-based sales charges and the service fee on such shares,
or to pay Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be established from
time to time under the Class B Plan and the Class C Plan by the Board.
Initially, the Board has set no minimum holding period. All payments under the
Class B Plan are subject to the limitations imposed by the Rules of Conduct of
the National Association of Securities Dealers, Inc. on payments of asset based
sales charges and service fees.
The Class B and the Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund
-35-
<PAGE>
during that period. The Distributor retains the asset-based sales charge on
Class B shares. As to Class C shares, the Distributor retains the asset-based
sales charge during the first year shares are outstanding, and pays the
asset-based sales charge as an ongoing commission to the dealer on Class C
shares outstanding for a year or more. Such payments are made to the Distributor
under the Plans in recognition that the Distributor (i) pays sales commissions
to authorized brokers and dealers at the time of sale and pays service fees, as
described in the Prospectus, (ii) may finance such commissions and/or the
advance of the service fee payment to Recipients under those Plans, or may
provide such financing from its own resources, or from an affiliate, (iii)
employs personnel to support distribution of shares, and (iv) may bear the costs
of sales literature, advertising and prospectuses (other than those furnished to
current shareholders) and state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the method
of purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other person entitled
to receive compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other. The Distributor
will not accept any order for $500,000 or more of Class B shares or $1 million
or more of Class C shares on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on such Class B and Class C shares will be
reduced by incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
-36-
<PAGE>
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to any
class are allocated pro rata to the shares of each class, based on the
percentage of the net assets of such class to the Fund's total net assets, and
then equally to each outstanding share within a given class. Such general
expenses include (i) management fees, (ii) legal, bookkeeping and audit fees,
(iii) printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses, (vi)
share issuance costs, (vii) organization and start-up costs, (viii) interest,
taxes and brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to a class are
allocated equally to each outstanding share within that class. Such expenses
include (a) Distribution and/or Service Plan fees, (b) incremental transfer and
shareholder servicing agent fees and expenses, (c) registration fees and (d)
shareholder meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per share of
Class A, Class B and Class C shares of the Fund are determined as of the close
of business of The New York Stock Exchange on each day that the Exchange is open
by dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class outstanding. The Exchange normally closes at 4:00
P.M., New York time, but may close earlier on some days (for example, in case of
weather emergencies or on days falling before a holiday). The Exchange's most
recent annual announcement (which is subject to change) states that it will
close on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may also
close on other days. Dealers other than Exchange members may conduct trading in
Municipal Securities on certain days on which the Exchange is closed (including
weekends and holidays) or after 4:00 P.M. on a regular business day. Because the
Fund's net asset value will not be calculated on those days, the Fund's net
asset value per share may be significantly affected on such days when
shareholders may not purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) long-term debt
securities having a remaining maturity in excess of 60 days are valued based on
the mean between the "bid" and "asked" prices determined by a portfolio pricing
service approved by the Fund's Board of Trustees or obtained by the Manager from
two active market makers in the security on the basis of reasonable inquiry;
(ii) debt instruments having a maturity of more than 397 days when issued, and
non-money market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are valued at the
mean between the "bid" and "asked" prices determined by a pricing service
approved by the Fund's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable inquiry; (iii)
money market debt securities that had a maturity of less than 397 days when
issued that have a remaining maturity of 60 days or less are valued at cost,
adjusted for amortization of premiums and accretion of discounts; and (iv)
securities (including restricted securities) not having readily-available market
quotations are valued at fair value determined under the Board's procedures. If
the Manager is unable to locate two market makers willing to give quotes (see
(i) and (ii) above), the security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "ask" price is available).
-37-
<PAGE>
In the case of Municipal Securities, U.S. Government securities and
corporate bonds, when last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity and other special factors
involved (such as the tax-exempt status of the interest paid by Municipal
Securities). The Manager may use pricing services approved by the Board of
Trustees to price any of the types of securities described above. The Manager
will monitor the accuracy of such pricing services, which may include comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts, calls, Interest Rate Futures and Municipal Bond Index Futures are
valued at the last sales price on the principal exchange on which they are
traded or on NASDAQ, as applicable, as determined by a pricing service approved
by the Board of Trustees or by the Manager. If there were no sales that day,
value shall be the last sale price on the preceding trading day if it is within
the spread of the closing "bid" and "asked" prices on the principal exchange or
on NASDAQ on the valuation date, or, if not, the value shall be the closing
"bid" price on the principal exchange or on NASDAQ on the valuation date. If the
put, call or future is not traded on an exchange or on NASDAQ, it shall be
valued at the mean between "bid" and "asked" prices obtained by the Manager from
two active money market makers (which in certain cases may be the "bid" price if
no "asked" price is available.
When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset, and
an equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the option.
In determining the Fund's gain on investments, if a call or put written by the
Fund is exercised, the proceeds are increased by the premium received. If a call
or put written by the Fund expires, the Fund has a gain in the amount of the
premium; if the Fund enters into a closing purchase transaction, it will have a
gain or loss, depending on whether the premium received was more or less than
the cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of the premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House transfer to
buy the shares. Dividends will begin to accrue on shares purchased by the
proceeds of ACH transfers on the business day the Fund receives Federal Funds
for the purchase through the ACH system before the close of The New York Stock
Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier on
certain days. If Federal Funds are received on a business day after the close of
the Exchange, the shares will be purchased and dividends will begin to accrue on
the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers
-38-
<PAGE>
to one's spouse, children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's spouse and a
spouse's siblings, aunts, uncles, nieces and nephews.
o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer New Jersey Municipal Fund
-39-
<PAGE>
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Bond Fund for Growth
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Rochester Portfolio Series - Limited-Term New York Municipal Fund*
Rochester Fund Municipals*
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
-40-
<PAGE>
- --------------------
* Shares of the Fund are not presently exchangeable for shares of these funds
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund shares
may be subject to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent (referred to as a "Letter") is
an investor's statement in writing to the Distributor of the intention to
purchase Class A shares or Class A and Class B shares of the Fund and (other
Oppenheimer funds) during a 13-month period (the "Letter of Intent period"),
which may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The Letter states the investor's intention to make
the aggregate amount of purchases of shares which, when added to the investor's
holdings of shares of those funds, will equal or exceed the amount specified in
the Letter. Purchases made by reinvestment of dividends or distributions of
capital gains and purchases made at net asset value without sales charge do not
count toward satisfying the amount of the Letter. A Letter enables an investor
to count the Class A and Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including sales charge) that applies
to a single lump-sum purchase of shares in the amount intended to be purchased
under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
-41-
<PAGE>
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility of the dealer of record and/or
the investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen- month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If such difference in sales charges is not paid within twenty days after
a request from the Distributor or the dealer, the Distributor will, within sixty
days of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the redemption
proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A or Class B shares acquired
in exchange for either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other Oppenheimer funds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described
-42-
<PAGE>
in "How To Sell Shares," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for monthly
automatic purchases of shares of up to four other Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply to shares
purchased by Asset Builder payments. An application should be obtained from the
Distributor, completed and returned, and a prospectus of the selected fund(s)
should be obtained from the Distributor or your financial advisor before
initiating Asset Builder payments. The amount of the Asset Builder investment
may be changed or the automatic investments may be terminated at any time by
writing to the Transfer Agent. A reasonable period (approximately 15 days) is
required after the Transfer Agent's receipt of such instructions to implement
them. The Fund reserves the right to amend, suspend, or discontinue offering
such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
the Bank or the Fund's Custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
o Involuntary Redemptions. The Trust's Board of Trustees has the right
to cause the involuntary redemption of the Fund's shares held in any account if
the aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
o Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Trust may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
-43-
<PAGE>
redemption order wholly or partly in cash. In that case, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Trust has
elected to be governed by Rule 18f-1 under the Investment Company Act, pursuant
to which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchase subject to an initial sales charge or Class A contingent deferred sales
charge, or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without sales
charge only in Class A shares of the Fund or any of the other Oppenheimer funds
into which shares of the Fund are exchangeable as described in "How to Exchange
Shares" below, at the net asset value next computed after the Transfer Agent
receives the reinvestment order. This reinvestment privilege does not apply to
Class C shares. The shareholder must ask the Distributor for that privilege at
the time of reinvestment. Any capital gain that was realized when the shares
were redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption, some
or all of the loss may not be tax deductible, depending on the timing and amount
of the reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B or Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
an order placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that
-44-
<PAGE>
day's net asset value if the order was received by the dealer or broker from its
customers prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to and received
by the Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of a payment on the date requested and reserves the right to
amend, suspend or discontinue offering such plans at any time without prior
notice. Because of the sales charge assessed on Class A share purchases,
shareholders should not make regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B and Class C shareholders
should not establish withdrawal plans because of the imposition of the
contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in the Prospectus under
"Waivers of Class B and Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below and
in the provisions of the OppenheimerFunds Application relating to such Plans, as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed instructions)
to exchange a pre-determined amount of shares of the Fund for shares (of the
same class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
such plans should not be considered as a yield or income on your investment. It
may not be desirable to purchase additional shares of Class A shares while
maintaining automatic withdrawals because of the sales
-45-
<PAGE>
charges that apply to purchases when made. Accordingly, a shareholder normally
may not maintain an Automatic Withdrawal Plan while simultaneously making
regular purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the
account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the Transfer
Agent upon receiving directions to that effect from the Fund. The Transfer Agent
will also terminate a Plan upon receipt of evidence satisfactory to it of the
death or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend-reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated form.
Upon written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
-46-
<PAGE>
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be exchanged only for
shares of the same class of other Oppenheimer funds. Shares of the Oppenheimer
funds that have a single class without a class designation are deemed "Class A"
shares for this purpose. All of the Oppenheimer funds offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust, Centennial
America Fund, L.P., and Daily Cash Accumulation Fund, Inc., which only offer
Class A shares and Oppenheimer Main Street California Municipal Fund which only
offers Class A and Class B shares, (Class B and Class C shares of Oppenheimer
Cash Reserves are generally available only by exchange from the same class of
shares of other Oppenheimer funds or through OppenheimerFunds sponsored 401(k)
plans). A current list showing which funds offer which classes can be obtained
by calling the Distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M
shares of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds, including Rochester Fund
Municipals and Limited Term New York Municipal Fund. Class A shares of Rochester
Fund Municipals or Limited Term New York Municipal Fund acquired on the exchange
of Class M shares of Oppenheimer Bond Fund for Growth may be exchanged for Class
M shares of that fund. For accounts of Oppenheimer Bond Fund for Growth
established after March 8, 1996, Class M shares may be exchanged for Class A
shares of other Oppenheimer funds except Rochester Fund Municipals and Limited
Term New York Municipals. Exchanges to Class M shares of Oppenheimer Bond Fund
for Growth are permitted from Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves that were acquired by exchange from Class M
shares. Otherwise no exchanges of any class of any Oppenheimer fund into Class M
shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months prior
to that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds (except Oppenheimer Cash
Reserves) or from any unit investment trust for which reinvestment arrangements
have been made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds. No contingent deferred sales charge is
imposed on exchanges of shares of any class purchased subject to a contingent
deferred sales charge. However,
-47-
<PAGE>
when Class A shares acquired by exchange of Class A shares of other Oppenheimer
funds purchased subject to a Class A contingent deferred sales charge are
redeemed within 18 months of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A contingent deferred sales
charge is imposed on the redeemed shares (see "Class A Contingent Deferred Sales
Charge" in the Prospectus). The Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange if they are redeemed within six
years of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or Class C contingent deferred sales charge will be followed in
determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
Class must specify whether they intend to exchange Class A, Class B or Class C
shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans and Automatic Withdrawal Plans will be switched to the new account unless
the Transfer Agent is instructed otherwise. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of
-48-
<PAGE>
reinvestment of redemption proceeds in such cases. The Fund, the Distributor,
and the Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other investment
transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value, or as otherwise
described in "How to Buy Shares." Daily dividends on newly purchased shares will
not be declared or paid until such time as Federal Funds (funds credited to a
member bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Dividends
will be declared on shares repurchased by a dealer or broker for three business
days following the trade date (i.e., to and including the day prior to
settlement of the repurchase). If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will be paid
together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money Market
Fund, Inc., as promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio, and
expenses borne by the Fund or borne separately by a class, as described in
"Alternative Sales Arrangements -- Class A, Class B and Class C Shares," above.
Dividends are calculated in the same manner, at the same time and on the same
day for shares of each class. However, dividends on Class B and Class C shares
are expected to be lower as a result of the asset-based sales charge on Class B
shares and Class C shares, and Class B and Class C dividends will also differ in
amount as a consequence of any difference in net asset value between Class A,
Class B and Class C shares.
Dividends will be declared from net investment income, if any. Net
investment income includes the allocation of amounts of income from the
Municipal Securities in the Fund's portfolio which are free from Federal income
taxes. This allocation will be made by the use of one designated percentage
applied uniformly to all income dividends made during the Fund's tax year. Such
designation will normally be made following the end of each fiscal year as to
income dividends paid in the prior year. The percentage of income designated as
tax-exempt may substantially differ from the percentage of the Fund's income
that was tax-exempt for a given period.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year and intends to qualify in future
years, but reserves the right not to qualify. The Internal Revenue Code contains
a number of complex tests to determine whether the Fund will qualify, and the
Fund might not meet those tests in a particular year. For example, if the Fund
derives 30% or more of its gross income from the sale of securities held less
than three months, it may fail to qualify (see "Tax Aspects of Covered Calls and
Hedging Instruments," above). If it does not qualify, the Fund will be treated
for tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
-49-
<PAGE>
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. The Manager
might determine in a particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the required levels
and to pay the excise tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for distribution to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund) of
a zero coupon security accrue as income each year a portion of the discount at
which the security was purchased even though the Fund receives no interest
payment in cash on the security during the year. As an investment company, the
Fund must pay out substantially all of its net investment income each year or be
subject to excise taxes, as described above. Accordingly, when the Fund holds
zero coupon securities, it may be required to pay out as an income distribution
each year an amount which is greater than the total amount of cash interest the
Fund actually received during that year. Such distributions will be made from
the cash assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the event the
Fund realizes net capital gains from such transactions, its shareholders may
receive a larger capital gain distribution than they would have had in the
absence of such transactions. At December 31, 1995 the Fund had available for
federal income tax purposes an unused capital loss carryover of approximately
$538,000, which will expire in the year 2002 and 2003.
Tax Status of the Fund's Dividends and Distributions. The Fund intends to
qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt- interest dividends
which are derived from net investment income earned by the Fund on Municipal
Securities will be excludable from the gross income of shareholders for Federal
income tax purposes. All of the Fund's dividends (excluding distributions) paid
during 1995 were exempt from such Federal income taxes. A portion of the
exempt-interest dividends paid by the Fund may be an item of tax preference for
shareholders subject to the alternative minimum tax. 17.1% of the Fund's
dividends (excluding distributions) paid during 1995 were a tax preference item
for such shareholders. Shareholders receiving Social Security benefits should be
aware that exempt-interest dividends are a factor in determining whether such
benefits are subject to Federal income tax. Losses realized by shareholders on
the redemption of Fund shares within six months of purchase (which period may be
shortened by regulation) will be disallowed for Federal income tax purposes to
the extent of exempt- interest dividends received on such shares. Corporate
shareholders and "substantial users" of facilities financed by Private Activity
Municipal Securities should read "Investment Objective and Policies", above
before purchasing shares.
For Federal income tax purposes, a shareholder receiving a dividend
from income earned by the Fund from one or more of (i) certain taxable temporary
investments, (ii) income from securities loans, (iii) income or gains from
hedging instruments, and (iv) an excess of net short-term capital gain over net
long-term capital loss from the Fund, treats the dividend as either a receipt of
ordinary income or long-term capital gains in the computation of gross income,
regardless of whether the dividend is reinvested. The Fund's dividends will not
be eligible for the dividends-received deduction for corporations.
Florida does not currently impose a personal income tax on individuals.
Accordingly, dividends or distributions paid by the Fund to individuals who are
Florida residents are not subject to any Florida
-50-
<PAGE>
state income tax. Investment company taxable income and capital gains of the
Fund will be subject to Florida corporate income taxes. Florida currently
imposes an "intangible tax" at the annual rate of 0.2% on certain securities and
other intangible assets owned by Florida residents on the first day of each
calendar year. The Fund has received a ruling from the Florida Department of
Revenue that, if on the close of business on the last business day of the
calendar year the Fund's portfolio assets consist entirely of securities that
are exempt from the Florida intangible personal property tax, including
obligations of the U.S. government, its agencies, instrumentalities and
territories (including Puerto Rico, Guam and the U.S. Virgin Islands) and
Florida Municipal Securities, shares of the Fund will be exempt from Florida's
intangible tax in the following year. On the last business day of the 1995
calendar year the Fund's assets consisted solely of assets exempt from Florida's
intangible personal property tax. The Fund anticipates that on the last business
day of each calendar year the Fund's assets will consist solely of assets exempt
from Florida's intangible personal property tax. Transaction costs involved in
restructuring the Fund's portfolio to take advantage of the exemption from the
intangibles tax in any year could reduce the Fund's investment return and might
exceed any increased investment return the Fund achieved by investing in
non-exempt assets during the year. At July 31, 1996, the Fund had available for
federal income tax purposes an unused capital loss carryover of approximately
$371,000, which expires in 2002 and 2003.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges"
above at net asset value without sales charge. To elect this option, the
shareholder must notify the Transfer Agent in writing and must either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Transfer Agent to establish
an account. The investment will be made at the net asset value per share in
effect at the close of business on the payable date of the dividend or
distribution. Dividends and/or distributions from certain of the Oppenheimer
funds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Custodian of the assets of the Fund is Citibank, N.A. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the Manager and
the Custodian have been and will continue to be unrelated to and unaffected by
the relationship between the Fund and the Custodian. It will be the practice of
the Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates. The
Fund's cash balances with the Custodian in excess of $100,000 are not protected
by Federal Deposit Insurance. Such uninsured balances may at times be
substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager and its affiliates.
-51-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Multi-State Tax-Exempt
Trust:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Florida Tax- Exempt Fund (a series of Oppenheimer
Multi-State Tax-Exempt Trust) as of July 31, 1996, and the statements of
operations for the seven month period then ended and the year ended December
31, 1995, the statements of changes in net assets for the seven month period
ended July 31, 1996 and the years ended December 31, 1995 and 1994, and the
financial highlights for the seven month period ended July 31, 1996, each of
the years in the two year period ended December 31, 1995 and the period from
October 1, 1993 (commencement of operations) to December 31, 1993. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 1996, by correspondence with the custodian
and brokers; and where confirmations were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Florida Tax-Exempt Fund as of July 31, 1996, the results of its
operations for the seven month period then ended and the year ended December
31, 1995, the changes in its net assets for the seven month period ended
July 31, 1996 and the years ended December 31, 1995 and 1994, and the
financial highlights for the seven month period ended July 31, 1996, each of
the years in the two year period ended December 31, 1995 and the period from
October 1, 1993 (commencement of operations) to December 31, 1993, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
------------------------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
August 21, 1996
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
STATEMENT OF INVESTMENTS JULY 31, 1996
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
================================================================================================================================
MUNICIPAL BONDS AND NOTES - 99.4%
- --------------------------------------------------------------------------------------------------------------------------------
FLORIDA - 89.3%
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alachua County, Florida Health Facilities
Authority Revenue Revenue Refunding Bonds,
Santa Fe Healthcare Facilities Project,
<PAGE>
6%, 11/15/09 Baa1/AAA $1,000,000 $ 1,021,452
--------------------------------------------------------------------------------------------------------------------------
Brevard County, Florida Housing Finance
Authority Single Family Mtg. Revenue
Bonds, 6.70%, 9/1/27 Aaa/NR 1,000,000 1,031,709
--------------------------------------------------------------------------------------------------------------------------
Broward County, Florida Resource Recovery
Revenue Bonds:
Broward Waste Energy-LP North Project,
7.95%, 12/1/08(1) A/A 1,825,000 2,014,418
Ses Broward Co.-LP South Project, 7.95%, 12/1/08 A/A- 1,425,000 1,572,902
--------------------------------------------------------------------------------------------------------------------------
Broward County, Florida School District General
Obligation Bonds, Prerefunded, 7.125%, 2/15/08 Aaa/AAA 750,000 813,993
--------------------------------------------------------------------------------------------------------------------------
Clay County, Florida Housing Finance Authority
Revenue Bonds, Single Family Mtg., 6.55%, 3/1/28 Aaa/NR 1,100,000 1,123,487
--------------------------------------------------------------------------------------------------------------------------
Collier County, Florida Health Facilities
Authority Revenue Refunding Bonds, The Moorings,
Inc. Project, 7%, 12/1/19 NR/BBB+/A- 1,000,000 1,036,319
--------------------------------------------------------------------------------------------------------------------------
Dade County, Florida General Obligation
Refunding Bonds, FGIC Insured, 12%, 10/1/04 Aaa/AAA/AAA 100,000 146,789
--------------------------------------------------------------------------------------------------------------------------
Dade County, Florida Industrial Development
Authority Revenue Bonds, Miami Cerebral Palsy
Services Project, 8%, 6/1/22 NR/NR 1,000,000 1,026,481
--------------------------------------------------------------------------------------------------------------------------
Dade County, Florida Special Obligation Revenue
Refunding Bonds, Series B, AMBAC Insured, Zero
Coupon, 6.25%, 10/1/14(2) Aaa/AAA/AAA 4,755,000 1,593,339
--------------------------------------------------------------------------------------------------------------------------
Florida Housing Finance Agency Revenue Bonds,
Maitland Club Apts. Project, Series B-1, AMBAC
Insured, 6.75%, 8/1/14 Aaa/AAA/AAA 1,000,000 1,040,420
--------------------------------------------------------------------------------------------------------------------------
Florida State Board of Education Capital Outlay
Public Education General Obligation Bonds,
Prerefunded, Series A, 7.25%, 6/1/23 Aaa/AAA 2,210,000 2,459,708
--------------------------------------------------------------------------------------------------------------------------
Florida State Board of Education Capital Outlay
Public Education General Obligation Refunding
Bonds, Series D, 5.125%, 6/1/22 Aa/AA/AA 700,000 638,354
--------------------------------------------------------------------------------------------------------------------------
Florida State Division of Bond Finance General
Services Revenue Bonds:
Consolidated & Recreation Lands-Department of
Natural Resources, Prerefunded, Series A,
MBIA Insured, 7.25%, 7/1/06 Aaa/AAA 1,000,000 1,077,109
Sunshine Skyway Project,
Prerefunded, 10.25%, 6/1/08 Aaa/AAA 1,000,000 1,071,781
--------------------------------------------------------------------------------------------------------------------------
Florida State Turnpike Authority Revenue
Bonds, Prerefunded, 7.50%, 7/1/19 Aaa/NR/AAA 700,000 773,322
--------------------------------------------------------------------------------------------------------------------------
Hillsborough County, Florida Aviation Authority
Revenue Refunding Bonds, Tampa International
Airport, Series B, FGIC Insured, 5.50%, 10/1/13 Aaa/AAA/AAA 900,000 885,210
</TABLE>
5 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
STATEMENT OF INVESTMENTS (CONTINUED)
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hillsborough County, Florida Industrial
Development Authority Pollution Control
Revenue Refunding Bonds, Tampa Electric Co.
Project, 8%, 5/1/22 Aa3/AA/AA- $1,000,000 $ 1,185,207
--------------------------------------------------------------------------------------------------------------------------
Hillsborough County, Florida Utility
Revenue Refunding Bonds, Series A, FSA
Insured, 7%, 8/1/14 Aaa/AAA 750,000 829,819
--------------------------------------------------------------------------------------------------------------------------
Jacksonville, Florida Electric Authority Revenue
Bonds, Prerefunded, Series 3-A, 6.875%, 10/1/12 Aaa/AAA/AA+ 1,360,000 1,407,118
--------------------------------------------------------------------------------------------------------------------------
Martin County Florida Industrial Development
Authority Revenue Refunding Bonds, Indiantown
Cogeneration Project, Series A, 7.875%, 12/15/25 Baa3/BBB-/BBB 1,000,000 1,123,180
--------------------------------------------------------------------------------------------------------------------------
Orange County, Florida Housing Finance Authority
Single Family Mtg. Revenue Bonds, 6.85%, 10/1/27 Aaa/AAA 1,000,000 1,042,241
--------------------------------------------------------------------------------------------------------------------------
Orange County, Florida Sales Tax Revenue Bonds,
Series B, MBIA Insured, 5.375%, 1/1/24 Aaa/AAA 1,000,000 936,074
--------------------------------------------------------------------------------------------------------------------------
Orlando, Florida Utilities Commission
Water & Electric Revenue Bonds:
Inverse Floater, 7.174%, 10/6/17(3) Aa/AA- 1,000,000 916,028
Prerefunded, Series C, 7%, 10/1/23 Aaa/AA- 600,000 658,111
--------------------------------------------------------------------------------------------------------------------------
Port St. Lucie, Florida Utility Revenue Bonds,
Series A, FGIC Insured, Zero Coupon, 6.25%,
9/1/16(2) Aaa/AAA 1,045,000 306,591
--------------------------------------------------------------------------------------------------------------------------
St. Petersburg, Florida Public Improvement
Revenue Refunding Bonds, MBIA Insured,
6.375%, 2/1/12 Aaa/AAA 750,000 794,382
--------------------------------------------------------------------------------------------------------------------------
Tampa, Florida Utility Special Tax RevenuE Bonds,
Prerefunded, AMBAC Insured, 8.125%, 10/1/15 Aaa/AAA/AAA 300,000 320,407
--------------
28,845,951
- --------------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS - 10.1%
--------------------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Aqueduct & Sewer
Authority Revenue Bonds, Escrowed to Maturity,
10.25%, 7/1/09 Aaa/AAA 400,000 553,927
--------------------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue Bonds:
Prerefunded, Series T, 6.625%, 7/1/18 NR/AAA 500,000 555,855
Series W, Inverse Floater, 6.62%, 7/1/10(3) Baa1/A 1,000,000 904,820
--------------------------------------------------------------------------------------------------------------------------
Puerto Rico Public Buildings Authority Guaranteed
Public Education & Health Facilities Revenue
Bonds, Prerefunded, Series L, 6.875%, 7/1/21 Aaa/AAA 600,000 674,704
--------------------------------------------------------------------------------------------------------------------------
Puerto Rico Public Buildings Authority
Revenue Guaranteed Bonds, Prerefunded,
Series K, 6.875%, 7/1/21 Aaa/AAA 500,000 562,253
------------
3,251,559
--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $32,218,299) 99.4% 32,097,510
--------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.6 205,865
------ ------------
NET ASSETS 100.0% $32,303,375
====== ============
</TABLE>
6 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
==========================================================================
STATEMENT OF INVESTMENTS (CONTINUED)
1. Securities with an aggregate market value of $2,014,418 are held in
collateralized accounts to cover initial margin requirements on open
futures sales contracts. See Note 5 of Notes to Financial Statements. 2.
For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase. 3. Represents the current interest rate for a
variable rate bond. These bonds known as "inverse floaters" pay interest
at a rate that varies inversely with short-term interest rates. As
interest rates rise, inverse floaters produce less current income. Their
price may be more volatile than the price of a comparable fixed-rate
security. Inverse floaters amount to $1,820,848 or 5.64% of the Fund's net
assets at July 31, 1996.
As of July 31, 1996, securities subject to the alternative minimum tax
amounted to $5,361,037 or 16.60% of the Fund's net assets.
Distribution of investments by industry, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
INDUSTRY MARKET VALUE PERCENT
-------- ------------ -------
<S> <C> <C>
Utilities:
Electric $ 5,891,425 18.3%
General 2,981,258 9.3
General Obligation Bonds 5,295,801 16.6
Transportation 4,985,370 15.5
Housing 4,237,857 13.2
Special Tax Bonds 3,606,521 11.2
Hospitals 3,084,252 9.6
Pollution Control 2,015,026 6.3
=========== ======
$32,097,510 100.0%
=========== ======
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996
============================================================================================================================
<S> <C> <C>
ASSETS Investments, at value (cost $32,218,299) - see accompanying statement $32,097,510
-------------------------------------------------------------------------------------------------
Cash 13,982
-------------------------------------------------------------------------------------------------
Receivables:
Interest 463,001
Shares of beneficial interest sold 98,299
Daily variation on futures contracts - Note 5 7,188
-------------------------------------------------------------------------------------------------
Deferred organization costs - Note 1 642
-------------------------------------------------------------------------------------------------
Other 4,782
------------
Total assets 32,685,404
============================================================================================================================
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 209,309
Dividends 99,934
Trustees' fees 39,008
Shareholder reports 9,468
Distribution and service plan fees 4,091
Custodian fees 1,211
Transfer and shareholder servicing agent fees 909
Other 18,099
------------
Total liabilities 382,029
============================================================================================================================
NET ASSETS $32,303,375
============
============================================================================================================================
COMPOSITION OF Paid-in capital $32,797,540
NET ASSETS -------------------------------------------------------------------------------------------------
Overdistributed net investment income (2,852)
-------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (375,211)
-------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments - Notes 3 and 5 (116,102)
------------
Net assets $32,303,375
============
============================================================================================================================
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $19,366,095 and 1,749,139 shares of beneficial interest outstanding) $11.07
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $11.62
-------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $12,865,019 and
1,160,156 shares of beneficial interest outstanding)
$11.09
-------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $72,261 and 6,528
shares of beneficial interest outstanding) $11.07
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================
STATEMENTS OF OPERATIONS
SEVEN
MONTHS ENDED YEAR ENDED
JULY 31, 1996(1) DECEMBER 31, 1995
============================================================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME Interest $ 1,201,396 $1,574,194
============================================================================================================================
EXPENSES Management fees - Note 4 109,426 151,497
-------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A 26,792 36,538
Class B 74,744 107,478
Class C 455 13
-------------------------------------------------------------------------------------------------
Trustees' fees and expenses - Note 1 18,642 41,364
-------------------------------------------------------------------------------------------------
Shareholder reports 15,079 24,543
-------------------------------------------------------------------------------------------------
Legal and auditing fees 11,996 27,955
-------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4 11,746 21,996
-------------------------------------------------------------------------------------------------
Custodian fees and expenses 6,198 3,441
-------------------------------------------------------------------------------------------------
Insurance expenses 3,141 5,091
-------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 227 2,419
Class B 241 1,287
Class C 26 --
-------------------------------------------------------------------------------------------------
Other 836 4,532
----------------------------------
Total expenses 279,549 428,154
Less expenses paid indirectly - Note 4 (4,385) (2,984)
Less reimbursement and assumption of expenses by
OppenheimerFunds, Inc. - Note 4 (20,298) (209,449)
----------------------------------
Net expenses 254,866 215,721
============================================================================================================================
NET INVESTMENT INCOME 946,530 1,358,473
============================================================================================================================
REALIZED AND Net realized gain (loss) on:
UNREALIZED GAIN (LOSS) Investments 266,721 (116,007)
Closing of futures contracts (87,097) --
----------------------------------
Net realized gain (loss) 179,624 (116,007)
-------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
on investments (1,072,986) 2,622,466
----------------------------------
Net realized and unrealized gain (loss) (893,362) 2,506,459
============================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 53,168 $3,864,932
==================================
</TABLE>
1. The Fund changed its fiscal year end from
December 31 to July 31.
See accompanying Notes to Financial Statements.
9 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
===================================
STATEMENTS OF CHANGES IN NET ASSETS
SEVEN MONTHS
ENDED
JULY 31, YEAR ENDED DECEMBER 31,
1996(1) 1995 1994
====================================================================================================================================
<S> <C> <C> <C> <C>
OPERATIONS Net investment income $ 946,530 $ 1,358,473 $ 932,745
---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 179,624 (116,007) (455,786)
---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (1,072,986) 2,622,466 (1,795,681)
----------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 53,168 3,864,932 (1,318,722)
====================================================================================================================================
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS Class A (584,598) (824,373) (574,828)
TO SHAREHOLDERS Class B (351,171) (528,564) (357,917)
Class C (2,112) (79) --
====================================================================================================================================
BENEFICIAL INTEREST Net increase in net assets resulting from TRANSACTIONS
beneficial interest transactions - Note 2:
Class A 503,417 5,923,134 6,272,842
Class B 574,639 3,616,484 4,026,577
Class C 35,925 38,376 --
====================================================================================================================================
NET ASSETS Total increase 229,268 12,089,910 8,047,952
---------------------------------------------------------------------------------------------------------------
Beginning of period 32,074,107 19,984,197 11,936,245
----------------------------------------------------
End of period (including overdistributed net investment
income of $2,852, $7,891 and $5,485, respectively) $32,303,375 $32,074,107 $19,984,197
====================================================
</TABLE>
1. The Fund changed its fiscal year end from
December 31 to July 31.
See accompanying Notes to Financial Statements.
10 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
--------------------------------------- -----------------------------------------------
SEVEN MONTHS SEVEN MONTHS
ENDED ENDED
JULY 31, YEAR ENDED DECEMBER 31, JULY 31, YEAR ENDED DECEMBER 31,
1996(2) 1995 1994 1993(3) 1996(2) 1995 1994 1993(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.40 $ 10.26 $ 11.79 $11.43 $ 11.42 $ 10.27 $11.81 $11.43
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 .63 .64 .14 .31 .55 .56 .12
Net realized and unrealized gain (loss) (.34) 1.14 (1.53) .36 (.34) 1.15 (1.54) .38
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .02 1.77 (.89) .50 (.03) 1.70 (.98) .50
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (.35) (.63) (.64) (.14) (.30) (.55) (.56) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.07 $ 11.40 $ 10.26 $11.79 $ 11.09 $ 11.42 $10.27 $11.81
==========================================================================================
====================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 0.25% 17.60% (7.66)% 4.39% (0.19)% 16.81% (8.42)% 4.35%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $19,366 $19,377 $11,992 $7,062 $12,865 $12,658 $7,992 $4,874
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $18,415 $14,508 $9,741 $2,471 $12,843 $10,772 $6,987 $2,304
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.50%(5) 5.71% 5.90% 5.08%(5) 4.75%(5) 4.92% 5.13% 4.20%(5)
Expenses, before reimbursement and
voluntary assumption by the Manager
or Distributor(6) 1.23%(5) 1.36% 1.25% 1.89%(5) 1.97%(5) 2.11% 1.99% 2.20%(5)
Expenses, net of reimbursement and
voluntary assumption by the Manager
or Distributor 1.09%(5) 0.53% 0.29% -- 1.83%(5) 1.29% 1.03% 0.38%(5)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 21.2% 18.4% 30.4% -- 21.2% 18.4% 30.4% --
</TABLE>
<TABLE>
<CAPTION>
============================================================
FINANCIAL HIGHLIGHTS
CLASS C
--------------------------------------
SEVEN MONTHS
ENDED PERIOD ENDED
JULY 31, DECEMBER 31,
1996(2) 1995(1)
================================================================================
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.40 $10.96
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .31 .20
Net realized and unrealized gain (loss) (.34) .44
- --------------------------------------------------------------------------------
Total income (loss) from investment
operations (.03) .64
- --------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (.30) (.20)
- --------------------------------------------------------------------------------
Net asset value, end of period $11.07 $11.40
======================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) (0.22)% 5.86%
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $72 $39
- --------------------------------------------------------------------------------
Average net assets (in thousands) $78 $ 5
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.68%(5) 4.68%(5)
Expenses, before reimbursement and
voluntary assumption by the Manager
or Distributor(6) 1.99%(5) 1.92%(5)
Expenses, net of reimbursement and
voluntary assumption by the Manager
or Distributor 1.87%(5) 1.43%(5)
- --------------------------------------------------------------------------------
Portfolio turnover rate(7) 21.2% 18.4%
</TABLE>
1. For the period from August 29, 1995 (inception of offering) to December 31,
1995. 2. The Fund changed its fiscal year from December 31 to July 31. 3. For
the period from October 1, 1993 (commencement of operations) to December 31,
1993. 4. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year. 5.
Annualized. 6. Beginning in fiscal 1995, the expense ratio reflects the effect
of gross expenses paid indirectly by the Fund. Prior year expense ratios have
not been adjusted. 7. The lesser of purchases or sales of portfolio securities
for a period, divided by the monthly average of the market value of portfolio
securities owned during the period. Securities with a maturity or expiration
date at the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-term
securities) for the period ended July 31, 1996 were $8,561,554 and $6,588,824,
respectively.
See accompanying Notes to Financial Statements.
11 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Florida Tax-Exempt Fund (the Fund) is a separate series of
Oppenheimer Multi-State Tax-Exempt Trust, a non-diversified, open-end
management investment company registered under the Investment Company Act
of 1940, as amended. On June 6, 1996, the Board of Trustees elected to
change the fiscal year end of the Fund from December 31 to July 31.
Accordingly, these financial statements include information for the seven
month period from January 1, 1996 to July 31, 1996. The Fund's investment
objective is to seek as high a level of current interest income exempt from
federal income and Florida state taxes for individual investors as is
available from municipal securities and consistent with preservation of
capital. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge. Class B and Class C shares
may be subject to a contingent deferred sales charge. All classes of shares
have identical rights to earnings, assets and voting privileges, except
that each class has its own distribution and/or service plan, expenses
directly attributable to a particular class and exclusive voting rights
with respect to matters affecting a single class. Class B shares will
automatically convert to Class A shares six years after the date of
purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted securities
for which such information is regularly reported are valued at the last
sale price of the day or, in the absence of sales, at values based on the
closing bid or asked price or the last sale price on the prior trading day.
Long-term and short-term "non-money market" debt securities are valued by a
portfolio pricing service approved by the Board of Trustees. Such
securities which cannot be valued by the approved portfolio pricing service
are valued using dealer-supplied valuations provided the Manager is
satisfied that the firm rendering the quotes is reliable and that the
quotes reflect current market value, or are valued under consistently
applied procedures established by the Board of Trustees to determine fair
value in good faith. Short-term "money market type" debt securities having
a remaining maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to maturity of any
premium or discount.
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
FEDERAL TAXES. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At July 31, 1996, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $371,000, which expires in 2002 and 2003.
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement
plan for the Fund's independent trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During
the seven months ended July 31, 1996, a provision of $14,690 was made for
the Fund's projected benefit obligations, and payments of $1,011 were made
to retired trustees, resulting in an accumulated liability of $39,008 at
July 31, 1996.
ORGANIZATION COSTS. The Manager advanced $1,480 for organization and
start-up costs of the Fund. Such expenses are being amortized over a five
year period from the effective date operations commenced. In the event that
all or part of the Manager's initial investment in shares of the Fund is
withdrawn during the amortization period, the redemption proceeds will be
reduced to reimburse the Fund for any unamortized expenses, in the same
ratio as the number of shares redeemed bears to the number of initial
shares outstanding at the time of such redemption.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment
income each day the New York Stock Exchange is open for business and pay
such dividends monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
12 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes primarily because of premium amortization for tax purposes.
The character of the distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gain (loss) was
recorded by the Fund.
During the seven months ended July 31, 1996, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during
the seven months ended July 31, 1996, amounts have been reclassified to
reflect an increase in overdistributed net investment income of $3,610.
Accumulated net realized loss on investments was decreased by the same
amount.
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Original issue discount on
securities purchased is amortized over the life of the respective
securities, in accordance with federal income tax requirements. For bonds
acquired after April 30, 1993, on disposition or maturity, taxable ordinary
income is recognized to the extent of the lesser of gain or market discount
that would have accrued over the holding period. Realized gains and losses
on investments and unrealized appreciation and depreciation are determined
on an identified cost basis, which is the same basis used for federal
income tax purposes. The Fund concentrates its investments in Florida and,
therefore, may have more credit risks related to the economic conditions of
Florida than a portfolio with a broader geographical diversification.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED JULY 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996(2) 1995(1) 1994
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 324,714 $ 3,615,201 828,453 $ 9,144,873 1,094,994 $11,835,206
Dividends reinvested 21,248 235,271 29,020 318,951 23,730 253,862
Redeemed (296,530) (3,347,055) (327,025) (3,540,690) (548,471) (5,816,226)
--------- ------------ --------- ------------ ---------- ------------
Net increase 49,432 $ 503,417 530,448 $ 5,923,134 570,253 $ 6,272,842
========= ============ ========= ============ ========== ============
Class B:
Sold 169,888 $ 1,894,958 419,746 $ 4,609,025 481,494 $ 5,234,804
Dividends reinvested 10,448 115,841 15,141 166,726 10,745 114,966
Redeemed (128,987) (1,436,160) (104,153) (1,159,267) (126,967) (1,323,193)
--------- ------------ --------- ------------ ---------- ------------
Net increase 51,349 $ 574,639 330,734 $ 3,616,484 365,272 $ 4,026,577
========= ============ ========= ============ ========== ============
Class C:
Sold 6,447 $ 72,184 3,407 $ 38,376 -- $ --
Dividends reinvested 140 1,550 -- -- -- --
Redeemed (3,466) (37,809) -- -- -- --
--------- ------------ --------- ------------ ---------- ------------
Net increase 3,121 $ 35,925 3,407 $ 38,376 -- $ --
========= ============ ========= ============ ========== ============
</TABLE>
1. For the year ended December 31, 1995 for Class A and Class B shares and
for the period from August 29, 1995 (inception of offering) to December 31,
1995 for Class C shares. 2. The Funds changed its fiscal year end from
December 31 to July 31.
13 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At July 31, 1996, net unrealized depreciation on investments of $120,789
was composed of gross appreciation of $457,097, and gross depreciation of
$577,886.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.60% on the
first $200 million of average annual net assets, 0.55% on the next $100
million, 0.50% on the next $200 million, 0.45% on the next $250 million,
0.40% on the next $250 million and 0.35% on net assets in excess of $1
billion. The Manager has agreed to assume Fund expenses (with specified
exceptions) in excess of the most stringent applicable regulatory limit on
Fund expenses. In addition, the Manager has voluntarily undertaken to
assume Fund expenses to the level needed to maintain a stable dividend.
For the seven months ended July 31, 1996, commissions (sales charges paid
by investors) on sales of Class A shares totaled $61,836, of which $21,269
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of
the Manager, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's
Class B shares totaled $68,510. During the seven months ended July 31,
1996, OFDI received contingent deferred sales charges of $26,038 upon
redemption of Class B shares as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer
and shareholder servicing agent for the Fund, and for other registered
investment companies. OFS's total costs of providing such services are
allocated ratably to these companies.
Expenses paid indirectly represent a reduction of custodian fees for
earnings on cash balances maintained by the Fund.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service
and maintenance of accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate that may not exceed 0.25% (voluntarily reduced
to 0.15% by the Fund's Board) of the average annual net assets of Class A
shares of the Fund. OFDI uses the service fee to reimburse brokers,
dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold
Class A shares.
The Fund has adopted a reimbursement type Distribution and Service Plan for
Class B shares to reimburse OFDI for its services and costs in distributing
Class B shares and servicing accounts. Under the Plan, the Fund pays OFDI
an annual asset-based sales charge of 0.75% per year on Class B shares that
are outstanding for 6 years or less. OFDI also receives a service fee of
0.25% (voluntarily reduced to 0.15% by the Fund's Board) per year to
reimburse dealers for providing personal services for accounts that hold
Class B shares. Both fees are computed on the average annual net assets of
Class B shares, determined as of the close of each regular business day. If
the Plan is terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge to OFDI for
certain expenses it incurred before the Plan was terminated. During the
seven months ended July 31, 1996, OFDI paid $59,299 to an affiliated
broker/dealer as reimbursement for Class B personal service and maintenance
expenses. As of July 31, 1996, OFDI had incurred unreimbursed expenses of
$484,148 for Class B.
The Fund has adopted a compensation type Distribution and Service Plan for
Class C shares to compensate OFDI for its services and costs in
distributing Class C shares and servicing accounts. Under the Plan, the
Fund pays OFDI an annual asset-based sales charge of 0.75% per year on
Class C shares. OFDI also receives a service fee of 0.25% (voluntarily
reduced to 0.15% by the Fund's Board) per year to compensate dealers for
providing personal services for accounts that hold Class C shares. Both
fees are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. If the Plan is
terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated.
14 Oppenheimer Florida Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
5. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates or for purposes of
duration management. The Fund may also buy or write put or call options on
these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value
of the underlying securities.
At July 31, 1996, the Fund had outstanding futures contracts to purchase
debt securities as follows:
<TABLE>
<CAPTION>
Number of Valuation as of Unrealized
Expiration Date Futures Contracts July 31, 1996 Appreciation
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds 9/96 10 $1,129,062 $4,687
</TABLE>
<PAGE>
APPENDIX A
Descriptions of Ratings Categories
Municipal Bonds
|X| Moody's Investor Services, Inc. The ratings of Moody's Investors Service,
Inc. ("Moody's") for Municipal Bonds are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C.
Municipal Bonds rated "Aaa" are judged to be of the "best quality." The rating
of Aa is assigned to bonds which are of "high quality by all standards," but as
to which margins of protection or other elements make long-term risks appear
somewhat larger than "Aaa" rated Municipal Bonds. The "Aaa" and "Aa" rated bonds
comprise what are generally known as "high grade bonds." Municipal Bonds which
are rated "A" by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A rated bonds are considered adequate, but elements
may be present which suggest a susceptibility to impairment at some time in the
future. Municipal Bonds rated "Baa" are considered "medium grade" obligations.
They are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated "Ba" are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Bonds which are rated
"Caa" are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Bonds which
are rated "Ca" represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Bonds which
are rated "C" are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated Aa1,
A1, Baa1, Ba1 and B1 respectively.
