PROSPECTUS
ROCHESTER
FUND
MUNICIPALS
350 Linden Oaks
Rochester, New York 14625-2807
1-800-552-1129
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Rochester Fund Municipals (the "Fund") is a non-diversified, open-end
management investment company having an investment objective of providing as
high a level of interest income exempt from Federal, New York State and New York
City personal income taxes as is consistent with prudent investing, while
seeking preservation of shareholders' capital. The Fund will seek to achieve
this investment objective through investing primarily in New York State
municipal and public authority debt obligations. Except for temporary defensive
purposes, at least 80% of the Fund's net assets will be invested in municipal
securities. There can be no assurance that the Fund will achieve its objective.
The Prospectus sets forth concisely information about the Fund that
prospective investors ought to know before investing. Investors should read this
Prospectus carefully before investing and should retain it for future reference.
A Statement of Additional Information (the "SAI") for the Fund dated May 1, 1995
as revised on January 5, 1996, which is incorporated by reference in its
entirety in this Prospectus, has been filed with the Securities and Exchange
Commission and is available without charge upon request to Oppenheimer
Shareholder Services, the Fund's shareholder servicing agent (the "Agent") at
1-800-552-1129 or by writing to the Agent. The SAI contains information about
the Fund and its management not included in this Prospectus.
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.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION NOR ARE SHARES OF THE FUND FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
The date of this Prospectus is May 1, 1995, as revised on January 5, 1996
Table of Contents
Page
----
Shareholder Expense Information ..................................... 2
Financial Highlights ................................................ 3
About the Fund ...................................................... 4
Risk Factors ........................................................ 8
Dividends and Other Distributions ................................... 10
How to Purchase Shares .............................................. 11
Distribution Plan ................................................... 13
Shareholder Services ................................................ 13
How to Redeem Shares ................................................ 14
Performance ......................................................... 15
Tax Matters ......................................................... 16
Management, Services and Distribution ............................... 17
Appendix A .......................................................... 19
Account Application ................................................. 21
<PAGE>
SHAREHOLDER EXPENSE INFORMATION
The information contained in the following tables is intended to assist an
investor in understanding the various costs and expenses that a shareholder in
the Fund will bear directly or indirectly. For a further description of the
various costs and expenses listed below, see How to Purchase Shares, How to
Redeem Shares, Shareholder Servicees and Management, Services and Distribution.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) ............................................. 4.00%
Annual Fund Operating Expenses
As a Percentage of Average Net Assets
Management Fees (1) .............................................. 0.48%
12b-1 Fees (2) ................................................... 0.15%
Other Expenses ................................................... 0.26%
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Total Fund Operating Expenses (3) ................................ 0.89%
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(1) The Fund's Management Fees have been restated to reflect the amendment of
the Fund's Investment Advisory Agreement on May 1, 1995 to increase such
fees as a percentage of average net assets payable to the Fund's investment
adviser.
(2) The Fund's 12b-1 Fees have been restated to reflect the amendment of the
Fund's 12b-1 Distribution Plan on May 1, 1995 to eliminate the asset based
sales charge. Although the Board of Trustees has authorized payment of a
service fee of only 0.15% per annum of average daily net assets, the Fund's
Distribution Plan, as amended, permits payment of a service fee up to 0.25%
per annum.
(3) Actual Total Operating Expenses during the fiscal year ended December 31,
1994 were 0.84% (including interest expense) and 0.73% (excluding interest
expense). For the fiscal year ending December 31, 1994, the Fund's interest
expense was substantially offset by the incremental interest income
generated on bonds purchased with borrowed funds.
Examples
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return and redemption at the end of each period:
Cumulative Expenses
1 year 3 years 5 years 10 years
------ ------- ------- --------
$49 $67 $87 $145
The above example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown.