In addition to the alphabetic rating system described above, Municipal
Bonds rated by Moody's which have a demand feature that provides the holder with
the ability to periodically tender ("put") the portion of the debt covered by
the demand feature, may also have a short-term rating assigned to such demand
feature. The short-term rating uses the symbol VMIG to distinguish
characteristics which include payment upon periodic demand rather than fund or
scheduled maturity dates and potential reliance upon external liquidity, as well
as other factors. The highest investment quality is designated by the VMIG 1
rating and the lowest by VMIG 4.
|X| Standard & Poor's Corporation. The ratings of Standard & Poor's Corporation
("S&P") for Municipal Bonds are AAA (Prime), AA (High Grade), A (Good Grade),
BBB (Medium Grade), BB, B, CCC, CC, and C (speculative grade). Bonds rated in
the top four categories (AAA, AA, A, BBB) are commonly referred to as
"investment grade." Municipal Bonds rated AAA are "obligations of the highest
quality." The rating of AA is accorded issues with investment characteristics
"only slightly less marked than those of the prime quality issues." The rating
of A describes "the third strongest capacity for payment of debt service."
Principal and interest payments on bonds in this category are regarded as
A-1
<PAGE>
safe. It differs from the two higher ratings because, with respect to general
obligations bonds, there is some weakness, either in the local economic base, in
debt burden, in the balance between revenues and expenditures, or in quality of
management. Under certain adverse circumstances, any one such weakness might
impair the ability of the issuer to meet debt obligations at some future date.
With respect to revenue bonds, debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate. The BBB rating is the lowest "investment grade"
security rating. The difference between A and BBB ratings is that the latter
shows more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered. With respect to revenue bonds, debt coverage is only fair. Stability
of the pledged revenues could show variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger. Bonds rated "BB" have less
near-term vulnerability to default than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which would lead to inadequate capacity to meet timely
interest and principal payments. Bonds rated "B" have a greater vulnerability to
default, but currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. Bonds rated
"CCC" have a current identifiable vulnerability to default, and is dependent
upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. Bonds noted "CC" typically are
debt subordinated to senior debt which is assigned on actual or implied "CCC"
debt rating. Bonds rated "C" typically are debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued. Bonds rated "D" are in payment default. The "D"
rating category is used when interest payments or principal payments are not
made on the date due even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during the grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
|X| Fitch. The ratings of Fitch Investors Service, Inc. for Municipal Bonds are
AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, and D. Municipal Bonds rated AAA
are judged to be of the "highest credit quality." The rating of AA is assigned
to bonds of "very high credit quality." Municipal Bonds which are rated A by
Fitch are considered to be of "high credit quality." The rating of BBB is
assigned to bonds of "satisfactory credit quality." The A and BBB rated bonds
are more vulnerable to adverse changes in economic conditions than bonds with
higher ratings. Bonds rated AAA, AA, A and BBB are considered to be of
investment grade quality. Bonds rated below BBB are considered to be of
speculative quality. The ratings of "BB" is assigned to bonds considered by
Fitch to be "speculative." The rating of "B" is assigned to bonds considered by
Fitch to be "highly speculative." Bonds rated "CCC" have certain identifiable
characteristics which, if not remedied, may lead to default. Bonds rated "CC"
are minimally protected. Default in payment of interest and/or principal seems
probable over time. Bonds rated "C" are in imminent default in payment of
interest or principal. Bonds rated "DDD", "DD" and "D" are in default on
interest and/or principal payments. DDD represents the highest potential for
recovery on these bonds, and D represents the lowest potential for recovery.
A-2
<PAGE>
o Duff & Phelps. The ratings of Duff & Phelps are as follows: AAA which
are judged to be the "highest credit quality". The risk factors are negligible,
being only slightly more than for risk-free US Treasury debt. AA+, AA & AA- High
credit quality protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions. A+, A & A- Protection
factors are average but adequate. However, risk factors are more variable and
greater in periods of economic stress. BBB+, BBB & BBB- Below average protection
factors but still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles. BB+, BB & BB- Below investment grade
but deemed to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the category.
B+, B & B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade. CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal interest or preferred
dividends. Protection factors are narrow and risk can be substantial with
unfavorable economic industry conditions, and/or with unfavorable company
developments. DD Defaulted debt obligations issuer failed to meet scheduled
principal and/or interest payments. DP Preferred stock with dividend arreages.
Municipal Notes
|X| Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG"). Notes bearing the
designation MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for financing. Notes bearing the designation
"MIG-2" are of high quality with ample margins of protection, although not as
large as notes rated "MIG." Such short-term notes which have demand features may
also carry a rating using the symbol VMIG as described above, with the
designation MIG-1/VMIG 1 denoting best quality, with superior liquidity support
in addition to those characteristics attributable to the designation MIG-1.
|X| S&P's rating for Municipal Notes due in three years or less are
SP-1, SP-2, and SP-3. SP-1 describes issues with a very strong capacity to pay
principal and interest and compares with bonds rated A by S&P; if modified by a
plus sign, it compares with bonds rated AA or AAA by S&P. SP-2 describes issues
with a satisfactory capacity to pay principal and interest, and compares with
bonds rated BBB by S&P. SP-3 describes issues that have a speculative capacity
to pay principal and interest.
|X| Fitch's rating for Municipal Notes due in three years or less are
F-1+, F-1, F-2, F-3, F-S and D. F-1+ describes notes with an exceptionally
strong credit quality and the strongest degree of assurance for timely payment.
F-1 describes notes with a very strong credit quality and assurance of timely
payment is only slightly less in degree than issues rated F-1+. F-2 describes
notes with a good credit quality and a satisfactory assurance of timely payment,
but the margin of safety is not as great for issues assigned F-1+ or F-1
ratings. F-3 describes notes with a fair credit quality and an adequate
assurance of timely payment, but near-term adverse changes could cause such
securities to be rated below investment grade. F-S describes notes with weak
credit quality. Issues rated D are in actual or imminent payment default.
A-3
<PAGE>
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations. The
Moody's, S&P and Fitch corporate debt ratings shown do not differ materially
from those set forth above for Municipal Bonds.
Commercial Paper
|X| Moody's The ratings of commercial paper by Moody's are Prime-1,
Prime-2, Prime-3 and Not Prime. Issuers rated Prime-1 have a superior capacity
for repayment of short-term promissory obligations. Issuers rated Prime-2 have a
strong capacity for repayment of short-term promissory obligations. Issuers
rated Prime-3 have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime rating
categories.
|X| S&P The ratings of commercial paper by S&P are A-1, A-2, A-3, B, C,
and D. A-1 indicates that the degree of safety regarding timely payment is
strong.A-2 indicates capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1. A-3
indicates an adequate capacity for timely payments. They are, however, more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. B indicates only speculative capacity for
timely payment. C indicates a doubtful capacity for payment. D is assigned to
issues in default.
|X| Fitch The ratings of commercial paper by Fitch are similar to its
ratings of Municipal Notes, above.
A-4
<PAGE>
TAX-EQUIVALENT YIELDS
Appendix B
<TABLE>
<CAPTION>
Federal Effective A tax-exempt yield of:
Taxable Tax 2.00% 2.50% 3.00% 3.50% 3.75% 3.77% 4.00% 4.25% 4.50%
Income Bracket Is Approximately Equivalent To a Taxable Yield of:
JOINT RETURN
Over Not over
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 40,100 15.00% 2.35% 2.94% 3.53% 4.12% 4.41% 4.44% 4.71% 5.00% 5.29%
$ 40,100 $ 96,900 28.00% 2.78% 3.47% 4.17% 4.86% 5.21% 5.24% 5.56% 5.90% 6.25%
$ 96,900 $147,700 31.00% 2.90% 3.62% 4.35% 5.07% 5.43% 5.46% 5.80% 6.16% 6.52%
$147,700 $263,750 36.00% 3.13% 3.91% 4.69% 5.47% 5.86% 5.89% 6.25% 6.64% 7.03%
$263,750 and above 39.60% 3.31% 4.14% 4.97% 5.79% 6.21% 6.24% 6.62% 7.04% 7.45%
5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
6.94% 7.64% 8.33% 9.03% 9.72% 10.42%
7.25% 7.97% 8.70% 9.42% 10.14% 10.87%
7.81% 8.59% 9.38% 10.16% 10.94% 11.72%
8.28% 9.11% 9.93% 10.76% 11.59% 12.42%
SINGLE RETURN
Over Not over 2.00% 2.50% 3.00% 3.50% 3.75% 3.77% 4.00% 4.25% 4.50%
$ 0 $ 24,000 15.00% 2.35% 2.94% 3.53% 4.12% 4.41% 4.44% 4.71% 5.00% 5.29%
$ 24,000 $ 58,150 28.00% 2.78% 3.47% 4.17% 4.86% 5.21% 5.24% 5.56% 5.90% 6.25%
$ 58,150 $121,300 31.00% 2.90% 3.62% 4.35% 5.07% 5.43% 5.46% 5.80% 6.16% 6.52%
$121,300 $263,750 36.00% 3.13% 3.91% 4.69% 5.47% 5.86% 5.89% 6.25% 6.64% 7.03%
$263,750 and above 39.60% 3.31% 4.14% 4.97% 5.79% 6.21% 6.24% 6.62% 7.04% 7.45%
5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
6.94% 7.64% 8.33% 9.03% 9.72% 10.42%
7.25% 7.97% 8.70% 9.42% 10.14% 10.87%
7.81% 8.59% 9.38% 10.16% 10.94% 11.72%
8.28% 9.11% 9.93% 10.76% 11.59% 12.42%
</TABLE>
B-1
<PAGE>
Appendix C
Municipal Bond Industry Classifications
Electric Resource Recovery
Gas
Water Higher Education
Sewer Education
Telephone
Lease Rental
Adult Living Facilities
Hospital Non Profit Organization
General Obligation Highways
Special Assessment Marine/Aviation Facilities
Sales Tax
Multi Family Housing
Manufacturing, Non Durables Single Family Housing
Manufacturing, Durables
Pollution Control
C-1
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
C-2
<PAGE>
OPPENHEIMER
NEW JERSEY MUNICIPAL FUND
Prospectus Dated November 25, 1996
Oppenheimer New Jersey Municipal Fund is a mutual fund with the investment
objective of seeking as high a level of current interest income exempt from
Federal and New Jersey income taxes for individual investors as is consistent
with preservation of capital. The Fund seeks to achieve this objective by
investing in municipal obligations, the income from which is tax-exempt as
described above. However, in times of unstable economic or market conditions,
the Fund's investment manager may deem it advisable to temporarily invest a
portion of the Fund's assets in certain taxable instruments. The Fund may use
certain hedging instruments to try to reduce the risks of market fluctuations
that affect the value of the securities the Fund holds. The Fund is not intended
to be a complete investment program and there is no assurance that it will
achieve its objective. Please refer to "Investment Objective and Policies" for
more information about the types of securities the Fund invests in and refer to
"Investment Risks" for a discussion of the risks of investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it for
future reference. You can find more detailed information about the Fund in the
November 25, 1996 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission, ("SEC") and is incorporated into this Prospectus by reference (which
means that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-1-
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements
-2-
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during the fiscal period January 1, 1996 to July
31, 1996 (the Fund's new fiscal year end).
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," starting on page
__, for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge
on Purchases (as a %
of offering price) 4.75% None None
Maximum Deferred Sales
Charge (as a % of the
lower of the original
offering price or
redemption proceeds) None(1) 5% in the first 1% if shares
year, declining are redeemed
to 1% in the within 12
sixth year and months of
eliminated purchase(2)
thereafter(2)
Maximum Sales Charge on
Reinvested Dividends None None None
Exchange Fee None None None
- --------------------------------------
<FN>
(1) If you invest $1 million or more in Class A shares, you may have to pay a
sales charge of up to 1% if you sell your shares within 18 calendar months from
the end of the calendar month in which you purchased those shares. See "How to
Buy Shares - Buying Class A Shares," below.
-3-
<PAGE>
(2) See "How to Buy Shares - Buying Class B Shares," and "How to Buy Shares -
Buying Class C Shares" below for more information on the contingent deferred
sales charges.
</FN>
</TABLE>
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (referred
to in this Prospectus as the "Manager"). The rates of the Manager's fees are set
forth in "How the Fund is Managed," below. The Fund has other regular expenses
for services, such as transfer agent fees, custodial fees paid to the bank that
holds the Fund's portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement of
Additional Information.
Annual Fund Operating Expenses as a Percentage of Average Net
Assets
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees
(after expense reimbursement) 0.00% 0.00% 0.00%
12b-1 Plan Fees 0.15% 0.90% 0.90%
Other Expenses (after expense
reimbursement) 0.82% 0.84% 0.91%
Total Fund Operating Expenses
(after expense reimbursement) 0.97% 1.74% 1.81%
</TABLE>
The numbers in the table above are based upon the Fund's expenses in
its last fiscal period January 1, 1996 to July 31, 1996. These amounts are shown
as a percentage of the average net assets of each class of the Fund's shares for
that year. The 12b-1 Distribution Plan Fees for Class A shares are Service Plan
Fees. For Class B and Class C shares, the 12b-1 Distribution Plan Fees are
Service Plan Fees and asset-based sales charges. The service fee for each class
is a maximum of 0.25% (currently set at 0.15%) of average annual net assets of
the class and the asset-based sales charge for Class B and Class C shares is
0.75%. These plans are described in greater detail in "How to Buy Shares,"
below.
The Total Fund Operating Expenses shown are net of a voluntary expense
assumption by the Manager. The expense assumption lowered the Fund's overall
expense ratio. Without such expense assumption by the Manager, the "Management
Fees" for each class of the Fund's shares would have been 0.60% of the Fund's
average net assets, "Other Expenses" for the Fund's Class A, Class B and Class C
shares would have been 0.89%, 0.90% and 0.98%, respectively, and the "Total Fund
Operating Expenses" for the Fund's Class A, Class B and Class C shares would
have been 1.64%, 2.40% and 2.48%,
-4-
<PAGE>
respectively. The expense assumption is described in the Statement
of Additional Information and may be modified or withdrawn by the
Manager at any time.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of factors,
including changes in the actual value of the Fund's assets represented by each
class of shares.
o Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown below.
Assume that you make a $1,000 investment in each class of shares of the Fund,
and that the Fund's annual return is 5%, and that its operating expenses for
each class are the ones shown in the Annual Fund Operating Expenses table above.
If you were to redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3, 5 and 10
years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
Class A Shares $57 $77 $ 99 $161
Class B Shares $68 $85 $114 $166
Class C Shares $28 $57 $ 98 $213
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class A Shares $57 $77 $99 $161
Class B Shares $18 $55 $94 $166
Class C Shares $18 $57 $98 $213
</TABLE>
* In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred sales charge.
In the second example, Class A expenses include the initial sales charge, but
Class B and Class C expenses do not include contingent deferred sales charges.
The Class B expenses in years 7 through 10 are based on the Class A expenses
shown above, because the Fund automatically converts your Class B shares into
Class A shares after 6 years. Because of the effect of the asset-based sales
charge and the contingent deferred sales charge, long term holders of Class B
and Class C shares could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations. For Class B
shareholders, the automatic conversion of Class B shares to Class A shares is
designed to minimize the likelihood that this will occur. Please refer to "How
to Buy Shares - Buying Class B Shares" for more information.
-5-
<PAGE>
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment returns of
the Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete information can
be found. You should carefully read the entire Prospectus before making a
decision about investing in the Fund. Keep the Prospectus for reference after
you invest, particularly for information about your account, such as how to sell
or exchange shares.
o What Is The Fund's Investment Objective? The Fund's investment
objective is to seek as high a level of current interest income exempt from
Federal and New Jersey income taxes for individual investors as is consistent
with preservation of capital.
o What Does the Fund Invest In? Under normal market conditions, the
Fund will invest at least 80% of its total assets in (1) municipal bonds,
municipal notes and other debt obligations issued by or on behalf of the State
of New Jersey or any political subdivision thereof, and its agencies or
authorities, the interest on which is not subject to Federal and New Jersey
individual income tax, and (2) municipal bonds, municipal notes and other debt
obligations issued by or on behalf of the State of New Jersey, or any political
subdivision thereof, and its agencies or authorities, other states and the
District of Columbia, or any political subdivisions thereof, the interest from
which is not subject to Federal individual income tax. The Fund may invest up to
20% of its assets in investments the income from which may be taxable. The Fund
may also use hedging instruments and some derivative investments in an effort to
protect against market risks. Currently there is no limitation on investments in
securities which may be subject to an alternative minimum tax. These investments
are more fully explained in "Investment Objective and Policies," starting on
page __.
o Who Manages the Fund? The Fund's investment adviser (the "Manager")
is OppenheimerFunds, Inc. The Manager (including a subsidiary) advises
investment company portfolios having over $55 billion in assets at September 30,
1996. The Manager is paid an advisory fee by the Fund, based on its net assets.
The Fund's portfolio manager, who is primarily responsible for the selection of
the Fund's securities, is Caryn Halbrecht. The Fund's Board of Trustees, elected
by shareholders, oversees the investment adviser
-6-
<PAGE>
and the portfolio manager. Please refer to "How the Fund is Managed," starting
on page __ for more information about the Manager and its fees.
o How Risky is the Fund? All investments carry risks to some degree.
The Fund's bond investments are subject to changes in their value from a number
of factors such as changes in general bond market movements, the change in value
of particular bonds because of an event affecting the issuer, or changes in
interest rates that can affect bond prices. These changes affect the value of
the Fund's investments and its price per share. The fact that the Fund
concentrates its investments in New Jersey Municipal Securities (described
below) and is able to invest its assets in a single issuer or limited number of
issuers entails greater risk than an investment in a diversified investment
company. The Fund's investment in certain derivative investments may add a
degree of risk not present in a fund that does not invest in such securities.
While the Manager tries to reduce risks by carefully researching
securities before they are purchased for the portfolio, and in some cases by
using hedging techniques, there is no guarantee of success in achieving the
Fund's objective and your shares may be worth more or less than their original
cost when you redeem them. Please refer to "Investment Risks" starting on page
__ for a more complete discussion.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the Fund's
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How To Buy Shares" on page __ for more
details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has three classes
of shares. All three classes have the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge, starting at
4.75%, and reduced for larger purchases. Class B and Class C shares are offered
without a front-end sales charge, but may be subject to a contingent deferred
sales charge if redeemed within 6 years or 12 months, respectively, of purchase.
There are also annual asset-based sales charges on Class B and Class C shares.
Please review "How To Buy Shares" starting on page __ for more details,
including a discussion about factors you and your financial advisor should
consider in determining which class may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail,
or by telephone call to the Transfer Agent on any business day, or
-7-
<PAGE>
through your dealer, or by writing a check against your Fund account (available
for Class A shares only). Please refer to "How To Sell Shares" on page __. The
Fund also offers exchange privileges to other Oppenheimer funds, described in
"How to Exchange Shares" on page __.
o How Has the Fund Performed? The Fund measures its performance by
quoting its yield, tax equivalent yield, average annual total return and
cumulative total return, which measure historical performance. Those yields and
returns can be compared to the yields and returns (over similar periods) of
other funds. Of course, other funds may have different objectives, investments,
and levels of risk. The Fund's performance can also be compared to a broad
market index, which we have done on pages __ and __. Please remember that past
performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense ratios and
other data based on the Fund's average net assets. This information has been
audited by KPMG Peat Marwick LLP, the Fund's independent auditors, whose reports
on the Fund's financial statements for the fiscal year ended December 31, 1995
and for the fiscal period January 1, 1996 to July 31, 1996 (the Fund's new
fiscal year end), are included in the Statement of Additional Information. Class
C shares were publicly offered only during a portion of the fiscal year ended
December 31, 1995, commencing on August 29, 1995.
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
------------------------------------ -------------------------------------
SEVEN MONTHS SEVEN MONTHS
ENDED ENDED
JULY 31, YEAR ENDED DECEMBER 31, JULY 31, YEAR ENDED DECEMBER 31,
1996(2) 1995 1994(3) 1996(2) 1995 1994(3)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.26 $10.41 $11.43 $11.25 $10.40 $11.43
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 .61 .49 .31 .53 .41
Net realized and unrealized gain (loss) (.16) .86 (1.02) (.16) .86 (1.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .20 1.47 (.53) .15 1.39 (.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment income (.36) (.61) (.49) (.31) (.53) (.42)
Distributions from net realized gain -- (.01) -- -- (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.36) (.62) (.49) (.31) (.54) (.42)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.10 $11.26 $10.41 $11.09 $11.25 $10.40
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 1.80% 14.42% (4.63)% 1.34% 13.59% (5.39)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $11,354 $8,806 $3,877 $9,740 $5,222 $2,986
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $10,036 $6,504 $2,506 $7,774 $4,080 $1,841
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.49%(6) 5.51% 5.57%(6) 4.70%(6) 4.79% 4.76%(6)
Expenses, before reimbursement and voluntary
assumption by the Manager or Distributor(7) 1.64%(6) 1.75% 1.46%(6) 2.40%(6) 2.49% 2.29%(6)
Expenses, net of reimbursement and voluntary
assumption by the Manager or Distributor 0.97%(6) 0.80% 0.31%(6) 1.74%(6) 1.53% 1.14%(6)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 33.1% 7.4% 17.3% 33.1% 7.4% 17.3%
</TABLE>
<TABLE>
<CAPTION>
-------------------------
FINANCIAL HIGHLIGHTS
CLASS C
-------------------------
SEVEN MONTHS
ENDED PERIOD ENDED
JULY 31, DECEMBER 31,
1996(2) 1995(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
<S> <C> <C>
Net asset value, beginning of period $11.25 $11.01
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .30 .19
Net realized and unrealized gain (loss) (.16) .25
- --------------------------------------------------------------------------------
Total income (loss) from investment
operations .14 .44
- --------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment income (.30) (.19)
Distributions from net realized gain -- (.01)
- --------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.30) (.20)
- --------------------------------------------------------------------------------
Net asset value, end of period $11.09 $11.25
================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 1.29% 4.07%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $132 $50
- --------------------------------------------------------------------------------
Average net assets (in thousands) $74 $3
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.66%(6) --(5)
Expenses, before reimbursement and voluntary
assumption by the Manager or Distributor(7) 2.48%(6) --(5)
Expenses, net of reimbursement and voluntary
assumption by the Manager or Distributor 1.81%(6) --(5)
- --------------------------------------------------------------------------------
Portfolio turnover rate(8) 33.1% 7.4%
<FN>
1. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year end from December 31 to July 31.
3. For the period from March 1, 1994 (commencement of operations) to December
31, 1994.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year. 5. Ratios
during this period would not be indicative of future results.
6. Annualized.
7. Beginning in fiscal 1995, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
8. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended July 31, 1996 were $13,014,523 and $5,699,401, respectively.
</FN>
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks as high a level of current interest income exempt from
Federal and New Jersey income taxes for individual investors as is consistent
with preservation of capital.
Investment Policies and Strategies. Under normal market conditions, the Fund
attempts to invest 100% of its assets, and as a matter of fundamental policy to
invest at least 80% of its assets, in Municipal Securities (as defined below).
In addition, under normal market conditions, the Fund will invest at least 80%
of its assets in New Jersey Municipal Securities.
Dividends paid by the Fund derived from interest attributable to New
Jersey Municipal Securities will be exempt from Federal and New Jersey
individual income taxes. Dividends derived from interest on Municipal Securities
of other than New Jersey issuers will be exempt from Federal income tax for
individuals, but will be
-8-
<PAGE>
subject to New Jersey individual income tax. Although exempt- interest dividends
will not be subject to federal income tax for Fund shareholders, a portion of
such dividends which is derived from interest on certain "private activity"
bonds may be an item of tax preference if you are subject to the federal
alternative minimum tax. Any net interest income on taxable investments will be
taxable as ordinary income when distributed to shareholders (see "Dividends,
Capital Gains, and Taxes" below).
o Can the Fund's Investment Objective and Policies Change? The Fund has
an investment objective, which is described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the Fund uses
certain investment techniques and strategies in carrying out those investment
policies. The Fund's investment policies and techniques are not "fundamental"
unless this Prospectus or the Statement of Additional Information says that a
particular policy is "fundamental." The Fund's investment objective is a
fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
percentage of outstanding voting shares (and this term is explained in the
Statement of Additional Information). The Board of Trustees of the Trust (as
defined below) (the "Board of Trustees") may change non-fundamental policies
without shareholder approval, although significant changes will be described in
amendments to this Prospectus.
o Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund generally will not engage in the trading
of securities for the purpose of realizing short-term gains, but the Fund may
sell securities as the Manager deems advisable to take advantage of
differentials in yield. The "Financial Highlights" table above shows the Fund's
portfolio turnover rate during past fiscal years. Portfolio turnover affects
brokerage costs, dealer markups and other transaction costs, and results in the
Fund's realization of capital gains or losses for tax purposes.
Investment Risks
All investments carry risks to some degree, whether they are risks that
market prices of the investment will fluctuate (this is known as "market risk")
or that the underlying issuer will experience financial difficulties and may
default on its obligation under a fixed-income investment to pay interest and
repay principal (this is referred to as "credit risk"). These general investment
-9-
<PAGE>
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for investors who are
investing for the long term. It is not intended for investors seeking assured
income. While the Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased, and in some cases by
using hedging techniques, changes in overall market prices can occur at any
time, and because the income earned on securities is subject to change, there is
no assurance that the Fund will achieve its investment objective. When you
redeem your shares, they may be worth more or less than what you paid for them.
o Special Considerations - New Jersey Municipal Securities. Because the
Fund concentrates its investments in New Jersey Municipal Securities, a default,
financial crisis or other material adverse event relating to any of such issuers
could adversely affect the market value and marketability of such Municipal
Securities and the interest income and repayment of principal to the Fund from
them. Investors should consider these matters as well as economic trends in New
Jersey, summarized in the Statement of Additional Information under "Special
Investment Considerations - New Jersey Municipal Securities."
o Interest Rate Risk. The values of Municipal Securities will change in
response to changes in prevailing interest rates. Should interest rates rise,
the values of outstanding Municipal Securities will probably decline and (if
purchased at principal amount) would sell at a discount. If interest rates fall,
the values of outstanding Municipal Securities will probably increase and (if
purchased at principal amount) would sell at a premium. Changes in the values of
Municipal Securities owned by the Fund from these or other factors will not
affect interest income derived from these securities but will affect the Fund's
net asset value per share.
o There are Special Risks in Investing in Derivative Investments. The
risks of investing in derivative investments include not only the ability of the
issuer of the derivative investment to pay the amount due on the maturity of the
investment, but also the risk that the underlying security or investment might
not perform the way the Manager expected it to perform. That can mean that the
Fund will realize less income than expected. Another risk of
-10-
<PAGE>
investing in derivative investments is that their market value could be expected
to vary to a much greater extent than the market value of municipal securities
that are not derivative investments but have similar credit quality, redemption
provisions and maturities.
o Non-diversification. The Trust is a "non-diversified" investment
company under the Investment Company Act. As a result, the Fund may invest its
assets in a single issuer or limited number of issuers without limitation by the
Investment Company Act. However, the Fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), pursuant to which (i) not more than 25% of the market
value of the Fund's total assets will be invested in the securities of a single
issuer, and (ii) 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 Fund must not own more than 10% of the
outstanding voting securities of a single issuer.
An investment in the Fund will 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 Fund's portfolio, and economic, political or regulatory developments may
have a greater impact on the value of the Fund's portfolio than would be the
case if the portfolio were diversified among more issuers.
o Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from what is required for
normal portfolio management. If the Manager uses a hedging instrument at the
wrong time or judges market conditions incorrectly, hedging strategies may
reduce the Fund's return. The Fund could also experience losses if the prices of
its futures and options positions were not correlated with its other investments
or if it could not close out a position because of an illiquid market for the
future or option. Such losses might cause previously distributed short-term
capital gains to be re-characterized as a non-taxable return of capital to
shareholders.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment at
the call price and
-11-
<PAGE>
will not be able to realize any profit if the investment has increased in value
above the call price. Interest rate swaps are subject to credit risks (if the
other party fails to meet its obligations) and also to interest rate risks. The
Fund could be obligated to pay more under its swap agreements than it receives
under them, as a result of interest rate changes. These risks are described in
greater detail in the Statement of Additional Information.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies
described below. These techniques involve certain risks. The Statement of
Additional Information contains more information about these practices,
including limitations on their use that are designed to reduce some of the
risks.
o Municipal Securities. Municipal Securities consist of municipal
bonds, municipal notes (including tax anticipation notes, bond anticipation
notes, revenue anticipation notes, construction loan notes, and other short-term
notes), tax-exempt commercial paper, certificates of participation,
participation interests and other debt obligations issued by or on behalf of the
State of New Jersey, or any political subdivision thereof, and its agencies and
authorities, other states and the District of Columbia, their political
subdivisions or any commonwealths, territories or possessions of the United
States, or their respective agencies, instrumentalities or authorities, the
interest on which is, in the opinion of bond counsel to the respective issuer at
the time of issue, not subject to Federal individual income tax. New Jersey
Municipal Securities are obligations of the State of New Jersey and its
political subdivisions, and their respective agencies, authorities or
instrumentalities, the interest from which is, in the opinion of bond counsel to
the respective issuer at the time of issue, not subject to New Jersey individual
income tax. No independent investigation has been made by the Manager as to the
users of proceeds of bond offerings or the application of such proceeds.
"Municipal bonds" are Municipal Securities that have a maturity when
issued of one year or more and "municipal notes" are Municipal Securities that
have a maturity when issued of less than one year. The two principal
classifications of Municipal Securities are "general obligations" (secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest) and "revenue obligations" (payable only from the
revenues derived from a particular facility or class of facilities, or specific
excise tax or other revenue source). The
-12-
<PAGE>
Fund may invest in Municipal Securities of both classifications. See "Investment
Objective and Policies" in the Statement of Additional Information for further
information about the Fund's investment policies and about Municipal Securities.
o Investments in Taxable Securities and Temporary Defensive Investment
Strategy. Under normal market conditions, the Fund may invest up to 20% of its
assets in taxable investments, including (i) certain "Temporary Investments"
(described immediately below); (ii) hedging instruments (described in "Hedging,"
below); (iii) repurchase agreements (explained below).
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary "defensive"
position by investing some or all of its assets (there is no limit on the
amount) in short-term money market instruments. These include the taxable
obligations described above, U.S. government securities, bank obligations,
commercial paper, corporate obligations and other instruments approved by the
Board of Trustees. This strategy would be implemented to attempt to reduce
fluctuations in the value of the Fund's assets. The Fund may hold temporary
investments pending the investment of proceeds from the sale of Fund shares or
portfolio securities, pending settlement of purchases of Municipal Securities,
or to meet anticipated redemptions. To the extent the Fund assumes a temporary
defensive position, a portion of the Fund's distributions may be subject to
Federal and state income taxes and the Fund may not achieve its objective.
|X| Municipal Lease Obligations. Municipal leases may take the form of
a lease or an installment purchase contract issued by state and local government
authorities to obtain funds to acquire a wide variety of equipment and
facilities. The Fund may invest in certificates of participation that represent
a proportionate interest in or right to the lease-purchase payments made under
municipal lease obligations. Certain of these securities may be deemed to be
"illiquid" securities (and their purchase would be limited as described below in
"Illiquid and Restricted Securities"); from time to time the Fund may invest
more than 5% of its net assets in municipal lease obligations that the Manager
has determined to be liquid under guidelines set by the Board of Trustees.
o Floating Rate/Variable Rate Obligations. Some of the
Municipal Securities the Fund may purchase may have variable or
floating interest rates. Variable rates are adjustable at stated
periodic intervals. Floating rates are automatically adjusted
-13-
<PAGE>
according to a specified market rate for such investments, such as the
percentage of the prime rate of a bank, or the 91-day U.S. Treasury Bill rate.
Such obligations may be secured by bank letters of credit or other credit
support arrangements.
o Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments." The Fund may use some
derivative investments for hedging purposes, and may invest in others because
they offer the potential for increased income and principal value. In general, a
"derivative investment" is a specially-designed investment. Its performance is
linked to the performance of another investment or security, such as an option,
future or index. In the broadest sense, derivative investments include
exchange-traded options and futures contracts (please refer to "Hedging,"
below).
The Fund may invest in "inverse floater" variable rate bonds, a type of
derivative investment whose yields move in the opposite direction from changes
in short-term interest rates. As interest rates rise, inverse floaters produce
less current income. Their price may be more volatile than the price of a
comparable fixed-rate security. Some inverse floaters have a "cap" whereby if
interest rates rise above the "cap," the security pays additional interest
income. If rates do not rise above the "cap," the Fund will have paid an
additional amount for a feature that proves worthless. The Fund may also invest
in Municipal Securities that pay interest that depends on an external pricing
mechanism, also a type of derivative investment. Examples of external pricing
mechanisms are interest rate swaps or caps and municipal bond or swap indices.
The Fund anticipates that under normal circumstances it will invest no more than
10% of its net assets in inverse floaters.
o Ratings of Municipal Securities; Special Risks of Lower Rated
Municipal Securities. No more than 25% of the Fund's total assets will be
invested in Municipal Securities that at the time of purchase are not
"investment grade," that is, rated below the four highest rating categories of
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), and Fitch Investors Service, Inc. ("Fitch"). If the securities are not
rated, the Manager will determine the equivalent rating category for purposes of
this limitation. (See Appendix A to the Statement of Additional Information for
a description of those ratings). A reduction of the rating of a security after
its purchase by the Fund will not require the Fund to dispose of such security.
Lower-grade Municipal Securities (sometimes called "municipal junk
bonds") may be subject to greater market fluctuations and are
-14-
<PAGE>
subject to greater risks of loss of income and principal than higher-rated
Municipal Securities, and may be considered to have some speculative
characteristics. Securities that are or that have fallen below investment grade
entail a greater risk that the ability of the issuers of such securities to meet
their debt obligations will be impaired. There may be less of a market for
lower-grade Municipal Securities and therefore they may be harder to sell at an
acceptable price. These risks mean that the Fund may not achieve the expected
income from lower-grade Municipal Securities, and that the Fund's income and net
asset value per share may be affected by declines in value of these securities.
However, the Fund's limitations on investments in non-investment grade Municipal
Securities may reduce some of these risks.
o When-Issued and Delayed Delivery Transactions. The Fund may purchase
Municipal Securities on a "when-issued" basis, and may purchase or sell such
securities on a "delayed delivery" basis. These terms refer to securities that
have been created and for which a market exists, but which are not available for
immediate delivery. There may be a risk of loss to the Fund if the value of the
security declines prior to the settlement date.
o Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. They are used primarily for cash liquidity purposes.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may incur
costs in disposing of the collateral and may experience losses if there is any
delay in its ability to do so. The Fund will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days. There is no limit on
the amount of the Fund's net assets that may be subject to repurchase agreements
of seven days or less.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. The Fund will not
invest more than 10% of its net assets in illiquid securities (the Board may
increase that limit to 15%). A restricted security is one that has a contractual
restriction on its resale or that cannot be sold publicly until it is registered
under the Securities Act of 1933.
-15-
<PAGE>
The Fund may not invest in securities that have a restriction on their resale.
o Loans of Portfolio Securities. To attempt to increase its income, and
for liquidity purposes, the Fund may lend its portfolio securities to brokers,
dealers and other financial institutions. The Fund must receive collateral for a
loan. These loans are limited to not more than 25% of the Fund's net assets and
are subject to other conditions described in the Statement of Additional
Information. The Fund presently does not intend to lend its portfolio
securities, but if it does, the value of securities loaned is not expected to
exceed 5% of the value of its total assets in the coming year.
o Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, and options on futures and
broadly-based municipal bond indices, or enter into interest rate swap
agreements. These are all referred to as "hedging instruments." The Fund does
not use hedging instruments for speculative purposes, and has limits on the use
of them, described below. The hedging instruments the Fund may use are described
below and in greater detail in "Other Investment Techniques and Strategies" in
the Statement of Additional Information.
The Fund may buy and sell options and futures for a number of purposes.
It may do so to try to manage its exposure to the possibility that the prices of
its portfolio securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. It may do so to try to manage its exposure to changing interest
rates. Some of these strategies, such as selling futures, buying puts and
writing covered calls, hedge the Fund's portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options, tend
to increase the Fund's exposure to the securities market. Writing covered call
options may also provide income to the Fund for liquidity purposes, defensive
reasons, or to raise cash to distribute to shareholders.
o Futures. The Fund may buy and sell futures contracts that relate to
(1) broadly-based municipal bond indices (these are referred to as Municipal
Bond Index Futures) and (2) interest rates (these are referred to as Interest
Rate Futures). These types of Futures are described in "Hedging" in the
Statement of Additional Information.
-16-
<PAGE>
o Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).
The Fund may buy calls only on securities, broadly-based municipal bond
indices, Municipal Bond Index Futures or Interest Rate Futures, or to terminate
its obligation on a call the Fund previously wrote. The Fund may write (that is,
sell) covered call options. When the Fund writes a call, it receives cash
(called a premium). The call gives the buyer the ability to buy the investment
on which the call was written from the Fund at the call price during the period
in which the call may be exercised. If the value of the investment does not rise
above the call price, it is likely that the call will lapse without being
exercised, while the Fund keeps the cash premium (and the investment).
The Fund may purchase puts. Buying a put on an investment gives the
Fund the right to sell the investment at a set price to a seller of a put on
that investment. The Fund can buy only those puts that relate to (1) securities
that the Fund owns, (2) broadly- based municipal bond indices, (3) Municipal
Bond Index Futures or (4) Interest Rate Futures. The Fund can buy a put on a
Municipal Bond Index Future or Interest Rate Future whether or not the Fund owns
the particular Future in its portfolio. The Fund may not sell a put other than a
put that it previously purchased.
The Fund may buy and sell puts and calls only if certain conditions are
met: (1) after the Fund writes a call, not more than 25% of the Fund's total
assets may be subject to calls; (2) calls the Fund buys or sells must be listed
on a securities or commodities exchange, or quoted on the Automated Quotation
System of the National Association of Securities Dealers, Inc. ("NASDAQ"), or
traded in the over-the-counter market; (3) each call the Fund writes must be
"covered" while it is outstanding: that means the Fund must own the investment
on which the call was written; (4) the Fund may write calls on Futures contracts
it owns, but these calls must be covered by securities or other liquid assets
the Fund owns and segregates to enable it to satisfy its obligations if the call
is exercised; (5) a call or put option may not be purchased if the value of all
of the Fund's put and call options would exceed 5% of the Fund's total assets;
and (6) the aggregate premiums paid on all such options which the Fund holds at
any time will be limited to 20% of the Fund's total assets, and the aggregate
margin deposits on all such futures or options thereon at any time will be
limited to 5% of the Fund's total assets.
o Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation
to pay interest on a security. For example, they may swap a right
-17-
<PAGE>
to receive floating rate payments for fixed rate payments. The Fund enters into
swaps only on securities it owns. The Fund may not enter into swaps with respect
to more than 25% of its total assets nor will it use interest rate swaps for
leverage. Also, the Fund will segregate liquid assets (such as cash or U.S.
Government securities) to cover any amounts it could owe under swaps that exceed
the amounts it is entitled to receive, and it will adjust that amount daily, as
needed. Income from interest rate swaps may be taxable.
Other Investment Restrictions. The Fund has other investment restrictions which
are fundamental policies. Pursuant to one such restriction, the Fund cannot
concentrate investments to the extent of more than 25% of its total assets in
any industry; however, there is no limitation as to investment in Municipal
Securities, New Jersey Municipal Securities or U.S. Government obligations.
As a matter of non-fundamental policy, changeable without a shareholder
vote, the Fund will not:
o Invest in securiites or any other investment other than the Municipal
Securities, temporary investments, taxable investments and Hedging Instruments
described above in "Investment Objective and Policies," above.
o Make loans, except through the purchase of portfolio securities
subject to repurchase agreements or through loans of portfolio securities as
described under "Loans of Portfolio Securities.
o Borrow money in excess of 10% of the value of its total assets or
make any investment whenever borrowings exceed 5% of the Fund's value of its
total assets; it may borrow only from banks as a temporary measure for
extraordinary or emergency purposes.
o Pledge, mortgage or otherwise encumber, transfer or assign any of its
assets to secure a debt; collateral arrangements for premium and margin payments
in connection with hedging instruments are not deemed to be a pledge of assets;
or
o Buy or sell futures contracts other than Interest Rate Futures or
Municipal Bond Index Futures.
Unless the prospectus states that a percentage restrictions applies on
an ongoing basis, it applies only at the time the Fund purchases an investment,
and the Fund need not sell securities to meet the percentage limits if the value
of the investment increases in proportion to the size of the Fund. Other
investment
-18-
<PAGE>
restrictions are listed in "Investment Restrictions" in the
Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1994 as a separate series of
Oppenheimer Multi-State Municipal Trust (the "Trust"), an open-end
non-diversified management investment company organized in 1989 as a
Massachusetts business trust. The Fund may issue an unlimited number of
authorized shares of beneficial interest. Each of the three series of the Trust
is a fund that issues its own shares, has its own investment portfolio, and its
own assets and liabilities.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Trust" in the Statement of Additional Information names the Trustees and
officers of the Trust and provides more information about them. Although the
Trust will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Trust's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of this Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All three classes invest in the same investment portfolio. Each class
has its own dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a different net asset
value. Each share has one vote at shareholder meetings, with fractional shares
voting proportionally. Only shares of a particular class vote as a class on
matters that affect that class alone. Shares are freely transferrable. Please
refer to "How the Fund is Managed" in the Statement of Additional Information on
voting of shares.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out its
duties, subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement which states the Manager's responsibilities. The
Agreement sets forth the fees paid by the Fund to the Manager and describes the
-19-
<PAGE>
expenses that the Fund is responsible to pay to conduct its
business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $55 billion as of
September 30, 1996, and with more than 3 million shareholder accounts. The
Manager is owned by Oppenheimer Acquisition Corp., a holding company that is
owned in part by senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
o Portfolio Manager. The portfolio manager of the Fund (who
is also a Vice President of the Fund and the Manager) is Caryn
Halbrecht. Ms. Halbrecht is the person principally responsible for
the day-to-day management of the Fund's portfolio, effective July
8, 1996. Ms. Halbrecht is also an officer and/or portfolio manager
of certain other Oppenheimer funds. Previously Ms. Halbrecht
served as a Vice President of Fixed Income Portfolio Management at
Bankers Trust Company.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional assets
as the Fund grows: 0.60% of the first $200 million of average annual net assets;
0.55% of the next $100 million; 0.50% of the next $200 million; 0.45% of the
next $250 million; 0.40% of the next $250 million; and 0.35% of average annual
net assets in excess of $1 billion. The Fund's management fee for its fiscal
year ended July 31, 1996 was 0.60% of average annual net assets (before expense
reimbursement) for Class A shares, Class B shares and Class C shares, which may
be higher than the rate paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal fees and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset value of
shares, and therefore are indirectly borne by shareholders through their
investment. More information about the Investment Advisory Agreement and the
other expenses paid by the Fund is contained in the Statement of Additional
Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. Because the Fund purchases most of its portfolio
securities
-20-
<PAGE>
directly from the sellers and not through brokers, it therefore incurs
relatively little expense for brokerage. From time to time, however, it may use
brokers when buying portfolio securities. When deciding which brokers to use,
the Manager is permitted by the Investment Advisory Agreement to consider
whether brokers have sold shares of the Fund or any other funds for which the
Manager serves as investment adviser.
o The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with OppenheimerFunds Distributor, Inc., a
subsidiary of the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of other Oppenheimer funds and is sub-distributor
for funds managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return,"
"average annual total return," "standardized yield," "dividend yield," "yield"
and "tax-equivalent yield" to illustrate its performance. The performance of
each class of shares is shown separately, because the performance of each class
of shares will usually be different, as a result of the different kinds of
expenses each class bears. These returns and yields measure the performance of a
hypothetical account in the Fund over various periods, and do not show the
performance of each shareholder's account (which will vary if dividends are
received in cash, or shares are sold or purchased). The Fund's performance may
help you see how well your Fund has done over time and to compare it to other
funds or to a market index.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions of
future returns or performance. This performance data is described below, but
more detailed information about how total returns and yields are calculated is
contained in the Statement of Additional Information, which also contains
information about indices and other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary
-21-
<PAGE>
over time, depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
o Total Returns. There are different types of "total returns" used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted.
However, total returns may also be quoted "at net asset value", without
considering the effect of the sales charge, and those returns would be less if
sales charges were deducted.
|X| Yield. Each class of shares calculates its yield by dividing the
annualized net investment income per share from the portfolio during a 30-day
period by the maximum offering price on the last day of the period. The yield of
each class will differ because of the different expenses of each class of
shares. The yield data represents a hypothetical investment return on the
portfolio, and does not measure an investment return based on dividends actually
paid to shareholders. To show that return, a dividend yield may be calculated.
Dividend yield is calculated by dividing the dividends of a class derived from
net investment income during a stated period by the maximum offering price on
the last day of the period. Yields and dividend yields for Class A shares
reflect the deduction of the maximum initial sales charge, but may also be shown
based on the Fund's net asset value per share. Yields for Class B and Class C
shares do not reflect the deduction of the contingent deferred sales charge. The
tax- equivalent yield is the equivalent yield that would be earned in the
absence of taxes. It is calculated by dividing that portion of the yield that is
tax-exempt by a factor equal to one minus the applicable tax rate.
How Has the Fund Performed? Below is a discussion by the Manager of
the Fund's performance during its fiscal year ended July 31, 1996,
-22-
<PAGE>
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
o Management's Discussion of Performance. During the Fund's fiscal year
ended July 31, 1996, the Fund's performance was affected by several economic and
market factors. A major factor in the Fund's performance was the portfolio
manager's emphasis an pre- refunded bonds, with shorter effective maturities
which performed well compared to other municipal bonds. Another factor was the
underperformance of long-term municipal bonds. The manager has lowered the
weighting in this sector which has helped the fund's performance.
o Comparing the Fund's Performance to the Market. The graphs below show
the performance of a hypothetical $10,000 investment in each class of shares of
the Fund held until July 31, 1996. In the case of Class A and Class B shares,
performance is measured from the Fund's inception on March 1, 1994, and in the
case of Class C shares, from the inception of the Class on August 29, 1995.
The Fund's performance is compared to that of the Lehman Brothers
Municipal Bond Index, an unmanaged index of a broad range of investment grade
municipal bonds that is widely regarded as a measure of the performance of the
general municipal bond market. Index performance reflects the reinvestment of
income but does not consider the effect of capital gains or transaction costs,
and none of the data below shows the effect of taxes. Also, the Fund's
performance data reflects the effect of Fund business and operating expenses.
While index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
securities in any one index. Moreover, the index performance data does not
reflect any assessment of the risk of the investments included in the index.
<TABLE>
<CAPTION>
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Oppenheimer New Jersey Municipal Fund and The
Lehman Brothers Municipal Bond Index
[Graph]
Past performance is not predictive of future performance.
Average Annual Total
Return of the Fund at 7/31/96
-23-
<PAGE>
<S> <C> <C>
A Shares One Year Life of Class
1.36% 2.36%(1)
B Shares 0.61% 2.44%(1)
C Shares N/A 4.41%
- ---------------------
Total returns and the ending account values in the graphs show a change in share
value and include reinvestment of all dividends and capital gains distributions.
The Fund's fiscal year has changed from 12/31 to 7/31.
<FN>
(1) The inception of the Fund (Class A and B shares) was 3/1/94. Class A returns
are shown net of the current applicable 4.75% maximum initial sales charge. The
average annual total returns reflect reinvestment of all dividends and capital
gains distributions and are shown net of the applicable 5% and 3% contingent
deferred sales charges respectively for the 1-year period and the life-of-class.
The ending account value in the graph is net of the applicable 3% contingent
deferred sales charge.
(2) Class C shares of the Fund were first publicly
offered on 8/29/95. The life-of-class is shown net of the applicable 1%
contingent deferred sales charge.
</FN>
</TABLE>
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
o Class A Shares. If you buy Class A shares, you pay an initial sales
charge on (investments up to $1 million). If you purchase Class A shares as part
of an investment of at least $1 million in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 18 months of buying them, you may pay a contingent deferred sales
charge. The amount of that sales charge will vary depending on the amount you
invested. Sales charge rates are described in "Buying Class A Shares," below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent
-24-
<PAGE>
deferred sales charge. That sales charge varies depending on how long you own
your shares, as described in "Buying Class B Shares" below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1% as
described in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decisions as to which class of shares is
best suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, and considered the effect of the annual
asset-based sales charge on Class B and Class C expenses (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns, and the operating
expenses borne by each class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you expect
to hold your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will also
depend on how much you
-25-
<PAGE>
plan to invest. For example, the reduced sales charges available for larger
purchases of Class A shares may, over time, offset the effect of paying an
initial sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the effect
over time of higher class-based expenses on Class B or Class C shares for which
no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than seven years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C shares (as well as Class
B shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C shares (and
B shares). If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares, or $1 million or more of
Class C shares from a single investor.
o Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to your
money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than
-26-
<PAGE>
$100,000. If you plan to invest more than $100,000 over the long term, Class A
shares will likely be more advantageous than Class B shares or C shares, as
discussed above, because of the effect of the expected lower expenses for Class
A shares and the reduced initial sales charges available for larger investments
in Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed performance return stated above, and therefore you should analyze
your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features such as checkwriting may not be available to Class B or
Class C shareholders, or other features (such as Automatic Withdrawal Plans) may
not be advisable (because of the effect of the contingent deferred sales charge)
for Class B or Class C shareholders, you should carefully review how you plan to
use your investment account before deciding which class of shares to buy.
Additionally, dividends payable to Class B and Class C shareholders will be
reduced by the additional expenses borne by those classes that are not borne by
Class A, such as the Class B and Class C asset-based sales charges described
below and in the Statement of Additional Information. Share certificates are not
available for Class B and Class C shares, and if you are considering using your
shares as collateral for a loan, that may be a factor to consider.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the Class B and Class C contingent deferred sales charge and
asset-based sales charges is the same as the purpose of the front-end sales
charge on sales of Class A shares, that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
o With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments for as little
as $25; and subsequent purchases of at least $25 can be made by telephone
through AccountLink.
-27-
<PAGE>
o There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other Oppenheimer funds (a list of
them appears in the Statement of Additional Information, or you can ask your
dealer or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is appropriate for
you.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to send redemption
proceeds and to have the Transfer Agent send redemption proceeds or to transmit
dividends and distributions.
Shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the ACH transfer to buy shares. You
can provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds PhoneLink,
also described below. You should request AccountLink privileges on the
application or dealer settlement instructions used to establish your account.
Please refer to "AccountLink" below for more details.
-28-
<PAGE>
o Asset Builder Plans. You may purchase shares of the Fund (and up to
four other Oppenheimer funds) automatically each month from your account at a
bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of Additional
Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado. In most cases, to enable you to receive that day's offering
price, the Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally 4:00 P.M., New
York time, but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each class of shares is
determined as of that time on each day The New York Stock Exchange is open
(which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your order
by the close of The New York Stock Exchange on a regular business day and
transmit it to the Distributor so that it is received before the Distributor's
close of business that day, which is normally 5:00 P.M. The Distributor may
reject any purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A in
this prospectus sets forth conditions for the waiver of, or exemption from,
sales charges or the special sales charge rates that apply to purchases of
shares of the Fund (including purchases by exchange) by a person who was a
shareholder of one of the former Quest for Value Funds (as defined in that
Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
-29-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Percentage Percentage of Offering
of Offering of Amount Price
Amount of Purchase Price Invested
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- -----------------------------------------------------------------------------------------------------------------
$50,000 or more
but less than
$100,000 4.50% 4.71% 4.00%
- ------------------------------------------------------------------------------------------------------------------
$100,000 or more
but less than
$250,000 3.50% 3.63% 3.00%
- ------------------------------------------------------------------------------------------------------------------
$250,000 or more
but less than
$500,000 2.50% 2.56% 2.25%
- ------------------------------------------------------------------------------------------------------------------
$500,000 or more
but less than
$1 million 2.00% 2.04% 1.80%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter" under
Federal securities laws.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more.
The Distributor pays dealers of record commissions on those
non-retirement purchases in an amount equal to the sum of 1.0%. That commission
will be paid only on the amount of those purchases that were not previously
subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge (called the
"Class A contingent deferred sales charge") may be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gain distributions) or (2) the original
offering price (which is the original net asset value) of the redeemed shares.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer on all
Class A
-30-
<PAGE>
shares of all Oppenheimer funds you purchased subject to the Class A contingent
deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 months of the end of the
calendar month of the purchase of the exchanged shares, the sales charge will
apply.
o Special Arrangements With Dealers. The Distributor may advance up to
13 months' commissions to dealers that have established special arrangements
with the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts, on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can also
include Class A and Class B shares of Oppenheimer funds you previously purchased
subject to an initial or contingent deferred sales charge to reduce the sales
charge rate for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of those shares
will be based on the greater of the amount you paid for the shares or their
current value (at offering price). The Oppenheimer funds are listed in "Reduced
Sales Charges" in the Statement of Additional Information, or a list can be
obtained from
-31-
<PAGE>
the Distributor. The reduced sales charge will apply only to current purchases
and must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares.
The total amount of your intended purchases of both Class A and Class B shares
will determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before the
date of the Letter. More information is contained in the Application and in
"Reduced Sales Charges" in the Statement of Additional Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker, bank or advisor for the purchase or sale of Fund shares).
-32-
<PAGE>
o directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts; or
o any unit investment trust that has entered into an appropriate
agreement with the Distributor.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the past 12 months from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below); or
o if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent
-33-
<PAGE>
deferred sales charge, the dealer agrees in writing to accept the dealer's
portion of the commission payable on the sale in installments of 1/18th of the
commission per month (and no further commission will be payable if the shares
are redeemed within 18 months of purchase).
o Service Plan for Class A Shares. The Fund has adopted a Service Plan
for Class A shares to reimburse the Distributor for a portion of its costs
incurred in connection with the personal service and maintenance of shareholder
accounts that hold Class A shares. Under the Plan, reimbursement is to be made
quarterly at an annual rate that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. The Board of Trustees has currently set
the service fee rate at 0.15% per year, which amount may be increased by the
Board from time to time up to the maximum of 0.25%. The Distributor uses all of
those fees to compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares and to reimburse itself (if
the Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% (currently set at
0.15% as described above) of the average annual net assets of Class A shares
held in accounts of the service providers or their customers. The payments under
the Plan increase the annual expenses of Class A shares. For more details,
please refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to
-34-
<PAGE>
reimburse its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
below in "Waivers of Class B and Class C Sales Charges."
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- -----------------------------------------------------------------------
<S> <C>
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the month in
which the purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
-35-
<PAGE>
o Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate the
Distributor for distributing Class B shares and servicing accounts. This Plan is
described below under "Buying Class C Shares - Distribution and Service Plans
for Class B and Class C Shares."
o Waivers of Class B Sales Charges. The Class B contingent deferred
sales charge will not apply to shares purchased in certain types of
transactions, nor will it apply to shares redeemed in certain circumstances, as
described below under "Buying Class C Shares - Waivers of Class B and Class C
Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the shares at the time of redemption or the original
offering price (which is the original net asset value). The contingent deferred
sales charge is not imposed on the amount of your account value represented by
the increase in net asset value over the initial purchase price. The Class C
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
asopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays the Distributor an annual
"asset-based sales charge" of 0.75% per year on Class B shares and on Class C
shares. The Distributor also receives a service fee of up to 0.25% per year
under each plan. The Board of Trustees has currently set the service fee at
0.15% per year, which amount may be increased by Board from time to time up to
the maximum of 0.25%.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of
-36-
<PAGE>
the close of each regular business day during the period. The asset-based sales
charge and service fees increase Class B and Class C expenses by up to 1.00% of
the net assets per year of the respective class.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class C shares.
Those services are similar to those provided under the Class A Service Plan,
described above. The Distributor pays the 0.25% service fees to dealers in
advance for the first year after Class B or Class C shares have been sold by the
dealer and retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers who sell those shares. The Fundpays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.85% of the
purchase price of Class B shares to dealers from its own resources at the trime
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the Dealer at the time of sales of Class B shares is 4.00% of the
purchase price. The Distributor retains the Class B asset-based sales charge.
The Distributor currently pays sales commissions of 0.90% of the
purchase price to dealers from its own resources at the time of sale of Class C
shares. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is 1.00% of the
purchase price. The Distributor plans to pay the asset-based sales charge as an
ongoing commission to the dealer on Class C shares that have been outstanding
for a year or more.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and Class C shares. If the Fund terminates either
Plan, the Board of
-37-
<PAGE>
Trustees may allow the Fund to continue payments of the asset-based sales charge
to the Distributor for distributing shares before the Plan was terminated. At
December 31, 1995 and July 31, 1996, the end of the Class B Plan years, the
Distributor had incurred unreimbursed expenses under the Class B Plan of
$200,879 and $438,267, respectively (equal to 3.85% and 4.50%, respectively, of
the Fund's net assets represented by Class B shares), which have been carried
over into the present plan year. At December 31, 1995 and July 31, 1996, the end
of the Class C Plan years, the Distributor had incurred unreimbursed expenses
under the Class C Plan of $843 and $2,768, respectively (equal to 1.68% and
2.10%, respectively, of the Fund's net assets represented by Class C shares),
which have been carried over into the present plan year.
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances, as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemption of shares in the
following cases:
o redemption from accounts following the death or disability of the
last surviving shareholder, including a trustee of a "grantor" trust or
revocable living trust for which the trustee is also the sole beneficiary (the
death or disability must have occurred after the account was established, and
for disability you must provide evidence of a determination of disability by the
Social Security Administration); or
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C shares
sold or issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund
is a party.
-38-
<PAGE>
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please refer to the
Application for details or call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can request
AccountLink privileges by sending signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder listed in
the registration on your account as well as to your dealer representative of
record unless and until the Transfer Agent receives written instructions
terminating or changing those privileges. After you establish AccountLink for
your account, any change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all shareholders who own
the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone
only after your account has been established. To purchase shares in amounts up
to $250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
-39-
<PAGE>
account you have already established by calling the special PhoneLink number.
Please refer to "How to Exchange Shares," below, for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Application and Statement of Additional
Information for more details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
automatically exchange an amount you establish in advance for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer fund account is $25. These exchanges are subject to the terms of the
Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C shares. You must be sure to ask
the Distributor for this privilege when you send your payment. Please consult
the Statement of Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day. Your shares
will be sold at the next net asset value calculated after your order is received
and accepted by the Transfer Agent.
-40-
<PAGE>
The Fund offers you a number of ways to sell your shares: in writing, by using
the Fund's checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis, as described above. If you
have questions about any of these procedures, and especially if you are
redeeming shares in a special situation, such as due to the death of the owner,
please call the Transfer Agent first, at 1-800-525- 7048, for assistance.
o Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and must
include a signature guarantee in the following situations (there may be other
situations also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o The redemption check is not payable to all shareholders
listed on the account statement
o The redemption check is not sent to the address of record on
your account statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are redeemed by someone other than the owners (such
as an Executor)
o Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the
account is registered, and
-41-
<PAGE>
o Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but which may
be earlier on some days. You may not redeem shares held under a share
certificate by telephone.
o To redeem shares through a service representative, call 1-
800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that account.
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
o Telephone Redemptions Through AccountLink. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
Checkwriting. To be able to write checks against your Fund account, you may
request that privilege on your account Application, or you can contact the
Transfer Agent for signature cards which must be signed (with a signature
guarantee) by all
-42-
<PAGE>
owners of the account and returned to the Transfer Agent so that checks can be
sent to you to use. Shareholders with joint accounts can elect in writing to
have checks paid over the signature of one owner. If you previously signed a
signature card to establish Checkwriting in another Oppenheimer fund, simply
call 1-800-525- 7048 to request Checkwriting for an account in this Fund with
the same registration as the previous Checkwriting account.
o Checks can be written to the order of whomever you wish, but may not
be cashed at the Fund's bank or custodian.
o Checkwriting privileges are not available for accounts holding Class
B shares or Class C shares, or Class A shares that are subject to a contingent
deferred sales charge.
o Checks must be written for at least $100.
o Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you
should not write a check close to the total account value.
o You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within the
prior 10 days.
o Don't use your checks if you changed your Fund account
number.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for more
information about this procedure. Please refer to "Special Arrangements for
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale
in your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them; after the
-43-
<PAGE>
account is open 7 days, you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
o Before exchanging into a fund, you should obtain and read
its prospectus.
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of shares
which are considered to be "Class A Shares" for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852- 8457 or by using
PhoneLink for automated exchanges, by calling 1- 800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that is in proper form by the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. However, either fund may delay the purchase of
-44-
<PAGE>
shares of the fund you are exchanging into up to seven days if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy shares. For
example, the receipt of multiple exchange requests from a dealer in a
"market-timing" strategy might require the sale of portfolio securities at a
time or price disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the
shares of the fund you own and a purchase of the shares of the other fund, which
may result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as
of the close of The New York Stock Exchange, which is normally 4:00 P.M. but may
be earlier on some days, on each day the Exchange is open by dividing the value
of the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are special
procedures for valuing illiquid and restricted securities and obligations for
which market values cannot be readily obtained. These procedures are described
more completely in the Statement of Additional Information.
o The Offering of Shares may be suspended during any period in
which the determination of net asset value is suspended, and the
-45-
<PAGE>
offering may be suspended by the Board of Trustees at any time the Board
believes it is in the Fund's best interest to do so.
o Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless and
until the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time to
time, the Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and Class C shares. Therefore, the redemption value of your
shares may be more or less than their original cost.
-46-
<PAGE>
o Payment for Redeemed Shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within seven days after the Transfer
Agent receives redemption instructions in proper form, except under unusual
circumstances determined by the Securities and Exchange Commission delaying or
suspending such payments. For accounts registered in the name of a
broker-dealer, payment will be forwarded within three business days. The
Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase payment
has cleared. That delay may be as much as 10 days from the date the shares were
purchased. That delay may be avoided if you purchase shares by certified check
or arrange with your bank to provide telephone or written assurance to the
Transfer Agent that your purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if
the account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate
of 31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a certified Social Security or
Employer Identification Number when you sign your application, or if you violate
Internal Revenue Service regulations on tax reporting of income.
o The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be avoided
by redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
-47-
<PAGE>
o To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask
that copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net tax-exempt income and/or net investment income each regular
business day and pays such dividends to shareholders monthly. Normally,
dividends are paid on or about the tenth business day of each month, but the
Board of Trustees can change that date. It is expected that distributions paid
with respect to Class A shares will generally be higher than for Class B and
Class C shares because expenses allocable to Class B and Class C shares will
generally be higher.
For the fiscal year ended July 31, 1996, the Fund maintained the
practice, to the extent consistent with the amount of the Fund's net investment
income and other distributable income, of attempting to pay dividends on Class A
shares at a constant level, although the amount of such dividends was subject to
change from time to time depending on market conditions, the composition of the
Fund's portfolio and expenses borne by the Fund or borne separately by that
Class. The practice of attempting to pay dividends on Class A shares at a
constant level requires the Manager, consistent with the Fund's investment
objective and investment restrictions, to monitor the Fund's portfolio and
select higher yielding securities when deemed appropriate to maintain necessary
net investment income levels. The Fund anticipates paying dividends at the
targeted dividend level from net investment income and other distributable
income without any impact on the Fund's net asset value per share. The Board of
Trustees may change the Fund's targeted dividend level at any time, without
prior notice to shareholders; the Fund does not otherwise have a fixed dividend
rate and there can be no assurance as to the payment of any dividends or the
realization of any net capital gains.
Capital Gains. Although the Fund does not seek capital gains, it
may realize capital gains on the sale of portfolio securities. If
it does, it may make distributions out of any net short-term or
long-term capital gains in December. The Fund may make
supplemental distributions of dividends and capital gains following
-48-
<PAGE>
the end of its fiscal year (which ends July 31st). Long-term capital gains will
be separately identified in the tax information the Fund sends you after the end
of the year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains distributions
in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. You have
four options:
o Reinvest All Distributions In The Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
o Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
o Receive All Distributions In Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank account on AccountLink.
o Reinvest Your Distributions In Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders for Federal income tax purposes. It does not matter
how long you hold your shares. Dividends paid from short-term capital gains and
net investment income are taxable as ordinary income. Dividends paid from net
investment income earned by the Fund on Municipal Securities will be excludable
from your gross income for Federal income tax purposes. A portion of the
dividends paid by the Fund may be an item of tax preference if you are subject
to the alternative minimum tax. Certain distributions are subject to Federal
income tax and may be subject to state and/or local taxes. Such distributions
are taxable when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a statement showing
the amount of each taxable distribution you received in the previous year.
o "Buying a Dividend". When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the
-49-
<PAGE>
full price for the shares and then receive a portion of the price back as a
taxable dividend or capital gain.
o Taxes on Transactions. Even though the Fund seeks tax-exempt income
for distribution to shareholders, you may have a capital gain or loss when you
sell or exchange your shares. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking, a capital gain
or loss is the difference between the price you paid for the shares and the
price you receive when you sell them.
o Returns of Capital. In certain cases distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If that
occurs, it will be identified in notices to shareholders. A non-taxable return
of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain Federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
-50-
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER NEW JERSEY MUNICIPAL FUND
Graphic material included in Prospectus of Oppenheimer New
Jersey Municipal Fund: "Comparison of Change in Value of $10,000
Hypothetical Investments in Oppenheimer New Jersey Municipal Fund
and the Lehman Brothers Municipal Bond Index."
A linear graph will be included in the Prospectus of Oppenheimer New Jersey
Municipal Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in the Fund since the
commencement of the Fund's operations (March 1, 1994) as to Class A and Class B
shares and since August 29, 1995 (inception of Class C shares) as to Class C
shares of the Fund through to December 31, 1995, and comparing such values with
the same investments over the same time periods with The Lehman Brothers
Municipal Bond Index. Set forth below are the relevant data points that will
appear on the linear graph. Additional information with respect to the
foregoing, including a description of The Lehman Brothers Municipal Bond Index,
is set forth in the Prospectus under "Performance of the Fund - How Has the Fund
Performed?"
<TABLE>
<CAPTION>
Oppenheimer
Fiscal/Year New Jersey Lehman Brothers
Period Ended Municipal Fund A Municipal Bond Index
<S> <C> <C>
3/1/94(1) $9,525 $10,000
12/31/94 $9,084 $ 9,625
12/31/95 $10,394 $11,307
7/31/96 $10,581 $11,358
Oppenheimer
Fiscal/Year New Jersey Lehman Brothers
Period Ended Municipal Fund B Municipal Bond Index
3/1/94(1) $10,000 $10,000
12/31/94 $ 9,461 $10,625
12/31/95 $10,746 $11,307
7/31/96 $10,599 $11,358
Oppenheimer
Fiscal/Year New Jersey Lehman Brothers
Period Ended Municipal Fund C Municipal Bond Index
-51-
<PAGE>
8/29/95(2) $10,000 $10,000
12/31/95 $10,407 $10,478
7/31/96 $10,441 $10,525
<FN>
(1) The Fund commenced operations on March 1, 1994.
(2) Class C shares of the Fund were first publicly offered on August
29, 1995.
</FN>
</TABLE>
-52-
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class
A, Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value Global
Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment adviser to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax- Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
o Purchases by Groups and Associations. The following table sets forth the
initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of securities if
that Association purchased shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995.
-53-
<PAGE>
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described on pages __ to __ of this Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of members of an Association
or the sales charge rate that applies under the Rights of Accumulation described
above in the Prospectus. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase shares
for their individual or custodial accounts at these reduced sales charge rates,
upon request to the Fund's Distributor.
o Special Class A Contingent Deferred Sales Charge Rates.
Class A shares of the Fund purchased by exchange of shares of other Oppenheimer
funds that were acquired as a result of the merger of Former Quest for Value
Funds into those Oppenheimer funds, and which shares were subject to a Class A
contingent deferred sales charge prior to November 24, 1995, will be subject to
a contingent deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they were purchased,
at a rate equal to 1.0% if the redemption occurs within 12 months of their
initial purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the
subsequent six months. Class A shares of any of the Former Quest Fund for Value
Funds purchased without an initial sales charge on or before November 22, 1995
will continue to be subject to the applicable contingent deferred sales charge
in effect as of that date as set forth in the then-current prospectus for such
fund.
-54-
<PAGE>
o Waiver of Class A Sales Charges for Certain Shareholders.
Class A shares of the Fund purchased by the following investors are not subject
to any Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions.
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6,
1995.
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by the
merger of a Former Quest for Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest for Value Fund or into which such fund
merged, if those shares were purchased prior to March 6, 1995 in connection
with: (i) withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (ii) liquidation of a shareholder's account if
the aggregate net
-55-
<PAGE>
asset value of shares held in the account is less than the required minimum
value of such accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by the
merger of a Former Quest for Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such fund
merged, if those shares were purchased on or after March 6, 1995, but prior to
November 24, 1995: (1) redemptions following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability by the U.S.
Social Security Administration); (2) withdrawals under an automatic withdrawal
plan (but only for Class B or Class C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and (3) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, Class B or Class C shares of the Fund described
in this section if within 90 days after that redemption, the proceeds are
invested in the same Class of shares in this Fund or another Oppenheimer fund.
<PAGE>
Oppenheimer New Jersey Municipal Fund
Two World Trade Center
New York, New York 10048-0203
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
One Citicorp Center
New York, New York 10154
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds, Inc. OppenheimerFunds
Distributor, Inc., or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
PR0395.1196.N * Printed on recycled paper
<PAGE>
Oppenheimer New Jersey Municipal Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated November 25, 1996
This Statement of Additional Information is not a Prospectus. This
document contains additional information about Oppenheimer New Jersey Municipal
Fund (the "Fund") and supplements information in the Prospectus dated November
25, 1996. It should be read together with the Prospectus, which may be obtained
by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box
5270, Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above.
Contents Page
About The Fund
Investment Objective and Policies..........................................
Investment Policies and Strategies....................................
Special Investment Considerations - New Jersey Municipal Securities...
Other Investment Techniques and Strategies............................
Other Investment Restrictions.........................................
How the Fund is Managed ...................................................
Organization and History..............................................
Trustees and Officers of the Trust....................................
The Manager and Its Affiliates........................................
Brokerage Policies of the Fund.............................................
Performance of the Fund....................................................
Distribution and Service Plans.............................................
About Your Account
How To Buy Shares...................................................
How To Sell Shares..................................................
How To Exchange Shares..............................................
Dividends, Capital Gains and Taxes..................................
Additional Information About the Fund...............................
Financial Information About the Fund
Independent Auditors' Report...............................................
Financial Statements.......................................................
Appendix A: Description of Ratings Categories.............................A-1
Appendix B: Tax-Equivalent Yield Tables...................................B-1
Appendix C: Industry Classifications......................................C-1
-1-
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
invests, as well as the strategies the Fund may use to try to achieve its
objective. Certain capitalized terms used in this Statement of Additional
Information have the same meaning as those terms used in the Prospectus.
Municipal Securities
Municipal Bonds. The principal classifications of long-term municipal
bonds in which the Fund may invest are "general obligation" and "revenue" or
"industrial development" bonds.
General Obligation Bonds. Issuers of general obligation bonds include
states, counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
Revenue Bonds. The principal security for a revenue bond is generally
the net revenues derived from a particular facility, group of facilities, or, in
some cases, the proceeds of a special excise or other specific revenue source.
Revenue bonds are issued to finance a wide variety of capital projects
including: electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund the money from
which 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:
-2-
<PAGE>
Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use of
business taxes, and are payable from these specific future taxes.
Revenue Anticipation Notes. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue, such as federal revenues
available under the Federal revenue sharing programs.
Bond Anticipation Notes. Bond anticipation notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the notes.
Construction Loan Notes. Construction loan notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing Administration.
Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is issued
by state and local governments or their agencies to finance seasonal working
capital needs or as short-term financing in anticipation of longer-term
financing.
Municipal Lease Obligations. From time to time the Fund may invest in
municipal lease obligations, some of which may be illiquid and others which the
Manager has determined to be liquid under guidelines set by the Board of
Trustees. Those guidelines require the Manager to evaluate: (1) the frequency of
trades and price quotations for such securities; (2) the number of dealers or
other potential buyers willing to purchase or sell such securities; (3) the
availability of market-makers; and (4) the nature of the trades for such
securities. The Manager will also evaluate the likelihood of a continuing market
for such securities throughout the time they are held by the Fund and the credit
quality of the instrument. Municipal leases may take the form of a lease or an
installment purchase contract issued by a state or local government authority to
obtain funds to acquire a wide variety of equipment and facilities. Although
lease obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate and
make the payments due under the lease obligation. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on a yearly basis. In
addition to the risk of such "non- appropriation," municipal lease securities do
not yet have a highly developed market to provide the same degree of liquidity
as conventional municipal bonds. Municipal leases, like other municipal debt
obligations, are subject to the risk of non-payment. The ability of issuers of
municipal leases to make timely lease payments may be adversely affected in
general economic downturns and as relative governmental cost burdens are
reallocated among federal, state and local governmental units. Such non-payment
would result in a reduction of income to the Fund, and could result in a
reduction in the value of the municipal lease experiencing non-payment and a
potential decrease in the net asset value of the Fund.
Private Activity Municipal Securities. The Tax Reform Act of 1986 (the
"Tax Reform Act") reorganized, as well as amended, the rules governing tax
exemption for interest on Municipal Securities. The Tax Reform Act generally
does not change the tax treatment of bonds issued in order
-3-
<PAGE>
to finance governmental operations. Thus, interest on obligations issued by or
on behalf of state or local government, the proceeds of which are used to
finance the operations of such governments (e.g., general obligation bonds)
continues to be tax-exempt. However, the Tax Reform Act further limited the use
of tax-exempt bonds for non-governmental (private) purposes. More stringent
restrictions were placed on the use of proceeds of such bonds. Interest on
certain private activity bonds (other than those specified as "qualified"
tax-exempt private activity bonds, e.g., exempt facility bonds including certain
industrial development bonds, qualified mortgage bonds, qualified Section
501(c)(3) bonds, qualified student loan bonds, etc.) is taxable under the
revised rules.
Interest on certain private activity bonds issued after August 7, 1986,
which continues to be tax-exempt, will be treated as a tax preference item
subject to the alternative minimum tax (discussed below) to which certain
taxpayers are subject. Further, a private activity bond which would otherwise be
a qualified tax-exempt private activity bond will not, under Internal Revenue
Code Section 147(a), be a qualified bond for any period during which it is held
by a person who is a "substantial user" of the facilities or by a "related
person" of such a substantial user. This "substantial user" provision is
applicable primarily to exempt facility bonds, including industrial development
bonds. The Fund may not be an appropriate investment for entities which are
"substantial users" (or persons related thereto) of such exempt facilities, and
such persons should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-exempt
person who regularly uses part of a facility" financed from the proceeds of
exempt facility bonds. Generally, an individual will not be a "related person"
under the Internal Revenue Code unless such investor or the investor's immediate
family (spouse, brothers, sisters and immediate descendants) own directly or
indirectly in the aggregate more than 50% in value of the equity of a
corporation or partnership which is a "substantial user" of a facility financed
from the proceeds of exempt facility bonds. In addition, the Tax Reform Act
revised downward the limitations as to the amount of private activity bonds
which each state may issue, which will reduce the supply of such bonds. The
value of the Fund's portfolio could be affected if there is a reduction in the
availability of such bonds. That value may also be affected by a 1988 U.S.
Supreme Court decision upholding the constitutionality of the imposition of a
Federal tax on the interest earned on Municipal Securities issued in bearer
form.
A Municipal Security is treated as a taxable private activity bond
under a test for: (a) a trade or business use and security interest, or (b) a
private loan restriction. Under the trade or business use and security interest
test, an obligation is a private activity bond if: (i) more than 10% of bond
proceeds are used for private business purposes and (ii) 10% or more of the
payment of principal or interest on the issue is directly or indirectly derived
from such private use or is secured by the privately used property or the
payments related to the use of the property. For certain types of uses, a 5%
threshold is substituted for this 10% threshold. (The term "private business
use" means any direct or indirect use in a trade or business carried on by an
individual or entity other than a state of 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 Fund makes no independent investigation of the users of such bonds
or their use of proceeds. If the Fund should hold a bond that loses its
tax-exempt status retroactively, there might be an adjustment to the tax-exempt
income previously paid to shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is accomplished
in part by including in taxable income certain tax
-4-
<PAGE>
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 Fund may hold Municipal
Securities the interest on which (and thus a proportionate share of the exempt-
interest dividends paid by the Fund) will be subject to the Federal alternative
minimum tax on individuals and corporations. The Fund anticipates that under
normal circumstances it will not purchase any such securities in an amount
greater than 20% of its total assets.
Ratings of Municipal Securities. Moody's, S&P's, Fitch's and Duff &
Phelps' ratings (see Appendix A) represent their respective opinions of the
quality of the Municipal Securities they undertake to rate. However, such
ratings are general and are not absolute standards of quality. Consequently,
Municipal Securities with the same maturity, coupon and rating may have
different yields, while Municipal Securities of the same maturity and coupon
with different ratings may have the same yield. Investment in lower quality
securities may produce a higher yield than securities rated in the higher rating
categories described in the Prospectus (or judged by the Manager to be of
comparable quality). However, the added risk of lower quality securities might
not be consistent with a policy of preservation of capital.
Special Investment Considerations - New Jersey Municipal Securities. As
explained in the Prospectus, the Fund is highly sensitive to the fiscal
stability of New Jersey and its subdivisions, agencies, instrumentalities or
authorities and the other issuers which issue the New Jersey Municipal
Securities in which the Fund concentrates its investments. Investors should also
consider the factors discussed below under "Other Investment Techniques and
Strategies".
The following information on risk factors in concentrating in New
Jersey Municipal Securities is only a summary, based on publicly available
information and official statements relating to information compiled annually by
the State of New Jersey (the "State") and other private sources, and no
representation is made as to the accuracy of such information. The information
is provided as general information intended to give a recent historical
description regarding the State and its economy and is not intended to indicate
future or continuing trends in the financial or other positions of the State or
of local governmental units located in the State or to provide financial,
economic or general information regarding the State or any other issuer of New
Jersey municipal securities or the risk factors related to an investment in the
same. The Fund has not independently verified this information.
New Jersey is the ninth largest state in population and fifth smallest
in land area. With an average of 1,071 persons per square mile, it is the most
densely populated of all the states. New Jersey is located at the center of the
megalopolis which extends from Boston to Washington, and which includes over
one-fifth of the country's population. The extensive facilities of the Port
Authority of New York and New Jersey, the Delaware River Port Authority and the
South Jersey Port Corporation across
-5-
<PAGE>
the Delaware River from Philadelphia augment the air, land and water
transportation complex which has influenced much of the State's economy. This
central location in the northeastern corridor, the transportation and port
facilities and proximity to New York City make the State an attractive location
for corporate headquarters and international business offices. A number of
Fortune Magazine's top 500 companies maintain headquarters or major facilities
in New Jersey, and many foreign-owned firms have located facilities in the
State.
After enjoying an extraordinary boom during the mid-1980's, the State,
as well as the rest of the northeast United States, slipped into a slowdown well
before the onset of the national recession which officially began in July 1990
(according to the National Bureau of Economic Research). From fiscal 1984 to
1988 revenues of the State grew almost 40%, increasing accumulated surpluses in
government funds from $1.02 billion to $1.93 billion during that period. This
growth has slowed, however, since 1988. The State had an operating deficit for
the 1989 and 1990 fiscal years and operations reduced the General Fund balance
to $391.5 million for the fiscal year 1989, to $1 million for the fiscal year
1990, to $1.4 million for the fiscal year 1991, to $760.8 million for the fiscal
year 1992, to $937.4 million for the fiscal year 1993, to $926 million for the
fiscal year 1994, to $569.2 million for the fiscal year 1995, and for the fiscal
year 1996 the balance in the General Fund is estimated to be $471.1 million. The
General Fund is the fund into which all State revenues not otherwise restricted
by statute are deposited and from which appropriations are made. The largest
part of the total financial operations of the State is accounted for in the
General Fund. Most revenues received from taxes and federal sources and certain
miscellaneous revenue items are recorded in the General Fund. The appropriations
act provides the basic framework for the operation of the General Fund.
The State finances capital projects primarily through the sale of the
general obligation bonds of the State. These bonds are backed by the full faith
and credit of the State. State tax revenues and certain other fees are pledged
to meet the principal and interest payments required to pay the debt fully. No
general obligation debt can be issued by the State without prior voter approval,
except that no voter approval is required for any law authorizing the creation
of a debt for the purpose of refinancing all or a portion of outstanding debt of
the State, so long as such law requires that the refinancing provide a debt
service savings. All appropriations for capital projects and all proposals for
State bond authorizations are subject to the review and recommendation of the
New Jersey Commission on Capital Budgeting and Planning.
The State may also enter into lease finance arrangements, through which
rental payments made by the State are sufficient to cover debt service on the
obligations issued to finance the project. Such rental payments are subject to
annual appropriation by the State Legislature. Also, various State entities have
issued obligations to which the State has a "moral obligation" to appropriate
funds to cover a deficiency in a debt service reserve fund maintained to meet
payments of principal of and interest on the obligations. The State Legislature,
however, is not legally bound to make such an appropriation.
The State has extensive control over school districts, cities, counties
and local financing authorities. Such local finance system is regulated by
various statutes designed to assure that these entities remain on a sound
financial basis. State laws impose specific limitations on local appropriations,
with exemptions subject to state approval. The State shares the proceeds of a
number of taxes, with funds going primarily for local education programs,
homestead rebates, medicaid and welfare programs. Certain bonds are issued by
localities but supported by direct state payments. In addition, the State
participates in local wastewater treatment programs.
-6-
<PAGE>
Although counties, municipalities and school districts finance capital
projects through the sale of general obligation bonds, backed by their
respective taxing power, other entities, including local financing authorities,
typically finance their capital needs through the sale of bonds backed by a
particular pledge of revenues, which may or may not include revenues derived
from taxing powers.
By the beginning of the national recession of 1990-1991, construction
activity had already been declining in New Jersey for nearly two years, growth
had tapered off markedly in the service sectors and the long-term downward trend
of factory employment had accelerated, partly because of a leveling off of
industrial demand nationally. The onset of recession caused an acceleration of
New Jersey's job losses in construction and manufacturing, as well as an
employment downturn in such previously growing sectors as wholesale trade,
retail trade, finance, utilities and trucking and warehousing. The net effect
was a decline in the State's total nonfarm wage and salary employment from a
peak of 3,689,800 in 1989 to a low of 3,457,900 in 1992. This loss was followed
by an employment gain of 200,700 from May 1992 to October 1995, a recovery of
77% of the jobs lost during the recession. More than two-thirds of this number,
nearly 138,000 jobs, were recovered in the 31 month period from January 1994 to
August 1996.
Reflecting the downturn, the rate of unemployment in the State rose
from a low of 3.6 percent during the first quarter of 1989 to a recessionary
peak of 8.5% during 1992. Since then, the unemployment rate fell to an average
of 6.4% in 1995 and 6.1% for the four-month period from May 1996 through August
1996.
For the recovery period as a whole, May 1992 to August 1996,
service-producing employment in New Jersey has expanded by 228,500 jobs. Hiring
has been reported by food stores, auto dealers, wholesale distributors, trucking
and warehousing firms, utilities, business and engineering/management service
firms, hotels/hotel-casinos, social service agencies and health care providers
other than hospitals. Employment growth was particularly strong in business
services and its personnel supply component with increases of 17,500 and 8,100,
respectively, in the 12-month period ending August 1996.
The insured unemployment rate, i.e. the number of individuals claiming
benefits as a percentage of the number of workers covered by unemployment
insurance, declined from 3.9% during the calendar years 1991 and 1992 to 3.3%
during 1993 and then averaged 3.2% throughout 1994, 1995 and the first six
months of 1996. As of August 1, 1996, the State's employment insurance trust
fund balance stood at $2.1 billion.
The State has benefited from the national recovery. New Jersey's
recovery is in its fifth year and appears to be sustainable, now that the
national economy has soft landed. The U.S. economy is in a period of steady,
moderate growth, having slowed enough during the fourth quarter of 1995 and
first quarter of 1996 to avoid inflation but not enough to slip into a
recession. While the latest national indicators show that economic growth
accelerated during the second quarter of this year, the inflation rate has
remained low.
Prospects for New Jersey appear favorable. While growth is likely to be
slower than in the nation, the locational advantages that have served New Jersey
well for many years will still be there. Structural changes that have been going
on for years can be expected to continue with job creation concentrated most
heavily in the service industries.
-7-
<PAGE>
Other Investment Techniques and Strategies
When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may purchase Municipal Securities on a "when-issued" basis,
and may purchase or sell such securities on a "delayed delivery" basis. Although
the Fund will enter into such transactions for the purpose of acquiring
securities for its portfolio or for delivery pursuant to options contracts it
has entered into, the Fund may dispose of a commitment prior to settlement.
"When-issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated the
price (which is generally expressed in yield terms) is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. During the period between commitment by the Fund and settlement
(generally within two months but not to exceed 120 days), no payment is made for
the securities purchased by the purchaser, and no interest accrues to the
purchaser from the transaction. Such securities are subject to market
fluctuation; the value at delivery may be less than the purchase price. The Fund
will maintain a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal to the
value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of entering
into the obligation. When the Fund engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to
consummate the transaction. Failure to do so may result in the Fund losing the
opportunity to obtain a price and yield considered to be advantageous. If the
Fund chooses to (i) dispose of the right to acquire a when-issued security prior
to its acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss. At the time the Fund makes a
commitment to purchase or sell a security on a when-issued or forward commitment
basis, it records the transaction and reflects the value of the security
purchased, or if a sale, the proceeds to be received in determining its net
asset value.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objective and policies and not for the purposes
of investment leverage. The Fund enters into such transactions only with the
intention of actually receiving or delivering the securities, although (as noted
above), when-issued securities and forward commitments may be sold prior to
settlement date. In addition, changes in interest rates in a direction other
than that expected by the Manager before settlement will affect the value of
such securities and may cause loss to the Fund.
When-issued transactions and forward commitments can be used by the
Fund as a defensive technique to use against anticipated changes in interest
rates and prices. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities in its portfolio on a forward commitment
basis to attempt to limit its exposure to anticipated falling prices. In periods
of falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
forward commitment basis, thereby obtaining the benefit of currently higher cash
yields.
Repurchase Agreements. In a repurchase transaction, the Fund acquires
a security from, and simultaneously resells it to, an approved vendor (a U.S.
commercial bank or U.S. branch of a foreign bank with total domestic assets of
a least $1 billion or broker-dealer with net capital of at least $50
-8-
<PAGE>
million which has been designated a primary dealer in government securities) for
delivery on an agreed- on future date. The resale price exceeds the purchase
price by an amount that reflects an agreed-upon interest rate effective for the
period during which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to resale typically will
occur within one to five days of the purchase. Repurchase agreements are
considered loans under the Investment Company Act, collateralized by the
underlying security. The Fund's repurchase agreements require that at all times
while the repurchase agreement is in effect, the value of the collateral must
equal or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will continuously monitor the collateral's
value and will impose creditworthiness requirements to confirm that the vendor
is financially sound.
Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the market value of
the loaned securities and must consist of cash, bank letters of credit,
securities of the U.S. Government or its agencies or instrumentalities, or other
cash equivalents in which the Fund is permitted to invest. To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. When it lends securities, the Fund
receives an amount equal to the dividends or interest on loaned securities and
also receives one or more of: (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such loan collateral. Either type of interest may be shared with
the borrower. The Fund may also pay reasonable finder's, custodian and
administrative fees. The terms of the Fund's loans must meet certain tests under
the Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important matter.
Income from securities loans is not included in the exempt-interest dividends
paid by the Fund. The Fund will not enter into any securities loans having a
duration of more than one year.
Inverse Floaters and Other Derivative Securities. The Fund will invest
in inverse floaters in the expectation that they will provide higher expected
tax-exempt yields than are available for fixed-rate bonds having comparable
credit ratings and maturity. In certain instances, the holder of an inverse
floater may have an option to convert it into a fixed-rate bond pursuant to a
"rate lock option." Inverse floaters may produce relatively high current income,
reflecting the spread between short-term and long-term tax-exempt interest
rates. As long as the municipal yield curve remains relatively steep and
short-term rates remain relatively low, owners of inverse floaters will continue
to earn above-market interest rates because they are receiving the higher
long-term rates and have paid for bonds with lower short-term rates. If the
yield curve flattens and shifts upward, an inverse floater will lose value more
quickly than conventional long-term municipal bonds.
Investing in inverse floaters that have interest rate caps might be a
part of a portfolio strategy to try to maintain a high current yield for the
Fund when the Fund has invested in inverse floaters that expose the Fund to the
risk of short-term interest rate fluctuation. Embedded caps may be used to hedge
a portion of the Fund's exposure to rising interest rates. When interest rates
exceed the "strike" price the "cap" generates additional cash flows that offset
the decline in interest rates on the inverse floater, and the hedge is
successful. However, the Fund bears the risk that if interest rates do not rise
above the strike price, the cap (which is purchased for additional cost) will
not provide additional cash flows and will expire worthless.
-9-
<PAGE>
Puts and Standby Commitments. When the Fund buys Municipal Securities,
it may obtain a standby commitment to repurchase the securities that entitles it
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 Fund to sell the underlying security within a
specified period of time at a fixed exercise price. The Fund may pay for a
standby commitment or put either separately in cash or by paying a higher price
for the securities acquired subject to the standby commitment or put. The Fund
will enter into these transactions only with banks and dealers which, in the
Manager's opinion, present minimal credit risks. The Fund's ability to exercise
a put or standby commitment will depend on the ability of the bank or dealer to
pay for the securities if the put or standby commitment is exercised. If the
bank or dealer should default on its obligation, the Fund might not be able to
recover all or a portion of any loss sustained from having to sell the security
elsewhere. Puts and standby commitments are not transferable by the Fund, and
therefore terminate if the Fund sells the underlying security to a third party.
The Fund intends to enter into these arrangements to facilitate portfolio
liquidity, although such arrangements may enable the Fund to sell a security at
a pre-arranged price which may be higher than the prevailing market price at the
time the put or standby commitment is exercised. However, the Fund might refrain
from exercising a put or standby commitment if the exercise price is
significantly higher than the prevailing market price, to avoid imposing a loss
on the seller which could jeopardize the Fund's business relationships with the
seller. Any consideration paid by the Fund for the put or standby commitment
(which increases the cost of the security and reduces the yield otherwise
available from the security) will be reflected on the Fund's books as unrealized
depreciation while the put or standby commitment is held, and a realized gain or
loss when the put or commitment is exercised or expires. Interest income
received by the Fund from Municipal Securities subject to puts or standby
commitments may not qualify as tax exempt in its hands if the terms of the put
or standby commitment cause the Fund not to be treated as the tax owner of the
underlying Municipal Securities.