2
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
(For a Share Outstanding Throughout the Period)
The following table contains financial information for a share of Rochester
Fund Municipals for the ten one year periods ended December 31, 1994. The
information set forth in this table has been derived from financial statements
which have been examined by Price Waterhouse LLP, independent accountants, whose
report thereon was unqualified. The information should be read in conjunction
with the financial statements and notes thereto which appear in the SAI.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987* 1986* 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ............... $19.00 $17.65 $17.01 $16.24 $16.29 $16.14 $15.31 $16.06 $16.14 $15.79
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income ............. 1.13 1.17 1.20 1.20 1.20 1.20 1.20 1.13 .88 .87
Net realized and unrealized
gain (loss) on investments ....... (2.68) 1.35 .64 .81 (.05) .15 .83 (.57) .16 .20
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ........................ (1.55) 2.52 1.84 2.01 1.15 1.35 2.03 .56 1.04 1.07
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income ................ (1.13) (1.17) (1.20) (1.20) (1.20) (1.20) (1.20) (1.20) (1.12) (.72)
Distributions from undistributed
net investment income--prior
year ............................. (0.01) -- -- -- -- -- -- -- -- --
Distributions from capital
gains ............................ -- -- (.04) -- -- -- -- (.11) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ................ (1.14) (1.17) (1.20) (1.24) (1.20) (1.20) (1.20) (1.31) (1.12) (.72)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period .... $16.31 $19.00 $17.65 $17.01 $16.24 $16.29 $16.14 $15.31 $16.06 $16.14
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return (excludes sales load) (8.35%) 14.60% 11.19% 12.79% 7.28% 8.67% 13.72% 3.69% 6.89% 7.87%
Ratios/supplemental data:
Net assets, end of period
(000 omitted) .................... $1,791,299 $1,794,096 $997,030 $497,440 $260,553 $98,095 $39,277 $16,567 $7,096 $5,077
Ratio of total expenses
to average net assets ............. 0.84% 0.75% 0.84% 0.87% 0.88% 1.11% 1.13% 1.2% 0.8% 1.1%
Ratio of total expenses
(excluding interest) to
average net assets(Y) ............. 0.73% 0.64% 0.70% 0.74% 0.72% 0.91% 1.10% 1.2% 0.8% 1.1%
Ratio of net investment income
to average net assets ............. 6.43% 6.21% 6.79% 7.12% 7.21% 7.19% 7.40% 7.3% 5.5% 5.4%
Portfolio turnover rate ............ 34.39% 18.27% 29.99% 48.54% 51.63% 34.76% 61.50% 72.8% 110.0% 30.3%
</TABLE>
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Per share information has been determined on the basis
of a weighted daily average number of shares outstanding
during the period.
* Includes a voluntary reimbursement of expenses by Fielding Management
Company, Inc. which amounted to $.04 per share in 1986 and $.01 per
share in 1987. Without reimbursement, the ratio of total expenses to
average net assets would have been 1.1% in 1986 and 1.2% in 1987. Fielding
Management Company, Inc. was the Fund's investment adviser from inception
through April 30, 1994.
(Y) During the periods shown above, the Fund's interest expense was
substantially offset by the incremental interest income generated on bonds
purchased with borrowed funds.
3
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<TABLE>
<CAPTION>
Information On Bank Loans
Year ended December 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988
-------- ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Bank loans outstanding at end of year (000) ........... $ 15,083 $30,886 $22,644 $18,292 $ 3,067 $1,139 $ 430
Monthly average amount of bank loans outstanding
during the year (000) ............................... $ 28,131 $27,137 $17,060 $ 5,317 $ 2,587 $ 990 $ 20
Monthly average number of shares of the Fund
outstanding during the year (000) .................... 105,753 77,472 41,429 22,445 10,327 3,980 1,554
Average amount of bank loans per share
outstanding during the year .......................... $ .27 $ .35 $ .41 $ .24 $ .25 $ .25 $ .01
</TABLE>
ABOUT THE FUND
Investment Objective
The Fund, which is organized as a business trust under the laws of the
Commonwealth of Massachusetts, conducted operations as a closed-end investment
company from December, 1982 until May 15, 1986, at which time it commenced
operations as an open-end investment company.
The Fund's investment objective is to provide as high a level of interest
income exempt from Federal, New York State (the "State ) and New York City
personal income taxes as is consistent with prudent investing while seeking
preservation of shareholders' capital. The investment objective of the Fund
cannot be changed without shareholder approval. The Fund will seek to achieve
its objective by investing primarily in State municipal and public authority
debt obligations exempt from such taxes. In addition, the Fund may also invest
its assets in obligations of municipal issuers located in U.S. territories. See
Tax Matters. Investments will be made without regard to maturity. The lack of
maturity restrictions, however, may result in greater fluctuation of bond prices
in the Fund's portfolio and greater fluctuation in the Fund's net asset value
because the prices of long term bonds are more affected by changes in interest
rates than prices of short term bonds.
As a fundamental policy, at least 80% of the Fund's net assets will be
invested in tax-exempt securities except when the Fund's investment adviser
determines that market conditions could cause serious erosion of portfolio
value, in which case assets may be temporarily invested in short-term taxable
obligations as a defensive measure to preserve net asset value. Such temporary
investments will be limited substantially to obligations issued or guaranteed by
the United States government, its agencies, instrumentalities or authorities;
highly-rated corporate debt securities; prime commercial paper; or certificates
of deposit of domestic banks with assets of at least $1 billion.