Hedging. As described in the Prospectus, the Fund may employ one or
more types of hedging instruments. When hedging to attempt to protect against
declines in the market value of the Fund's portfolio, to permit the Fund to
retain unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons, the
Fund may: (i) sell Interest Rate Futures or Municipal Bond Index Futures, (ii)
buy puts on such Futures or securities, or (iii) write covered calls on
securities, Interest Rate Futures or Municipal Bond Index Futures (as described
in the Prospectus). Covered calls may also be written on debt securities to
attempt to increase the Fund's income. When hedging to permit the Fund to
establish a position in the debt securities market as a temporary substitute for
purchasing individual debt securities (which the Fund will normally purchase,
and then terminate that hedging position), the Fund may: (i) buy Interest Rate
Futures or Municipal Bond Index Futures, or (ii) buy calls on such Futures or on
securities. The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's investment activities in the underlying cash
market. In the future, the Fund may employ hedging instruments and strategies
that are not presently contemplated but which may be developed, to the extent
such investment methods are consistent with the Fund's investment objective and
are legally permissible and disclosed in the Prospectus. Additional information
about the hedging instruments the Fund may use is provided below.
Writing Covered Call Options. When the Fund writes a call on a
security, it receives a premium and agrees to sell the underlying investment to
a purchaser of a corresponding call on the same security during the call period
(usually not more than nine months) at a fixed exercise price (which may differ
from the market price of the underlying investment) regardless of market price
changes during
-10-
<PAGE>
the call period. The Fund has retained the risk of loss should the price of the
underlying security decline during the call period, which may be offset to some
extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call written was more
or less than the price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Any such profits are considered short-term
capital gains for Federal tax purposes, as are premiums on lapsed calls, and
when distributed by the Fund are taxable as ordinary income. An option position
may be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary market
will exist for a particular option. If the Fund could not effect a closing
purchase transaction due to a lack of a market, it would have to hold the
underlying investment until the call lapsed or were exercised.
Interest Rate Futures. The Fund may buy and sell futures contracts
relating to debt securities ("Interest Rate Futures") and municipal bond indices
("Municipal Bond Index Futures," discussed below). An Interest Rate Future
obligates the seller to deliver and the purchaser to take the related debt
securities at a specified price on a specified date. No amount is paid or
received upon the purchase or sale of an Interest Rate Future.
The Fund may concurrently buy and sell Futures contracts in the
expectation that the Future purchased will outperform the Future sold. For
example, the Fund might simultaneously buy Municipal Bond Futures and sell U.S.
Treasury Bond Futures. This type of transaction would be profitable to the Fund
if municipal bonds, in general, outperform U.S. Treasury bonds. Risks of this
type of Futures strategy include the possibility that the Manager does not
correctly assess the relative durations of the investments underlying the
Futures, with the result that the strategy changes the overall duration of the
Fund's portfolio in a manner that increases the volatility of the Fund's price
per share. Duration is a volatility measure that refers to the expected
percentage change in the value of a bond resulting from a change in general
interest rates (measured by each 1% change in the rates on U.S. Treasury
securities). For example, if a bond has an effective duration of three years, a
1% increase in general interest rates would be expected to cause the bond to
decline about 3%.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, equal to a specified percentage of the
contract amount, with the futures commission merchant (the "futures broker").
The initial margin will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures broker can gain
access to that account only under specified conditions. As the Future is marked
to market to reflect changes in its market value, subsequent margin payments,
called variation margin, will be made to and from the futures broker on a daily
basis. At any time prior to the expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required to be
paid by or released to the Fund. Any gain or loss is then realized. Although
Interest Rate Futures by their terms call for settlement by the delivery of debt
securities, in most cases the obligation is fulfilled by entering into an
offsetting transaction. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are traded.
Municipal Bond Index Futures. A "municipal bond index" assigns
relative values to the municipal bonds in the index, and is used as the basis
for trading long-term municipal bond futures
-11-
<PAGE>
contracts. Municipal Bond Index Futures are similar to Interest Rate Futures
except that settlement is made in cash. The obligation under such contracts may
also be satisfied by entering into an offsetting contract to close out the
futures position. Net gain or loss on options on Municipal Bond Index Futures
depends on the price movements of the securities included in the index. The
strategies which the Fund employs regarding Municipal Bond Index Futures are
similar to those described above with regard to Interest Rate Futures.
Purchasing Calls and Puts. When the Fund purchases a call (other than
in a closing purchase transaction), it pays a premium and, except as to calls on
Municipal Bond Index Futures, has the right to buy the underlying investment
from a seller of a corresponding call on the same investment during the call
period at a fixed exercise price. The Fund benefits only if the call is sold at
a profit or if, during the call period, the market price of the underlying
investment is above the sum of the exercise price plus the transaction costs and
premium paid for the call, and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right to
purchase the underlying investment.
When the Fund purchases a call or put on a municipal bond index,
Municipal Bond Index Future or Interest Rate Future, it pays a premium, but
settlement is in cash rather than by delivery of the underlying investment to
the Fund. Gain or loss depends on changes in the index in question (and thus on
price movements in the debt securities market generally) rather than on price
movements in individual futures contracts.
When the Fund purchases a put, it pays a premium and, except as to puts on
municipal bond indices, has the right to sell the underlying investment to a
seller of a corresponding put on the same investment during the put period at a
fixed exercise price. Buying a put on a debt security, Interest Rate Future or
Municipal Bond Index Future the Fund owns enables the Fund to protect itself
during the put period against a decline in the value of the underlying
investment below the exercise price by selling such underlying investment at the
exercise price to a seller of a corresponding put. If the market price of the
underlying investment is equal to or above the exercise price and as a result
the put is not exercised or resold, the put will become worthless at its
expiration date and the Fund will lose its premium payment and the right to sell
the underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit).
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund's
option activities may affect its turnover rate and brokerage commissions. The
exercise of calls written by the Fund may cause it to sell underlying
investments, thus increasing its turnover rate in a manner beyond its control.
The exercise by the Fund of puts may also cause the sale of underlying
investments, also causing turnover, since the underlying investment might be
sold for reasons which would not exist in the absence of the put. The Fund will
pay a brokerage commission each time it buys a call or a put or sells a call.
Premiums paid for options are small in relation to the market value of the
related investments and, consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could cause the Fund's
net asset value to be more sensitive to changes in the value of the underlying
investments.
Interest Rate Swap Transactions. Swap agreements entail both interest
rate risk and credit risk. There is a risk that, based on movements of interest
rates in the future, the payments made by the Fund under a swap agreement will
have been greater than those received by it. Credit risk arises from
-12-
<PAGE>
the possibility that the counterparty will default. If the counterparty to an
interest rate swap defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Manager
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done between the
Fund and that counterparty under the master agreement shall be regarded as parts
of an integral agreement. If on any date amounts are payable in the same
currency in respect of one or more swap transactions, the net amount payable on
that date in that currency shall be paid. In addition, the master netting
agreement may provide that if one party defaults generally or on one swap, the
counterparty may terminate the swaps with that party. Under such agreements, if
there is a default resulting in a loss to one party, the measure of that party's
damages is calculated by reference to the average cost of a replacement swap
with respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then netted,
and the result is the counterparty's gain or loss on termination. The
termination of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation."
Additional Information about Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written calls
traded on exchanges, or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release the securities
on the expiration of the calls or upon the Fund's entering into a closing
purchase transaction. An option position may be closed out only on a market
which provides secondary trading for options of the same series and there is no
assurance that a liquid secondary market will exist for any particular option.
When the Fund writes an over-the- counter("OTC") option, it intends to into an
arrangement with a primary U.S. Government securities dealer, which would
establish a formula price at which the Fund would have the absolute right to
repurchase that OTC option. This formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security
("in-the-money"). For any OTC option the Fund writes, it will treat as illiquid
(for purposes of its restriction on illiquid securities, stated in the
Prospectus) the mark-to-market value of any OTC option held by it. The
Securities and Exchange Commission is evaluating the general issue of whether or
not OTC options should be considered as liquid securities, and the procedure
described above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its portfolio
turnover rate. The exercise by the Fund of puts on securities will cause the
sale of related investments, increasing portfolio turnover. Although such
exercise is within the Fund's control, holding a put might cause the Fund to
sell the related investments for reasons which would not exist in the absence of
the put. The Fund will pay a brokerage commission each time it buys a call or
put, sells a call, or buys or sells an underlying investment in connection with
the exercise of a call or put. Such commissions may be higher on a relative
basis than those which would apply to direct purchases or sales of such
underlying investments. Premiums paid for options as to underlying investments
are small in relation to the market value of such investments and consequently,
put and call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investment.
-13-
<PAGE>
Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
futures and options on futures as established by the Commodity Futures Trading
Commission ("CFTC"). In particular, the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. Under the Rule, the Fund also must
use short futures and options on futures positions solely for "bona fide hedging
purposes" within the meaning and intent of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by the Option Exchanges, governing the maximum number of options
that may be written or held by a single investor or group of investors acting in
concert, regardless of whether the options were written or purchased on the same
or different exchanges or are held in one or more accounts or through one or
more different exchanges or through one or more brokers. Thus, the number of
options which the Fund may write or hold may be affected by options written or
held by other entities, including other investment companies having the same
adviser as the Fund (or an adviser that is an affiliate of the Fund's adviser).
The exchanges also impose position limits on futures transaction. An exchange
may order the liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases an Interest Rate Future or Municipal Bond Index Future, the Fund will
maintain, in a segregated account or accounts with its Custodian, cash or
readily marketable short-term (maturing in one year or less) debt instruments in
an amount equal to the market value of the investments underlying such Future,
less the margin deposit applicable to it.
Tax Aspects of Hedging Instruments and Covered Calls. The Fund intends
to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). One of the tests for such
qualification is that less than 30% of its gross income (irrespective of losses)
must be derived from gains realized on the sale of securities held for less than
three months. Due to this limitation, the Fund will limit the extent to which it
engages in the following activities, but will not be precluded from them: (i)
selling investments, including Interest Rate Futures and Municipal Bond Index
Futures, held for less than three months, whether or not they were purchased on
the exercise of a call held by the Fund; (ii) writing calls on investments held
less than three months; (iii) purchasing calls or puts which expire in less than
three months; (iv) effecting closing transactions with respect to calls or puts
purchased less than three months previously; and (v) exercising puts or calls
held by the Fund for less than three months.
Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above, there is a
risk in using short hedging by selling Interest Rate Futures and Municipal Bond
Index Futures that the prices of such Futures or the applicable index will
correlate imperfectly with the behavior of the cash (i.e., market value) prices
of the Fund's securities. The ordinary spreads between prices in the cash and
futures markets are subject to distortions due to differences in the natures of
those markets. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship between the
cash and futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit
-14-
<PAGE>
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of debt
securities being hedged and movements in the price of the Hedging Instruments,
the Fund may use Hedging Instruments in a greater dollar amount than the dollar
amount of debt securities being hedged if the historical volatility of the
prices of such debt securities being hedged is more than the historical
volatility of the applicable index. It is also possible that if the Fund has
used Hedging Instruments in a short hedge, the market may advance and the value
of debt securities held in the Fund's portfolio may decline. If that occurred,
the Fund would lose money on the Hedging Instruments and also experience a
decline in value of its debt securities. However, while this could occur for a
very brief period or to a very small degree, over time the value of a
diversified portfolio of debt securities will tend to move in the same direction
as the indices upon which the Hedging Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the
debt securities markets as a temporary substitute for the purchase of individual
debt securities (long hedging) by buying Interest Rate Futures, Municipal Bond
Index Futures and/or calls on such Futures or debt securities, it is possible
that the market may decline; if the Fund then concludes not to invest in such
securities at that time because of concerns as to possible further market
decline or for other reasons, the Fund will realize a loss on the Hedging
Instruments that is not offset by a reduction in the price of the debt
securities purchased.
Diversification. For purposes of the investment restrictions set forth
in the Prospectus and above, the identification of the "issuer" of a Municipal
Security depends on the terms and conditions of the security. When the assets
and revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the subdivision,
and the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the case
of an industrial development bond, if that bond is backed only by the assets and
revenues of the nongovernmental user, then such nongovernmental user would be
deemed the sole issuer. However, if in either case the creating government or
some other entity guarantees a security, such a guarantee would be considered a
separate security and would be treated as an issue of such government or other
agency. In applying these restrictions to the Fund'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 such
bonds are Municipal Securities as to which there is no industry concentration
limitation. Although this application of the restriction is not technically a
fundamental policy of the Fund, it will not be changed without shareholder
approval. The Manager has no present intention of investing more than 25% of the
total assets of the Fund in securities paying interest from revenues of similar
type projects, or in industrial development bonds. Neither of these are
fundamental policies, and therefore may be changed without shareholder approval.
Should any such change be made, the Prospectus and/or this Statement of
Additional Information will be supplemented accordingly.
Other Investment Restrictions
The most significant investment restrictions that apply to the Fund are
described in the Prospectus. The following investment restrictions are also
fundamental policies of the Fund, and,
-15-
<PAGE>
together with the Fund's fundamental policies and investment objective described
in the Prospectus, can be changed only by the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act, such a
"majority" vote is defined as the vote of the holders of the lesser of: (i) 67%
or more of the shares present or represented by proxy at a shareholders'
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by a proxy, or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
Invest in real estate, but the Fund may invest in Municipal Securities
or other permitted securities secured by real estate or interests therein;
Purchase securities other than Hedging Instruments on margin; however,
the Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities;
Make short sales of securities;
Invest in or hold securities of any issuer if those officers and
Trustees or Directors of the Fund or its adviser beneficially owning
individually more than .5% of the securities of such issuer together own more
than 5% of the securities of such issuer; or
Invest in securities of any other investment company, except in
connection with a merger with another investment company.
For purposes of the Fund's policy not to concentrate its assets,
described in "Other Investment Restrictions" in the Prospectus, the Fund has
adopted the industry classifications set forth in Appendix C to this Statement
of Additional Information. This is not a fundamental policy. In connection with
the sale of its shares in the State of Ohio, the Fund undertakes, as a
non-fundamental policy, that with respect to 75% of its total assets, it will
purchase no more than 10% of the outstanding voting securities of any one
issuer.
How the Fund Is Managed
Organization and History. As a series of a Massachusetts business trust, the
Fund is not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the 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 shares of the Trust valued at
$25,000 or more or holding at least 1% of the Trust's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
shareholder list available to the applicants or mail their communication to all
other shareholders at the applicants' expense, or the Trustees may take such
other action as set forth under Section 16(c) of the Investment Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while
-16-
<PAGE>
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances, the
risk of a Fund shareholder incurring financial loss on account of shareholder
liability is limited to the relatively remote circumstances in which the Fund
would be unable to meet its obligations described above. Any person doing
business with the Trust, and any shareholder of the Trust, agrees under the
Trust's Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand which may arise out of any dealings with the
Trust, and the Trustees shall have no personal liability to any such person, to
the extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and officers and their
principal occupations and business affiliations during the past five years are
listed below. The address of each Trustee and officer is Two World Trade Center,
New York, New York 10048-0203, unless another address is listed below. All of
the Trustees (except Ms. Macaskill, who is not a director of Oppenheimer Money
Market Fund, Inc.) are also trustees or directors of Oppenheimer Fund,
Oppenheimer Enterprise Fund, Oppenheimer Global Fund, Oppenheimer Money Market
Fund, Inc., Oppenheimer Growth Fund, Oppenheimer Discovery Fund, Oppenheimer
Global Growth & Income Fund, Oppenheimer Global Emerging Growth Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Municipal Bond Fund,
Oppenheimer New York Municipal Fund, Oppenheimer California Municipal Fund,
Oppenheimer Target Fund, Oppenheimer Asset Allocation Fund, Oppenheimer U.S.
Government Trust, Oppenheimer Multi-Sector Income Trust, Oppenheimer World Bond
Fund and Oppenheimer Series Fund, Inc. (collectively the "New York-based
Oppenheimer funds"). Ms. Macaskill and Messrs. Spiro, Donohue, Bishop, Bowen,
Farrar and Zack respectively hold the same offices with the other New York-based
Oppenheimer funds as with the Trust. As of November 6, 1996, the Trustees and
officers of the Trust as a group owned less than 1% of the outstanding Class A,
Class B and Class C shares of the Trust and the Fund. The foregoing statement
does not reflect ownership of shares held of record by an employee benefit plan
for employees of the Manager (for which plan two of the officers listed above,
Ms. Macaskill and Mr. Donohue, are trustees) other than the shares beneficially
owned under that plan by the officers of the Fund listed above.
Leon Levy, Chairman of the Board of Trustees; Age 71
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership) and
Chairman of Avatar Holdings Inc. (real estate development).
Robert G. Galli, Trustee; Age 63
Vice Chairman of OppenheimerFunds, Inc. (the "Manager"); formerly he
held the following positions: Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding
company; Executive Vice President & General Counsel and a
director of the Manager and OppenheimerFunds Distributor, Inc. (the
"Distributor"), Vice President and a director of HarbourView Asset
Management Corporation ("HarbourView") and Centennial Asset Management
Corporation ("Centennial"), investment adviser subsidiaries of the
Manager, a director of Shareholder Financial Services, Inc. ("SFSI")
and Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager, and an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age 73
591 Breezy Hill Road, Hillsdale, New York 12529
-17-
<PAGE>
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a Director of Sussex Publishers,
Inc. (Publishers of Psychology Today and
Mother Earth News) and of Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee; Age 48*
President, Chief Executive Officer and a Director of the Manager,
Chairman and a Director of SSI, President and a Director of OAC,
HarbourView, and Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc.; formerly an Executive Vice President of the Manager.
Elizabeth B. Moynihan, Trustee; Age 67
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of
Art (Smithsonian Institution), the Institute of Fine Arts (New York
University), and the National Building Museum; a member of the Trustees
Council, the Preservation League of New York State, and of the
Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age 69
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil and gas
producer), Enron-Dominion Cogen Corp. (cogeneration company), Kemper
Corporation (insurance and financial services company), Fidelity Life
Association (mutual life insurance company); formerly President and
Chief Executive Officer of The Conference Board, Inc. (international
economic and business research) and a director of Lumbermens Mutual
Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee; Age 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York;
Senior Fellow of Jerome Levy Economics Institute, Bard College; a
member of the U.S. Competitiveness Policy Council; a director of
GranCare, Inc. (health care provider); formerly New York State
Comptroller and a trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age 64
200 Park Avenue, New York, New York 10166
Founder, Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship, Inc. (consulting and
publishing); a director of XYAN Inc. (printing), Professional Staff
Limited and American Scientific Resources, Inc.; a trustee of Mystic
Seaport Museum, International House, Greenwich Historical Society and
Greenwich Hospital.
-18-
<PAGE>
Sidney M. Robbins, Trustee; Age 84
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions, Graduate
School of Business, Columbia University; Visiting Professor of Finance,
University of Hawaii; Emeritus Funding Director of The Korea Fund, Inc.
(a closed-end investment company); a member of the Board of Advisors,
Olympus Private Placement Fund, L.P.; Professor Emeritus of Finance,
Adelphi University.
- --------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Donald W. Spiro, Vice Chairman and Trustee; Age
70* Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and OppenheimerFunds Distributor, Inc. (the
"Distributor").
Pauline Trigere, Trustee; Age 83
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale
of women's fashions).
Clayton K. Yeutter, Trustee; Age 65
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery),
IMC Global Inc. (chemicals and animal feed) and Texas Instruments,
Inc. (electronics); formerly (in descending chronological order)
Counsellor to the President (Bush) for Domestic Policy, Chairman of
the Republican National Committee, Secretary of the U.S.
Department of Agriculture, and U.S. Trade Representative.
Andrew J. Donohue, Secretary; Age 46
Executive Vice President and General Counsel of the Manager and the
Distributor; President and a director of Centennial; Executive Vice
President, General Counsel and a director of HarbourView, SSI, SFSI,
and Oppenheimer Partnership Holdings, Inc.; President and director of
Oppenheimer Real Asset Management, Inc.; General Counsel of OAC;
Executive Vice President, Chief Legal Officer and a director of
MultiSource Services, Inc. (a broker-dealer); an officer of other
Oppenheimer funds; formerly Senior Vice President and Associate General
Counsel of the Manager and the Distributor, partner in Kraft &
McManimon (a law firm), an officer of First Investors Corporation (a
broker-dealer) and First Investors Management Company, Inc.
(broker-dealer and investment adviser), and a director and an officer
of First Investors Family of Funds and First Investors Life Insurance
Company.
Caryn Halbrecht, Vice President and Portfolio Manager; Age 39
Vice President of the Manager; an officer of other Oppenheimer funds;
formerly Vice President of Fixed Income Portfolio Management at Bankers
Trust Company.
George C. Bowen, Treasurer; Age 60
-19-
<PAGE>
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Senior
Vice President, Treasurer and Secretary of SSI; Vice President,
Treasurer and Secretary of SFSI; Treasurer of OAC; Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc.; Chief Executive
Officer, Treasurer and a director of MultiSource Services, Inc. (a
broker-dealer); an officer of other Oppenheimer funds.
- --------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Robert G. Zack, Assistant Secretary; Age 48
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI, SFSI; an officer of other Oppenheimer
funds.
Robert Bishop, Assistant Treasurer; Age 37
3410 South Galena Street, Denver, Colorado, 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously a Fund Controller for the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions
Supervisor for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age 31
3410 South Galena Street, Denver, Colorado, 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co., a bank, and previously a Senior Fund
Accountant for State Street Bank & Trust Company.
Remuneration of Trustees. The officers of the Fund are affiliated with
the Manager. They and the Trustees of the Fund who are affiliated with the
Manager (Ms. Macaskill and Messrs. Galli and Spiro) receive no salary or fee
from the Fund. The remaining Trustees of the Fund received the compensation
shown below from the Fund, during its fiscal year ended December 31, 1995 and
from all of the New York-based Oppenheimer funds (including the Fund) for which
they served as Trustee or Director. Compensation is paid for services in the
positions below their names:
<TABLE>
<CAPTION>
Retirement
Benefits Total Compensation
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses OppenheimerFunds1
<S> <C> <C> <C>
Leon Levy, Chairman $4,060 $2,005 $141,000.00
and Trustee
Benjamin Lipstein, $2,482 $1,226 $ 86,200.00
Study Committee
Chairman, Audit
Committee Member
-20-
<PAGE>
and Trustee
Elizabeth B. Moynihan, $2,482 $1,226 $ 86,200.00
Study Committee
Member2 and Trustee
Kenneth A. Randall, $2,258 $1,115 $ 78,400.00
Audit Committee
Chairman and Trustee
</TABLE>
<TABLE>
<CAPTION>
Retirement
Benefits Total Compensation
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses OppenheimerFunds1
<S> <C> <C> <C>
Edward V. Regan, $1,981 $ 979 $ 68,800.00
Proxy Committee
Chairman, Audit Committee
Member2 and Trustee
Russell S. Reynolds, Jr., $1,500 $ 741 $ 52,100.00
Proxy Committee Member
and Trustee
Sidney M. Robbins, $3,516 $1,737 $122,100.00
Study Committee
Advisory Member, Audit
Committee Advisory
Member and Trustee
Pauline Trigere, $1,500 $ 741 $ 52,100.00
Trustee
Clayton K. Yeutter, $1,500 $ 741 $ 52,100.00
Proxy Committee
Member and Trustee
- ----------------------
<FN>
1For the 1995 calendar year.
2Committee position held during a portion of the period shown. The Study and
Audit Committees meet for all of the New York-based Oppenheimer funds and the
fees are allocated among the funds by the Board.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Retirement
Benefits Total Compensation
-21-
<PAGE>
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses OppenheimerFunds
<S> <C> <C> <C>
Leon Levy, Chairman $673 $4,505 $141,000.00
and Trustee
Retirement
Benefits Total Compensation
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses OppenheimerFunds1
Benjamin Lipstein, $412 $2,753 $ 86,200.00
Study Committee
Chairman, Audit
Committee Member
and Trustee
Elizabeth B. Moynihan, $412 $2,753 $ 86,200.00
Study Committee
Member2 and Trustee
Kenneth A. Randall, $375 $2,504 $ 78,400.00
Audit Committee
Chairman and Trustee
Edward V. Regan, $329 $2,198 $ 68,800.00
Proxy Committee
Chairman, Audit Committee
Member1 and Trustee
Russell S. Reynolds, Jr., $249 $1,664 $ 52,100.00
Proxy Committee Member
and Trustee
Sidney M. Robbins, $584 $3,900 $122,100.00
Study Committee
Advisory Member, Audit
Committee Advisory
Member and Trustee
Pauline Trigere, $249 $1,664 $ 52,100.00
-22-
<PAGE>
Trustee
Clayton K. Yeutter, $249 $1,664 $ 52,100.00
Proxy Committee
Member and Trustee
- ----------------------
<FN>
1Committee position held during a portion of the period shown. The Study and
Audit Committees meet for all of the New York-based Oppenheimer funds and the
fees are allocated among the funds by the Board.
</FN>
</TABLE>
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was received.
A Trustee must serve in that capacity for any of the New York-based Oppenheimer
funds for at least 15 years to be eligible for the maximum payment. Because each
Trustee's retirement benefits will depend on the amount of the Trustee's future
compensation and length of service, the amount of those benefits cannot be
determined at this time, nor can the Fund estimate the number of years of
credited service that will be used to determine those benefits. During the
fiscal year ended December 31, 1995 and the fiscal period ended July 31, 1996
$12,698 and $23,605 was accrued for the Fund's projected retirement obligations.
Major Shareholders. As of November 6, 1996, the only persons who owned
of record or is known to the Fund to own beneficially 5% or more of the Fund's
outstanding Class A, Class B or Class C shares were as follows:
<TABLE>
<CAPTION>
Percentage of
Outstanding Shares
Name & Address Number of Shares of the Class
<S> <C> <C>
Class B
Merrill Lynch Pierce Fenner 65,663.000 6.23%
& Smith
for the Sole Benefit of its
Customers
Att.: Fund Administration/97DN2
4800 Deer Lake Dr. E. Fl. 3
Jacksonville, FL 32246-6484
Class C
Ellen Carr & Arthur Carr & 5,660.889 19.19%
Ronald Carr
JT TEN WROS NOT TC
192 Hidden Hollow Court
Edison, NJ 08820-1066
Michael T. Robinson & 5,147.309 17.45%
-23-
<PAGE>
Nancy E. Robinson
JT TEN WROS NOT TC
15 Heath Drive
Basking Ridge, NJ 07920-1949
Percentage of
Outstanding Shares
Name & Address Number of Shares of the Class
Merrill Lynch Pierce Fenner 3,388.000 11.48%
& Smith
For the Sole Benefit of its
Customers
Attn.: Fund Administration/97HF5
4800 Deer Lake Dr. E. Fl. 3
Jacksonville, FL 32246-6484
Mary L. Parker 2,777.778 9.41%
612 Cambridge Road
Turnersville, NJ 08012-1430
James J. Hayden & Anne M. Hayden 2,639.854 8.95%
JT TEN WROS NOT TC
91 Howe Lane
Freehold, NJ 07728-3336
Diane M. Jacek 2,278.633 7.72%
280 Chestnut Street
Kearny, NJ 07032-2502
Franca Esposito & 2,139.597 7.25%
Giulio Esposito
JT TEN WROS NOT TC
540 Butler Street
Avenel, NJ 07001-1102
Beverly Crane & Gerald Crane 1,847.846 6.26%
JT TEN WROS NOT TC
46 Geatry Drive
Englewood, NJ 07631-5034
</TABLE>
-24-
<PAGE>
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom may also serve as officers of the Fund,
and three of whom (Ms. Macaskill and Messrs. Galli and Spiro) serve as Trustees
of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees, including
portfolio managers, that would compete with or take advantage of the Fund's
portfolio transactions. Compliance with the Code of Ethics is carefully
monitored and strictly enforced by the Manager.
The Investment Advisory Agreement. The Investment Advisory Agreement
between the Manager and the Fund requires the Manager, at its expense, to
provide the Fund with adequate office space, facilities and equipment, and to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective corporate administration for the Fund,
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and the composition
of proxy materials and registration statements for continuous public sale of
shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement are
paid by the Fund. The investment advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain printing
and registration costs and non-recurring expenses, including litigation costs.
For the Fund's fiscal period from March 1, 1994 to December 31, 1994, the fiscal
year ended December 31, 1995 and the fiscal period ended July 31, 1996, the
management fee payable by the Fund to the Manager was $21,740, $63,400 and
$62,334, respectively. These amounts do not reflect the expense assumption of
$38,370, $102,282 and $67,889 by the Manager for such period.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the investment advisory agreement, the
Manager has undertaken that the total expenses of the Fund 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 the most stringent expense limitation imposed
under state law applicable to the Fund. Pursuant to the undertaking, the
Manager's fee will be reduced at the end of a month so that there will not be
any accrued but unpaid liability under this undertaking. Currently, the most
stringent state expense limitation is imposed by California, and limits the
Fund's expenses (with specified exclusions) to 2.5% of the first $30 million of
average annual net assets, 2% of the next $70 million of average annual net
assets, and 1.5% of average annual net assets in excess of $100 million. In
addition, the Manager has voluntarily agreed to assume the expenses of the Fund
to the extent required to enable the Fund to pay dividends per Class A share at
the rate of $.612 per year. The payment of the management fee and other expenses
will be reduced monthly to the extent necessary so that there will not be any
accrued but unpaid liability under this voluntary expense assumption
undertaking. To enable the Fund to pay dividends per Class A share at a set
rate, the Manager will assume certain Fund level expenses
-25-
<PAGE>
as well as Class A expenses. Therefore, Class B and Class C shareholders will
benefit from the expense assumption. The Manager reserves the right to modify or
terminate a voluntary expense assumption undertaking at any time. Any assumption
of the Fund's expenses under a voluntary undertaking would lower the Fund's
overall expense ratio and increase its total return during any period in which
expenses are limited.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard for its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss sustained by reason of any
investment of Fund assets made with due care and in good faith. The advisory
agreement permits the Manager to act as investment adviser for any other person,
firm or corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Manager or one of its affiliates shall no longer act as
investment adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
The Distributor. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares but is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales, excluding payments under the Distribution and Service Plan, but including
advertising and the cost of printing and mailing prospectuses, other than those
furnished to existing shareholders, are borne by the Distributor. During the
period March 1, 1994 (inception of the Fund) through December 31, 1994, the
fiscal year ended December 31, 1995, and the fiscal period ended July 31, 1996,
sales charges paid by investors on purchases of Class A shares were $102,836,
$146,598 and $104,007, respectively, of which $19,169, $34,262 and $19,481 was
retained by the Distributor. During the period March 1, 1994 through December
31, 1994, no contingent deferred sales charge were collected on redemption of
Class B shares; for the fiscal year ended December 31, 1995 and the fiscal
period ended July 31, 1996, the contingent deferred sales charges collected on
the Fund's Class B shares totaled $27,816 and $13,422, all of which the
Distributor retained. During the Fund's fiscal period August 29, 1995 through
December 31, 1995 and the fiscal period January 1, 1996 through July 31, 1996,
no contingent deferred sales charges were collected for the Class C shares. For
additional information about distribution of the Fund's shares and the expenses
connected with such activities, please refer to "Distribution and Service
Plans," below.
The Transfer Agent. The Fund's Transfer Agent, OppenheimerFunds
Services, a division of the Manager, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for shareholder
servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the Investment Advisory Agreement is to arrange the portfolio
transactions for the Fund. The Investment Advisory Agreement contains provisions
relating to the employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by the Investment
Advisory Agreement to employ broker-dealers, including "affiliated" brokers, as
that term
-26-
<PAGE>
is defined in the Investment Company Act, as may, in its best judgment based on
all relevant factors, implement the policy of the Fund to obtain, at reasonable
expense, the "best execution" (prompt and reliable execution at the most
favorable price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions paid
to the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund and/or the
other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination is made by the
Manager that the commission is fair and reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may also consider
sales of shares of the Fund and other investment companies managed by the
Manager or its affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreement and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's portfolio
traders upon recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and allocate brokerage,
also subject to the provisions of the Investment Advisory Agreement and the
procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. As most purchases
made by the Fund are principal transactions at net prices, the Fund does not
incur substantial brokerage costs. The Fund usually deals directly with the
selling or purchasing principal or market maker without incurring charges for
the services of a broker on its behalf unless it is determined that a better
price or execution may be obtained by utilizing the services of a broker.
Purchases of portfolio securities from underwriters include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
include a spread between the bid and asked price. The Fund seeks to obtain
prompt execution of orders at the most favorable net prices. When the Fund
engages in an option transaction, ordinarily the same broker will be used for
the purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, concurrent orders to purchase or sell
the same security by more than one of the accounts managed by the Manager or its
affiliates are combined. The transactions effected pursuant to such combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other accounts may
be useful both to the Fund and one or more of such other accounts. Such
research, which may be supplied by a third party at the instance of a broker,
includes information and analyses on particular companies and industries as well
as market or economic trends and portfolio strategy, receipt of market
quotations for portfolio evaluations, information systems, computer hardware and
similar products and services. If a research service also assists the Manager in
a non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid in commission dollars. The
Board of Trustees has permitted the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
-27-
<PAGE>
transactions. The Board has also permitted the Manager to use stated commissions
on secondary fixed-income agency trades to obtain research where the broker has
represented to the Manager that: (i) the trade is not from or for the broker's
own inventory, (ii) the trade was executed by the broker on an agency basis at
the stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the Manager
to obtain market information for the valuation of securities held in the Fund's
portfolio or being considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Trust (those Trustees of the Trust who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the Investment
Advisory Agreement or the Distribution Plans described below) annually reviews
information furnished by the Manager as to the commissions paid to brokers
furnishing such services so that the Board may ascertain whether the amount of
such commissions was reasonably related to the value or benefit of such
services.
Other funds advised by the Manager have investment objectives and
policies similar to those of the Fund. Such other funds may purchase or sell the
same securities at the same time as the Fund, which could affect the supply and
price of such securities. If two or more of such funds purchase the same
security on the same day from the same dealer, the Manager may average the price
of the transactions and allocate the average among such funds.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from time to
time the "standardized yield," "dividend yield," "tax-equivalent yield" "average
annual total return", "cumulative total return," "average annual total return at
net asset value," and "total return at net asset value" of an investment in a
class of Fund shares may be advertised. An explanation of how yields and total
returns are calculated for each class and the components of those calculations
is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the average
annual total returns for each advertised class of shares of the Fund for the 1,
5, and 10-year periods (or the life of the class, if less) ending as of the most
recently ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its yield and total
returns are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Yield and total returns for any given past period are not a prediction or
representation by the Fund of future yields or rates of return. The yield and
total returns of each class of shares of the Fund are affected by portfolio
quality, portfolio maturity, the type of investments the Fund holds and its
operating expenses allocated to the particular class.
Standardized Yields
-28-
<PAGE>
Yield. The Fund's "yield" (referred to as "standardized yield") for a
given 30-day period for a class of shares is calculated using the following
formula set forth in rules adopted by the Securities and Exchange Commission
that apply to all funds that quote yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of the class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that the
standardized yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This standardized
yield is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments calculated for that period. The
standardized yield may differ from the "dividend yield" of that class, described
below. Additionally, because each class of shares is subject to different
expenses, it is likely that the standardized yields of the Fund's classes of
shares will differ. For the 30-day period ended December 31, 1995, the
standardized yields for the Fund's Class A, Class B and Class C shares were
3.96%, 3.40% and 2.95%, respectively. For the 30-day period ended July 31, 1996,
the standardized yields for the Fund's Class A, Class B and Class C shares were
3.95%, 3.41% and 3.28%, respectively.
Tax-Equivalent Yield. The "tax-equivalent yield" of a class of shares
adjusts the Fund's current yield, as calculated above, by a stated combined
Federal, state and city tax rate. The tax equivalent yield is based on a 30-day
period, and is computed by dividing the tax-exempt portion of the Fund's current
yield (as calculated above) by one minus a stated income tax rate and adding the
result to the portion (if any) of the Fund's current yield that is not tax
exempt. The tax equivalent yield may be used to compare the tax effects of
income derived from the Fund with income from taxable investments at the tax
rates stated. Appendix B includes a tax equivalent yield table, based on various
effective tax brackets for individual taxpayers. Such tax brackets are
determined by a taxpayer's Federal, state and city taxable income (the net
amount subject to Federal and state income taxes after deductions and
exemptions). The tax equivalent yield table assumes that the investor is taxed
at the highest bracket, regardless of whether a switch to non-taxable
investments would cause a lower bracket to apply, 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. The
Fund's tax- equivalent yields (after expense assumptions by the Manager) for its
Class A, Class B and Class C shares for the 30-day period ended December 31,
1995, for an individual taxpayer in the 43.57% combined tax
-29-
<PAGE>
bracket were 7.02%, 6.03% and 5.23%, respectively. For the 30-day period ended
July 31, 1996, the Fund's tax-equivalent yield for an individual taxpayer in the
43.57% combined tax bracket were 7.00%, 6.04% and 5.81%, respectively.
Dividend Yield and Distribution Return. From time to time the Fund may
quote a "dividend yield" or a "distribution return" for each class. Dividend
yield is based on the dividends paid on shares of a class from dividends derived
from net investment income during a stated period. Distribution return includes
dividends derived from net investment income and from realized capital gains
declared during a stated period. Under those calculations, the dividends and/or
distributions for that class declared during a stated period of one year or less
(for example, 30 days) are added together, and the sum is divided by the maximum
offering price per share of that class on the last day of the period. When the
result is annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B and Class C shares, the maximum offering
price is the net asset value per share, without considering the effect of
contingent deferred sales charges. From time to time similar yield or
distribution return calculations may also be made using the Class A net asset
value (instead of its respective maximum offering price) at the end of the
period.
The dividend yields on Class A shares for the 30-day period ended
December 31, 1995, were 5.24% and 5.50% when calculated at maximum offering
price and at net asset value, respectively. The dividend yield on Class B shares
for the 30-day period ended December 31, 1995, was 4.75%. The dividend yield on
Class C shares for the 30-day period ended December 31, 1995 was 4.61%.
Distribution returns for the 30-day period ended December 31, 1995 are the same
as the above-quoted dividend yields. No portions of the Class A, Class B or
Class C dividends for the year ended December 31, 1995 were derived from
realized capital gains. The dividend yields on Class A shares for the 30-day
period ended July 31, 1996, were 5.09% and 5.35% when calculated at maximum
offering price and at net asset value, respectively. The dividend yields on
Class B and Class C shares for the 30-day period ended July 31, 1996, were 4.61%
and 4.50%, respectively, when calculated at net asset value.
Total Return Information
Average Annual Total Returns. The "average annual total return" of
each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
-30-
<PAGE>
Cumulative Total Returns. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted from
the initial investment ("P") (unless the return is shown at net asset value, as
discussed below). For Class B shares, the payment of the applicable contingent
deferred sales charge of (5.0% for the first year, 4.0% for the second year,
3.0% for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth
year and none thereafter) is applied to the investment result for the time
period shown (unless the total return is shown at net asset value, as described
below. For Class C shares, the payment for the 1.0% contingent deferred sales
charge is applied to the investment result for the one year period (or less).
Total returns also assume that all dividends and capital gains distributions
during the period are reinvested to buy additional shares at net asset value per
share, and that the investment is redeemed at the end of the period.
For the one year period ended December 31, 1995 and for the period from
March 1, 1994 (commencement of offering) through December 31, 1995, the average
annual total returns on an investment in Class A shares of the Fund were 8.98%
and 2.13%, respectively, and in Class B shares of the Fund over those periods
were 8.59% and 1.91%, respectively. The cumulative total returns for Class A and
Class B shares for the latter period were 3.94% and 3.53%, respectively. For the
period from August 29, 1995 through December 31, 1995, the cumulative total
return on an investment in Class C shares of the Fund was 3.07%. The "average
annual total returns" on an investment in Class A shares of the Fund for the one
year period ended July 31, 1996 and for the period from March 1, 1994
(commencement of offering) through July 31, 1996 were 1.36% and 2.36%,
respectively, and in Class B shares of the Fund over those periods were 0.61%
and 2.44%, respectively. The cumulative total returns for the Class A and Class
B shares for the latter period were 5.81% and 5.99%, respectively. For the
period from August 29, 1995 through July 31, 1996, the cumulative total return
on an investment in Class C shares of the Fund was 4.41%.
Total Returns at Net Asset Value. From time to time the Fund may also
quote an "average annual total return at net asset value" or a cumulative "total
return at net asset value" for Class A, Class B or Class C shares. It is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions. The
average annual total returns at net asset value on the Fund's Class A shares for
the period from March 1, 1994 (commencement of offering) through December 31,
1995, and for the
-31-
<PAGE>
one-year period ended December 31, 1995, was 4.88% and 14.42% respectively. The
average annual total returns at net asset value on the Fund's Class B shares for
the fiscal period from March 1, 1994 (commencement of offering) through December
31, 1995, and for the one-year period ended December 31, 1995, was 4.00% and
13.59%, respectively. The cumulative total return at net asset value on the
Fund's Class C shares for the period from August 29, 1995 through December 31,
1995 was 4.07%. The average annual total returns at net asset value for the
Fund's Class A shares for the period from March 1, 1994 (commencement of
offering) through July 31, 1996, and for the one year period ended July 31, 1996
was 6.41% and 4.45%, respectively. The average annual total returns at net asset
value for the Fund's Class B shares for the period from March 1, 1994
(commencement of offering) through July 31, 1996, and for the one year period
ended July 31, 1996 was 5.61% and 3.59%, respectively. The cumulative total
return at net asset value on the Fund's Class C shares for the period from
August 29, 1995 through July 31, 1996 was 5.41%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment in Class A, Class B or Class C shares of
the Fund, a number of factors should be considered before using such information
as a basis for comparison before using such information with other investments.
Other Performance Comparisons. From time to time the Fund may publish
the ranking of the performance of its Class A, Class B or Class C shares by
Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized independent
mutual fund monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives. The
performance of the Fund is ranked against (i) all other bond funds, other than
money market funds, and (ii) all other New Jersey municipal bond funds. The
Lipper performance rankings are based on total returns that include the
reinvestment of capital gain distributions and income dividends but do not take
sales charges or taxes into consideration.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an independent
mutual fund monitoring service that ranks mutual funds, including the Fund,
monthly in broad investment categories (equity, taxable bond, municipal bond and
hybrid) based on risk-adjusted investment return. Investment return measures a
fund's three, five and ten-year average annual total returns (when available) in
excess of 90-day U.S. Treasury bill returns after considering sales charges and
expenses. Risk reflects fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and return are combined to produce star rankings reflecting
performance relative to the average fund in a given fund's category. Five stars
is the "highest" ranking (top 10%), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average" (next 22.5%)
and one star is "lowest" (bottom 10%). Morningstar ranks the Fund in relation to
other rated municipal bond funds. Rankings are subject to change.
From time to time the Fund may include in its advertisements and sales
literature performance information about the Fund cited in newspapers and other
periodicals such as The New York Times, which may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's Class A, Class B or Class C shares may be compared in publications to (i)
-32-
<PAGE>
the performance of various market indices or to other investments for which
reliable performance data is available, and (ii) to averages, performance
rankings or other benchmarks prepared by recognized mutual fund statistical
services.
Investors may also wish to compare the Fund's Class A, Class B or Class
C return to the returns on fixed income investments available from banks and
thrift institutions, such as certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed by the FDIC or any other
agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return, and Treasury bills
are guaranteed or insured as to principal and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or the Transfer Agent), or the investor services provided by
them to shareholders of the Oppenheimer funds, other than the performance
rankings of the Oppenheimer funds themselves. Those ratings or rankings of
shareholder/investor services by a third party may compare the OppenheimerFunds'
services to those of other mutual fund families selected by the rating or
ranking services, and may be based upon the opinions of the rating or ranking
service itself, based on its research or judgment, or based upon surveys of
investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and Distribution
and Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of
the Investment Company Act pursuant to which the Fund will make payments the
Distributor in connection with the distribution and/or servicing of the shares
of that class as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on that Plan, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class. For the Distribution and
Service Plan for Class C shares, that vote was cast by the Manager as the sole
initial holder of Class C shares.
In addition, under the Plans the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. The Distributor and
the Manager may, in their sole discretion, increase or decrease the amount of
payments they make from their own resources to Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically approved
at least annually by the Trust's Board of Trustees and its Independent Trustees
by a vote cast in person at a meeting called for the purpose of voting on such
continuance. Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
No Plan may be amended to increase materially the amount of
-33-
<PAGE>
payments to be made unless such amendment is approved by shareholders of the
class affected by the amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund is required
to obtain the approval of Class B as well as Class A shareholders for a proposed
amendment to the Class A Plan that would materially increase the amount to be
paid by Class A shareholders under the Class A Plan. Such approval must be by a
"majority" of the Class A and Class B shares (as defined in the Investment
Company Act), voting separately by Class. All material amendments must be
approved by the Board and the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Trust's Board of Trustees at least quarterly for
its review, detailing the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient that
received any such payment. The report for the Class B Plan and the Class C Plan
shall also include the Distributor's distribution costs for that quarter, and
such costs for previous fiscal periods that have been carried forward, as
explained in the Prospectus and below. Those reports, including the allocations
on which they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan further
provides that while it is in effect, the selection and nomination of those
Trustees of the Fund who are not "interested persons" of the Fund is committed
to the discretion of the Independent Trustees. This does not prevent the
involvement of others in such selection and nomination if the final decision as
to any such selection or nomination is approved by a majority of the Independent
Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount, if any,
that may be determined from time to time by a majority of the Fund's Independent
Trustees. Initially, the Board of Trustees has set the fees at the maximum rate
allowed under the Plans and set no minimum amount.
For the fiscal year ended December 31, 1995 and July 31, 1996, payments
under the Class A Plan totaled $16,259 and $14,602, of which $411 and $0 were
paid by the Distributor to an affiliate. Any unreimbursed expenses incurred with
respect to Class A shares for any fiscal year by the Distributor may not be
recovered in subsequent years. Payments received by the Distributor under the
Plan for Class A shares will not be used to pay any interest expense, carrying
charge, or other financial costs, or allocation of overhead by the Distributor.
At December 31, 1995 and July 31, 1996, the Distributor had incurred
unreimbursed expenses under the Plan of $200,879 and $438,267 (equal to 3.85%
and 4.50% of the Fund's net assets represented by Class B shares on that date),
which have been carried over to the present Plan year. At December 31, 1995 and
July 31, 1996, the Distributor had incurred unreimbursed expenses under the Plan
of $843 and $2,768 (equal to 1.68% and 2.10% of the Fund's net assets
represented by Class C shares on that date), which have been carried over to the
present Plan year.
The Class B Plan and the Class C Plan allow the service fee payments to
be paid by the Distributor to Recipients in advance for the first year such
shares are outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of shares sold.
An exchange of shares does not entitle the Recipient to an advance service fee
payment. In the event Class B shares are redeemed during the first year such
shares are outstanding, the Recipient will be obligated to repay a pro rata
portion of such advance payment to the Distributor. Service fee
-34-
<PAGE>
payments by the Distributor to Recipients will be made (i) in advance for the
first year Class B shares are outstanding, following the purchase of shares, in
an amount up to 0.25% of the net asset value of the shares purchased by the
Recipient or its customers (the Board has currently set the service fee at 0.15%
per year, which amount may be increased by the Board from time to time up to the
maximum of 0.25%) and (ii) thereafter, on a quarterly basis, computed as of the
close of business each day at an annual rate of up to 0.25% of the average daily
net asset value of Class B shares held in accounts of the Recipient or its
customers. For the fiscal year ended December 31, 1995 and July 31, 1996,
payments under the Class B plan totaled $40,713 and $45,242, of which $45 and $0
were paid to an affiliate and $34,481 and $37,850, of which was retained by the
Distributor. For the fiscal year ended December 31, 1995 and July 31, 1996,
payments under the Class C plan totaled $2 and $430, all of which was retained
by the Distributor.
Although the Class B Plan and the Class C Plan permit the Distributor
to retain both the asset-based sales charges and the service fee on such shares,
or to pay Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be established from
time to time under the Class B Plan and the Class C Plan by the Board.
Initially, the Board has set no minimum holding period. All payments under the
Class B Plan are subject to the limitations imposed by the Rules of Conduct of
the National Association of Securities Dealers, Inc. on payments of asset-based
sales charges and service fees.
The Class B Plan and the Class C Plan provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. The
Distributor retains the asset-based sales charge on Class B shares. As to Class
C shares, the Distributor retains the asset-based sales charge during the first
year shares are outstanding, and pays the asset-based sales charge as an ongoing
commission to the dealer on Class C shares outstanding for a year or more. Such
payments are made to the Distributor under the Plans in recognition that the
Distributor (i) pays sales commissions to authorized brokers and dealers at the
time of sale and pays service fees, as described in the Prospectus, (ii) may
finance such commissions and/or the advance of the service fee payment to
Recipients under those Plans, or may provide such financing from its own
resources, or from an affiliate, (iii) employs personnel to support distribution
of shares, and (iv) may bear the costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders) and state
"blue sky" registration fees and certain other distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the method
of purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other person entitled
to receive compensation for selling Fund shares may receive different
compensation with
-35-
<PAGE>
respect to one class of shares than the other. The Distributor will not accept
any order for $500,000 or more of Class B shares or $1 million or more of Class
C shares on behalf of a single investor (not including dealer "street name" or
omnibus accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on such Class B and Class C shares will be
reduced by incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to any
class are allocated pro rata to the shares of each class, based on the
percentage of the net assets of such class to the Fund's total net assets, and
then equally to each outstanding share within a given class. Such general
expenses include (i) management fees, (ii) legal, bookkeeping and audit fees,
(iii) printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses, (vi)
share issuance costs, (vii) organization and start-up costs, (viii) interest,
taxes and brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to a class are
allocated equally to each outstanding share within that class. Such expenses
include (i) Distribution Plan and/or Service fees, (ii) incremental transfer and
shareholder servicing agent fees and expenses, (iii) registration fees and (iv)
shareholder meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per share of
Class A, Class B and Class C shares of the Fund are determined as of the close
of business of The New York Stock Exchange on each day that the Exchange is open
by dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class outstanding. The Exchange normally closes at 4:00
P.M., New York time, but may close earlier on some days (for example, in case of
weather emergencies or on days falling before a holiday). The Exchange's most
recent annual announcement (which is subject to change) states that it will
close on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may also
close on other days. Dealers other than Exchange members may conduct trading in
Municipal Securities on certain days on
-36-
<PAGE>
which the Exchange is closed (including weekends and holidays) or after 4:00
P.M. on a regular business day. Because the Fund's net asset value will not be
calculated on those days, the Fund's net asset value per share may be
significantly affected on such days when shareholders may not purchase or redeem
shares.
The Trust's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) long-term debt
securities having a remaining maturity in excess of 60 days are valued based on
the mean between the "bid" and "asked" prices determined by a portfolio pricing
service approved by the Fund's Board of Trustees or obtained by the Manager from
two active market makers in the security on the basis of reasonable inquiry;
(ii) debt instruments having a maturity of more than 397 days when issued, and
non-money market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are valued at the
mean between the "bid" and asked prices determined by a pricing service approved
by the Fund's Board of Trustees or obtained by the Manager from two active
market makers in the security on the basis of reasonable inquiry; (iii) money
market debt securities that had a maturity of less than 397 days when issued
that have a remaining maturity of 60 days or less are valued at cost, adjusted
for amortization of premiums and accretion of discounts; and (iv) securities
(including restricted securities) not having readily-available market quotations
are valued at fair value determined under the Board's procedures. If the Manager
is unable to locate two market makers willing to give quotes (see (i) and (ii)
above), the security may be priced by the mean between the "bid" and "asked"
prices provided by a single active market maker (which in certain cases may be
the "bid" price if no "ask" price is available.
In the case of Municipal Securities, U.S. Government securities and
corporate bonds, when last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity and other special factors
involved (such as the tax-exempt status of the interest paid by Municipal
Securities). The Manager may use pricing services approved by the Board of
Trustees to price any of the types of securities described above. The Manager
will monitor the accuracy of such pricing services, which may include comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts, calls, Interest Rate Futures and Municipal Bond Index Futures are
valued at the last sales price on the principal exchange on which they are
traded or on NASDAQ, as applicable, as determined by a pricing service approved
by the Board of Trustees or by the Manager. If there were no sales that day,
value shall be the last sale price on the preceding trading day if it is within
the spread of the closing bid and asked prices on the principal exchange or on
NASDAQ on the valuation date, or, if not, the value shall be the closing bid
price on the principal exchange or on NASDAQ on the valuation date. If the put,
call or future is not traded on an exchange or on NASDAQ, it shall be valued by
the mean between the bid and asked prices obtained by the Manager from two
active market makers (which in certain cases may be the bid price if no asked
price is available).
When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset, and
an equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the option.
In determining the Fund's gain on investments, if a call or put written by the
Fund is exercised, the proceeds are increased by the premium received. If a call
or put written by the Fund expires, the Fund
-37-
<PAGE>
has a gain in the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on whether the
premium received was more or less than the cost of the closing transaction. If
the Fund exercises a put it holds, the amount the Fund receives on its sale of
the underlying investment is reduced by the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House transfer to
buy the shares. Dividends will begin to accrue on shares purchased by the
proceeds of ACH transfers on the business day the Fund receives Federal Funds
for the purchase through the ACH system before the close of The New York Stock
Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier on
certain days. If Federal Funds are received on a business day after the close of
the Exchange, the shares will be purchased and dividends will begin to accrue on
the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, grandparents, parents, parents-in-law, brothers and sisters,
sons- and daughters-in-law, a sibling's spouse and a spouse's siblings, aunts,
uncles, nieces and nephews.
-38-
<PAGE>
The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer International Growth Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Bond Fund for Growth
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Rochester Portfolio Series - Limited-Term New York Municipal Fund*
Rochester Fund Municipals*
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
-39-
<PAGE>
* Shares of the Fund are not presently exchangeable for shares of these funds.
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund shares
may be subject to a contingent deferred sales charge).
Letters of Intent. A Letter of Intent (referred to as a "Letter") is
an investor's statement in writing to the Distributor of the intention to
purchase Class A shares or Class A and Class B shares of the Fund (and other
Oppenheimer funds) during a 13-month period (the "Letter of Intent period"),
which may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The Letter states the investor's intention to make
the aggregate amount of purchases of shares which, when added to the investor's
holdings of shares of those funds, will equal or exceed the amount specified in
the Letter. Purchases made by reinvestment of dividends or distributions of
capital gains and purchases made at net asset value without sales charge do not
count toward satisfying the amount of the Letter. A Letter enables an investor
to count the Class A and Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge) that
applies to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility
-40-
<PAGE>
of the dealer of record and/or the investor to advise the Distributor about the
Letter in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen- month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If such difference in sales charges is not paid within twenty days after
a request from the Distributor or the dealer, the Distributor will, within sixty
days of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the redemption
proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A or Class B shares acquired
in exchange for either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other OppenheimerFunds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
-41-
<PAGE>
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply to shares
purchased by Asset Builder payments. An application should be obtained from the
Distributor, completed and returned, and a prospectus of the selected fund(s)
should be obtained from the Distributor or your financial advisor before
initiating Asset Builder payments. The amount of the Asset Builder investment
may be changed or the automatic investments may be terminated at any time by
writing to the Transfer Agent. A reasonable period (approximately 15 days) is
required after the Transfer Agent's receipt of such instructions to implement
them. The Fund reserves the right to amend, suspend, or discontinue offering
such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
the Bank or the Fund's Custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
Involuntary Redemptions. The Trust's Board of Trustees has the right
to cause the involuntary redemption of the Fund's shares held in any account if
the aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
-42-
<PAGE>
Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Trust may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Trust has
elected to be governed by Rule 18f-1 under the Investment Company Act, pursuant
to which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchase subject to an initial sales charge or Class A contingent deferred sales
charge, or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without sales
charge only in Class A shares of the Fund or any of the other Oppenheimer funds
into which shares of the Fund are exchangeable as described in "How to Exchange
Shares" below, at the net asset value next computed after the Transfer Agent
receives the reinvestment order. This reinvestment does not apply to Class C
shares. The shareholder must ask the Distributor for that privilege at the time
of reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption, some
or all of the loss may not be tax deductible, depending on the timing and amount
of the reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B or the Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase
-43-
<PAGE>
price per share will be the net asset value next computed after the Distributor
receives an order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from a dealer or broker after the close of The New
York Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from its
customers prior to the time the Exchange closes (normally, that is 4:00 P.M. but
may be earlier on some days) and the order was transmitted to and received by
the Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of a payment on the date requested and reserves the right to
amend, suspend or discontinue offering such plans at any time without prior
notice. Because of the sales charge assessed on Class A share purchases,
shareholders should not make regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B and Class C shareholders
should not establish withdrawal plans because of the imposition of the
contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in the Prospectus under
"Waivers of Class B and Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below and
in the provisions of the OppenheimerFunds Application relating to such Plans, as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed instructions)
to exchange a pre-determined amount of shares of the Fund for shares (of the
same class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and thereafter shares acquired with reinvested dividends and
capital gains distributions will be redeemed next, followed by shares acquired
with a sales charge, to the extent necessary to make withdrawal payments.
-44-
<PAGE>
Depending upon the amount withdrawn, the investor's principal may be depleted.
Payments made under such plans should not be considered as a yield or income on
your investment. It may not be desirable to purchase additional shares of Class
A shares while maintaining automatic withdrawals because of the sales charges
that apply to purchases when made. Accordingly, a shareholder normally may not
maintain an Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the
account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the Transfer
Agent upon receiving directions to that effect from the Fund. The Transfer Agent
will also terminate a Plan upon receipt of evidence satisfactory to it of the
death or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend-reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated form.
Upon written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
-45-
<PAGE>
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be exchanged only for
shares of the same class of other Oppenheimer funds. Shares of the Oppenheimer
funds that have a single class without a class designation are deemed "Class A"
shares for this purpose. All of the Oppenheimer funds offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust, Centennial
America Fund, L.P., and Daily Cash Accumulation Fund, Inc., which only offer
Class A shares and Oppenheimer Main Street California Municipal Fund which only
offers Class A and Class B shares, (Class B and Class C shares of Oppenheimer
Cash Reserves are generally available only by exchange from the same class of
shares of other Oppenheimer funds or through OppenheimerFunds sponsored 401(k)
plans). A current list showing which funds offer which classes can be obtained
by calling the Distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M
shares of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds, including Rochester Fund
Municipals and Limited Term New York Municipal Fund. Class A shares of Rochester
Fund Municipals or Limited Term New York Municipal Fund acquired on the exchange
of Class M shares of Oppenheimer Bond Fund for Growth may be exchanged for Class
M shares of that fund. For accounts of Oppenheimer Bond Fund for Growth
established after March 8, 1996, Class M shares may be exchanged for Class A
shares of other Oppenheimer funds except Rochester Fund Municipals and Limited
Term New York Municipals. Exchanges to Class M shares of Oppenheimer Bond Fund
for Growth are permitted from Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves that were acquired by exchange from Class M
shares. Otherwise no exchanges of any class of any Oppenheimer fund into Class M
shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months prior
to that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds (except Oppenheimer Cash
Reserves) or from any unit investment trust for which
-46-
<PAGE>
reinvestment arrangements have been made with the Distributor may be exchanged
at net asset value for shares of any of the Oppenheimer funds. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus). The Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within six years of the initial
purchase of the exchanged Class B shares. The Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they are redeemed
within 12 months of the initial purchase of the exchanged Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or Class C contingent deferred sales charge will be followed in
determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
Class must specify whether they intend to exchange Class A, Class B or Class C
shares.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans and Automatic Withdrawal Plans will be switched to the new account unless
the Transfer Agent is instructed otherwise. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her
-47-
<PAGE>
investment and should be aware of the tax consequences of an exchange. For
federal income tax purposes, an exchange transaction is treated as a redemption
of shares of one fund and a purchase of shares of another. "Reinvestment
Privilege," above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the Transfer
Agent are unable to provide investment, tax or legal advice to a shareholder in
connection with an exchange request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value, or as otherwise
described in "How to Buy Shares." Daily dividends on newly purchased shares will
not be declared or paid until such time as Federal Funds (funds credited to a
member bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Dividends
will be declared on shares repurchased by a dealer or broker for three business
days following the trade date (i.e., to and including the day prior to
settlement of the repurchase). If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will be paid
together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money Market
Fund, Inc., as promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio, and
expenses borne by the Fund or borne separately by a class, as described in
"Alternative Sales Arrangements -- Class A, Class B and Class C Shares," above.
Dividends are calculated in the same manner, at the same time and on the same
day for shares of each class. However, dividends on Class B and Class C shares
are expected to be lower as a result of the asset-based sales charge on Class B
and Class C shares, and Class B and Class C dividends will also differ in amount
as a consequence of any difference in net asset value between Class A, Class B
and Class C shares.
Distributions may be made annually in December out of any net
short-term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from hedging
instruments and closing purchase transactions realized in the twelve months
ending on October 31 of the current year. Any difference between the net asset
values of the classes of shares will be reflected in such distributions.
Distributions from net short-term capital gains are taxable to shareholders as
ordinary income and when paid by the Fund are considered "dividends." The Fund
may make a supplemental distribution of capital gains and ordinary income
following the end of its fiscal year. Long-term capital gains distributions, if
any are taxable as long-term capital gains whether received in cash or
reinvested and regardless of how long Fund shares have been held. There is no
fixed dividend rate (although the Fund has a targeted dividend rate for Class A
shares) and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
Tax Status of the Fund's Dividends and Distributions. The Fund intends to
qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt- interest dividends
which are derived from net investment income earned by the Fund on Municipal
-48-
<PAGE>
Securities will be excludable from gross income of shareholders for Federal
income tax purposes. Net investment income includes the allocation of amounts of
income from the Municipal Securities in the Fund's portfolio which are free from
Federal income taxes. This allocation will be made by the use of one designated
percentage applied uniformly to all income dividends made during the Fund's tax
year. Such designation will normally be made following the end of each fiscal
year as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of the
Fund's income that was tax-exempt for a given period. All of the Fund's
dividends (excluding capital gains distributions) paid during 1995 were exempt
from Federal and New Jersey income taxes. A portion of the exempt-interest
dividends paid by the Fund may be an item of tax preference for shareholders
subject to the alternative minimum tax. The amount of any dividends attributable
to tax preference items for purposes of the alternative minimum tax will be
identified when tax information is distributed by the Fund. 12% of the Fund's
dividends (excluding distributions) paid during 1995 were a tax preference item
for shareholders subject to the alternative minimum tax.
A shareholder receiving a dividend from income earned by the Fund from
one or more of: (1) certain taxable temporary investments (such as certificates
of deposit, repurchase agreements, commercial paper and obligations of the U.S.
government, its agencies and instrumentalities); (2) income from securities
loans; (3) income or gains from options or Futures; or (4) an excess of net
short-term capital gain over net long-term capital loss from the Fund, treats
the dividend as a receipt of either ordinary income or long-term capital gain in
the computation of gross income, regardless of whether the dividend is
reinvested. The Fund's dividends will not be eligible for the dividends-received
deduction for corporations. Shareholders receiving Social Security benefits
should be aware that exempt-interest dividends are a factor in determining
whether such benefits are subject to Federal income tax. Losses realized by
shareholders on the redemption of Fund shares within six months of purchase
(which period may be shortened by regulation) will be disallowed for Federal
income tax purposes to the extent of exempt-interest dividends received on such
shares.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year and intends to qualify in future
years, but reserves the right not to qualify. The Internal Revenue Code contains
a number of complex tests to determine whether the Fund will qualify, and the
Fund might not meet those tests in a particular year. For example, if the Fund
derives 30% or more of its gross income from the sale of securities held less
than three months, it may fail to qualify (see "Tax Aspects of Covered Calls and
Hedging Instruments," above). If it does not qualify, the Fund will be treated
for tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. The Manager
might determine in a particular year that it might be in the best interest of
shareholders for the Fund not to make distributions at the required levels and
to pay the excise tax on the undistributed amounts. That would reduce the amount
of income or capital gains available for distribution to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund) of
a zero coupon security accrue as income each year a portion of the discount at
which the security was purchased even though
-49-
<PAGE>
the Fund receives no interest payment in cash on the security during the year.
As an investment company, the Fund must pay out substantially all of its net
investment income each year or be subject to excise taxes, as described above.
Accordingly, when the Fund holds zero coupon securities, it may be required to
pay out as an income distribution each year an amount which is greater than the
total amount of cash interest the Fund actually received during that year. Such
distributions will be made from the cash assets of the Fund or by liquidation of
portfolio securities, if necessary. The Fund may realize a gain or loss from
such sales. In the event the Fund realizes net capital gains from such
transactions, its shareholders may receive a larger capital gain distribution
than they would have had in the absence of such transactions.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. Not all of the Oppenheimer funds
offer Class B and Class C shares. The names of the Funds that offer Class B
shares can be obtained by calling the Distributor at 1-800-525-7048. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
either have an existing account in the fund selected for reinvestment or must
obtain a prospectus for that fund and an application from the Distributor to
establish an account. The investment will be made at the net asset value per
share in effect at the close of business on the payable date of the dividend or
distribution. Dividends and/or distributions from certain of the
OppenheimerFunds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Custodian of the assets of the Fund is Citibank, N.A. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the Manager and
the Custodian have been and will continue to be unrelated to and unaffected by
the relationship between the Fund and the Custodian. It will be the practice of
the Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates. The
Fund's cash balances with the Custodian in excess of $100,000 are not protected
by Federal Deposit Insurance. Such uninsured balances may at times be
substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager and its affiliates.
-50-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Multi-State
Tax-Exempt Trust:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer New Jersey Tax-Exempt Fund (a series of
Oppenheimer Multi-State Tax-Exempt Trust) as of July 31, 1996, and the
statements of operations for the seven month period then ended and the year
ended December 31, 1995, the statements of changes in net assets for the
seven month period ended July 31, 1996 and the years ended December 31,
1995 and 1994, and the financial highlights for the seven month period
ended July 31, 1996, the year ended December 31, 1995 and the period from
March 1, 1994 (commencement of operations) to December 31, 1994. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 1996, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed
other auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Oppenheimer New Jersey Tax-Exempt Fund as of July 31, 1996, the results
of its operations for the seven month period then ended and the year ended
December 31, 1995, the changes in its net assets for the seven month period
ended July 31, 1996 and the years ended December 31, 1995 and 1994, and the
financial highlights for the seven month period ended July 31, 1996, the
year ended December 31, 1995 and the period from March 1, 1994
(commencement of operations) to December 31, 1994, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
August 21, 1996
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JULY 31, 1996
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES - 98.1%
- ------------------------------------------------------------------------------------------------------------------
NEW JERSEY - 82.4%
-------------------------------------------------------------------------------------------------------------
<PAGE>
<S> <C> <C> <C> <C>
Bayonne, New Jersey General Obligation Bonds,
FGIC Insured, 6%, 5/1/13 Aaa/AAA/AAA $ 100,000 $ 103,496
-------------------------------------------------------------------------------------------------------------
Bergen County, New Jersey Utilities Authority
Water Pollution Control Revenue Bonds, Series A,
FGIC Insured, 6.50%, 12/15/12 Aaa/AAA/AAA 400,000 427,710
-------------------------------------------------------------------------------------------------------------
Camden County, New Jersey Utilities Authority
Sewer Revenue Bonds:
Prerefunded, FGIC Insured, 8.125%, 12/1/07 Aaa/AAA 505,000 542,047
Unrefunded Balance,
FGIC Insured, 8.125%, 12/1/07 Aaa/AAA 245,000 262,074
-------------------------------------------------------------------------------------------------------------
Delaware River Joint Toll Bridge Commission
Revenue Bonds, Interstate 78, Prerefunded,
FGIC Insured, 7.80%, 7/1/18 Aaa/AAA/AAA 175,000 189,912
-------------------------------------------------------------------------------------------------------------
Delaware River Port Authority, Delaware
River Bridges Revenue Refunding Bonds,
AMBAC Insured, 7.375%, 1/1/07 Aaa/AAA/AAA 750,000 809,147
-------------------------------------------------------------------------------------------------------------
Essex County, New Jersey Improvement Authority
Lease Revenue Bonds, Prerefunded,
AMBAC Insured, 7%, 12/1/20 Aaa/AAA/AAA 150,000 166,511
-------------------------------------------------------------------------------------------------------------
Hoboken, Union City & Weehawken, New Jersey Sewer
Authority Revenue Refunding Bonds, MBIA Insured,
6.20%, 8/1/19 Aaa/AAA 85,000 88,253
-------------------------------------------------------------------------------------------------------------
Hudson County, New Jersey Certificates of
Participation, Correctional Facility Improvements,
Prerefunded, BIG Insured, 7.60%, 12/1/21(1) Aaa/AAA 2,500,000 2,735,745
-------------------------------------------------------------------------------------------------------------
Hudson County, New Jersey Utilities Authority
System Revenue Bonds, Prerefunded,
11.875%, 7/1/06 Aaa/AAA 520,000 665,311
-------------------------------------------------------------------------------------------------------------
Lacey Municipal Utilities Authority of New Jersey
Water Revenue Bonds, Prerefunded,
BIG Insured, 7%, 12/1/16 Aaa/AAA 500,000 548,670
-------------------------------------------------------------------------------------------------------------
Mercer County, New Jersey Improvement Authority
Revenue Bonds, Justice Complex Project,
6.05%, 1/1/11 Aa/AA- 250,000 251,056
-------------------------------------------------------------------------------------------------------------
New Brunswick, New Jersey Parking Authority
Revenue Refunding Bonds, Series A,
FGIC Insured, 6.50%, 9/1/19 Aaa/AAA 150,000 159,674
-------------------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority:
Pollution Control Revenue Bonds, Public Service
Electric & Gas Co. Project, Series A,
MBIA Insured, 6.40%, 5/1/32 Aaa/AAA 500,000 530,071
Water Facilities Revenue Bonds, American
Water Co., Inc. Project, Series A, FGIC
Insured, 6.875%, 11/1/34 Aaa/AAA/AAA 500,000 538,042
-------------------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities
Financing Authority Revenue Bonds:
Centrastate Medical Center, Series A,
AMBAC Insured, 6%, 7/1/21 Aaa/AAA/AAA 100,000 101,804
Columbus Hospital, Series A, 7.50%, 7/1/21 Baa/BB- 1,000,000 1,045,872
Southern Ocean County Hospital,
Series A, 6.25%, 7/1/23 Baa/NR/BBB 1,000,000 990,932
St. Josephs Hospital & Medical Center,
Series A, 6%, 7/1/26 NR/AAA 750,000 751,853
-------------------------------------------------------------------------------------------------------------
New Jersey Sports & Exposition Authority Revenue
Bonds, Convention Center Luxury Tax, Series A,
MBIA Insured, 6.25%, 7/1/20 Aaa/AAA 80,000 83,284
</TABLE>
5 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
NEW JERSEY (CONTINUED)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New Jersey State General Obligation Bonds,
Series D, 8%, 2/15/07 Aa1/AA+/AA+ $ 400,000 $ 493,657
-------------------------------------------------------------------------------------------------------------
New Jersey State Housing & Mtg. Finance
Agency Revenue Bonds:
Home Buyer, Series J,
MBIA Insured, 6.20%, 10/1/25 Aaa/AAA 200,000 200,989
Refunding, Series 1, 6.70%, 11/1/28 NR/A+ 150,000 155,159
-------------------------------------------------------------------------------------------------------------
New Jersey State Turnpike Authority Revenue
Refunding Bonds, Series C, 6.50%, 1/1/16 Baa1/BBB+/A- 950,000 1,027,974
-------------------------------------------------------------------------------------------------------------
New Jersey Wastewater Treatment Trust
Revenue Refunding Bonds, Series A,
MBIA Insured, 7%, 9/1/07 Aaa/AAA 810,000 927,188
-------------------------------------------------------------------------------------------------------------
Ocean County, New Jersey General
Obligation Bonds:
7.40%, 10/15/00 Aa/AA-/AA 600,000 664,726
7.50%, 10/15/01 Aa/AA-/AA 500,000 564,671
-------------------------------------------------------------------------------------------------------------
Pennsauken Township, New Jersey Board of
Education Certificates of Participation,
BIG Insured, 7.70%, 7/15/09 Aaa/AAA 500,000 549,498
-------------------------------------------------------------------------------------------------------------
Port Authority of New York & New Jersey
Consolidated Revenue Bonds:
Ninety-Fourth Series, 6%, 12/1/14 A1/AA-/AA- 200,000 204,932
Sixty-Ninth Series, 7.125%, 6/1/25 A1/AA-/AA- 600,000 650,748
-------------------------------------------------------------------------------------------------------------
Port Authority of New York & New Jersey Special
Obligation Revenue Refunding Bonds,
KIAC-4 Project, 5th
Installment, 6.75%, 10/1/19 NR/NR 900,000 909,562
-------------------------------------------------------------------------------------------------------------
Sussex County, New Jersey General
Obligation Bonds, General Improvement,
AMBAC Insured, 6%, 4/1/07 Aaa/AAA/AAA 135,000 142,357
------------
17,482,925
<PAGE>
- ------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS - 15.7%
-------------------------------------------------------------------------------------------------------------
Guam Power Authority Revenue Bonds,
Series A, 6.30%, 10/1/22 NR/BBB 185,000 185,216
-------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Aqueduct & Sewer
Authority Revenue Bonds,
Escrowed to Maturity, 10.25%, 7/1/09 Aaa/AAA 460,000 637,016
-------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Bonds:
Series Y, 5%, 7/1/36 Baa1/A 1,000,000 855,659
Refunding, Series V, 6.625%, 7/1/12 Baa1/A 300,000 320,491
-------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority
Revenue Bonds, Unrefunded Balance,
Series O, 7.125%, 7/1/14 Baa1/A- 540,000 576,633
-------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Tourist, Educational,
Medical & Environmental Control Facilities
Revenue Bonds, Polytechnic University Project,
Series A, 6.50%, 8/1/24 NR/BBB- 415,000 418,640
-------------------------------------------------------------------------------------------------------------
Virgin Islands Housing Finance Authority
Single Family Revenue Refunding Bonds,
Series A, 6.50%, 3/1/25 NR/AAA 350,000 352,246
--------------
3,345,901
--------------
Total Municipal Bonds and Notes (Cost $20,646,883) 20,828,826
6 Oppenheimer New Jersey Tax-Exempt Fund
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
SHORT-TERM TAX-EXEMPT OBLIGATIONS - 3.3%
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
New Jersey Economic Development Authority
Manufacturing Facilities Revenue Bonds, VPR Commerce
Center Project, 3.75%, 8/1/96(2) (Cost $700,000) $ 700,000 $ 700,000
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $21,346,883) 101.4% 21,528,826
------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.4) (302,470)
------ ------------
NET ASSETS 100.0% $21,226,356
====== ============
</TABLE>
1. Securities with an aggregate market value of $2,735,745 are held in
collateralized accounts to cover initial margin requirements on open
futures sales contracts. See Note 5 of Notes to Financial Statements.
2. Floating or variable rate obligation maturing in more than one year. The
interest rate, which is based on specific, or an index of, market interest
rates, is subject to change periodically and is the effective rate on July 31,
1996. This instrument may also have a demand feature which allows the recovery
of principal at any time, or at specified intervals not exceeding one year, on
up to 30 days' notice. Maturity date shown represent effective maturity based on
a variable rate and, if applicable, demand feature.
As of June 30, 1996, securities subject to the alternative minimum tax amounted
to $2,530,910 or 11.92% of the Fund's net assets.
Distribution of investments by industry, as a percentage of total investments at
value, is as follows:
<TABLE>
<CAPTION>
INDUSTRY MARKET VALUE PERCENT
-------- ------------ -------
<S> <C> <C>
Utilities:
Water $ 2,441,610 11.3%
Sewer 1,529,389 7.1
Electric 1,427,160 6.6
General Obligation Bonds 4,704,652 21.8
Transportation 4,218,537 19.6
Hospitals 2,890,460 13.4
Lease/Rental 1,327,129 6.2
Education 968,139 4.5
Housing 708,394 3.3
Letters of Credit 700,000 3.3
Pollution Control 530,072 2.5
Special Tax Bonds 83,284 0.4
--------------- ------
$ 21,528,826 100.0%
=============== ======
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
<PAGE>
ASSETS Investments, at value (cost $21,346,883) - see accompanying statement $21,528,826
--------------------------------------------------------------------------------------------------
Cash 144,126
--------------------------------------------------------------------------------------------------
Receivables:
Investments sold 2,941,224
Interest 263,263
Shares of beneficial interest sold 115,561
Daily variation on futures contracts - Note 5 7,188
--------------------------------------------------------------------------------------------------
Other 3,718
------------------
Total assets 25,003,906
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES Payables and other liabilities:
Investments purchased 3,637,238
Dividends 60,520
Trustees' fees 38,835
Shareholder reports 11,389
Shares of beneficial interest redeemed 11,145
Distribution and service plan fees 2,542
Other 15,881
------------------
Total liabilities 3,777,550
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $21,226,356
------------------
------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $21,030,051
NET ASSETS --------------------------------------------------------------------------------------------------
Overdistributed net investment income (17,852)
--------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (7,162)
--------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments - Notes 3 and 5 221,319
------------------
Net assets $21,226,356
------------------
------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $11,354,321 and 1,023,211 shares of beneficial interest outstanding) $11.10
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $11.65
--------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering
price per share (based on net assets of
$9,740,383 and 878,192 shares of beneficial
interest outstanding) $11.09
--------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering
price per share (based on net assets of $131,652
and 11,866 shares of beneficial interest
outstanding) $11.09
See accompanying Notes to Financial Statements.
</TABLE>
8 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
SEVEN
MONTHS ENDED YEAR ENDED
JULY 31, 1996(1) DECEMBER 31, 1995
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME Interest $671,686 $667,864
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees - Note 4 62,334 63,400
----------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A 14,602 16,259
Class B 45,242 40,713
Class C 430 2
----------------------------------------------------------------------------------------------------
Trustees' fees and expenses - Note 1 31,695 24,854
----------------------------------------------------------------------------------------------------
Shareholder reports 20,148 24,819
----------------------------------------------------------------------------------------------------
Legal and auditing fees 14,339 22,706
----------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4 8,334 12,207
----------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 1,070 1,572
Class B 1,635 650
Class C 46 --
----------------------------------------------------------------------------------------------------
Insurance expenses 2,669 5,014
----------------------------------------------------------------------------------------------------
Custodian fees and expenses 2,242 313
----------------------------------------------------------------------------------------------------
Other 1,374 3,725
-------------------------
Total expenses 206,160 216,234
Less expenses paid indirectly - Note 4 (2,102) --
Less reimbursement and assumption of
expenses by OppenheimerFunds, Inc. - Note 4 (67,889) (102,282)
-------------------------
Net expenses 136,169 113,952
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 535,517 553,912
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED AND Net realized gain (loss) on:
UNREALIZED GAIN (LOSS) Investments (67,460) 14,709
<PAGE>
Closing of futures contracts 45,425 --
--------------------------
Net realized gain (loss) (22,035) 14,709
-------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (185,048) 698,858
--------------------------
Net realized and unrealized gain (loss) (207,083) 713,567
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $328,434 $1,267,479
==========================
</TABLE>
1. The Fund changed its fiscal year end from
December 31 to July 31.
See accompanying Notes to Financial Statements.
9 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SEVEN MONTHS
ENDED JULY 31, YEAR ENDED DECEMBER 31,
1996(2) 1995 1994(1)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS Net investment income $535,517 $553,912 $190,459
-----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (22,035) 14,709 (5,176)
-----------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation (185,048) 698,858 (292,491)
--------------------------------------------------
Net increase (decrease)
in net assets resulting from operations 328,434 1,267,479 (107,208)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS Class A (320,924) (359,044) (116,609)
TO SHAREHOLDERS Class B (212,582) (195,257) (73,850)
Class C (2,007) (18) --
-----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (7,650) --
Class B -- (4,513) --
Class C -- (1) --
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL Net increase in net assets resulting from INTEREST beneficial
interest transactions - Note 2:
TRANSACTIONS Class A 2,672,488 4,506,035 4,048,476
Class B 4,601,865 1,958,383 3,111,768
Class C 81,113 49,978 --
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase 7,148,387 7,215,392 6,862,577
-----------------------------------------------------------------------------------------------------------------
Beginning of period 14,077,969 6,862,577 --
--------------------------------------------------
End of period [including undistributed (overdistributed) net
investment income of $(17,852), $(4) and $403, respectively] $21,226,356 $14,077,969 $6,862,577
==================================================
</TABLE>
1. For the period from March 1, 1994
(commencement of operations) to December 31, 1994.
2. The Fund changed its fiscal year end from December 31
to July 31.
See accompanying Notes to Financial Statements.
10 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
------------------------------------ -------------------------------------
SEVEN MONTHS SEVEN MONTHS
ENDED ENDED
JULY 31, YEAR ENDED DECEMBER 31, JULY 31, YEAR ENDED DECEMBER 31,
1996(2) 1995 1994(3) 1996(2) 1995 1994(3)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.26 $10.41 $11.43 $11.25 $10.40 $11.43
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 .61 .49 .31 .53 .41
Net realized and unrealized gain (loss) (.16) .86 (1.02) (.16) .86 (1.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .20 1.47 (.53) .15 1.39 (.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment income (.36) (.61) (.49) (.31) (.53) (.42)
Distributions from net realized gain -- (.01) -- -- (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.36) (.62) (.49) (.31) (.54) (.42)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.10 $11.26 $10.41 $11.09 $11.25 $10.40
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 1.80% 14.42% (4.63)% 1.34% 13.59% (5.39)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $11,354 $8,806 $3,877 $9,740 $5,222 $2,986
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $10,036 $6,504 $2,506 $7,774 $4,080 $1,841
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.49%(6) 5.51% 5.57%(6) 4.70%(6) 4.79% 4.76%(6)
Expenses, before reimbursement and voluntary
assumption by the Manager or Distributor(7) 1.64%(6) 1.75% 1.46%(6) 2.40%(6) 2.49% 2.29%(6)
Expenses, net of reimbursement and voluntary
assumption by the Manager or Distributor 0.97%(6) 0.80% 0.31%(6) 1.74%(6) 1.53% 1.14%(6)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 33.1% 7.4% 17.3% 33.1% 7.4% 17.3%
</TABLE>
<TABLE>
<CAPTION>
-------------------------
FINANCIAL HIGHLIGHTS
CLASS C
-------------------------
SEVEN MONTHS
ENDED PERIOD ENDED
JULY 31, DECEMBER 31,
1996(2) 1995(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
<S> <C> <C>
Net asset value, beginning of period $11.25 $11.01
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .30 .19
Net realized and unrealized gain (loss) (.16) .25
- --------------------------------------------------------------------------------
Total income (loss) from investment
operations .14 .44
- --------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment income (.30) (.19)
Distributions from net realized gain -- (.01)
- --------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.30) (.20)
- --------------------------------------------------------------------------------
Net asset value, end of period $11.09 $11.25
================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 1.29% 4.07%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $132 $50
- --------------------------------------------------------------------------------
Average net assets (in thousands) $74 $3
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.66%(6) --(5)
Expenses, before reimbursement and voluntary
assumption by the Manager or Distributor(7) 2.48%(6) --(5)
Expenses, net of reimbursement and voluntary
assumption by the Manager or Distributor 1.81%(6) --(5)
- --------------------------------------------------------------------------------
Portfolio turnover rate(8) 33.1% 7.4%
</TABLE>
1. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year end from December 31 to July 31.
3. For the period from March 1, 1994 (commencement of operations) to December
31, 1994.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year. 5. Ratios
during this period would not be indicative of future results.
6. Annualized.
7. Beginning in fiscal 1995, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
8. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended July 31, 1996 were $13,014,523 and $5,699,401, respectively. See
accompanying Notes to Financial Statements.
11 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer New Jersey Tax-Exempt Fund (the Fund) is a separate series of
Oppenheimer Multi-State Tax-Exempt Trust, a non-diversified, open-end
management investment company registered under the Investment Company Act
of 1940, as amended. On June 6, 1996, the Board of Trustees elected to
change the fiscal year end of the Fund from December 31 to July 31.
Accordingly, these financial statements include information for the seven
month period from January 1, 1996 to July 31, 1996. The Fund's investment
objective is to seek as high a level of current income exempt from federal
and New Jersey income taxes for individual investors that is consistent
with preservation of capital. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and
Class C shares. Class A shares are sold with a front-end sales charge.
Class B and Class C shares may be subject to a contingent deferred sales
charge. All classes of shares have identical rights to earnings, assets and
voting privileges, except that each class has its own distribution and/or
service plan, expenses directly attributable to a particular class and
exclusive voting rights with respect to matters affecting a single class.
Class B shares will automatically convert to Class A shares six years after
the date of purchase. The following is a summary of significant accounting
policies consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted securities
for which such information is regularly reported are valued at the last
sale price of the day or, in the absence of sales, at values based on the
closing bid or asked price or the last sale price on the prior trading day.
Long-term and short-term "non-money market" debt securities are valued by a
portfolio pricing service approved by the Board of Trustees. Such
securities which cannot be valued by the approved portfolio pricing service
are valued using dealer-supplied valuations provided the Manager is
satisfied that the firm rendering the quotes is reliable and that the
quotes reflect current market value, or are valued under consistently
applied procedures established by the Board of Trustees to determine fair
value in good faith. Short-term "money market type" debt securities having
a remaining maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to maturity of any
<PAGE>
premium or discount.
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
FEDERAL TAXES. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement
plan for the Fund's independent trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During
the seven months ended July 31, 1996, a provision of $27,570 was made for
the Fund's projected benefit obligations, and payments of $1,011 were made
to retired trustees, resulting in an accumulated liability of $38,835 at
July 31, 1996.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment
income each day the New York Stock Exchange is open for business and pay
such dividends monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes primarily because of premium amortization for tax purposes.
The character of the distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gain (loss) was
recorded by the Fund.
12 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
During the seven months ended July 31, 1996, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during
the seven months ended July 31, 1996, amounts have been reclassified to
reflect a decrease in paid-in capital of $55, a decrease in undistributed
net investment income of $17,852, and a decrease in accumulated net
realized loss on investments of $17,907.
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Original issue discount on
securities purchased is amortized over the life of the respective
securities, in accordance with federal income tax requirements. For bonds
acquired after April 30, 1993, on disposition or maturity, taxable ordinary
income is recognized to the extent of the lesser of gain or market discount
that would have accrued over the holding period. Realized gains and losses
on investments and unrealized appreciation and depreciation are determined
on an identified cost basis, which is the same basis used for federal
income tax purposes. The Fund concentrates its investments in New Jersey
and, therefore, may have more credit risks related to the economic
conditions of New Jersey than a portfolio with a broader geographical
diversification.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED JULY 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996(3) 1995(2) 1994(1)
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Class A:
<S> <C> <C> <C> <C> <C> <C>
Sold 325,900 $3,619,573 491,477 $ 5,411,078 447,660 $4,853,160
Dividends reinvested 19,711 217,924 21,117 233,177 6,784 72,067
Redeemed (104,674) (1,165,009) (102,930) (1,138,220) (81,834) (876,751)
--------- ----------- ---------- ------------ -------- -----------
Net increase 240,937 $2,672,488 409,664 $ 4,506,035 372,610 $4,048,476
========= =========== ========== ============ ======== ==========
Class B:
Sold 458,042 $5,089,081 257,922 $ 2,845,886 294,677 $3,191,135
Dividends reinvested 12,354 136,326 11,729 129,351 4,335 45,898
Redeemed (56,298) (623,542) (92,736) (1,016,854) (11,833) (125,265)
--------- ----------- ---------- ------------ -------- -----------
Net increase 414,098 $4,601,865 176,915 $ 1,958,383 287,179 $3,111,768
========= =========== ========== ============ ======== ==========
Class C:
Sold 11,763 $ 130,464 4,551 $ 51,000 -- $ --
Dividends reinvested 144 1,592 -- -- -- --
Redeemed (4,501) (50,943) (91) (1,022) -- --
--------- ----------- ---------- ------------ -------- ----------
Net increase 7,406 $ 81,113 4,460 $ 49,978 -- $ --
========= =========== ========== ============ ======== ==========
<FN>
(1)For the period from March 1, 1994 (commencement of operations) to December
31, 1994 for both Class A and Class B shares.
(2)For the year ended December 31, 1995 for Class A and Class B shares, and for
the period from August 29, 1995(inception of offering), to December 31, 1995,
for Class C shares.
(3)The Fund changed its fiscal year end from December 31 to July 31.
</FN>
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At July 31, 1996, net unrealized appreciation on investments of $181,943
was composed of gross appreciation of $320,102, and gross depreciation of
$138,159.
13 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
<PAGE>
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of 0.60%
on the first $200 million of net assets, 0.55% on the next $100 million,
0.50% on the next $200 million, 0.45% on the next $250 million, 0.40% on
the next $250 million and 0.35% on net assets in excess of $1 billion. The
Manager has agreed to assume Fund expenses (with specified exceptions) in
excess of the most stringent applicable regulatory limit on Fund expenses.
In addition, the Manager has voluntarily undertaken to assume Fund expenses
to the level needed to maintain a stable dividend.
For the seven months ended July 31, 1996, commissions (sales charges paid
by investors) on sales of Class A shares totaled $104,007, of which $19,481
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of
the Manager, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's
Class B and Class C shares totaled $196,077 and $1,174, of which $4,261 was
paid to an affiliated broker/dealer for Class B shares. During the seven
months ended July 31, 1996, OFDI received contingent deferred sales charges
of $13,422 upon redemption of Class B shares as reimbursement for sales
commissions advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer
and shareholder servicing agent for the Fund, and for other registered
investment companies. OFS's total costs of providing such services are
allocated ratably to these companies.
Expenses paid indirectly represent a reduction of custodian fees for
earnings on cash balances maintained by the Fund.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service
and maintenance of accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate that may not exceed .25% (voluntarily reduced
to 0.15% by the Fund's Board) of the average annual net assets of Class A
shares of the Fund. OFDI uses the service fee to reimburse brokers,
dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold
Class A shares.
The Fund has adopted a reimbursement type Distribution and Service Plan for
Class B shares to reimburse OFDI for its services and costs in distributing
Class B shares and servicing accounts. Under the Plan, the Fund pays OFDI
an annual asset-based sales charge of 0.75% per year on Class B shares that
are outstanding for 6 years or less. OFDI also receives a service fee of
0.25% (voluntarily reduced to 0.15% by the Fund's Board) per year to
reimburse dealers for providing personal services for accounts that hold
Class B shares. Both fees are computed on the average annual net assets of
Class B shares, determined as of the close of each regular business day. If
the Plan is terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge to OFDI for
certain expenses it incurred before the Plan was terminated. During the
seven months ended July 31, 1996, OFDI retained $37,850 as reimbursement
for Class B sales commissions and service fee advances, as well as
financing costs. As of July 31, 1996, OFDI had incurred unreimbursed
expenses of $438,267 for Class B.