Credit Quality
At least 80% of the Fund's net assets which are invested in tax-exempt
obligations will be invested in securities which have received investment grade
ratings from a nationally recognized statistical rating organization ("NRSRO"),
or in securities which are not rated, provided that, in the opinion of
OppenheimerFunds, Inc. (the "Adviser"), such securities are of equivalent
quality to securities so rated. Such securities may have speculative
characteristics. A description of rating categories is contained in Appendix A
to the SAI. The remaining 20% of the Fund's assets which are invested in
tax-exempt obligations may be invested in lower rated securities or in
securities which are unrated. Investments in these securities present different
risks than investments in higher rated securities, including an increased
sensitivity to adverse economic changes or individual developments and a higher
rate of default. The Adviser will attempt to reduce the risks inherent in
investments in lower rated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and financial markets. Such securities are regarded as
speculative securities. See Risk Factors and the SAI for a discussion of the
risks associated with investments in high yield, high risk securities.
Municipal Obligations
Municipal securities include debt obligations issued to obtain funds for
various public purposes, including the construction of a wide range of public
facilities such as bridges, highways, housing, hospitals, mass transportation,
schools, streets and water and sewer works. Other public
4
<PAGE>
purposes for which municipal securities or bonds may be issued include the
refunding of outstanding obligations, obtaining funds for general operating
expenses and the obtaining of funds to loan to other public institutions and
facilities. In addition, certain types of private activity bonds are issued by
or on behalf of public authorities to obtain funds to provide housing
facilities, sports facilities, manufacturing facilities, convention or trade
show facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal.
The interest on bonds issued to finance essential state and local
government operations is fully tax-exempt. However, the interest on certain
private activity bonds (including those for housing and student loans) issued
after August 15, 1986, while still tax-exempt for regular tax purposes,
constitutes a preference item for taxpayers in determining their alternative
minimum tax under the Internal Revenue Code of 1986, as amended (the "Code").
See Tax Matters Taxation of Shareholders. The Code also imposes certain
limitations and restrictions on the use of tax-exempt bond financing for
non-government business activities, such as non-essential private activity
bonds. The Fund intends to purchase private activity bonds only to the extent
that the interest paid by such bonds is exempt from Federal, State and New York
City taxes for regular tax purposes pursuant to the Code.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. There are variations in the security of
municipal bonds, both within a particular classification and between
classifications. General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or specific revenue source. One type of revenue bond common to
the State is a "moral obligation" bond. A moral obligation bond is a bond which
is issued by revenue authorities under circumstances where the State provides a
moral pledge of payment in the event that an authority is unable to make timely
debt service. Unlike a general obligation pledge, however, the moral pledge does
not constitute the State's official pledge of its full faith and credit.
Accordingly, the Adviser would consider precedents established in the State with
respect to the honoring of such moral pledges in its credit analyses of moral
obligation bonds. Private activity bonds, which are municipal bonds, are in most
cases revenue bonds and do not generally constitute the pledge of the credit of
the issuer of such bonds.
The values of outstanding municipal bonds will vary as a result of changing
evaluations of the ability of their issuers to meet the interest and principal
payments. Such values will also change in response to changes in the interest
rates payable on new issues of municipal bonds. Should such interest rates rise,
the values of outstanding bonds, including those held in the Fund's portfolio,
will decline and (if purchased at principal amount) would sell at a discount. If
such interest rates fall, the values of outstanding bonds will increase and (if
purchased at principal amount) would sell at a premium. Changes in the value of
municipal bonds held in the Fund's portfolio arising from these or other factors
will cause changes in the net asset value per share of the Fund. As an
operational policy, however, the Fund will not invest more than 5% of its assets
in securities where the principal and interest are the responsibility of an
industrial user with less than three years' operational history.
In determining the issuer of a tax-exempt security, each state and each
political subdivision, agency and instrumentality of each state and each
multistate agency of which such state is a member is a separate issuer. Where
securities are backed only by assets and revenues of a particular
instrumentality, facility or subdivision, such entity is considered the issuer.
The percentage limitations referred to herein and elsewhere in this Prospectus
are determined as of the time an investment or purchase is made.