The Fund has adopted a compensation type Distribution and Service Plan for
Class C shares to compensate OFDI for its services and costs in
distributing Class C shares and servicing accounts. Under the Plan, the
Fund pays OFDI an annual asset-based sales charge of 0.75% per year on
Class C shares. OFDI also receives a service fee of 0.25% (voluntarily
reduced to 0.15% by the Fund's Board) per year to compensate dealers for
providing personal services for accounts that hold Class C shares. Both
fees are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. If the Plan is
terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated. As of July 31, 1996,
OFDI had incurred unreimbursed expenses of $2,768 for Class C.
5. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates or for purposes of
duration management. The Fund may also buy or write put or call options on
these futures contracts.
14 Oppenheimer New Jersey Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value
of the underlying securities.
At July 31, 1996, the Fund had outstanding futures contracts to purchase
debt securities as follows:
<TABLE>
<CAPTION>
Number of Valuation as of Unrealized
Expiration Date Futures Contracts July 31, 1996 Appreciation
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds 9/96 10 $1,129,063 $39,376
</TABLE>
<PAGE>
APPENDIX A
Descriptions of Ratings Categories
Municipal Bonds
Moody's Investor Services, Inc. The ratings of Moody's Investors Service, Inc.
("Moody's") for Municipal Bonds are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C.
Municipal Bonds rated "Aaa" are judged to be of the "best quality." The rating
of Aa is assigned to bonds which are of "high quality by all standards," but as
to which margins of protection or other elements make long-term risks appear
somewhat larger than "Aaa" rated Municipal Bonds. The "Aaa" and "Aa" rated bonds
comprise what are generally known as "high grade bonds." Municipal Bonds which
are rated "A" by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A rated bonds are considered adequate, but elements
may be present which suggest a susceptibility to impairment at some time in the
future. Municipal Bonds rated "Baa" are considered "medium grade" obligations.
They are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated "Ba" are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Bonds which are rated
"Caa" are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Bonds which
are rated "Ca" represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Bonds which
are rated "C" are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated Aa1,
A1, Baa1, Ba1 and B1 respectively.
In addition to the alphabetic rating system described above, Municipal
Bonds rated by Moody's which have a demand feature that provides the holder with
the ability to periodically tender ("put") the portion of the debt covered by
the demand feature, may also have a short-term rating assigned to such demand
feature. The short-term rating uses the symbol VMIG to distinguish
characteristics which include payment upon periodic demand rather than fund or
scheduled maturity dates and potential reliance upon external liquidity, as well
as other factors. The highest investment quality is designated by the VMIG 1
rating and the lowest by VMIG 4.
Standard & Poor's Corporation. The ratings of Standard & Poor's Corporation
("S&P") for Municipal Bonds are AAA (Prime), AA (High Grade), A (Good Grade),
BBB (Medium Grade), BB, B, CCC, CC, and C (speculative grade). Bonds rated in
the top four categories (AAA, AA, A, BBB) are commonly referred to as
"investment grade." Municipal Bonds rated AAA are "obligations of the highest
quality." The rating of AA is accorded issues with investment characteristics
"only slightly less marked than those of the prime quality issues." The rating
of A describes "the third strongest capacity for payment of debt service."
Principal and interest payments on bonds in this category are regarded as safe.
It differs from the two higher ratings because, with respect to general
obligations bonds, there is some weakness, either in the local economic base, in
debt burden, in the balance between revenues and
A-1
<PAGE>
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issuer to meet debt
obligations at some future date. With respect to revenue bonds, debt service
coverage is good, but not exceptional. Stability of the pledged revenues could
show some variations because of increased competition or economic influences on
revenues. Basic security provisions, while satisfactory, are less stringent.
Management performance appears adequate. The BBB rating is the lowest
"investment grade" security rating. The difference between A and BBB ratings is
that the latter shows more than one fundamental weakness, or one very
substantial fundamental weakness, whereas the former shows only one deficiency
among the factors considered. With respect to revenue bonds, debt coverage is
only fair. Stability of the pledged revenues could show variations, with the
revenue flow possibly being subject to erosion over time. Basic security
provisions are no more than adequate. Management performance could be stronger.
Bonds rated "BB" have less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which would lead to
inadequate capacity to meet timely interest and principal payments. Bonds rated
"B" have a greater vulnerability to default, but currently has the capacity to
meet interest payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay interest
and repay principal. Bonds rated "CCC" have a current identifiable vulnerability
to default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. Bonds noted "CC"
typically are debt subordinated to senior debt which is assigned on actual or
implied "CCC" debt rating. Bonds rated "C" typically are debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. Bonds rated "D" are in payment
default. The "D" rating category is used when interest payments or principal
payments are not made on the date due even if the applicable grace period has
not expired, unless S&P believes that such payments will be made during the
grace period. The "D" rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
Fitch. The ratings of Fitch Investors Service, Inc. for Municipal Bonds are
AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, and D. Municipal Bonds rated AAA
are judged to be of the "highest credit quality." The rating of AA is assigned
to bonds of "very high credit quality." Municipal Bonds which are rated A by
Fitch are considered to be of "high credit quality." The rating of BBB is
assigned to bonds of "satisfactory credit quality." The A and BBB rated bonds
are more vulnerable to adverse changes in economic conditions than bonds with
higher ratings. Bonds rated AAA, AA, A and BBB are considered to be of
investment grade quality. Bonds rated below BBB are considered to be of
speculative quality. The ratings of "BB" is assigned to bonds considered by
Fitch to be "speculative." The rating of "B" is assigned to bonds considered by
Fitch to be "highly speculative." Bonds rated "CCC" have certain identifiable
characteristics which, if not remedied, may lead to default. Bonds rated "CC"
are minimally protected. Default in payment of interest and/or principal seems
probable over time. Bonds rated "C" are in imminent default in payment of
interest or principal. Bonds rated "DDD", "DD" and "D" are in default on
interest and/or principal payments. DDD represents the highest potential for
recovery on these bonds, and D represents the lowest potential for recovery.
Duff & Phelps. The ratings of Duff & Phelps are as follows: AAA which
are judged to be the "highest credit quality". The risk factors are negligible,
being only slightly more than for risk-free US Treasury debt. AA+, AA & AA- High
credit quality protection factors are strong. Risk is modest but
A-2
<PAGE>
may vary slightly from time to time because of economic conditions. A+, A & A-
Protection factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress. BBB+, BBB & BBB- Below
average protection factors but still considered sufficient for prudent
investment. Considerable variability in risk during economic cycles. BB+, BB &
BB- Below investment grade but deemed to meet obligations when due. Present or
prospective financial protection factors fluctuate according to industry
conditions or company fortunes. Overall quality may move up or down frequently
within the category. B+, B & B- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher of lower rating grade. CCC Well below investment
grade securities. Considerable uncertainty exists as to timely payment of
principal interest or preferred dividends. Protection factors are narrow and
risk can be substantial with unfavorable economic industry conditions, and/or
with unfavorable company developments. DD Defaulted debt obligations issuer
failed to meet scheduled principal and/or interest payments. DP Preferred stock
with dividend arreages.
Municipal Notes
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG"). Notes bearing the
designation MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for financing. Notes bearing the designation
"MIG-2" are of high quality with ample margins of protection, although not as
large as notes rated "MIG." Such short-term notes which have demand features may
also carry a rating using the symbol VMIG as described above, with the
designation MIG-1/VMIG 1 denoting best quality, with superior liquidity support
in addition to those characteristics attributable to the designation MIG-1.
S&P's rating for Municipal Notes due in three years or less are SP-1,
SP-2, and SP-3. SP-1 describes issues with a very strong capacity to pay
principal and interest and compares with bonds rated A by S&P; if modified by a
plus sign, it compares with bonds rated AA or AAA by S&P. SP-2 describes issues
with a satisfactory capacity to pay principal and interest, and compares with
bonds rated BBB by S&P. SP-3 describes issues that have a speculative capacity
to pay principal and interest.
Fitch's rating for Municipal Notes due in three years or less are
F-1+, F-1, F-2, F-3, F-S and D. F-1+ describes notes with an exceptionally
strong credit quality and the strongest degree of assurance for timely payment.
F-1 describes notes with a very strong credit quality and assurance of timely
payment is only slightly less in degree than issues rated F-1+. F-2 describes
notes with a good credit quality and a satisfactory assurance of timely payment,
but the margin of safety is not as great for issues assigned F-1+ or F-1
ratings. F-3 describes notes with a fair credit quality and an adequate
assurance of timely payment, but near-term adverse changes could cause such
securities to be rated below investment grade. F-S describes notes with weak
credit quality. Issues rated D are in actual or imminent payment default.
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations. The
Moody's, S&P and Fitch corporate debt ratings shown do not differ materially
from those set forth above for Municipal Bonds.
A-3
<PAGE>
Commercial Paper
Moody's The ratings of commercial paper by Moody's are Prime-1,
Prime-2, Prime-3 and Not Prime. Issuers rated Prime-1 have a superior capacity
for repayment of short-term promissory obligations. Issuers rated Prime-2 have a
strong capacity for repayment of short-term promissory obligations. Issuers
rated Prime-3 have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P The ratings of commercial paper by S&P are A-1, A-2, A-3, B, C,
and D. A-1 indicates that the degree of safety regarding timely payment is
strong.A-2 indicates capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1. A-3
indicates an adequate capacity for timely payments. They are, however, more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. B indicates only speculative capacity for
timely payment. C indicates a doubtful capacity for payment. D is assigned to
issues in default.
Fitch The ratings of commercial paper by Fitch are similar to its
ratings of Municipal Notes, above.
A-4
<PAGE>
APPENDIX B
TAX EQUIVALENT YIELD TABLES
The equivalent yield tables below compare tax-free income with taxable income
under Federal individual income tax rates effective January 1, 1995 and New
Jersey state income tax rates effective January 1, 1995. Combined taxable income
refers to the net amount subject to Federal and New Jersey income taxes 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 state income tax payments are fully deductible
for Federal income tax purposes. They do not reflect the phaseout of itemized
deductions and personal exemptions at higher income levels, resulting in higher
effective tax rates and tax equivalent yields.
<TABLE>
<CAPTION>
Federal Effective A tax-exempt yield of:
Taxable Tax
Income Bracket Is Approximately Equivalent To a Taxable Yield of:
JOINT RETURN
Over Not over Federal NJ Combined 2.00% 2.50% 2.95% 3.00% 3.40% 3.50%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 20,000 $ 40,100 15.00% 21.30% 16.81% 2.40% 3.01% 3.55% 3.61% 4.09% 4.21%
$ 40,100 $ 50,000 28.00% 21.30% 29.53% 2.84% 3.55% 4.19% 4.26% 4.82% 4.97%
$ 50,000 $ 70,000 28.00% 29.80% 30.15% 2.86% 3.58% 4.22% 4.29% 4.87% 5.01%
$ 70,000 $ 80,000 28.00% 42.50% 31.06% 2.90% 3.63% 4.28% 4.35% 4.93% 5.08%
$ 80,000 $ 96,900 28.00% 60.10% 32.33% 2.96% 3.69% 4.36% 4.43% 5.02% 5.17%
$ 96,900 $147,700 31.00% 60.10% 35.15% 3.08% 3.85% 4.55% 4.63% 5.24% 5.40%
$147,700 $150,000 36.00% 60.10% 39.85% 3.32% 4.16% 4.90% 4.99% 5.65% 5.82%
$150,000 $263,750 36.00% 65.80% 40.21% 3.35% 4.18% 4.93% 5.02% 5.69% 5.85%
$263,750 and above 39.60% 65.80% 43.57% 3.54% 4.43% 5.23% 5.32% 6.03% 6.20%
3.96% 4.00% 4.50% 5.00%
4.76% 4.81% 5.41% 6.01%
5.62% 5.68% 6.39% 7.10%
5.67% 5.73% 6.44% 7.16%
5.74% 5.80% 6.53% 7.25%
5.85% 5.91% 6.65% 7.39%
6.11% 6.17% 6.94% 7.71%
6.58% 6.65% 7.48% 8.31%
6.62% 6.69% 7.53% 8.36%
7.02% 7.09% 7.98% 8.86%
SINGLE RETURN
Over Not over Federal NJ Combined 2.00% 2.50% 2.95% 3.00% 3.40% 3.50%
$ 20,000 $ 24,000 15.00% 21.30% 16.81% 2.40% 3.01% 3.55% 3.61% 4.09% 4.21%
$ 24,000 $ 35,000 28.00% 21.30% 29.53% 2.84% 3.55% 4.19% 4.26% 4.82% 4.97%
B-1
<PAGE>
$ 35,000 $ 40,000 28.00% 42.50% 31.06% 2.90% 3.63% 4.28% 4.35% 4.93% 5.08%
$ 40,000 $ 58,150 28.00% 60.10% 32.33% 2.96% 3.69% 4.36% 4.43% 5.02% 5.17%
$ 58,150 $ 75,000 31.00% 60.10% 35.15% 3.08% 3.85% 4.55% 4.63% 5.24% 5.40%
$ 75,000 $121,300 31.00% 65.80% 35.54% 3.10% 3.88% 4.58% 4.65% 5.27% 5.43%
$121,300 $263,750 36.00% 65.80% 40.21% 3.35% 4.18% 4.93% 5.02% 5.69% 5.85%
$263,750 and above 39.60% 65.80% 43.57% 3.54% 4.43% 5.23% 5.32% 6.03% 6.20%
3.96% 4.00% 4.50% 5.00%
4.76% 4.81% 5.41% 6.01%
5.62% 5.68% 6.39% 7.10%
5.74% 5.80% 6.53% 7.25%
5.85% 5.91% 6.65% 7.39%
6.11% 6.17% 6.94% 7.71%
6.14% 6.21% 6.98% 7.76%
6.62% 6.69% 7.53% 8.36%
7.02% 7.09% 7.98% 8.86%
</TABLE>
B-2
<PAGE>
Appendix C
Municipal Bond Industry Classifications
Electric Resource Recovery
Gas
Water Higher Education
Sewer Education
Telephone
Lease Rental
Adult Living Facilities
Hospital Non Profit Organization
General Obligation Highways
Special Assessment Marine/Aviation Facilities
Sales Tax
Multi Family Housing
Manufacturing, Non Durables Single Family Housing
Manufacturing, Durables
Pollution Control
C-1
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
C-2
<PAGE>
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
--------------------
(1) Condensed Financial Information
(i) for Oppenheimer Pennsylvania Municipal Fund
("OPMF") - Filed herewith.
(ii) for Oppenheimer Florida Municipal Fund ("OFMF")
- - Filed herewith.
(iii) for Oppenheimer New Jersey Municipal Fund
("ONJMF") - Filed herewith.
(2) Independent Auditors' Report
(i) for OPMF - Filed herewith.
(ii) for OFMF - Filed herewith.
(iii) for ONJMF - Filed herewith.
(3) Statement of Investments
(i) for OPMF - Filed herewith.
(ii) for OFMF - Filed herewith.
(iii) for ONJMF - Filed herewith.
C-1
<PAGE>
(4) Statement of Assets and Liabilities
(i) for OPMF - Filed herewith.
(ii) for OFMF - Filed herewith.
(iii) for ONJMF - Filed herewith.
(5) Statement of Operations
(i) for OPMF - Filed herewith.
(ii) for OFMF - Filed herewith.
(iii) for ONJMF - Filed herewith.
(6) Statement of Changes in Net Assets
(i) for OPMF - Filed herewith.
(ii) for OFMF - Filed herewith.
(iii) for ONJMF - Filed herewith.
(7) Notes to Financial Statements
(i) for OPMF - Filed herewith.
(ii) for OFMF - Filed herewith.
(iii) for ONJMF - Filed herewith.
(8) Independent Auditors' Consent (for the "Trust"):
Filed herewith.
(b) Exhibits
--------
(1) Registrant's Amended and Restated Declaration of
Trust dated September 16, 1996: Filed herewith.
C-2
<PAGE>
(2) By-Laws dated 10/10/89 - Filed with Post-Effective
Amendment No.4, 4/30/92, refiled with Post-Effective Amendment No. 12, 4/25/95,
pursuant to Item 102 of Regulation S-T, and incorporated herein by reference.
(3) Not applicable.
(4) (i) OPMF Specimen Class A Share Certificate - Filed
herewith.
(ii) OPMF Specimen Class B Share Certificate - Filed
herewith.
(iii) OPMF Specimen Class C Share Certificate -
Filed herewith.
(iv) OFMF Specimen Class A Share Certificate - Filed
herewith.
(v) OFMF Specimen Class B Share Certificate - Filed
herewith.
(vi) OFMF Specimen Class C Share Certificate - Filed
herewith.
(vii) ONJMF Specimen Class A Share Certificate -
Filed herewith.
(viii) ONJMF Specimen Class B Share Certificate -
Filed herewith.
(ix) ONJMF Specimen Class C Share Certificate -
Filed herewith.
(5) (i) Investment Advisory Agreement for OPMF dated
10/22/90 - Filed with Post-Effective Amendment No. 2, 3/1/91,
refiled with Post-Effective Amendment No. 12, 4/25/95, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(ii) Investment Advisory Agreement for OFMF dated
10/1/93 - Filed with Post-Effective Amendment No. 8, 12/29/93, and
incorporated herein by reference.
C-3
<PAGE>
(iii) Investment Advisory Agreement for ONJMF dated
12/9/93 - Filed with Post-Effective Amendment No. 9 to Registrant's
Registration Statement, 2/25/94, and incorporated herein by
reference.
(6) (a) General Distributor's Agreement between the
Registrant and OppenheimerFunds Distributor, Inc. ("Distributor")
dated 8/19/93 - Filed with Post-Effective Amendment No. 12,
4/25/95, and incorporated herein by reference.
(b) Form of Distributor Dealer Agreement: Filed with
Post-Effective Amendment No. 14 to the Registration Statement of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(c) Form of Distributor Broker Agreement -Filed with
Post-Effective Amendment No. 14 to the Registration Statement of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(d) Form of Distributor Agency Agreement -Filed with
Post-Effective Amendment No. 14 to the Registration Statement of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(e) Broker Agreement between Distributor and
Newbridge Securities dated 11/1/86 - Filed with Post-Effective
Amendment No. 25 of Oppenheimer Growth Fund (Reg. No. 2-45272),
10/30/86, refiled with Post-Effective Amendment No. 45 of
Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(7) Retirement Plan for Non-Interested Trustees or
Directors dated 6/7/90 - Filed with Post-Effective Amendment No.
97 to the Registration Statement of Oppenheimer Fund (File No. 2-
14586) 8/30/90, refiled with Post-Effective Amendment No. 45 of
Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(8) Custodian Agreement dated 9/18/89 - Filed with
Registrant's Post-Effective Amendment No. 3, 4/30/91, refiled with
Post-Effective Amendment No. 12, 4/25/95, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
C-4
<PAGE>
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 9/15/89 - Filed with
Pre-Effective Amendment No. 2, 9/18/89, refiled with Post-Effective
Amendment No. 12, 4/25/95, pursuant to Item 102 of Regulation S-T,
and incorporated herein by reference.
(11) Not applicable.
(12) Not applicable.
(13) Investment Letter dated 8/29/89 from Oppenheimer Management
Corporation to Registrant - Filed with Post-Effective Amendment No. 3 to the
Registrant's Registration Statement, 4/30/91, refiled with Post-Effective
Amendment No. 12, 4/25/95, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(14) Not applicable.
(15) (i) Service Plan and Agreement for Class A shares of OPMF under
Rule 12b-1 of the Investment Company Act, dated 7/1/93 Filed with Post-Effective
Amendment No. 6, 7/16/93, and refiled with Post-Effective Amendment No. 12,
4/25/95, pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(ii) Distribution and Service Plan and Agreement for Class B
shares of OPMF under Rule 12b-1 of the Investment Company Act, dated May 26,
1995: Filed with Post-Effective Amendment No.
14, 8/25/95, and incorporated by reference.
(iii) Distribution and Service Plan and Agreement for Class C
shares of OPMF under Rule 12b-1 of the Investment Company Act, dated as of
August 1, 1995 - Filed with Post-Effective Amendment No. 13, 6/23/95, and
incorporated herein by reference.
(iv) Service Plan and Agreement for Class A shares of OFMF
dated 10/1/93 under Rule 12b-1 of the Investment Company Act Filed with
Post-Effective Amendment No. 7, 10/1/93, and incorporated herein by reference.
(v) Distribution and Service Plan and Agreement for Class B
shares of OFMF dated 2/10/94 under Rule 12b-1 of the Investment
C-5
<PAGE>
Company Act - Filed with Post-Effective Amendment No. 14, 8/25/95,
and incorporated herein by reference.
(vi) Distribution and Service Plan and Agreement for Class C
shares of OFMF under Rule 12b-1 of the Investment Company Act, dated as of
August 1, 1995 - Filed with Post-Effective Amendment No. 13, 6/23/95, and
incorporated herein by reference.
(vii) Service Plan and Agreement for Class A shares of ONJMF
under Rule 12b-1 of the Investment Company Act dated 12/9/93 - Filed with
Post-Effective Amendment No. 9 to Registrant's Registration Statement, 2/25/94,
and incorporated herein by reference.
(viii) Distribution and Service Plan and Agreement for Class B
shares of ONJMF under Rule 12b-1 of the Investment Company Act dated 2/10/94 -
Filed with Post-Effective Amendment No. 14 to Registrant's Registration
Statement, 8/25/95, and incorporated
herein by reference.
(ix) Distribution and Service Plan and Agreement for Class C
Shares of ONJMF under Rule 12b-1 of the Investment Company Act, dated as of
August 1, 1995 - Filed with Post-Effective Amendment No. 13, 6/23/95, and
incorporated herein by reference.
(16) (i) Performance Computation Schedule for OPMF - Filed
herewith.
(ii) Performance Computation Schedule for OFMF - Filed
herewith.
(iii) Performance Computation Schedule for ONJMF - Filed
herewith.
(17) (i) Financial Data Schedules for Class A Shares of OPMF:
Filed herewith.
(ii) Financial Data Schedules for Class B Shares of OPMF:
Filed herewith.
(iii) Financial Data Schedules for Class C Shares of
OPMF: Filed herewith.
C-6
<PAGE>
(iv) Financial Data Schedules for Class A Shares of OFMF:
Filed herewith.
(v) Financial Data Schedules for Class B Shares of OFMF:
Filed herewith.
(vi) Financial Data Schedules for Class C Shares of OFMF:
Filed herewith.
(vii) Financial Data Schedules for Class A Shares of
ONJMF: Filed herewith.
(viii) Financial Data Schedules for Class B Shares of
ONJMF: Filed herewith.
(iv) Financial Data Schedules for Class C Shares of
ONJMF: Filed herewith.
(18) Not Applicable.
-- Powers of Attorney - Previously filed with Post-
Effective Amendment No. 16, 4/15/96 (Bridget A. Macaskill) and
previously filed with Post-Effective Amendments No. 6 and No. 7,
7/16/93 and 10/1/93, respectively, and incorporated herein by
reference.
ITEM 25. Persons Controlled by or under Common Control with
Registrant
---------------------------------------------------------
None
ITEM 26. Number of Holders of Securities
-------------------------------
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of November 6, 1996
-------------- ------------------------
<S> <C>
OPMF Shares of Beneficial
Interest, Class A 5,412,658.732
OPMF Shares of Beneficial
Interest, Class B 1,358,614.351
C-7
<PAGE>
OPMF Shares of Beneficial
Interest, Class C 52,077.782
OFMF Shares of Beneficial
Interest, Class A 1,853,811.844
OFMF Shares of Beneficial
Interest, Class B 1,077,114.731
OFMF Shares of Beneficial
Interest, Class C 11,696.728
ONJMF Shares of Beneficial
Interest, Class A 1,113,522.430
ONJMF Shares of Beneficial
Interest, Class B 1,053,189.687
ONJMF Shares of Beneficial
Interest, Class C 29,494.135
</TABLE>
ITEM 27. Indemnification
---------------
Reference is made to paragraphs (c) through (f) of Section 12 of
Article SEVENTH of Registrant's Declaration of Trust filed as Exhibit
24(b)(1)(i) to this Registration Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
C-8
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant;
it and certain subsidiaries and affiliates act in the same capacity to other
registered investment companies as described in Parts A and B hereof and listed
in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each officer
and director of OppenheimerFunds, Inc. is, or at any time during the past two
fiscal years has been, engaged for his/her own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name & Current Position Other Business and Connections with
OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- -------------------------------
<S> <C>
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real
Asset Management, Inc. ("ORAMI");
formerly Vice President of Equity
Derivatives at Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Senior Vice
President of HarbourView; prior to
March, 1996 he was the senior equity
portfolio manager for the Panorama
Series Fund, Inc. (the "Company") and
other mutual funds and pension funds
managed by G.R. Phelps & Co. Inc.
("G.R. Phelps"), the Company's former
investment adviser, which was a
subsidiary of Connecticut Mutual Life
Insurance Company; was also responsible
for managing the common stock
department and common stock investments
of Connecticut Mutual Life Insurance
Co.
Lawrence Apolito,
Vice President None.
C-9
<PAGE>
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds;
formerly a Vice
President and Senior
Portfolio Manager at
First of America
Investment
Corp.
Ellen Batt,
Assistant Vice President None
Kathleen Beichert,
Assistant Vice President Formerly employed by Smith Barney, Inc.
David Bernard,
Vice President Previously a Regional Sales Director
for Retirement Plan Services at Charles
Schwab & Co., Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the Oppenheimer
Funds (listed below); previously a Fund
Controller for OppenheimerFunds, Inc.
(the "Manager").
C-10
<PAGE>
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
Assistant Secretary and Treasurer of
the Denver-based Oppenheimer Funds.
Vice President and Treasurer of
OppenheimerFunds Distributor, Inc. (the
"Distributor") and HarbourView Asset
Management Corporation ("HarbourView"),
an investment adviser subsidiary of the
Manager; Senior Vice President,
Treasurer, Assistant Secretary and a
director of Centennial Asset Management
Corporation ("Centennial"), an
investment adviser subsidiary of the
Manager; Vice President, Treasurer and
Secretary of Shareholder Services, Inc.
("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent
subsidiaries of the Manager; Director,
Treasurer and Chief Executive Officer
of MultiSource Services, Inc.; Vice
President and Treasurer of Oppenheimer
Real Asset Management, Inc.; President,
Treasurer and Director of Centennial
Capital Corporation; Vice President and
Treasurer of Main Street Advisers.
Scott Brooks,
Assistant Vice President None.
Susan Burton,
Assistant Vice President Previously a Director of Educational
Services for H.D. Vest Investment
Securities, Inc.
Michael A. Carbuto,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds;
Vice President of
Centennial.
Ruxandra Chivu,
Assistant Vice President None.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed Income
for State Street Research & Management
Co.
Robert A. Densen,
Senior Vice President None.
C-11
<PAGE>
Robert Doll, Jr.,
Executive Vice President and
Director An officer and/or
portfolio manager of
certain Oppenheimer
funds.
John Doney,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Secretary of the New York-based
Oppenheimer Funds; Vice President and
Secretary of the Denver-based
Oppenheimer Funds; Secretary of the
Oppenheimer Quest and Oppenheimer
Rochester Funds; Executive Vice
President, Director and General Counsel
of the Distributor; President and a
Director of Centennial; Chief Legal
Officer and a Director of MultiSource
Services, Inc.; President and a
Director of Oppenheimer Real Asset
Management, Inc.; Executive Vice
President, General Counsel and Director
of SFSI and SSI; formerly Senior Vice
President and Associate General Counsel
of the Manager and the Distributor.
George Evans,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds.
Scott Farrar,
Vice President Assistant Treasurer of the New York-
based and Denver-based Oppenheimer
funds.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
OppenheimerFunds Distributor, Inc.;
Secretary of HarbourView Asset
Management Corporation, MultiSource
Services, Inc. and Centennial Asset
Management Corporation; Secretary, Vice
President and Director of Centennial
Capital Corporation; Vice President and
Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
C-12
<PAGE>
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds.
Formerly Chairman of the Board and
Director of Rochester Fund
Distributors, Inc. ("RFD"), President
and Director of Fielding Management
Company, Inc. ("FMC"), President and
Director of Rochester Capital Advisors,
Inc. ("RCAI"), Managing Partner of
Rochester Capital Advisors, L.P.,
President and Director of Rochester
Fund Services, Inc. ("RFS"), President
and Director of Rochester Tax Managed
Fund, Inc.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds; Secretary and
General Counsel of Rochester Capital
Advisors, L.P. and Secretary of
Rochester Tax Managed Fund, Inc.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President and
Counsel of OAC; formerly he held the
following positions: Vice President and
a director of HarbourView and
Centennial, a director of SFSI and SSI,
an officer of other Oppenheimer Funds.
Linda Gardner,
Assistant Vice President None.
Janelle Gellermann,
Assistant Vice President None.
Jill Glazerman, None.
Assistant Vice President
Ginger Gonzalez,
Vice President, Director of
Marketing Communications Formerly 1st Vice President / Director
of Graphic and Print Communications for
Shearson Lehman Brothers.
C-13
<PAGE>
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Caryn Halbrecht,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds;
formerly Vice
President of Fixed
Income Portfolio
Management at Bankers
Trust.
Barbara Hennigar,
Executive Vice President and
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI;
President and Chief Executive Officer
of SSI.
Dorothy Hirshman,
Assistant Vice President None.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
C-14
<PAGE>
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Ronald Jamison,
Vice President Formerly Vice President andAssociate
General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Managing Director of Global Equities at
Paine Webber's Mitchell Hutchins
division.
Heidi Kagan,
Assistant Vice President None.
Thomas W. Keffer,
Vice President Formerly Senior Managing Director of
Van Eck Global.
Avram Kornberg,
Vice President Formerly a Vice President with Bankers
Trust.
Paul LaRocco,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Securities Analyst for Columbus Circle
Investors.
C-15
<PAGE>
Michael Levine,
Assistant Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March, 1996 he
was the senior bond portfolio manager
for Panorama Series Fund, Inc., other
mutual funds and pension accounts
managed by G.R. Phelps; was also
responsible for managing the public
fixed-income securities department at
Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of the
New York-based and the Denver-based
Oppenheimer funds; President and a
Director of OAC, HarbourView and
Oppenheimer Partnership Holdings, Inc.;
Director of ORAMI; Chairman and
Director of SSI; a Director of
Oppenheimer Real Asset Management, Inc.
Timothy Martin,
Assistant Vice President Formerly Vice President, Mortgage
Trading, at S.N. Phelps & Co.,Salomon
Brothers, and Kidder Peabody.
Sally Marzouk,
Vice President None.
C-16
<PAGE>
Lisa Migan,
Assistant Vice President, None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Portfolio Manager with Phoenix
Securities Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President An
officer and/or
portfolio manager of
certain Oppenheimer
funds.
John Pirie,
Assistant Vice President Formerly a Vice President with Cohane
Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds.
Formerly Senior
Investment Officer and
Portfolio Manager with
Chemical Bank.
Russell Read,
Vice President Consultant for Prudential Insurance on
behalf of the General Motors Pension
Plan.
C-17
<PAGE>
Thomas Reedy,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Securities Analyst for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President Formerly a Product Manager for
Metropolitan Life Insurance Company.
Michael S. Rosen
Vice President; President:
Rochester Division An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly
Vice President of RFS, President and
Director of RFD, Vice President and
Director of FMC, Vice President and
director of RCAI, General Partner of
RCA, an officer and/or portfolio
manager of certain Oppenheimer funds.
David Rosenberg,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly
Vice President and Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of Dollar Dry
Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
C-18
<PAGE>
Stephanie Seminara,
Vice President Formerly Vice President of Citicorp
Investment Services.
Diane Sobin,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds;
formerly a Vice
President and Senior
Portfolio Manager for
Dean Witter
InterCapital,
Inc.
Richard A. Soper, None.
Assistant Vice President
Nancy Sperte,
Executive Vice President
None.
Donald W. Spiro,
Chairman Emeritus Vice Chairman
and Trustee of the New
York-based Oppenheimer
Funds; formerly
Chairman of the
Manager and the
Distributor.
Arthur Steinmetz,
Senior Vice President An
officer and/or
portfolio manager of
certain Oppenheimer
funds.
Ralph Stellmacher,
Senior Vice President An
officer and/or
portfolio manager of
certain Oppenheimer
funds.
John Stoma,
Senior Vice President,
Director Retirement Plans Formerly Vice President of U.S. Group
Pension Strategy and Marketing for
Manulife Financial.
C-19
<PAGE>
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March, 1996 he
was an equity portfolio manager for
Panorama Series Fund, Inc. and other
mutual funds and pension accounts
managed by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or
Managing Partner of the Denver-based
Oppenheimer Funds; President and a
Director
of Centennial; formerly President and
Director of OAMC, and Chairman of the
Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Discovery Fund, Oppenheimer
Global Emerging Growth Fund and
Oppenheimer Enterprise Fund. Formerly
Managing Director of Buckingham Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor
and SFSI.
Ashwin Vasan,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds.
Jerry A. Webman,
Senior Vice President
Director of New
York-based tax-exempt
fixed income
Oppenheimer Funds;
Formerly Managing
Director and Chief
Fixed Income
Strategist at
Prudential Mutual
Funds.
Christine Wells,
Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Vice President of
HarbourView; prior to March, 1996 he
was an equity portfolio manager for
Panorama Series Fund, Inc. and other
mutual funds and pension funds managed
by G.R. Phelps.
William L. Wilby,
Senior Vice President An
officer and/or
portfolio manager of
certain Oppenheimer
funds; Vice President
of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice
President of Centennial; Vice
President, Finance and Accounting and
member of the Board of Directors of the
Junior League of Denver, Inc.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate
General Counsel of the
Manager; Assistant
Secretary of the
Oppenheimer Funds;
Assistant Secretary of
SSI, SFSI; an officer
of other Oppenheimer
Funds.
Arthur J. Zimmer,
Vice President An officer
and/or portfolio
manager of certain
Oppenheimer funds;
Vice President of
Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer
Funds, the Denver-based Oppenheimer Funds, and the Rochester-
based Oppenheimer Funds, set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Municipal Fund
C-20
<PAGE>
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer New York Municipal Fund
Oppenheimer Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Series Fund, Inc.
Oppenheimer Target Fund
Oppenheimer Municipal Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Municipal Fund
Oppenheimer Total Return Fund, Inc.
C-21
<PAGE>
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Rochester-based Oppenheimer Funds
- ---------------------------------
Bond Fund Series - Oppenheimer Bond Fund For
Growth
Rochester Fund Municipals
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management Corp.,
Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp. is Two
World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds,
Shareholder Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management
Corporation, Centennial Capital Corp., Oppenheimer Real Asset
Management, Inc., MultiSource Services, Inc. and Oppenheimer Real
Asset Management, Inc. is 3410 South Galena Street, Denver,
Colorado 80231.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New
York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the
other registered open-end investment companies for which
OppenheimerFunds, Inc. is the investment adviser, as described in
Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
C-22
<PAGE>
<TABLE>
<CAPTION>
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
<S> <C> <C>
George Clarence Bowen+ Vice President & Treasurer Vice President
and Treasurer of
the NY-based
Oppenheimer funds
/ Vice President,
Secretary and
Treasurer of the
Denver-based
Oppen- heimer
funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce* Senior Vice President - None
Director - Financial
Institution Div.
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Bill Coughlin Vice President None
3425 1/2 Irving Avenue So.
Minneapolis, MN 55408
Mary Crooks+ Senior Vice President None
E. Drew Devereaux ++ Assistant Vice President None
C-23
<PAGE>
Andrew John Donohue* Executive Vice Secretary of
President, General the New York-
Counsel and Director based Oppen-
heimer funds /
Vice President of
the Denver-based
Oppen-heimer
funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding++ Vice President; Chairman:
Rochester Division None
Reed F. Finley Vice President - None
320 E. Maple, Ste. 254 Financial Institution Div.
Birmingham, MI 48009
Wendy Fishler* Vice President - None
Financial Institution Div.
Ronald R. Foster Senior Vice President None
139 Avant Lane
Cincinatti, OH 45249
Patricia Gadecki Vice President None
3906 Americana Drive
Tampa, FL 3334
Luiggino Galletto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
C-24
<PAGE>
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
Michael Keogh* Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Ilene Kutno* Vice President - None
Director - Regional Sales
Wayne A. LeBlang Senior Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
Timothy G. Mulligan ++ Vice President None
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
C-25
<PAGE>
Wendy Murray Vice President None
114-B Larchmont Acres West
Larchmont, NY 10538
Joseph Norton Vice President None
2518 Fillmore Street
Apt. 1
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.,
Director -
Key Accounts
Minnie Ra Vice President - None
0895 Thirty-First Ave. Financial Institution Div.
Apt. 4
San Francisco, CA 94121
Michael Raso Vice President None
30 Hommocks Road
Apt. 30
Larchmont, NY 10538
John C. Reinhardt ++ Vice President None
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
C-26
<PAGE>
Michael S. Rosen++ Vice President, President:
Rochester Division None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. 3D
Indianapolis, IN 46240
James Ruff* President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Wasington, DC 20007
Mark Schon Vice President None
10483 E. Corrine Dr.
Scottsdale, AZ 85259
Michael Sciortino Vice President None
3114 Hickory Run
Sugarland, TX 77479
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker ++ Vice President None
Michael Stenger Vice President None
8572 Saint Ives Place
Cincinnati, OH 45255
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
Philip Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
C-27
<PAGE>
Mark Stephen Vandehey+ Vice President None
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester
Division")
</TABLE>
(c) Not applicable.
ITEM 30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act and rules
promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its
offices at 3410 South Galena Street, Denver, Colorado 80231.
ITEM 31. Management Services
-------------------
Not applicable.
ITEM 32. Undertakings
------------
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of a Trustee or Trustees
when requested to do so by the holders of at least 10% of Registrant's
outstanding shares and in connection with such meeting to comply with provisions
of Section 16(c) of the Investment Company Act of 1940 relating to shareholder
communications.
C-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York on the 22nd day of November, 1996.
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
By: /s/ Bridget A. Macaskill*
------------------------------------
Bridget A. Macaskill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Leon Levy * Chairman of the
- ---------------------------- Board of Trustees November 22, 1996
Leon Levy
/s/ Bridget A. Macaskill * President (Principal
- ------------------------ Executive Officer) November 22, 1996
Bridget A. Macaskill and Trustee
/s/ Donald W. Spiro * Trustee November 22, 1996
- ----------------------------
Donald W. Spiro
/s/ George Bowen * Treasurer and
- ---------------------------- Principal Financial
George Bowen and Accounting
Officer November 22, 1996
/s/ Robert G. Galli * Trustee November 22, 1996
- ---------------------------
Robert G. Galli
C-29
<PAGE>
/s/ Benjamin Lipstein * Trustee November 22, 1996
- ----------------------------
Benjamin Lipstein
/s/ Kenneth A. Randall * Trustee November 22, 1996
- ----------------------------
Kenneth A. Randall
/s/ Sidney M. Robbins * Trustee November 22, 1996
- ---------------------------
Sidney M. Robbins
/s/ Russell S. Reynolds, Jr.* Trustee November 22, 1996
- ----------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere * Trustee November 22, 1996
- ---------------------------
Pauline Trigere
/s/ Elizabeth B. Moynihan * Trustee November 22, 1996
- ----------------------------
Elizabeth B. Moynihan
/s/ Clayton K. Yeutter * Trustee November 22, 1996
- ----------------------------
Clayton K. Yeutter
/s/ Edward V. Regan * Trustee November 22, 1996
- ----------------------------
Edward V. Regan
* By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
C-30
<PAGE>
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Form N-1A
Item No. Description
- --------- -----------
<S> <C>
24(b)(1) Amended and Restated Declaration of Trust dated
September 16, 1996
24(b)(4)(i) OPMF Specimen Class A Share Certificate
24(b)(4)(ii) OPMF Specimen Class B Share Certificate
24(b)(4)(iii) OPMF Specimen Class C Share Certificate
24(b)(4)(iv) OFMF Specimen Class A Share Certificate
24(b)(4)(v) OFMF Specimen Class B Share Certificate
24(b)(4)(vi) OFMF Specimen Class C Share Certificate
24(b)(4)(vii) ONJMF Specimen Class A Share Certificate
24(b)(4)(viii) ONJMF Specimen Class B Share Certificate
24(b)(4)(ix) ONJMF Specimen Class C Share Certificate
24(b)(8) Independent Auditor's Consent
24(b)(16)(i) Performance Data Computation Schedule for
Oppenheimer Pennsylvania Municipal Fund
24(b)(16)(ii) Performance Data Computation Schedule for
Oppenheimer Florida Municipal Fund
24(b)(16)(iii) Performance Data Computation Schedule for
Oppenheimer New Jersey Municipal Fund
24(b)(17)(i) Financial Data Schedule for Class A Shares of
Oppenheimer Pennsylvania Municipal Fund
24(b)(17)(ii) Financial Data Schedule for Class B Shares of
Oppenheimer Pennsylvania Municipal Fund
24(b)(17)(iii) Financial Data Schedule for Class C
Shares of Oppenheimer Pennsylvania Municipal Fund
24(b)(17)(iv) Financial Data Schedule for Class A Shares of
Oppenheimer Florida Municipal Fund
C-31
<PAGE>
24(b)(17)(v) Financial Data Schedule for Class B Shares of
Oppenheimer Florida Municipal Fund
24(b)(17)(vi) Financial Data Schedule for Class C
Shares of Oppenheimer Florida Municipal
Fund
24(b)(17)(vii) Financial Data Schedule for Class A Shares of
Oppenheimer New Jersey Municipal Fund
24(b)(17)(viii) Financial Data Schedule for Class B Shares of
Oppenheimer New Jersey Municipal Fund
24(b)(17)(ix) Financial Data Schedule for Class C
Shares of Oppenheimer New Jersey Municipal Fund
</TABLE>
C-32
Exhibit 24(b)(1)
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
This AMENDED AND RESTATED DECLARATION OF TRUST, made as of September
16, 1996, by and among the individuals executing this Amended and Restated
Declaration of Trust as the Trustees.
WHEREAS, the Trustees established Oppenheimer Multi-State Tax- Exempt
Trust, formerly Oppenheimer Pennsylvania Tax-Exempt Fund (the "Trust"), as a
trust fund under the laws of the Commonwealth of Massachusetts, for the
investment and reinvestment of funds contributed thereto, under a Declaration of
Trust dated July 15, 1989, as amended pursuant to Amended and Restated
Declarations of Trust dated April 23, 1993, June 10, 1993, December 9, 1993 and
July 1, 1995;
WHEREAS, the Trustees desire to further amend such Declaration of
Trust, as amended, without shareholder approval, as permitted under ARTICLE
SEVENTH, to change the name of the Trust and its Series;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall henceforth be held and managed
under this Amended and Restated Declaration of Trust IN TRUST as herein set
forth below.
FIRST: This Trust shall be known as OPPENHEIMER MULTI-STATE
MUNICIPAL TRUST (the "Trust"). The address of Oppenheimer Multi-
State Municipal Trust is Two World Trade Center, New York, New York
10048-0203. The Trust's Registered Agent for Service in the
Commonwealth of Massachusetts is Massachusetts Mutual Life
Insurance Company, 1295 State Street, Springfield, Massachusetts
01111, Attention: Stephen Kuhn, Esq.
SECOND: Whenever used herein, unless otherwise required by
the context or specifically provided:
1. All terms used in this Declaration of Trust that are
defined in the 1940 Act (defined below) shall have the meanings
-1-
<PAGE>
given to them in the 1940 Act.
-2-
<PAGE>
2. "Board" or "Board of Trustees" or the "Trustees" means
the Board of Trustees of the Trust.
3. "By-Laws" means the By-Laws of the Trust as amended from
time to time.
-3-
<PAGE>
4. "Class" means a Class of a series of Shares of the Trust
established and designated under or in accordance with the
provisions of Article FOURTH.
5. "Commission" means the Securities and Exchange
Commission.
6. "Declaration of Trust" shall mean this Amended and
Restated Declaration of Trust as it may be amended or restated from
time to time.
7. The "1940 Act" refers to the Investment Company Act of
1940 and the Rules and Regulations of the Commission thereunder,
all as amended from time to time.
8. "Series" refers to series of Shares of the Trust
established and designated under or in accordance with the
provisions of Article FOURTH.
9. "Shareholder" means a record owner of Shares of the
Trust.
10. "Shares" refers to the transferable units of interest into which
the beneficial interest in the Trust or any Series or Class of the Trust (as the
context may require) shall be divided from time to time and includes fractions
of Shares as well as whole Shares.
11. The "Trust" refers to the Massachusetts business trust
created by this Declaration of Trust, as amended or restated from
time to time.
12. "Trustees" refers to the individual trustees in their
capacity as trustees hereunder of the Trust and their successor or
successors for the time being in office as such trustees.