Investments in Illiquid Securities
The Fund may purchase securities, in private placements or in other
transactions, the disposition of which would be subject to legal restrictions,
or in securities for which there is no regular trading market (collectively,
"Illiquid Securities"). No more than an aggregate of 15% of the value of the
Fund's net assets at the time of acquisition may be invested in Illiquid
Securities. The Fund's policy with respect to investments in illiquid securities
is a non-fundamental
5
<PAGE>
policy and, as such, may be changed by action of the Fund's Board of Trustees.
Such investments may include lease obligations or installment purchase
contract obligations (hereinafter collectively called "municipal leases") of
municipal authorities or entities. Subject to the percentage limitation on
investments in Illiquid Securities, the Fund may invest only a maximum of 5% of
assets which are invested in tax-exempt obligations in unrated or illiquid
tax-exempt municipal leases. Investments in tax-exempt municipal leases will be
subject to the 15% limitation on investments in Illiquid Securities unless, in
the judgment of the Adviser, a particular municipal lease is liquid and unless
the lease has received an investment grade rating from an NRSRO. The Board of
Trustees has adopted guidelines to be utilized by the Adviser in making
determinations concerning the liquidity and valuation of municipal lease
obligations. See the SAI for a description of the guidelines which will be
utilized by the Adviser in making such determinations. Under circumstances where
the Fund proposes to purchase unrated municipal lease obligations, the Fund's
Board of Trustees will be responsible for determining the credit quality of such
obligations and will be responsible for assessing on an ongoing basis the
likelihood that the lease will not be cancelled.
Although municipal leases do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a municipal
lease may be backed by the municipality's covenant to budget for, appropriate
and make the payments due under the municipal lease. Most municipal leases,
however, 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. Although
"non-appropriation" municipal leases are generally secured by the leased
property, disposition of the property in the event of default might prove
difficult.
Investment in tax-exempt lease obligations presents certain special risks
which are not associated with investments in other tax-exempt obligations such
as general obligation bonds or revenue bonds. A discussion of such risks and the
manner in which the Fund will seek to minimize such risks is contained in the
SAI.
Investments in Illiquid Securities may also include, but are not limited
to, securities which have not been registered under the Securities Act of 1933,
as amended, (the "1933 Act"). Rule 144A under the 1933 Act permits certain
resales of such unregistered securities, provided that such securities have been
determined to be eligible for resale to certain qualified institutional buyers
("Rule 144A Securities"). Rule 144A Securities which are determined to be liquid
by the Fund's Adviser pursuant to certain guidelines which have been adopted by
the Board of Trustees will be excluded from the 15% limitation on investments in
Illiquid Securities.
Borrowing for Investment Purposes
The Fund may borrow money, but only from banks, in amounts up to 5% of its
total assets to purchase additional portfolio securities. Borrowing for
investment purposes increases both investment opportunity and investment risk.
Such borrowings in no way affect the Federal or State tax status of the Fund or
its dividends. If the investment income on securities purchased with borrowed
money exceeds the interest paid on the borrowing, the net asset value of the
Fund's shares will rise faster than would otherwise be the case. On the other
hand, if the investment income fails to cover the Fund's costs, including the
interest on borrowings or if there are losses, the net asset value of the Fund's
shares will decrease faster than would otherwise be the case.
The Investment Company Act of 1940, as amended (the "Act"), requires the
Fund to maintain asset coverage of at least 300% for all such borrowings, and
should such asset coverage at any time fall below 300%, the Fund would be
required to reduce its borrowings within three days to the extent necessary to
meet the requirements of the Act. The Fund might be required to sell securities
at a time when it would be disadvantageous to do so in order to reduce its
borrowing. The Fund may also borrow for temporary and emergency purposes. See
Investment Restrictions in the SAI.
In addition, because interest on money borrowed is an expense that the Fund
would not otherwise incur, the Fund may have less net investment income during
periods when its borrowings are substantial. The interest paid by the Fund on
borrowings may be more or less than the yield on the securities purchased with
borrowed funds, depending on prevailing market conditions.
6
<PAGE>
Description of Additional Investment Policies and
Permitted Securities
Except as otherwise noted, the investment policies described below are
non-fundamental investment policies and, as such, may be changed by action of
the Fund's Board of Trustees.
Portfolio Diversification. As a fundamental policy, as to 75% of the value
of the Fund's gross assets, no more than 5% of the value thereof will be
invested in the securities of any one issurer. This limitation does not apply to
investments issued or guaranteed by the U.S. Government, its agencies, or its
instrumentalities or authorities. As part of that policy, the Fund may invest
more than 25% of its assets in industrial development bonds but no more than 5%
of the assets will be invested in such bonds for which the underlying credit is
one business or one charitable entity. As to the balance of 25% of the Fund's
gross assets not covered by this policy, the Fund would not invest more than 10%
thereof in the securities of any one issuer. In no case, however, will the Fund
invest more than 5% of its assets in the securities of any one issuer where such
securities are rated B or below. The Fund is not a diversified fund for purposes
of the Act.
Investing in Other Investment Companies. The Fund also may invest on a
short term basis up to 5% of its net assets in other investment companies which
have a similar objective of obtaining income exempt from Federal, State, and New
York City income taxes. Such investing involves similar expenses by the Fund and
by other investment companies involved, and the Fund intends to make such
investments only on a short-term basis and only when the Adviser reasonably
anticipates that the net after-tax return to the Fund's shareholders will be
improved, as compared to the return available from other short-term investments.
See the SAI.
Inverse Floaters. The Fund may also invest in municipal obligations on
which the interest rates typically decline as market rates increase and increase
as market rates decline (commonly referred to as "inverse floaters"). Changes in
the market interest rate or in the floating rate security inversely affect the
residual interest rate paid on the inverse floater, with the result that the
inverse floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable rate instruments instead of a single long-term, fixed-rate bond. Such
securities have the effect of providing a degree of investment leverage, since
the interest rate on one instrument reflects short-term interest rates, while
the interest rate on the other instrument (the inverse floater) reflects the
approximate rate the issuer would have paid on a fixed-rate bond, multiplied by
two, minus the interest rate paid on the short-term instrument. The two portions
may be recombined to form a fixed-rate municipal bond. To seek to limit the
volatility of the securities, the Adviser may acquire both portions in an effort
to reduce risk and preserve capital. The market for inverse floaters is
relatively new. The Adviser believes that inverse floating obligations represent
a flexible portfolio management instrument for the Fund which allows the Adviser
to vary the degree of investment leverage efficiently under different market
conditions. Certain investments in such obligations may be illiquid and, as
such, are subject to the Fund's limitation on investments in Illiquid
Securities. The Fund may not invest in such illiquid obligations if such
investments, together with other Illiquid Securities, would exceed 15% of the
Fund's net assets.
Put Options. The Fund, for liquidity purposes only, may purchase from banks
municipal securities together with the right to resell ("put") the securities to
the seller. A separate put option may not be marketable or otherwise assignable,
and the sale of the security to a third-party or a lapse of time during which
the put is unexercised may terminate the right to exercise the put. The Fund
does not expect to assign any value to any separate put option which may be
acquired to facilitate portfolio liquidity inasmuch as the value, if any, of the
put will be reflected in the value assigned to the associated security.
Variable Rate Demand Notes. The Fund may purchase variable rate demand
notes ("VRDNs") which are tax-exempt obligations that contain a floating or
variable interest rate adjustment formula and an unconditional right of demand
to receive payment of the unpaid principal balance plus accrued interest upon a
short notice period. The Fund may also invest in VRDNs in the form of
participation interests in variable rate tax-exempt obligations held by a
financial institution, typically a commercial bank.
7
<PAGE>
When-Issued and Delayed Delivery Transactions. The Fund may also purchase
and sell municipal securities on a "when-issued" and "delayed delivery" basis.
These transactions are subject to market fluctuation and the value at delivery
may be more or less than the purchase price. Since the Fund relies on the buyer
or seller, as the case may be, to consummate the transaction, failure by the
other party to complete the transaction may result in the Fund missing the
opportunity of obtaining a price or yield considered to be advantageous. When
the Fund is the buyer in such a transaction, however, it will maintain, in a
segregated account with its custodian, cash or high grade marketable securities
having an aggregate value equal to the amount of such purchase commitments until
payment is made. In addition, the Fund would mark the "when issued" security to
market each day for purposes of portfolio valuation. To the extent the Fund
engages in "when-issued" and "delayed delivery" transactions, it will do so for
the purpose of acquiring securities for the Fund's portfolio consistent with its
investment objective and policies and not for the purpose of investment
leverage. As a fundamental policy, securities purchased on a "when-issued" and
"delayed delivery" basis may not constitute more than 10% of the Fund's net
assets.