THIRD: The purpose or purposes for which the Trust is formed
and the business or objects to be transacted, carried on and
promoted by it are as follows:
-4-
<PAGE>
1. To hold, invest or reinvest its funds, and in connection therewith
to hold part or all of its funds in cash, and to purchase or otherwise acquire,
hold for investment or otherwise, sell, sell short, assign, negotiate, transfer,
exchange or otherwise dispose of or turn to account or realize upon, securities
(which term "securities" shall for the purposes of this Declaration of Trust,
without limitation of the generality thereof, be deemed to include any stocks,
shares, bonds, financial futures contracts, indexes, debentures, notes,
mortgages or other obligations, and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interests therein, or in
any property or assets) created or issued by any issuer (which term "issuer"
shall for the purposes of this Declaration of Trust, without limitation of the
generality thereof be deemed to include any persons, firms, associations,
corporations, syndicates, business trusts, partnerships, investment companies,
combinations, organizations, governments, or subdivisions thereof) and in
financial instruments (whether they are considered as securities or
commodities); and to exercise, as owner or holder of any securities or financial
instruments, all rights, powers and privileges in respect thereof; and to do any
and all acts and things for the preservation, protection, improvement and
enhancement in value of any or all such securities or financial instruments.
2. To borrow money and pledge assets in connection with any of the
objects or purposes of the Trust, and to issue notes or other obligations
evidencing such borrowings, to the extent permitted by the 1940 Act and by the
Trust's fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such Series and Classes and amounts
and on such terms and conditions, for such purposes and for such amount or kind
of consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of the Commonwealth of Massachusetts and by this
Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel its Shares, or to classify or reclassify any
unissued Shares or any Shares previously issued and reacquired of any Series or
Class into one or more Series or Classes that may have been established and
designated from time to time, all without the vote or consent of the
Shareholders of the
-5-
<PAGE>
Trust, in any manner and to the extent now or hereafter permitted by this
Declaration of Trust.
5. To conduct its business in all its branches at one or more offices
in New York, Colorado and elsewhere in any part of the world, without
restriction or limit as to extent.
6. To carry out all or any of the foregoing objects and purposes as
principal or agent, and alone or with associates or to the extent now or
hereafter permitted by the laws of Massachusetts, as a member of, or as the
owner or holder of any stock of, or share of interest in, any issuer, and in
connection therewith or make or enter into such deeds or contracts with any
issuers and to do such acts and things and to exercise such powers, as a natural
person could lawfully make, enter into, do or exercise.
7. To do any and all such further acts and things and to exercise any
and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from, the terms of any other clause of this or any other Article of
this Declaration of Trust, and shall each be regarded as independent and
construed as powers as well as objects and purposes, and the enumeration of
specific purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the general powers of the
Trust now or hereafter conferred by the laws of the Commonwealth of
Massachusetts nor shall the expression of one thing be deemed to exclude
another, though it be of a similar or dissimilar nature, not expressed;
provided, however, that the Trust shall not carry on any business, or exercise
any powers, in any state, territory, district or country except to the extent
that the same may lawfully be carried on or exercised under the laws thereof.
FOURTH:
1. The beneficial interest in the Trust shall be divided into Shares,
all without par value, but the Trustees shall have the authority from time to
time, without obtaining shareholder approval, to create one or more Series of
Shares in addition to the
-6-
<PAGE>
Series specifically established and designated in part 3 of this Article FOURTH,
and to divide the shares of any Series into two or more Classes pursuant to Part
2 of this Article FOURTH, all as they deem necessary or desirable, to establish
and designate such Series and Classes, and to fix and determine the relative
rights and preferences as between the different Series of Shares or Classes as
to right of redemption and the price, terms and manner of redemption,
liabilities and expenses to be borne by any Series or Class, special and
relative rights as to dividends and other distributions and on liquidation,
sinking or purchase fund provisions, conversion on liquidation, conversion
rights, and conditions under which the several Series or Classes shall have
individual voting rights or no voting rights. Except as aforesaid, all Shares of
the different Series shall be identical.
(a) The number of authorized Shares and the number of Shares
of each Series and each Class of a Series that may be issued is unlimited, and
the Trustees may issue Shares of any Series or Class of any Series for such
consideration and on such terms as they may determine (or for no consideration
if pursuant to a Share dividend or split-up), all without action or approval of
the Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and non-assessable. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Series into one or more Series or Classes of Series that may be established
and designated from time to time. The Trustees may hold as treasury Shares (of
the same or some other Series), reissue for such consideration and on such terms
as they may determine, or cancel, at their discretion from time to time, any
Shares of any Series reacquired by the Trust.
(b) The establishment and designation of any Series or any
Class of any Series in addition to that established and designated in part 3 of
this Article FOURTH shall be effective with the effectiveness of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such Series or such Class of such Series or as otherwise provided
in such instrument. At any time that there are no Shares outstanding of any
particular Series previously established and designated, the Trustees may by an
instrument executed by a majority of their number abolish that Series and the
establishment and designation thereof. If and to the extent the instrument
referred to in this paragraph shall be an amendment to this Declaration of
Trust, the Trustees may make any such amendment
-7-
<PAGE>
without shareholder approval.
(c) Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire, own, hold and
dispose of Shares of any Series or Class of any Series of the Trust to the same
extent as if such person were not a Trustee, officer or other agent of the
Trust; and the Trust may issue and sell or cause to be issued and sold and may
purchase Shares of any Series or Class of any Series from any such person or any
such organization subject only to the general limitations, restrictions or other
provisions applicable to the sale or purchase of Shares of such Series or Class
generally.
2. The Trustees shall have the authority from time to time, without
obtaining shareholder approval, to divide the Shares of any Series into two or
more Classes as they deem necessary or desirable, and to establish and designate
such Classes. In such event, each Class of a Series shall represent interests in
the designated Series of the Trust and have such voting, dividend, liquidation
and other rights as may be established and designated by the Trustees. Expenses
and liabilities related directly or indirectly to the Shares of a Class of a
Series may be borne solely by such Class (as shall be determined by the
Trustees) and, as provided in Article FIFTH, a Class of a Series may have
exclusive voting rights with respect to matters relating solely to such Class.
The bearing of expenses and liabilities solely by a Class of Shares of a Series
shall be appropriately reflected (in the manner determined by the Trustees) in
the net asset value, dividend and liquidation rights of the Shares of such Class
of a Series. The division of the Shares of a Series into Classes and the terms
and conditions pursuant to which the Shares of the Classes of a Series will be
issued must be made in compliance with the 1940 Act. No division of Shares of a
Series into Classes shall result in the creation of a Class of Shares having a
preference as to dividends or distributions or a preference in the event of any
liquidation, termination or winding up of the Trust, to the extent such a
preference is prohibited by Section 18 of the 1940 Act as to the Trust.
The relative rights and preferences of shares of different classes
shall be the same in all respects except that, and unless and until the Board of
Trustees shall determine otherwise: (i) when a vote of Shareholders is required
under this Declaration of Trust or when a meeting of Shareholders is called by
the Board of Trustees, the Shares of a Class shall vote exclusively on matters
-8-
<PAGE>
that affect that Class only; (ii) the expenses and liabilities related to a
Class shall be borne solely by such Class (as determined and allocated to such
Class by the Trustees from time to time in a manner consistent with parts 2 and
3 of Article FOURTH); and (iii) pursuant to paragraph 10 of Article NINTH, the
Shares of each Class shall have such other rights and preferences as are set
forth from time to time in the then effective prospectus and/or statement of
additional information relating to the Shares. Dividends and distributions on
one class may differ from the dividends and distributions on another class, and
the net asset value of the shares of one class may differ from the net asset
value of shares of another class.
3. Without limiting the authority of the Trustees set forth in part 1
of this Article FOURTH to establish and designate any further Series, the
Trustees hereby establish three Series of Shares: "Oppenheimer Pennsylvania
Municipal Fund," established by the Declaration of Trust dated July 15, 1989;
"Oppenheimer Florida Municipal Fund," established by the Amended and Restated
Declaration of Trust dated as of June 10, 1993; and "Oppenheimer New Jersey
Municipal Fund," established by the Amended and Restated Declaration of Trust
dated as of July 20, 1995. The Shares of each Series shall be divided into such
number of Classes as shall be set forth from time to time in the then effective
prospectus and/or statement of additional information relating to the Trust. The
Shares of each Series and any Shares of any further Series or Classes that may
from time to time be established and designated by the Trustees shall (unless
the Trustees otherwise determine with respect to some further Series or Classes
at the time of establishing and designating the same) have the following
relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors, and shall be so recorded upon the books of account of the Trust.
Such consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from
-9-
<PAGE>
any reinvestment of such proceeds, in whatever form the same may be, together
with any General Items allocated to that Series as provided in the following
sentence, are herein referred to as "assets belonging to" that Series. In the
event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular Series (collectively "General Items"), the Trustees shall
allocate such General Items to and among any one or more of the Series
established and designated from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable; and any General Items
so allocated to a particular Series shall belong to that Series. Each such
allocation by the Trustees shall be conclusive and binding upon the shareholders
of all Series for all purposes.
(b) (1) Liabilities Belonging to Series. The
liabilities, expenses, costs, charges and reserves attributable to
each Series shall be charged and allocated to the assets belonging
to each particular Series. Any general liabilities, expenses,
costs, charges and reserves of the Trust which are not identifiable
as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the Series
established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The liabilities, expenses, costs, charges and reserves
allocated and so charged to each Series are herein referred to as
"liabilities belonging to" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the shareholders of all Series
for all purposes.
(2) Liabilities Belonging to a Class. If a Series
is divided into more than one Class, the liabilities, expenses, costs, charges
and reserves attributable to a Class shall be charged and allocated to the Class
to which such liabilities, expenses, costs, charges or reserves are
attributable. Any general liabilities, expenses, costs, charges or reserves
belonging to the Series which are not identifiable as belonging to any
particular Class shall be allocated and charged by the Trustees to and among any
one or more of the Classes established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. The allocations in the two preceding sentences shall be subject to
the 1940 Act or any release, rule, regulation, interpretation or order
thereunder relating to such allocations. The liabilities, expenses, costs,
-10-
<PAGE>
charges and reserves allocated and so charged to each Class are herein referred
to as "liabilities belonging to" that Class. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the holders of all Classes for all purposes.
(c) Dividends. Dividends and distributions on Shares of a
particular Series or Class may be paid to the holders of Shares of that Series
or Class, with such frequency as the Trustees may determine, which may be daily
or otherwise pursuant to a standing resolution or resolutions adopted only once
or with such frequency as the Trustees may determine, from such of the income,
capital gains accrued or realized, and capital and surplus, from the assets
belonging to that Series, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to such Series or Class. All dividends
and distributions on Shares of a particular Series or Class shall be distributed
pro rata to the Shareholders of such Series or Class in proportion to the number
of Shares of such Series or Class held by such Shareholders at the date and time
of record established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution shall be payable on
Shares as to which the Shareholder's purchase order and/or payment have not been
received by the time or times established by the Trustees under such program or
procedure. Such dividends and distributions may be made in cash or Shares or a
combination thereof as determined by the Trustees or pursuant to any program
that the Trustees may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution to that
Shareholder. Any such dividend or distribution paid in Shares will be paid at
the net asset value thereof as determined in accordance with paragraph 13 of
Article SEVENTH.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Series and all Classes of
each Series that has been established and designated shall be entitled to
receive, as a Series or Class, when and as declared by the Trustees, the excess
of the assets belonging to that Series over the liabilities belonging to that
Series or Class. The assets so distributable to the Shareholders of any
particular Series shall be distributed among such Shareholders in proportion to
the number of Shares of such Class of that Series held by them and recorded on
the books of the Trust.
-11-
<PAGE>
(e) Transfer. All Shares of each particular Series or Class
shall be transferable, but transfers of Shares of a particular Class and Series
will be recorded on the Share transfer records of the Trust applicable to such
Series or Class of that Series only at such times as Shareholders shall have the
right to require the Trust to redeem Shares of such Series or Class of that
Series and at such other times as may be permitted by the Trustees.
(f) Equality. All Shares of each Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities belonging to such Series or any Class of that Series), and each
Share of any particular Series shall be equal to each other Share of that Series
and shares of each Class of a Series shall be equal to each other Share of such
Class; but the provisions of this sentence shall not restrict any distinctions
permissible under this Article FOURTH that may exist with respect to Shares of
the different Classes of a Series. The Trustees may from time to time divide or
combine the Shares of any particular Class or Series into a greater or lesser
number of Shares of that Class or Series without thereby changing the
proportionate beneficial interest in the assets belonging to that Class or
Series or in any way affecting the rights of Shares of any other Class or
Series.
(g) Fractions. Any fractional Share of any Class and Series,
if any such fractional Share is outstanding, shall carry proportionately all the
rights and obligations of a whole Share of that Class and Series, including
those rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(h) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
whether (i) holders of Shares of any Series shall have the right to exchange
said Shares into Shares of one or more other Series of Shares, (ii) holders of
shares of any Class shall have the right to exchange said Shares into Shares of
one or more other Classes of the same or a different Series, and/or (iii) the
Trust shall have the right to carry out exchanges of the aforesaid kind, in each
case in accordance with such requirements and procedures as may be established
by the Trustees.
(i) Ownership of Shares. The ownership of Shares shall
be recorded on the books of the Trust or of a transfer or similar
agent for the Trust, which books shall be maintained separately for
-12-
<PAGE>
the Shares of each Class and Series that has been established and designated. No
certification certifying the ownership of Shares need be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of Share certificates, the
use of facsimile signatures, the transfer of Shares and similar matters. The
record books of the Trust as kept by the Trust or any transfer or similar agent,
as the case may be, shall be conclusive as to who are the Shareholders and as to
the number of Shares of each Class and Series held from time to time by each
such Shareholder.
(j) Investments in the Trust. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase or sale of Shares that conform to such authorized terms
and to reject any purchase or sale orders for Shares whether or not conforming
to such authorized terms.
FIFTH: The following provisions are hereby adopted with
respect to voting Shares of the Trust and certain other rights:
1. The Shareholders shall have the power to vote (a) for the election
of Trustees when that issue is submitted to them, (b) with respect to the
amendment of this Declaration of Trust except where the Trustees are given
authority to amend the Declaration of Trust without shareholder approval, (c) to
the same extent as the shareholders of a Massachusetts business corporation, as
to whether or not a court action, proceeding or claim should be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (d) with respect to those matters relating to the Trust as may
be required by the 1940 Act or required by law, by this Declaration of Trust, or
the By-Laws of the Trust or any registration statement of the Trust filed with
the Commission or any State, or as the Trustees may consider desirable.
2. The Trust will not hold shareholder meetings unless required by the
1940 Act, the provisions of this Declaration of Trust, or any other applicable
law, or unless the Trustees determine to call a meeting of shareholders.
3. At all meetings of Shareholders, each Shareholder shall
be entitled to one vote on each matter submitted to a vote of the
-13-
<PAGE>
Shareholders of the affected Series for each Share standing in his name on the
books of the Trust on the date, fixed in accordance with the By-Laws, for
determination of Shareholders of the affected Series entitled to vote at such
meeting (except, if the Board so determines, for Shares redeemed prior to the
meeting), and each such Series shall vote separately ("Individual Series
Voting"); a Series shall be deemed to be affected when a vote of the holders of
that Series on a matter is required by the 1940 Act; provided, however, that as
to any matter with respect to which a vote of Shareholders is required by the
1940 Act or by any applicable law that must be complied with, such requirements
as to a vote by Shareholders shall apply in lieu of Individual Series Voting as
described above. If the shares of a Series shall be divided into Classes as
provided in Article FOURTH, the shares of each Class shall have identical voting
rights except that the Trustees, in their discretion, may provide a Class of a
Series with exclusive voting rights with respect to matters which relate solely
to such Class. If the Shares of any Series shall be divided into Classes with a
Class having exclusive voting rights with respect to certain matters, the quorum
and voting requirements described below with respect to action to be taken by
the Shareholders of the Class of such Series on such matters shall be applicable
only to the Shares of such Class. Any fractional Share shall carry
proportionately all the rights of a whole Share, including the right to vote and
the right to receive dividends. The presence in person or by proxy of the
holders of one-third of the Shares, or of the Shares of any Series or Class of
any Series, outstanding and entitled to vote thereat shall constitute a quorum
at any meeting of the Shareholders or of that Series or Class, respectively;
provided however, that if any action to be taken by the Shareholders or by a
Series or Class at a meeting requires an affirmative vote of a majority, or more
than a majority, of the shares outstanding and entitled to vote, then in such
event the presence in person or by proxy of the holders of a majority of the
shares outstanding and entitled to vote at such a meeting shall constitute a
quorum for all purposes. At a meeting at which is a quorum is present, a vote of
a majority of the quorum shall be sufficient to transact all business at the
meeting. If at any meeting of the Shareholders there shall be less than a quorum
present, the Shareholders or the Trustees present at such meeting may, without
further notice, adjourn the same from time to time until a quorum shall attend,
but no business shall be transacted at any such adjourned meeting except such as
might have been lawfully transacted had the meeting not been adjourned.
-14-
<PAGE>
4. Each Shareholder, upon request to the Trust in proper form
determined by the Trust, shall be entitled to require the Trust to redeem from
the net assets of that Series all or part of the Shares of such Series and Class
standing in the name of such Shareholder. The method of computing such net asset
value, the time at which such net asset value shall be computed and the time
within which the Trust shall make payment therefor, shall be determined as
hereinafter provided in Article SEVENTH of this Declaration of Trust.
Notwithstanding the foregoing, the Trustees, when permitted or required to do so
by the 1940 Act, may suspend the right of the Shareholders to require the Trust
to redeem Shares.
5. No Shareholder shall, as such holder, have any right to purchase or
subscribe for any Shares of the Trust which it may issue or sell, other than
such right, if any, as the Trustees, in their discretion, may determine.
6. All persons who shall acquire Shares shall acquire the
same subject to the provisions of the Declaration of Trust.
7. Cumulative voting for the election of Trustees shall not
be allowed.
SIXTH:
1. The persons who shall act as initial Trustees until the first
meeting or until their successors are duly chosen and qualify are the initial
trustees executing this Declaration of Trust or any counterpart thereof.
However, the By-Laws of the Trust may fix the number of Trustees at a number
greater or lesser than the number of initial Trustees and may authorize the
Trustees to increase or decrease the number of Trustees, to fill any vacancies
on the Board which may occur for any reason including any vacancies created by
any such increase in the number of Trustees, to set and alter the terms of
office of the Trustees and to lengthen or lessen their own terms of office or
make their terms of office of indefinite duration, all subject to the 1940 Act.
Unless otherwise provided by the By-Laws of the Trust, the Trustees need not be
Shareholders.
2. A Trustee at any time may be removed either with or without cause by
resolution duly adopted by the affirmative vote of the holders of two-thirds of
the outstanding Shares, present in person or by proxy at any meeting of
Shareholders called for such purpose; such a meeting shall be called by the
Trustees when
-15-
<PAGE>
requested in writing to do so by the record holders of not less than ten per
centum of the outstanding Shares. A Trustee may also be removed by the Board of
Trustees as provided in the By-Laws of the Trust.
3. The Trustees shall make available a list of names and addresses of
all Shareholders as recorded on the books of the Trust, upon receipt of the
request in writing signed by not less than ten Shareholders (who have been
shareholders for at least six months) holding in the aggregate shares of the
Trust valued at not less than $25,000 at current offering price (as defined in
the then effective Prospectus and\or Statement of Additional Information
relating to the Shares under the Securities Act of 1933, as amended from time to
time) or holding not less than 1% in amount of the entire amount of Shares
issued and outstanding; such request must state that such Shareholders wish to
communicate with other Shareholders with a view to obtaining signatures to a
request for a meeting to take action pursuant to part 2 of this Article SIXTH
and be accompanied by a form of communication to the Shareholders. The Trustees
may, in their discretion, satisfy their obligation under this part 3 by either
making available the Shareholder list to such Shareholders at the principal
offices of the Trust, or at the offices of the Trust's transfer agent, during
regular business hours, or by mailing a copy of such communication and form of
request, at the expense of such requesting Shareholders, to all other
Shareholders, and the Trustees may also take such other action as may be
permitted under Section 16(c) of the 1940 Act.
4. The Trust may at any time or from time to time apply to the
Commission for one or more exemptions from all or part of said Section 16(c) of
the 1940 Act, and, if an exemptive order or orders are issued by the Commission,
such order or orders shall be deemed part of said Section 16(c) for the purposes
of parts 2 and 3 of this Article SIXTH.
SEVENTH: The following provisions are hereby adopted for the
purpose of defining, limiting and regulating the powers of the
Trust, the Trustees and the Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or the
Trustees and shall have accepted this Trust, the Trust estate shall vest in the
new Trustee or Trustees, together with the continuing Trustees, without any
further act or conveyance, and he or she shall be deemed a Trustee hereunder.
-16-
<PAGE>
2. The death, declination, resignation, retirement, removal, or
incapacity of the Trustees, or any one of them, shall not operate to annul or
terminate the Trust but the Trust shall continue in full force and effect
pursuant to the terms of this Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from any
assets now or hereafter held in any capacity other than as Trustee hereunder by
the Trustees or any successor Trustees. All of the assets of the Trust shall at
all times be considered as vested in the Trustees. No Shareholder shall have, as
a holder of beneficial interest in the Trust, any authority, power or right
whatsoever to transact business for or on behalf of the Trust, or on behalf of
the Trustees, in connection with the property or assets of the Trust, or in any
part thereof.
4. The Trustees in all instances shall act as principals, and are and
shall be free from the control of the Shareholders. The Trustees shall have full
power and authority to do any and all acts and to make and execute, and to
authorize the officers and agents of the Trust to make and execute, any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not in any way
be bound or limited by present or future laws or customs in regard to Trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Subject to any applicable limitation in
this Declaration of Trust or by the By-Laws of the Trust, the Trustees shall
have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration of
Trust providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do not reserve that right to the
Shareholders;
(b) to elect and remove such officers and appoint and
terminate such officers as they consider appropriate with or without cause, and
to appoint and designate from among the Trustees such committees as the Trustees
may determine, and to terminate any such committee and remove any member of such
committee;
(c) to employ as custodian of any assets of the Trust a
bank or trust company or any other entity qualified and eligible to
act as a custodian, subject to any conditions set forth in this
-17-
<PAGE>
Declaration of Trust or in the By-Laws;
(d) to retain a transfer agent and shareholder servicing
agent, or both;
(e) to provide for the distribution of Shares either
through a principal underwriter or the Trust itself or both;
(f) to set record dates in the manner provided for in
the By-Laws of the Trust;
(g) to delegate such authority as they consider
desirable to any officers of the Trust and to any agent, custodian
or underwriter;
(h) to vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property held in Trust
hereunder; and to execute and deliver powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such person or persons
such power and discretion with relation to securities or property as the
Trustees shall deem proper;
(i) to exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities
held in trust hereunder;
(j) to hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form, either in
its own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts business trusts or investment companies;
(k) to consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust claims
in favor of or against the Trust or any matter in controversy
including, but not limited to, claims for taxes;
-18-
<PAGE>
(m) to make, in the manner provided in the By-Laws,
distributions of income and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner
permitted by the 1940 Act and the Trust's fundamental policy
thereunder as to borrowing;
(o) to enter into investment advisory or management contracts,
subject to the 1940 Act, with any one or more corporations, partnerships,
trusts, associations or other persons;
(p) to change the name of the Trust or any Class or
Series of the Trust as they consider appropriate without prior
shareholder approval; and
(q) to establish officers' and Trustees' fees or compensation
and fees or compensation for committees of the Trustees to be paid by the Trust
or each Series thereof in such manner and amount as the Trustees may determine.
5. No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
6. (a) The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of money
or assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription to any Shares or otherwise. This
paragraph shall not limit the right of the Trustees to assert claims against any
shareholder based upon the acts or omissions of such shareholder or for any
other reason. There is hereby expressly disclaimed shareholder and Trustee
liability for the acts and obligations of the Trust. Every note, bond, contract
or other undertaking issued by or on behalf of the Trust or the Trustees
relating to the Trust shall include a notice and provision limiting the
obligation represented thereby to the Trust and its assets (but the omission of
such notice and provision shall not operate to impose any liability or
obligation on any Shareholder or Trustee).
(b) Whenever this Declaration of Trust calls for or permits
any action to be taken by the Trustees hereunder, such action shall mean that
taken by the Board of Trustees by vote of the majority of a quorum of Trustees
as set forth from time to time
-19-
<PAGE>
in the By-Laws of the Trust or as required by the 1940 Act.
(c) The Trustees shall possess and exercise any and all such
additional powers as are reasonably implied from the powers herein contained
such as may be necessary or convenient in the conduct of any business or
enterprise of the Trust, to do and perform anything necessary, suitable, or
proper for the accomplishment of any of the purposes, or the attainment of any
one or more of the objects, herein enumerated, or which shall at any time appear
conducive to or expedient for the protection or benefit of the Trust, and to do
and perform all other acts and things necessary or incidental to the purposes
herein before set forth, or that may be deemed necessary by the Trustees.
(d) The Trustees shall have the power, to the extent not
inconsistent with the 1940 Act, to determine conclusively whether any moneys,
securities, or other properties of the Trust are, for the purposes of this
Trust, to be considered as capital or income and in what manner any expenses or
disbursements are to be borne as between capital and income whether or not in
the absence of this provision such moneys, securities, or other properties would
be regarded as capital or income and whether or not in the absence of this
provision such expenses or disbursements would ordinarily be charged to capital
or to income.
7. The By-Laws of the Trust may divide the Trustees into classes and
prescribe the tenure of office of the several classes, but no class of Trustee
shall be elected for a period shorter than that from the time of the election
following the division into classes until the next meeting and thereafter for a
period shorter than the interval between meetings or for a period longer than
five years, and the term of office of at least one class shall expire each year.
8. The Shareholders shall have the right to inspect the records,
documents, accounts and books of the Trust, subject to reasonable regulations of
the Trustees, not contrary to Massachusetts law, as to whether and to what
extent, and at what times and places, and under what conditions and regulations,
such right shall be exercised.
9. Any officer elected or appointed by the Trustees or by the
Shareholders or otherwise, may be removed at any time, with or without cause, in
such lawful manner as may be provided in the ByLaws of the Trust.
-20-
<PAGE>
10. The Trustees shall have power to hold their meetings, to have an
office or offices and, subject to the provisions of the laws of Massachusetts,
to keep the books of the Trust outside of said Commonwealth at such places as
may from time to time be designated by them. Action may be taken by the Trustees
without a meeting by unanimous written consent or by telephone or similar method
of communication.
11. Securities held by the Trust shall be voted in person or by proxy
by the President or a Vice-President, or such officer or officers of the Trust
as the Trustees shall designate for the purpose, or by a proxy or proxies
thereunto duly authorized by the Trustees, except as otherwise ordered by vote
of the holders of a majority of the Shares outstanding and entitled to vote in
respect thereto.
12. (a) Subject to the provisions of the 1940 Act, any Trustee, officer
or employee, individually, or any partnership of which any Trustee, officer or
employee may be a member, or any corporation or association of which any
Trustee, officer or employee may be an officer, partner, director, trustee,
employee or stockholder, or otherwise may have an interest, may be a party to,
or may be pecuniarily or otherwise interested in, any contract or transaction of
the Trust, and in the absence of fraud no contract or other transaction shall be
thereby affected or invalidated; provided that in such case a Trustee, officer
or employee or a partnership, corporation or association of which a Trustee,
officer or employee is a member, officer, director, trustee, employee or
stockholder is so interested, such fact shall be disclosed or shall have been
known to the Trustees including those Trustees who are not so interested and who
are neither "interested" nor "affiliated" persons as those terms are defined in
the 1940 Act, or a majority thereof; and any Trustee who is so interested, or
who is also a director, officer, partner, trustee, employee or stockholder of
such other corporation or a member of such partnership or association which is
so interested, may be counted in determining the existence of a quorum at any
meeting of the Trustees which shall authorize any such contract or transaction,
and may vote thereat to authorize any such contract or transaction, with like
force and effect as if he were not so interested.
(b) Specifically, but without limitation of the foregoing, the
Trust may enter into a management or investment advisory contract or
underwriting contract and other contracts with, and may otherwise do business
with any manager or investment
-21-
<PAGE>
adviser for the Trust and/or principal underwriter of the Shares of the Trust or
any subsidiary or affiliate of any such manager or investment adviser and/or
principal underwriter and may permit any such firm or corporation to enter into
any contracts or other arrangements with any other firm or corporation relating
to the Trust notwithstanding that the Trustees of the Trust may be composed in
part of partners, directors, officers or employees of any such firm or
corporation, and officers of the Trust may have been or may be or become
partners, directors, officers or employees of any such firm or corporation, and
in the absence of fraud the Trust and any such firm or corporation may deal
freely with each other, and no such contract or transaction between the Trust
and any such firm or corporation shall be invalidated or in any way affected
thereby, nor shall any Trustee or officer of the Trust be liable to the Trust or
to any Shareholder or creditor thereof or to any other person for any loss
incurred by it or him solely because of the existence of any such contract or
transaction; provided that nothing herein shall protect any director or officer
of the Trust against any liability to the trust or to its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
(c) As used in this paragraph the following terms shall
have the meanings set forth below:
(i) the term "indemnitee" shall mean any present
or former Trustee, officer or employee of the Trust, any present or former
Trustee, partner, Director or officer of another trust, partnership, corporation
or association whose securities are or were owned by the Trust or of which the
Trust is or was a creditor and who served or serves in such capacity at the
request of the Trust, and the heirs, executors, administrators, successors and
assigns of any of the foregoing; however, whenever conduct by an indemnitee is
referred to, the conduct shall be that of the original indemnitee rather than
that of the heir, executor, administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, to which an indemnitee is or was a
party or is threatened to be made a party by reason of the fact or facts under
which he or it is an indemnitee as defined above;
-22-
<PAGE>
(iii) the term "disabling conduct" shall mean
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office in
question;
(iv) the term "covered expenses" shall mean
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by an indemnitee in connection with
a covered proceeding; and
(v) the term "adjudication of liability" shall
mean, as to any covered proceeding and as to any indemnitee, an adverse
determination as to the indemnitee whether by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any
covered expenses in any covered proceeding if there has been an adjudication of
liability against such indemnitee expressly based on a finding of disabling
conduct.
(e) Except as set forth in paragraph (d) above, the Trust
shall indemnify any indemnitee for covered expenses in any covered proceeding,
whether or not there is an adjudication of liability as to such indemnitee, such
indemnification by the Trust to be to the fullest extent now or hereafter
permitted by any applicable law unless the By-laws limit or restrict the
indemnification to which any indemnitee may be entitled. The Board of Trustees
may adopt bylaw provisions to implement sub-paragraphs (c), (d) and (e) hereof.
(f) Nothing herein shall be deemed to affect the right of the
Trust and/or any indemnitee to acquire and pay for any insurance covering any or
all indemnitees to the extent permitted by applicable law or to affect any other
indemnification rights to which any indemnitee may be entitled to the extent
permitted by applicable law. Such rights to indemnification shall not, except as
otherwise provided by law, be deemed exclusive of any other rights to which such
indemnitee may be entitled under any statute now or hereafter enacted, By-Law,
contract or otherwise.
13. The Trustees are empowered, in their absolute discretion, to
establish bases or times, or both, for determining the net asset value per Share
of any Class and Series in accordance with the 1940 Act and to authorize the
voluntary purchase by any Class and
-23-
<PAGE>
Series, either directly or through an agent, of Shares of any Class and Series
upon such terms and conditions and for such consideration as the Trustees shall
deem advisable in accordance with the 1940 Act.
14. Payment of the net asset value per Share of any Class and Series
properly surrendered to it for redemption shall be made by the Trust within
seven days, or as specified in any applicable law or regulation, after tender of
such stock or request for redemption to the Trust for such purpose together with
any additional documentation that may be reasonably required by the Trust or its
transfer agent to evidence the authority of the tenderor to make such request,
plus any period of time during which the right of the holders of the shares of
such Class of that Series to require the Trust to redeem such shares has been
suspended. Any such payment may be made in portfolio securities of such Class of
that Series and/or in cash, as the Trustees shall deem advisable, and no
Shareholder shall have a right, other than as determined by the Trustees, to
have Shares redeemed in kind.
15. The Trust shall have the right, at any time and without prior
notice to the Shareholder, to redeem Shares of the Class and Series held by such
Shareholder held in any account registered in the name of such Shareholder for
its current net asset value, if and to the extent that such redemption is
necessary to reimburse either that Series or Class of the Trust or the
distributor (i.e., principal underwriter) of the Shares for any loss either has
sustained by reason of the failure of such Shareholder to make timely and good
payment for Shares purchased or subscribed for by such Shareholder, regardless
of whether such Shareholder was a Shareholder at the time of such purchase or
subscription, subject to and upon such terms and conditions as the Trustees may
from time to time prescribe.
EIGHTH: The name "Oppenheimer" included in the name of the Trust and of
any Series shall be used pursuant to a royalty-free, non-exclusive license from
Oppenheimer Management Corporation ("OMC"), incidental to and as part of any one
or more advisory, management or supervisory contracts which may be entered into
by the Trust with OMC. Such license shall allow OMC to inspect and, subject to
the control of the Board of Trustees, to control the nature and quality of
services offered by the Trust under such name. The license may be terminated by
OMC upon termination of such advisory, management or supervisory contracts or
without cause upon 60 days' written notice, in which case neither the Trust nor
-24-
<PAGE>
any Series or Class shall have any further right to use the name "Oppenheimer"
in its name or otherwise and the Trust, the Shareholders and its officers and
Trustees shall promptly take whatever action may be necessary to change its name
and the names of any Series or Classes accordingly.
NINTH:
1. In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or the Shareholders, heirs, executors, administrators or
other legal representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the Trust estate
to be held harmless from and indemnified against all loss and expense arising
from such liability. The Trust shall, upon request by the Shareholder, assume
the defense of any such claim made against any Shareholder for any act or
obligation of the Trust and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a partnership
is created hereby. No individual Trustee hereunder shall have any power to bind
the Trust, the Trust's officers or any Shareholder. All persons extending credit
to, doing business with, contracting with or having or asserting any claim
against the Trust or the Trustees shall look only to the assets of the Trust for
payment under any such credit, transaction, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present or
future, shall be personally liable therefor; notice of such disclaimer shall be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. Nothing in this Declaration of Trust shall protect a
Trustee against any liability to which such Trustee would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee
hereunder.
3. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances then
prevailing, shall be binding upon everyone interested. Subject to the provisions
of paragraph 2 of this Article NINTH, the Trustees shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and
-25-
<PAGE>
operations of this Declaration of Trust, applicable laws, contracts,
obligations, transactions or any other business the Trust may enter into, and
subject to the provisions of paragraph 2 of this Article NINTH, shall be under
no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
4. This Trust shall continue without limitation of time but
subject to the provisions of sub-sections (a), (b), (c) and (d) of
this paragraph 4.
(a) The Trustees, with the favorable vote of the holders of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
any one or more Series entitled to vote, may sell and convey the assets of that
Series (which sale may be subject to the retention of assets for the payment of
liabilities and expenses) to another issuer for a consideration which may be or
include securities of such issuer. Upon making provision for the payment of
liabilities, by assumption by such issuer or otherwise, the Trustees shall
distribute the remaining proceeds ratably among the holders of the outstanding
Shares of the Series the assets of which have been so transferred.
(b) The Trustees, with the favorable vote of the holders of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
any one or more Series entitled to vote, may at any time sell and convert into
money all the assets of that Series. Upon making provisions for the payment of
all outstanding obligations, taxes and other liabilities, accrued or contingent,
of that Series, the Trustees shall distribute the remaining assets of that
Series ratably among the holders of the outstanding Shares of that Series.
(c) The Trustees, with the favorable vote of the holders of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
any one or more Series entitled to vote, may otherwise alter, convert or
transfer the assets of that Series or those Series.
(d) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in sub-sections (a) and (b), and in
subsection (c) where applicable, the Series the assets of which have been so
transferred shall terminate, and if all the assets of the Trust have been so
transferred, the Trust
-26-
<PAGE>
shall terminate and the Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties shall be cancelled and discharged.
5. The original or a copy of this instrument and of each restated
declaration of trust or instrument supplemental hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental or restated declaration of trust shall be
filed with the Secretary of the Commonwealth of Massachusetts, as well as any
other governmental office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such supplemental or restated declarations of
trust have been made and as to any matters in connection with the Trust
hereunder, and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such supplemental or restated declaration of trust. In this instrument or in
any such supplemental or restated declaration of trust, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as amended or affected by any such
supplemental or restated declaration of trust. This instrument may be executed
in any number of counterparts, each of which shall be deemed an original.
6. The Trust set forth in this instrument is created under and is to be
governed by and construed and administered according to the laws of the
Commonwealth of Massachusetts. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption of the
Shares held in any account if the aggregate net asset value of such Shares has
been reduced to $200 or less upon such notice to the shareholder in question,
with such permission to increase the investment in question and upon such other
terms and conditions as may be fixed by the Board of Trustees in accordance with
the 1940 Act.
8. In the event that any person advances the organizational expenses of
the Trust, such advances shall become an obligation of the Trust subject to such
terms and conditions as may be fixed by, and on a date fixed by, or determined
with criteria fixed by the
-27-
<PAGE>
Board of Trustees, to be amortized over a period or periods to be fixed by the
Board.
9. Whenever any action is taken under this Declaration of Trust
including action which is required or permitted by the 1940 Act or any other
applicable law, such action shall be deemed to have been properly taken if such
action is in accordance with the construction of the 1940 Act or such other
applicable law then in effect as expressed in "no action" letters of the staff
of the Commission or any release, rule, regulation or order under the 1940 Act
or any decision of a court of competent jurisdiction, notwithstanding that any
of the foregoing shall later be found to be invalid or otherwise reversed or
modified by any of the foregoing.
10. Any action which may be taken by the Board of Trustees under this
Declaration of Trust or its By-Laws may be taken by the description thereof in
the then effective prospectus and/or statement of additional information
relating to the Shares under the Securities Act of 1933 or in any proxy
statement of the Trust rather than by formal resolution of the Board.
11. Whenever under this Declaration of Trust, the Board of Trustees is
permitted or required to place a value on assets of the Trust, such action may
be delegated by the Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940 Act.
12. If authorized by vote of the Trustees and, if a vote of
Shareholders is required under this Declaration of Trust, the favorable vote of
the holders of a "majority" of the outstanding voting securities, as defined in
the 1940 Act, entitled to vote, or by any larger vote which may be required by
applicable law in any particular case, the Trustees may amend or otherwise
supplement this instrument, by making a Restated Declaration of Trust or a
Declaration of Trust supplemental hereto, which thereafter shall form a part
hereof; any such Supplemental or Restated Declaration of Trust may be executed
by and on behalf of the Trust and the Trustees by an officer or officers of the
Trust.
-28-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 16th day of September, 1996.
/s/ Robert G. Galli
- ----------------------------
Robert G. Galli
11-54 Shearwater Court
Jersey City, NJ 07305
/s/ Leon Levy
- ----------------------------
Leon Levy
One Sutton Place South
New York, NY 10022
/s/ Russell S. Reynolds
- ----------------------------
Russell S. Reynolds
39 Clapboard Ridge Road
Greenwich, CT 06830
/s/ Clayton K. Yeutter
- ----------------------------
Clayton K. Yeutter
1325 Merrie Ridge Road
McLean, Virginia 22101
/s/ Benjamin Lipstein
- ----------------------------
Benjamin Lipstein
591 Breezy Hill Road
Hillsdale, NY 2529
/s/ Bridget A. Macaskill
- ---------------------------
Bridget A. Macaskill
160 East 81st Street
New York, NY 10028
/s/ Donald W. Spiro
- ----------------------------
Donald W. Spiro
399 Ski Trail
Kinnelon, NJ 07405
/s/ Pauline Trigere
- ----------------------------
Pauline Trigere
525 Park Avenue
New York, NY 10021
/s/ Kenneth A. Randall
- ----------------------------
Kenneth A. Randall
6 Whittaker's Mill
Williamsburg, VA 23185
/s/ Elizabeth B. Moynihan
- ----------------------------
Elizabeth B. Moynihan
801 Pennsylvania Avenue
Washington, D.C. 20004
/s/ Edward V. Regan
- ----------------------------
Edward V. Regan
40 Park Avenue
New York, NY 10016
/s/ Sidney M. Robbins
- ----------------------------
Sidney M. Robbins
50 Overlook Road
Ossining, NY 10562
-29-
Exhibit 24(b)(4)(i)
OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND
Class A Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: CLASS A SHARES
(centered
below boxes) Oppenheimer Multi-State Municipal Trust
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND
(at left) THIS IS TO CERTIFY THAT (at right)
SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 100
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer Pennsylvania Municipal Fund
a series of Oppenheimer Multi-State Municipal Trust
(hereinafter called the "Trust"), transferable only
on the books of the Trust by the holder hereof in
person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This
certificate and the shares represented hereby are
issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all
of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by
the Transfer Agent.
WITNESS the facsimile seal of the Trust and the signatures
<PAGE>
of its duly authorized officers.
Dated:
(at left (at right
of seal) of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
------------------- ----------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right,
printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with rights of survivorship and not as tenants in
common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ______________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- -----------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class A Shares of beneficial
interest represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Trust with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
Guaranteed Name of Guarantor
By: _____________________________
Sigature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Trust.
PLEASE NOTE: This document contains a OppenheimerFunds "four
watermark when viewed at an angle. hands" logotype
It is invalid without this watermark.
-----------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(ii)
OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND
Class B Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: CLASS B SHARES
(centered
below boxes) Oppenheimer Multi-State Municipal Trust
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND
(at left) THIS IS TO CERTIFY THAT (at right)
SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 209
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer Pennsylvania Municipal Fund
a series of Oppenheimer Multi-State Municipal Trust
(hereinafter called the "Trust"), transferable only
on the books of the Trust by the holder hereof in
person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This
certificate and the shares represented hereby are
issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all
of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by
the Transfer Agent.
WITNESS the facsimile seal of the Trust and the signatures
<PAGE>
of its duly authorized officers.
Dated:
(at left (at right
of seal) of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
-------------------- ---------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right,
printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with rights of survivorship and not as tenants in
common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ______________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- -----------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class B Shares of beneficial
interest represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Trust with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
Guaranteed Name of Guarantor
By: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Trust.
PLEASE NOTE: This document contains a OppenheimerFunds "four
watermark when viewed at an angle. hands" logotype
It is invalid without this watermark.
- -----------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(iii)
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
SERIES: OPPENHEIMER PENNSYLVANIA MUNICIPAL TRUST
A MASSACHUSETTS BUSINESS TRUST
Class C Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) share certificate no.
(upper right box with heading: CLASS C SHARES
below cert. no.)
(centered
below boxes) OPPENHEIMER PENNSYLVANIA MUNICIPAL TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 704
(at left) is the owner of
(centered) FULLY PAID CLASS C SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER PENNSYLVANIA MUNICIPAL
TRUST (hereinafter called the "Fund"), transferable
only on the books of the Fund by the holder hereof in
person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This
certificate and the shares represented hereby are
issued and shall be held subject to all of the
provisions of the Declaration of Trust of the Fund to
all of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by
the Transfer Agent.
<PAGE>
WITNESS the facsimile seal of the Fund and the
signatures of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
-------------------- ------------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER PENNSYLVANIA MUNICIPAL TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.
Denver (CO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................ hereby sell(s), assign(s), and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
- ----------------------------------------------------------------------
_ (Please print or type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class C Shares of beneficial
interest [capital stock] represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________ Attorney to
transfer the said shares on the books of the within named Fund with full power
of substitution in the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this "four hands"
watermark: logotype
- ------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(iv)
OPPENHEIMER FLORIDA MUNICIPAL FUND
Class A Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: CLASS A SHARES
(centered
below boxes) Oppenheimer Multi-State Municipal Trust
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER FLORIDA MUNICIPAL FUND
(at left) THIS IS TO CERTIFY THAT (at right)
SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 308
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer Florida Municipal Fund
a series of Oppenheimer Multi-State Municipal Trust
(hereinafter called the "Trust"), transferable only
on the books of the Trust by the holder hereof in
person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This
certificate and the shares represented hereby are
issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all
of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by
the Transfer Agent.
WITNESS the facsimile seal of the Trust and the signatures
<PAGE>
of its duly authorized officers.
Dated:
(at left (at right
of seal) of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
--------------------- ------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right,
printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with rights of survivorship and not as tenants in
common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ______________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- -----------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class A Shares of beneficial
interest represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Trust with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
Guaranteed Name of Guarantor
By: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Trust.
- -----------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(v)
OPPENHEIMER FLORIDA MUNICIPAL FUND
Class B Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: CLASS B SHARES
(centered
below boxes) Oppenheimer Multi-State Municipal Trust
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER FLORIDA MUNICIPAL FUND
(at left) THIS IS TO CERTIFY THAT (at right)
SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 407
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer Florida Municipal Fund a
series of Oppenheimer Multi-State Municipal Trust
(hereinafter called the "Trust"), transferable only
on the books of the Trust by the holder hereof in
person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This
certificate and the shares represented hereby are
issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all
of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by
the Transfer Agent.
WITNESS the facsimile seal of the Trust and the
signatures of its duly authorized officers.
<PAGE>
Dated:
(at left (at right
of seal) of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
--------------------- ----------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right,
printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with rights of survivorship and not as tenants in
common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ______________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- -----------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class B Shares of beneficial
interest represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Trust with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
Guaranteed Name of Guarantor
By: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Trust.
- -----------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(vi)
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
SERIES: OPPENHEIMER FLORIDA MUNICIPAL TRUST
A MASSACHUSETTS BUSINESS TRUST
Class C Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) share certificate no.
(upper right box with heading: CLASS C SHARES
below cert. no.)
(centered
below boxes) OPPENHEIMER FLORIDA MUNICIPAL TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 886
(at left) is the owner of
(centered) FULLY PAID CLASS C SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER FLORIDA MUNICIPAL TRUST
(hereinafter called the "Fund"), transferable only on
the books of the Fund by the holder hereof in person
or by duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate
and the shares represented hereby are issued and
shall be held subject to all of the provisions of the
Declaration of Trust of the Fund to all of which the
holder by acceptance hereof assents. This certificate
is not valid until countersigned by the Transfer
Agent.
<PAGE>
WITNESS the facsimile seal of the Fund and the
signatures of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER FLORIDA MUNICIPAL TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.
Denver (CO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................ hereby sell(s), assign(s), and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
- ----------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class C Shares of beneficial
interest [capital stock] represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________ Attorney to
transfer the said shares on the books of the within named Fund with full power
of substitution in the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this "four hands"
watermark: logotype
- ------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(vii)
OPPENHEIMER NEW JERSEY MUNICIPAL FUND
Class A Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: CLASS A SHARES
(centered
below boxes) Oppenheimer Multi-State Municipal Trust
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER NEW JERSEY MUNICIPAL FUND
(at left) THIS IS TO CERTIFY THAT (at right)
SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 506
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer New Jersey Municipal Fund
a series of Oppenheimer Multi-State Municipal Trust
(hereinafter called the "Trust"), transferable only
on the books of the Trust by the holder hereof in
person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This
certificate and the shares represented hereby are
issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all
of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by
the Transfer Agent.
WITNESS the facsimile seal of the Trust and the signatures
<PAGE>
of its duly authorized officers.
Dated:
(at left (at right
of seal) of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
--------------------- ---------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right,
printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with rights of survivorship and not as tenants in
common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ______________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- -----------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class A Shares of beneficial
interest represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Trust with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
Guaranteed Name of Guarantor
By: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Trust.
- -------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(viii)
OPPENHEIMER NEW JERSEY MUNICIPAL FUND
Class B Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: CLASS B SHARES
(centered
below boxes) Oppenheimer Multi-State Municipal Trust
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER NEW JERSEY MUNICIPAL FUND
(at left) THIS IS TO CERTIFY THAT (at right)
SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 605
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer New Jersey Municipal Fund
a series of Oppenheimer Multi-State Municipal Trust
(hereinafter called the "Trust"), transferable only
on the books of the Trust by the holder hereof in
person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This
certificate and the shares represented hereby are
issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all
of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by
the Transfer Agent.
WITNESS the facsimile seal of the Trust and the signatures
<PAGE>
of its duly authorized officers.
Dated:
(at left (at right
of seal) of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
--------------------- ----------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right,
printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with rights of survivorship and not as tenants in
common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ______________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- -----------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class B Shares of beneficial
interest represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Trust with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
Guaranteed Name of Guarantor
By: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Trust.
- -----------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(ix)
OPPENHEIMER MULTI-STATE MUNICIPAL TRUST
SERIES: OPPENHEIMER NEW JERSEY MUNICIPAL TRUST
A MASSACHUSETTS BUSINESS TRUST
Class C Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) share certificate no.
(upper right box with heading: CLASS C SHARES
below cert. no.)
(centered
below boxes) OPPENHEIMER NEW JERSEY MUNICIPAL TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683940 803
(at left) is the owner of
(centered) FULLY PAID CLASS C SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER NEW JERSEY MUNICIPAL
TRUST (hereinafter called the "Fund"), transferable
only on the books of the Fund by the holder hereof in
person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This
certificate and the shares represented hereby are
issued and shall be held subject to all of the
provisions of the Declaration of Trust of the Fund to
all of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by
the Transfer Agent.
<PAGE>
WITNESS the facsimile seal of the Fund and the
signatures of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER NEW JERSEY MUNICIPAL TRUST
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.
Denver (CO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................ hereby sell(s), assign(s), and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
- ----------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class C Shares of beneficial
interest [capital stock] represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________ Attorney to transfer
the said shares on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this "four hands"
watermark: logotype
- ------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(8)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer Multi-State Municipal Trust
We consent to the use of our reports dated August 21, 1996 and January 22, 1996
on the Oppenheimer New Jersey Municipal Fund (formerly Oppenheimer New Jersey
Tax-Exempt Fund), Oppenheimer Florida Municipal Fund (formerly Oppenheimer
Florida Tax-Exempt Fund), and Oppenheimer Pennsylvania Municipal Fund (formerly
Oppenheimer Pennsylvania Tax-Exempt Fund), collectively the Oppenheimer
Multi-State Municipal Trust (formerly Oppenheimer Multi-State Tax-Exempt Trust)
included herein and to the reference to our Firm under the heading "Financial
Highlights" in Part A of the Registration Statement.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
November 19, 1996
Denver, Colorado
Oppenheimer Pennsylvania Tax-Exempt Fund
Exhibit 24(b)(16)(ii) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares
10/18/89 0.0614000 0.0000 11.470
11/15/89 0.0614000 0.0000 11.490
12/13/89 0.0614000 0.0000 11.560
01/10/90 0.0614000 0.0000 11.590
02/07/90 0.0614000 0.0000 11.420
03/07/90 0.0614000 0.0000 11.410
04/04/90 0.0614000 0.0000 11.350
05/02/90 0.0614000 0.0000 11.170
05/30/90 0.0614000 0.0000 11.370
06/27/90 0.0644000 0.0000 11.390
07/25/90 0.0644000 0.0000 11.470
08/22/90 0.0644000 0.0000 11.300
09/19/90 0.0644000 0.0000 11.230
10/17/90 0.0644000 0.0000 11.150
11/14/90 0.0644000 0.0000 11.360
12/12/90 0.0554000 0.0000 11.470
01/09/91 0.0544000 0.0000 11.410
02/06/91 0.0549000 0.0000 11.550
03/06/91 0.0548000 0.0000 11.460
04/03/91 0.0539000 0.0000 11.450
05/01/91 0.0567000 0.0000 11.520
05/29/91 0.0559000 0.0000 11.590
06/26/91 0.0576000 0.0000 11.530
07/24/91 0.0552000 0.0000 11.620
08/21/91 0.0562000 0.0000 11.740
09/18/91 0.0573000 0.0000 11.770
10/16/91 0.0572000 0.0000 11.840
11/13/91 0.0570000 0.0000 11.870
12/11/91 0.0571000 0.0377 11.810
01/08/92 0.0580000 0.0000 11.970
02/05/92 0.0590000 0.0000 11.870
03/04/92 0.0593000 0.0000 11.800
04/01/92 0.0566000 0.0000 11.780
04/29/92 0.0622000 0.0000 11.810
05/27/92 0.0605000 0.0000 11.850
06/24/92 0.0605000 0.0000 11.880
07/22/92 0.0605000 0.0000 12.140
08/19/92 0.0605000 0.0000 12.140
09/16/92 0.0140000 0.0697 12.050
10/14/92 0.0585000 0.0000 11.970
11/11/92 0.0585000 0.0000 11.920
12/09/92 0.0585000 0.0053 12.020
01/06/93 0.0585000 0.0000 12.070
02/03/93 0.0585000 0.0000 12.110
03/03/93 0.0585000 0.0000 12.520
03/31/93 0.0585000 0.0000 12.380
<PAGE>
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
04/28/93 0.0585000 0.0000 12.430
05/26/93 0.0585000 0.0000 12.410
07/09/93 0.0609000 0.0000 12.660
08/10/93 0.0609000 0.0000 12.640
09/10/93 0.0609000 0.0000 12.970
10/08/93 0.0609000 0.0000 12.960
11/10/93 0.0590000 0.0000 12.770
12/10/93 0.0571000 0.0044 12.850
01/10/94 0.0571000 0.0000 12.860
02/10/94 0.0571000 0.0000 12.850
03/10/94 0.0571000 0.0000 12.290
04/08/94 0.0571000 0.0000 11.790
05/10/94 0.0571000 0.0000 11.630
06/10/94 0.0571000 0.0000 12.010
07/08/94 0.0571000 0.0000 11.590
08/10/94 0.0571000 0.0000 11.720
09/09/94 0.0571000 0.0000 11.700
10/10/94 0.0571000 0.0000 11.450
11/10/94 0.0571000 0.0000 10.900
12/09/94 0.0571000 0.0000 11.050
01/10/95 0.0571000 0.0000 11.220
02/10/95 0.0571000 0.0000 11.680
03/10/95 0.0571000 0.0000 11.720
04/10/95 0.0571000 0.0000 11.880
05/10/95 0.0571000 0.0000 11.990
06/09/95 0.0571000 0.0000 12.120
07/10/95 0.0571000 0.0000 12.050
08/10/95 0.0571000 0.0000 11.860
09/08/95 0.0571000 0.0000 12.000
10/10/95 0.0571000 0.0000 12.080
11/10/95 0.0571000 0.0000 12.170
12/08/95 0.0571000 0.0000 12.390
01/10/96 0.0571000 0.0000 12.300
02/09/96 0.0571000 0.0000 12.400
03/08/96 0.0571000 0.0000 12.070
04/10/96 0.0571000 0.0000 11.900
05/10/96 0.0571000 0.0000 11.930
06/10/96 0.0571000 0.0000 11.820
07/10/96 0.0571000 0.0000 11.860
Class B Shares
05/26/93 0.0386000 0.0000 12.410
07/09/93 0.0439000 0.0000 12.660
08/10/93 0.0521000 0.0000 12.630
09/10/93 0.0510000 0.0000 12.970
10/08/93 0.0523000 0.0000 12.960
11/10/93 0.0496000 0.0000 12.770
12/10/93 0.0481000 0.0044 12.850
01/10/94 0.0490847 0.0000 12.860
02/10/94 0.0484937 0.0000 12.850
03/10/94 0.0496200 0.0000 12.290
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (continued)
04/08/94 0.0493571 0.0000 11.790
05/10/94 0.0494176 0.0000 11.630
06/10/94 0.0489772 0.0000 12.010
07/08/94 0.0500546 0.0000 11.590
08/10/94 0.0493409 0.0000 11.720
09/09/94 0.0490793 0.0000 11.700
10/10/94 0.0500195 0.0000 11.450
11/10/94 0.0497783 0.0000 10.900
12/09/94 0.0497066 0.0000 11.050
01/10/95 0.0501320 0.0000 11.220
02/10/95 0.0492180 0.0000 11.680
03/10/95 0.0502120 0.0000 11.720
04/10/95 0.0497950 0.0000 11.870
05/10/95 0.0496546 0.0000 11.990
06/09/95 0.0490445 0.0000 12.120
07/10/95 0.0499052 0.0000 12.050
08/10/95 0.0492669 0.0000 11.860
09/08/95 0.0494910 0.0000 12.000
10/10/95 0.0496361 0.0000 12.080
11/10/95 0.0486906 0.0000 12.170
12/08/95 0.0499497 0.0000 12.390
01/10/96 0.0492085 0.0000 12.300
02/09/96 0.0489161 0.0000 12.400
03/08/96 0.0499787 0.0000 12.060
04/10/96 0.0493056 0.0000 11.900
05/10/96 0.0491592 0.0000 11.920
06/10/96 0.0499560 0.0000 11.820
07/10/96 0.0496817 0.0000 11.860
Class C Shares
09/08/95 0.0204886 0.0000 12.000
10/10/95 0.0557899 0.0000 12.070
11/10/95 0.0486906 0.0000 12.160
12/08/95 0.0483733 0.0000 12.390
01/10/96 0.0478194 0.0000 12.300
02/09/96 0.0449510 0.0000 12.400
03/08/96 0.0487777 0.0000 12.060
04/10/96 0.0494001 0.0000 11.900
05/10/96 0.0491423 0.0000 11.920
06/10/96 0.0494449 0.0000 11.810
07/10/96 0.0487977 0.0000 11.860
</TABLE>
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 4
1. Average Annual Total Returns for the Periods Ended 07/31/96:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,012.96 1 $1,332.47 .2
(---------) - 1 = 1.30% (---------) - 1 = 5.91%
$1,000 $1,000
Inception
$1,540.23 .1456
(---------) - 1 = 6.49%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 2.00% for the inception year:
One Year Inception
$1,005.48 1 $1,115.75 .3077
(---------) - 1 = 0.55% (---------) - 1 = 3.43%
$1,000 $1,000
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 5
1. Average Annual Total Returns for the Periods Ended 07/31/96 (Continued):
Examples at NAV:
Class A Shares
One Year Five Year
$1,063.47 1 $1,398.90 .2
(---------) - 1 = 6.35% (---------) - 1 = 6.94%
$1,000 $1,000
Inception
$1,616.99 .1456
(---------) - 1 = 7.25%
$1,000
Class B Shares
One Year Inception
$1,055.47 1 $1,135.08 .3077
(---------) - 1 = 5.55% (---------) - 1 = 3.98%
$1,000 $1,000
2. Cumulative Total Returns for the Periods Ended 07/31/96:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,012.96 - $1,000 $1,332.47 - $1,000
------------------ = 1.30% ------------------ = 33.25%
$1,000 $1,000
Inception
$1,540.23 - $1,000
------------------ = 54.02%
$1,000
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 6
2. Cumulative Total Returns for the Periods Ended 07/31/96 (Continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 2.00% for the inception year:
One Year Inception
$1,005.48 - $1,000 $1,115.75 - $1,000
------------------ = 0.55% ------------------ = 11.58%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00% for the
inception year:
Inception
$1,043.95 - $1,000
------------------ = 4.40%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,063.47 - $1,000 $1,398.90 - $1,000
------------------ = 6.35% ------------------ = 39.89%
$1,000 $1,000
Inception
$1,616.99 - $1,000
------------------ = 61.70%
$1,000
Class B Shares
One Year Inception
$1,055.47 - $1,000 $1,135.08 - $1,000
------------------ = 5.55% ------------------ = 13.51%
$1,000 $1,000
Class C Shares
Inception
$1,053.95 - $1,000
------------------ = 5.40%
$1,000
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 7
3. Standardized Yield for the 30-Day Period Ended 07/31/96:
The Fund's standardized yields are calculated using the following formula
set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$324,552.96 - $52,583.98 6
2{(------------------------ + 1) - 1} = 4.87%
5,366,115 x $12.61
Class B Shares
Example at NAV:
$ 80,119.46 - $23,029.74 6
2{(------------------------ + 1) - 1} = 4.34%
1,324,820 x $12.01
Class C Shares
Example at NAV:
$ 2,231.64 - $ 678.44 6
2{(------------------------ + 1) - 1} = 4.24%
36,917 x $12.00
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 8
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 07/31/96:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share on
the last day of the period.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering $.0546010/30 x 365
------------------ = 5.27%
$12.61
Dividend Yield
at Net Asset Value $.0546010/30 x 365
------------------ = 5.53%
$12.01
Class B Shares
Dividend Yield
at Net Asset Value $.0472479/30 x 365
------------------ = 4.79%
$12.01
Class C Shares
Dividend Yield
at Net Asset Value $.0462641/30 x 365
------------------ = 4.69%
$12.00
Oppenheimer Pennsylvania Tax-Exempt Fund
Page 9
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 07/31/96:
The Fund's tax-equivalent yields are calculated using the following formula:
a
----- + b = Tax-Equivalent Yield
1 - c
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Combined stated tax rate (e.g., federal and state income tax rates
for an individual in the 39.6% federal tax bracket filing singly).
Examples:
Class A Shares
.0487
----------- + 0 = 8.30%
1 - .4129
Class B Shares
.0434
----------- + 0 = 7.39%
1 - .4129
Class C Shares
.0424
----------- + 0 = 7.22%
1 - .4129
Combined Stated Tax Rate Formula
1 - {(1-d)(1-e)} = Combined Stated Tax Rate
The symbols above represent the following factors:
d = Stated federal tax rate (e.g., federal income tax rate for an
individual in the 39.6% federal tax bracket filing singly).
e = Stated Pennsylvania State tax rate (e.g., for an individual in
the 39.6% federal and 2.80% state tax bracket filing singly).
Example: 1 - {(1 - .3960)(1 - .0280)} = 41.29%
Oppenheimer Florida Tax-Exempt Fund
Exhibit 24(b)(16)(iii) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares
11/10/93 0.0530000 0.0000 11.590
12/10/93 0.0530000 0.0000 11.770
01/10/94 0.0530000 0.0000 11.790
02/10/94 0.0530000 0.0000 11.750
03/10/94 0.0530000 0.0000 11.140
04/08/94 0.0530000 0.0000 10.730
05/10/94 0.0530000 0.0000 10.670
06/10/94 0.0530000 0.0000 11.040
07/08/94 0.0530000 0.0000 10.620
08/10/94 0.0530000 0.0000 10.750
09/09/94 0.0530000 0.0000 10.710
10/10/94 0.0530000 0.0000 10.440
11/10/94 0.0530000 0.0000 9.930
12/09/94 0.0530000 0.0000 10.140
01/10/95 0.0530000 0.0000 10.320
02/10/95 0.0530000 0.0000 10.750
03/10/95 0.0530000 0.0000 10.790
04/10/95 0.0530000 0.0000 10.930
05/10/95 0.0530000 0.0000 11.010
06/09/95 0.0530000 0.0000 11.160
07/10/95 0.0530000 0.0000 11.060
08/10/95 0.0530000 0.0000 10.900
09/08/95 0.0530000 0.0000 11.050
10/10/95 0.0506000 0.0000 11.140
11/10/95 0.0506000 0.0000 11.230
12/08/95 0.0506000 0.0000 11.420
01/10/96 0.0506000 0.0000 11.340
02/09/96 0.0506000 0.0000 11.400
03/08/96 0.0506000 0.0000 11.090
04/10/96 0.0506000 0.0000 10.980
05/10/96 0.0506000 0.0000 10.980
06/10/96 0.0506000 0.0000 10.870
07/10/96 0.0506000 0.0000 10.930
Class B Shares
11/10/93 0.0410915 0.0000 11.590
12/10/93 0.0436759 0.0000 11.780
01/10/94 0.0468184 0.0000 11.810
02/10/94 0.0456769 0.0000 11.760
03/10/94 0.0461788 0.0000 11.160
04/08/94 0.0461931 0.0000 10.740
05/10/94 0.0463047 0.0000 10.680
06/10/94 0.0450584 0.0000 11.060
07/08/94 0.0468869 0.0000 10.640
08/10/94 0.0459714 0.0000 10.770
<PAGE>
Oppenheimer Florida Tax-Exempt Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (Continued)
09/09/94 0.0457576 0.0000 10.730
10/10/94 0.0470162 0.0000 10.460
11/10/94 0.0469221 0.0000 9.940
12/09/94 0.0463407 0.0000 10.150
01/10/95 0.0466534 0.0000 10.340
02/10/95 0.0457796 0.0000 10.760
03/10/95 0.0464463 0.0000 10.800
04/10/95 0.0465218 0.0000 10.950
05/10/95 0.0460054 0.0000 11.030
06/09/95 0.0456381 0.0000 11.180
07/10/95 0.0463674 0.0000 11.080
08/10/95 0.0460523 0.0000 10.920
09/08/95 0.0459325 0.0000 11.060
10/10/95 0.0437788 0.0000 11.160
11/10/95 0.0430014 0.0000 11.250
12/08/95 0.0440888 0.0000 11.430
01/10/96 0.0433970 0.0000 11.360
02/09/96 0.0430042 0.0000 11.420
03/08/96 0.0442573 0.0000 11.110
04/10/96 0.0434936 0.0000 10.990
05/10/96 0.0433521 0.0000 10.990
06/10/96 0.0442989 0.0000 10.890
07/10/96 0.0439453 0.0000 10.940
Class C Shares
09/08/95 0.0192678 0.0000 11.040
10/10/95 0.0499167 0.0000 11.140
11/10/95 0.0482577 0.0000 11.230
12/08/95 0.0506349 0.0000 11.410
01/10/96 0.0442657 0.0000 11.340
02/09/96 0.0420212 0.0000 11.400
03/08/96 0.0418421 0.0000 11.090
04/10/96 0.0425692 0.0000 10.980
05/10/96 0.0427069 0.0000 10.980
06/10/96 0.0440270 0.0000 10.870
07/10/96 0.0458665 0.0000 10.930
</TABLE>
1. Average Annual Total Returns for the Periods Ended 07/31/96:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Oppenheimer Florida Tax-Exempt Fund
Page 3
1. Average Annual Total Returns for the Periods Ended 07/31/96 (Continued):
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Inception
$1,015.23 1 $1,082.54 .3529
(---------) - 1 = 1.52% (---------) - 1 = 2.84%
$1,000 $1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 3.00% for the inception year:
One Year Inception
$1,007.85 1 $1,084.99 .3529
(---------) - 1 = 0.79% (---------) - 1 = 2.92%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Inception
$1,065.84 1 $1,136.51 .3529
(---------) - 1 = 6.58% (---------) - 1 = 4.62%
$1,000 $1,000
Class B Shares
One Year Inception
$1,057.85 1 $1,114.10 .3529
(---------) - 1 = 5.79% (---------) - 1 = 3.89%
$1,000 $1,000
Oppenheimer Florida Tax-Exempt Fund
Page 4
2. Cumulative Total Returns for the Periods Ended 07/31/96:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Inception
$1,015.23 - $1,000 $1,082.54 - $1,000
------------------ = 1.52% ------------------ = 8.25%
$1,000 $1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 3.00% for the inception year:
One Year Inception
$1,007.85 - $1,000 $1,084.99 - $1,000
------------------ = 0.79% ------------------ = 8.50%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00% for the
inception year:
Inception
$1,046.36 - $1,000
------------------ = 4.64%
$1,000
Oppenheimer Florida Tax-Exempt Fund
Page 5
2. Cumulative Total Returns for the Periods Ended 07/31/96 (Continued):
Examples at NAV:
Class A Shares
One Year Inception
$1,065.84 - $1,000 $1,136.51 - $1,000
------------------ = 6.58% ------------------ = 13.65%
$1,000 $1,000
Class B Shares
One Year Inception
$1,057.85 - $1,000 $1,114.10 - $1,000
------------------ = 5.79% ------------------ = 11.41%
$1,000 $1,000
Class C Shares
Inception
$1,056.35 - $1,000
------------------ = 5.64%
$1,000
Oppenheimer Florida Tax-Exempt Fund
Page 6
3. Standardized Yield for the 30-Day Period Ended 07/31/96:
The Fund's standardized yields are calculated using the following formula
set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$89,172.04 - $17,282.11 6
2{(----------------------- + 1) - 1} = 4.28%
1,749,126 x $11.62
Class B Shares
Example at NAV:
$59,854.48 - $19,422.46 6
2{(----------------------- + 1) - 1} = 3.76%
1,172,192 x $11.09
Class C Shares
Example at NAV:
$ 336.91 - $ 108.52 6
2{(----------------------- + 1) - 1} = 3.77%
6,610 x $11.07
Oppenheimer Florida Tax-Exempt Fund
Page 7
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 07/31/96:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share on
the last day of the period.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering $.0483845/30 x 365
------------------ = 5.07%
$11.62
Dividend Yield
at Net Asset Value $.0483845/30 x 365
------------------ = 5.32%
$11.07
Class B Shares
Dividend Yield
at Net Asset Value $.0417058/30 x 365
------------------ = 4.58%
$11.09
Class C Shares
Dividend Yield
at Net Asset Value $.0418254/30 x 365
------------------ = 4.60%
$11.07
Oppenheimer Florida Tax-Exempt Fund
Page 8
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 07/31/96:
The Fund's tax-equivalent yields are calculated using the following formula:
a
----- + b = Tax-Equivalent Yield
1 - c
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Stated income tax rate for an individual in the 39.6% federal tax
bracket filing singly).
Examples:
Class A Shares
.0428
----------- + 0 = 7.09%
1 - .3960
Class B Shares
.0376
----------- + 0 = 6.23%
1 - .3960
Class C Shares
.0377
----------- + 0 = 6.24%
1 - .3960
Oppenheimer New Jersey Tax-Exempt Fund
Exhibit 24(b)(16)(iii) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares
04/08/94 0.0510000 0.0000 10.810
05/10/94 0.0510000 0.0000 10.800
06/10/94 0.0510000 0.0000 11.100
07/08/94 0.0510000 0.0000 10.750
08/10/94 0.0510000 0.0000 10.870
09/09/94 0.0510000 0.0000 10.880
10/10/94 0.0510000 0.0000 10.610
11/10/94 0.0510000 0.0000 10.120
12/09/94 0.0510000 0.0000 10.290
01/10/95 0.0510000 0.0000 10.450
02/10/95 0.0510000 0.0000 10.800
03/10/95 0.0510000 0.0000 10.890
04/10/95 0.0510000 0.0000 11.000
05/10/95 0.0510000 0.0000 11.070
06/09/95 0.0510000 0.0000 11.180
07/10/95 0.0510000 0.0000 11.120
08/10/95 0.0510000 0.0000 10.970
09/08/95 0.0510000 0.0000 11.070
10/10/95 0.0510000 0.0000 11.100
11/10/95 0.0510000 0.0000 11.160
12/08/95 0.0510000 0.0100 11.270
01/10/96 0.0510000 0.0000 11.210
02/09/96 0.0510000 0.0000 11.310
03/08/96 0.0510000 0.0000 11.070
04/10/96 0.0510000 0.0000 11.000
05/10/96 0.0510000 0.0000 11.000
06/10/96 0.0510000 0.0000 10.920
07/10/96 0.0510000 0.0000 10.970
Class B Shares
04/08/94 0.0356294 0.0000 10.800
05/10/94 0.0436201 0.0000 10.790
06/10/94 0.0423901 0.0000 11.090
07/08/94 0.0449888 0.0000 10.740
08/10/94 0.0430984 0.0000 10.860
09/09/94 0.0432218 0.0000 10.870
10/10/94 0.0440405 0.0000 10.600
11/10/94 0.0441921 0.0000 10.100
12/09/94 0.0443710 0.0000 10.280
01/10/95 0.0451309 0.0000 10.440
02/10/95 0.0442981 0.0000 10.790
03/10/95 0.0451547 0.0000 10.880
04/10/95 0.0445743 0.0000 10.990
05/10/95 0.0439795 0.0000 11.060
06/09/95 0.0437032 0.0000 11.170
07/10/95 0.0445079 0.0000 11.110
<PAGE>
Oppenheimer New Jersey Tax-Exempt Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (Continued)
08/10/95 0.0438748 0.0000 10.970
09/08/95 0.0440455 0.0000 11.070
10/10/95 0.0443213 0.0000 11.100
11/10/95 0.0434742 0.0000 11.160
12/08/95 0.0444830 0.0100 11.270
01/10/96 0.0437903 0.0000 11.200
02/09/96 0.0429986 0.0000 11.310
03/08/96 0.0440210 0.0000 11.070
04/10/96 0.0439382 0.0000 10.990
05/10/96 0.0435617 0.0000 10.990
06/10/96 0.0443803 0.0000 10.910
07/10/96 0.0441169 0.0000 10.970
Class C Shares
09/08/95 0.0185144 0.0000 11.070
10/10/95 0.0501312 0.0000 11.100
11/10/95 0.0487637 0.0000 11.160
12/08/95 0.0511721 0.0100 11.270
01/10/96 0.0401835 0.0000 11.200
02/09/96 0.0423239 0.0000 11.300
03/08/96 0.0429055 0.0000 11.070
04/10/96 0.0436957 0.0000 11.000
05/10/96 0.0422277 0.0000 10.990
06/10/96 0.0437398 0.0000 10.910
07/10/96 0.0443183 0.0000 10.970
</TABLE>
1. Average Annual Total Returns for the Periods Ended 07/31/96:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Inception
$1,013.55 1 $1,058.11 .4138
(---------) - 1 = 1.36% (---------) - 1 = 2.36%
$1,000 $1,000
Oppenheimer New Jersey Tax-Exempt Fund
Page 3
1. Average Annual Total Returns for the Periods Ended 07/31/96 (Continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year and 3.00% for the inception year:
One Year Inception
$1,006.07 1 $1,059.92 .4138
(---------) - 1 = 0.61% (---------) - 1 = 2.44%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Inception
$1,064.11 1 $1,110.89 .4138
(---------) - 1 = 6.41% (---------) - 1 = 4.45%
$1,000 $1,000
Class B Shares
One Year Inception
$1,056.08 1 $1,089.03 .4138
(---------) - 1 = 5.61% (---------) - 1 = 3.59%
$1,000 $1,000
2. Cumulative Total Returns for the Periods Ended 07/31/96:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Inception
$1,013.55 - $1,000 $1,058.11 - $1,000
------------------ = 1.36% ------------------ = 5.81%
$1,000 $1,000
Oppenheimer New Jersey Tax-Exempt Fund
Page 4
2. Cumulative Total Returns for the Periods Ended 07/31/96 (Continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year and 3.00% for the inception year:
One Year Inception
$1,006.07 - $1,000 $1,059.92 - $1,000
------------------ = 0.61% ------------------ = 5.99%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00% for the
inception year:
Inception
$1,044.12 - $1,000
------------------ = 4.41%
$1,000
Examples at NAV:
Class A Shares
One Year Inception
$1,064.11 - $1,000 $1,110.89 - $1,000
------------------ = 6.41% ------------------ = 11.09%
$1,000 $1,000
Class B Shares
One Year Inception
$1,056.08 - $1,000 $1,089.03 - $1,000
------------------ = 5.61% ------------------ = 8.90%
$1,000 $1,000
Class C Shares
Inception
$1,054.13 - $1,000
------------------ = 5.41%
$1,000
Oppenheimer New Jersey Tax-Exempt Fund
Page 5
3. Standardized Yield for the 30-Day Period Ended 07/31/96:
The Fund's standardized yields are calculated using the following formula
set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$48,902.23 - $10,632.33 6
2{(---------------------- + 1) - 1} = 3.95%
1,005,146 x $11.65
Class B Shares
Example at NAV:
$41,979.25 - $14,951.90 6
2{(---------------------- + 1) - 1} = 3.41%
863,257 x $11.09
Class C Shares
Example at NAV:
$ 536.51 - $ 203.72 6
2{(---------------------- + 1) - 1} = 3.28%
11,044 x $11.09
Oppenheimer New Jersey Tax-Exempt Fund
Page 6
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 07/31/96:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share on
the last day of the period.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering $.0487677/30 x 365
------------------ = 5.09%
$11.65
Dividend Yield
at Net Asset Value $.0487677/30 x 365
------------------ = 5.35%
$11.10
Class B Shares
Dividend Yield
at Net Asset Value $.0419961/30 x 365
------------------ = 4.61%
$11.09
Class C Shares
Dividend Yield
at Net Asset Value $.0410458/30 x 365
------------------ = 4.50
$11.09
Oppenheimer New Jersey Tax-Exempt Fund
Page 8
5. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 07/31/96:
The Fund's tax-equivalent yields are calculated using the following formula:
a
----- + b = Tax-Equivalent Yield
1 - c
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Combined stated tax rate (e.g., federal and state income tax rates
for an individual in the 39.6% federal tax bracket filing singly).
Examples:
Class A Shares
.0395
----------- + 0 = 7.00%
1 - .4357
Class B Shares
.0341
----------- + 0 = 6.04%
1 - .4357
Class C Shares
.0328
----------- + 0 = 5.81%
1 - .4357
Combined Stated Tax Rate Formula
1 - {(1-d)(1-e)} = Combined Stated Tax Rate
The symbols above represent the following factors:
d = Stated federal tax rate (e.g., federal income tax rate for an
individual in the 39.6% federal tax bracket filing singly).
e = Stated New Jersey State tax rate (e.g., for an individual in the
39.6% federal and 6.58% state tax bracket filing singly).
Example: 1 - {(1 - .3960)(1 - .0658)} = 43.57%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 853593
<NAME> OPPENHEIMER PENNSYLVANIA TAX-EXEMPT-A
<SERIES>
<NUMBER> 1
<NAME> OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 78,865,306
<INVESTMENTS-AT-VALUE> 79,628,824
<RECEIVABLES> 1,370,847
<ASSETS-OTHER> 5,337
<OTHER-ITEMS-ASSETS> 450,724
<TOTAL-ASSETS> 81,455,732
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 577,854
<TOTAL-LIABILITIES> 577,854
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,437,419
<SHARES-COMMON-STOCK> 5,362,121
<SHARES-COMMON-PRIOR> 5,377,105
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 161,975
<ACCUMULATED-NET-GAINS> (1,161,084)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 763,518
<NET-ASSETS> 64,391,239
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,144,822
<OTHER-INCOME> 0
<EXPENSES-NET> 544,726
<NET-INVESTMENT-INCOME> 2,600,096
<REALIZED-GAINS-CURRENT> (39,279)
<APPREC-INCREASE-CURRENT> (2,305,381)
<NET-CHANGE-FROM-OPS> 255,436
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,144,352
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 444,071
<NUMBER-OF-SHARES-REDEEMED> 572,992
<SHARES-REINVESTED> 113,937
<NET-CHANGE-IN-ASSETS> (335,106)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,153,533)
<OVERDISTRIB-NII-PRIOR> 147,080
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 280,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 559,459
<AVERAGE-NET-ASSETS> 64,997,000
<PER-SHARE-NAV-BEGIN> 12.36
<PER-SHARE-NII> 0.40
<PER-SHARE-GAIN-APPREC> (0.35)
<PER-SHARE-DIVIDEND> 0.40
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.01
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 853593
<NAME> OPPENHEIMER PENNSYLVANIA TAX-EXEMPT-B
<SERIES>
<NUMBER> 1
<NAME> OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 78,865,306
<INVESTMENTS-AT-VALUE> 79,628,824
<RECEIVABLES> 1,370,847
<ASSETS-OTHER> 5,337
<OTHER-ITEMS-ASSETS> 450,724
<TOTAL-ASSETS> 81,455,732
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 577,854
<TOTAL-LIABILITIES> 577,854
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,437,419
<SHARES-COMMON-STOCK> 1,332,915
<SHARES-COMMON-PRIOR> 1,170,055
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 161,975
<ACCUMULATED-NET-GAINS> (1,161,084)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 763,518
<NET-ASSETS> 16,004,847
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,144,822
<OTHER-INCOME> 0
<EXPENSES-NET> 544,726
<NET-INVESTMENT-INCOME> 2,600,096
<REALIZED-GAINS-CURRENT> (39,279)
<APPREC-INCREASE-CURRENT> (2,305,381)
<NET-CHANGE-FROM-OPS> 255,436
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 430,663
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 224,245
<NUMBER-OF-SHARES-REDEEMED> 82,510
<SHARES-REINVESTED> 21,125
<NET-CHANGE-IN-ASSETS> (335,106)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,153,533)
<OVERDISTRIB-NII-PRIOR> 147,080
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 280,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 559,459
<AVERAGE-NET-ASSETS> 15,085,000
<PER-SHARE-NAV-BEGIN> 12.36
<PER-SHARE-NII> 0.35
<PER-SHARE-GAIN-APPREC> (0.35)
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.01
<EXPENSE-RATIO> 1.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 853593
<NAME> OPPENHEIMER PENNSYLVANIA TAX-EXEMPT-C
<SERIES>
<NUMBER> 1
<NAME> OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 78,865,306
<INVESTMENTS-AT-VALUE> 79,628,824
<RECEIVABLES> 1,370,847
<ASSETS-OTHER> 5,337
<OTHER-ITEMS-ASSETS> 450,724
<TOTAL-ASSETS> 81,455,732
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 577,854
<TOTAL-LIABILITIES> 577,854
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,437,419
<SHARES-COMMON-STOCK> 40,136
<SHARES-COMMON-PRIOR> 21,337
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 161,975
<ACCUMULATED-NET-GAINS> (1,161,084)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 763,518
<NET-ASSETS> 481,792
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,144,822
<OTHER-INCOME> 0
<EXPENSES-NET> 544,726
<NET-INVESTMENT-INCOME> 2,600,096
<REALIZED-GAINS-CURRENT> (39,279)
<APPREC-INCREASE-CURRENT> (2,305,381)
<NET-CHANGE-FROM-OPS> 255,436
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,248
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,594
<NUMBER-OF-SHARES-REDEEMED> 11,403
<SHARES-REINVESTED> 608
<NET-CHANGE-IN-ASSETS> (335,106)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,153,533)
<OVERDISTRIB-NII-PRIOR> 147,080
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 280,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 559,459
<AVERAGE-NET-ASSETS> 296,000
<PER-SHARE-NAV-BEGIN> 12.36
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> (0.36)
<PER-SHARE-DIVIDEND> 0.34
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.00
<EXPENSE-RATIO> 1.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 853593
<NAME> OPPENHEIMER FLORIDA TAX-EXEMPT FUND-A
<SERIES>
<NUMBER> 2
<NAME> OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 32,218,299
<INVESTMENTS-AT-VALUE> 32,097,510
<RECEIVABLES> 568,488
<ASSETS-OTHER> 4,782
<OTHER-ITEMS-ASSETS> 14,624
<TOTAL-ASSETS> 32,685,404
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 382,029
<TOTAL-LIABILITIES> 382,029
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,797,540
<SHARES-COMMON-STOCK> 1,749,139
<SHARES-COMMON-PRIOR> 1,699,707
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,852
<ACCUMULATED-NET-GAINS> (375,211)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (116,102)
<NET-ASSETS> 19,366,095
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,201,396
<OTHER-INCOME> 0
<EXPENSES-NET> 254,866
<NET-INVESTMENT-INCOME> 946,530
<REALIZED-GAINS-CURRENT> 179,624
<APPREC-INCREASE-CURRENT> (1,072,986)
<NET-CHANGE-FROM-OPS> 53,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 584,598
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 324,714
<NUMBER-OF-SHARES-REDEEMED> 296,530
<SHARES-REINVESTED> 21,248
<NET-CHANGE-IN-ASSETS> 229,268
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (558,445)
<OVERDISTRIB-NII-PRIOR> 7,891
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 109,426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 279,549
<AVERAGE-NET-ASSETS> 18,415,000
<PER-SHARE-NAV-BEGIN> 11.40
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> (0.34)
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.07
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 853593
<NAME> OPPENHEIMER FLORIDA TAX-EXEMPT FUND-B
<SERIES>
<NUMBER> 2
<NAME> OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 32,218,299
<INVESTMENTS-AT-VALUE> 32,097,510
<RECEIVABLES> 568,488
<ASSETS-OTHER> 4,782
<OTHER-ITEMS-ASSETS> 14,624
<TOTAL-ASSETS> 32,685,404
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 382,029
<TOTAL-LIABILITIES> 382,029
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,797,540
<SHARES-COMMON-STOCK> 1,160,156
<SHARES-COMMON-PRIOR> 1,108,807
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,852
<ACCUMULATED-NET-GAINS> (375,211)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (116,102)
<NET-ASSETS> 12,865,019
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,201,396
<OTHER-INCOME> 0
<EXPENSES-NET> 254,866
<NET-INVESTMENT-INCOME> 946,530
<REALIZED-GAINS-CURRENT> 179,624
<APPREC-INCREASE-CURRENT> (1,072,986)
<NET-CHANGE-FROM-OPS> 53,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 351,171
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 169,888
<NUMBER-OF-SHARES-REDEEMED> 128,987
<SHARES-REINVESTED> 10,448
<NET-CHANGE-IN-ASSETS> 229,268
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (558,445)
<OVERDISTRIB-NII-PRIOR> 7,891
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 109,426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 279,549
<AVERAGE-NET-ASSETS> 12,843,000
<PER-SHARE-NAV-BEGIN> 11.42
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> (0.34)
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 1.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 853593
<NAME> OPPENHEIMER FLORIDA TAX-EXEMPT FUND-C
<SERIES>
<NUMBER> 2
<NAME> OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 32,218,299
<INVESTMENTS-AT-VALUE> 32,097,510
<RECEIVABLES> 568,488
<ASSETS-OTHER> 4,782
<OTHER-ITEMS-ASSETS> 14,624
<TOTAL-ASSETS> 32,685,404
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 382,029
<TOTAL-LIABILITIES> 382,029
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,797,540
<SHARES-COMMON-STOCK> 6,528
<SHARES-COMMON-PRIOR> 3,407
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,852
<ACCUMULATED-NET-GAINS> (375,211)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (116,102)
<NET-ASSETS> 72,261
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,201,396
<OTHER-INCOME> 0
<EXPENSES-NET> 254,866
<NET-INVESTMENT-INCOME> 946,530
<REALIZED-GAINS-CURRENT> 179,624
<APPREC-INCREASE-CURRENT> (1,072,986)
<NET-CHANGE-FROM-OPS> 53,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,112
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,447
<NUMBER-OF-SHARES-REDEEMED> 3,466
<SHARES-REINVESTED> 140
<NET-CHANGE-IN-ASSETS> 229,268
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (558,445)
<OVERDISTRIB-NII-PRIOR> 7,891
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 109,426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 279,549
<AVERAGE-NET-ASSETS> 78,000
<PER-SHARE-NAV-BEGIN> 11.40
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> (0.34)
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.07
<EXPENSE-RATIO> 1.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 853593
<NAME> OPPENHEIMER NEW JERSEY TAX-EXEMPT - A
<SERIES>
<NUMBER> 3
<NAME> OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 21,346,883
<INVESTMENTS-AT-VALUE> 21,528,826
<RECEIVABLES> 3,327,236
<ASSETS-OTHER> 3,718
<OTHER-ITEMS-ASSETS> 144,126
<TOTAL-ASSETS> 25,003,906
<PAYABLE-FOR-SECURITIES> 3,637,238
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,312
<TOTAL-LIABILITIES> 3,777,550
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,030,051
<SHARES-COMMON-STOCK> 1,023,211
<SHARES-COMMON-PRIOR> 782,274
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 17,852
<ACCUMULATED-NET-GAINS> (7,162)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 221,319
<NET-ASSETS> 11,354,321
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 671,686
<OTHER-INCOME> 0
<EXPENSES-NET> 136,169
<NET-INVESTMENT-INCOME> 535,517
<REALIZED-GAINS-CURRENT> (22,035)
<APPREC-INCREASE-CURRENT> (185,048)
<NET-CHANGE-FROM-OPS> 328,434
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 320,924
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 325,900
<NUMBER-OF-SHARES-REDEEMED> 104,674
<SHARES-REINVESTED> 19,711
<NET-CHANGE-IN-ASSETS> 7,148,387
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,034)
<OVERDISTRIB-NII-PRIOR> 4
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62,334
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 206,160
<AVERAGE-NET-ASSETS> 10,036,000
<PER-SHARE-NAV-BEGIN> 11.26
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> (0.16)
<PER-SHARE-DIVIDEND> 0.36
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.10
<EXPENSE-RATIO> 0.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 853593
<NAME> OPPENHEIMER NEW JERSEY TAX-EXEMPT - B
<SERIES>
<NUMBER> 3
<NAME> OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 21,346,883
<INVESTMENTS-AT-VALUE> 21,528,826
<RECEIVABLES> 3,327,236
<ASSETS-OTHER> 3,718
<OTHER-ITEMS-ASSETS> 144,126
<TOTAL-ASSETS> 25,003,906
<PAYABLE-FOR-SECURITIES> 3,637,238
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,312
<TOTAL-LIABILITIES> 3,777,550
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,030,051
<SHARES-COMMON-STOCK> 878,192
<SHARES-COMMON-PRIOR> 464,094
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 17,852
<ACCUMULATED-NET-GAINS> (7,162)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 221,319
<NET-ASSETS> 9,740,383
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 671,686
<OTHER-INCOME> 0
<EXPENSES-NET> 136,169
<NET-INVESTMENT-INCOME> 535,517
<REALIZED-GAINS-CURRENT> (22,035)
<APPREC-INCREASE-CURRENT> (185,048)
<NET-CHANGE-FROM-OPS> 328,434
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 212,582
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 458,042
<NUMBER-OF-SHARES-REDEEMED> 56,298
<SHARES-REINVESTED> 12,354
<NET-CHANGE-IN-ASSETS> 7,148,387
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,034)
<OVERDISTRIB-NII-PRIOR> 4
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62,334
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 206,160
<AVERAGE-NET-ASSETS> 7,774,000
<PER-SHARE-NAV-BEGIN> 11.25
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> (0.16)
<PER-SHARE-DIVIDEND> 0.31
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 853593
<NAME> OPPENHEIMER NEW JERSEY TAX-EXEMPT - C
<SERIES>
<NUMBER> 3
<NAME> OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 21,346,883
<INVESTMENTS-AT-VALUE> 21,528,826
<RECEIVABLES> 3,327,236
<ASSETS-OTHER> 3,718
<OTHER-ITEMS-ASSETS> 144,126
<TOTAL-ASSETS> 25,003,906
<PAYABLE-FOR-SECURITIES> 3,637,238
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,312
<TOTAL-LIABILITIES> 3,777,550
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,030,051
<SHARES-COMMON-STOCK> 11,866
<SHARES-COMMON-PRIOR> 4,460
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 17,852
<ACCUMULATED-NET-GAINS> (7,162)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 221,319
<NET-ASSETS> 131,652
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 671,686
<OTHER-INCOME> 0
<EXPENSES-NET> 136,169
<NET-INVESTMENT-INCOME> 535,517
<REALIZED-GAINS-CURRENT> (22,035)
<APPREC-INCREASE-CURRENT> (185,048)
<NET-CHANGE-FROM-OPS> 328,434
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,007
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,763
<NUMBER-OF-SHARES-REDEEMED> 4,501
<SHARES-REINVESTED> 144
<NET-CHANGE-IN-ASSETS> 7,148,387
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,034)
<OVERDISTRIB-NII-PRIOR> 4
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62,334
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 206,160
<AVERAGE-NET-ASSETS> 74,000
<PER-SHARE-NAV-BEGIN> 11.25
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> (0.16)
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