Zero Coupon Securities. The Fund may invest without limitation as to amount
in zero coupon securities. Zero coupon securities are debt obligations that do
not entitle the holder to any periodic payment of interest prior to maturity or
a specified date when the securities begin paying current interest. They are
issued and traded at a discount from their face amount or par value, which
discount varies depending on the time remaining until cash payments begin,
prevailing interest rates, liquidity of the security and the perceived credit
quality of the issuer. Original issue discount earned on zero coupon securities
is included in the Fund's income. The market prices of zero coupon securities
generally are more volatile than the prices of securities that pay interest
periodically and in cash and are likely to respond to changes in interest rates
to a greater degree than do other types of debt securities having similar
maturities and credit quality.
In addition, the Fund is subject to certain investment restrictions, some
of which may be changed only with the approval of shareholders. See the SAI for
a list of these additional restrictions and for additional information
concerning the characteristics of municipal securities.
Portfolio Transactions
The Board of Trustees of the Fund monitors the composition of, and
purchases in, the Fund's portfolio to insure consistency with the stated
investment objective and policies of the Fund. Among the responsibilities of the
Adviser under the Investment Advisory Agreement is the selection of
broker-dealers through whom transactions in the Fund's portfolio securities will
be effected. The primary aim in allocation by the Adviser of portfolio
transactions to brokers is the attainment of the best execution of all such
transactions. If more than one broker is able to provide the best execution,
securities may be purchased from or sold to brokers who have furnished research
to the Adviser. Although such research may be used by the Adviser in servicing
accounts other than the Fund, the receipt of such research will be taken into
account in the selection of brokers only to the extent that such research is
primarily intended to benefit the Fund. The Fund and the Adviser also may take
into account the sale of Fund shares in selecting broker-dealers to execute
transactions. For further information see "Brokerage Policies of the Fund" in
the SAI.
A change in securities held by the Fund is known as "portfolio turnover."
See Financial Highlights for the Fund's portfolio turnover rate for the past ten
fiscal years. Municipal bonds may be purchased or sold without regard to the
length of time they have been held, to attempt to take advantage of short-term
differentials in yields with the objective of seeking income while conserving
capital. While short-term trading increases portfolio turnover, the Fund incurs
little or no brokerage costs with respect to such transactions since most
purchases made by the Fund are principal transactions at net prices.
RISK FACTORS
In addition to those risks discussed in About the Fund, investing in the
Fund includes the following risks.
Concentration in New York Issuers
Because the Fund will ordinarily invest 80% or more of its assets in the
obligations of State, its municipalities, agencies and instrumentalities
(collectively, "New York Issuers") which are exempt from Federal, State and New
8
<PAGE>
York City personal income taxes, it is more susceptible to factors affecting the
State and other New York Issuers than is a comparable municipal bond fund whose
investments are not concentrated in the obligations of issuers located in a
single state. See Appendix A to this Prospectus for addtiional information
relating to the risks associated with concentration of investments in New York
municipal securities.
Credit Quality
At least 80% of the Fund's net assets which are invested in tax-exempt
obligations will be invested in securities which have received investment grade
ratings from an NRSRO or in unrated securities, which in the opinion of the
Adviser, are of comparable quality. Tax-exempt obligations which are in the
lowest categories of investment grade ratings (e.g. those rated BBB by Standard
and Poor's Ratings Group ["S&P"] or Baa by Moody's Investors Services, Inc.
["Moody's"]) have speculative characteristics and a weakened capacity to repay
principal and pay interest. The Fund may invest up to 20% of its net assets in
high-yield, lower-rated tax exempt securities or in such lower rated securities.
Investments in these securities present different risks than investments in
higher-rated securities, including an increased sensitivity to adverse economic
changes or individual developments and a higher rate of default. Certain risks
are associated with applying credit ratings as a method for evaluating high
yield securities. Credit ratings evaluate the safety of scheduled payments, not
market value risk of high yield securities. Since credit rating agencies may
fail to timely change the credit ratings to reflect subsequent events, the
Adviser seeks to monitor the issuers of high yield securities in its portfolio
to seek to determine if the issuers will have sufficient cash flow and profits
to meet required payments, and to attempt to assure the liquidity of the
securities so the Fund can meet redemption requests. The Fund may retain a
portfolio security whose rating has been changed.
The dollar weighted average of credit ratings of all bonds rated by NRSROs
held by the Fund during the year ended December 31, 1994, computed on a monthly
basis, as a percentage of the Fund's total portfolio, separated into each rating
category established by S&P, Fitch Investor Services, Inc. ("Fitch") and Duff &
Phelps ("D&P") (AAA,AA, A,BBB,BB,B or lower), Moody's (Aaa,Aa,A,Baa,Ba,B or
lower), were, respectively, 23%, 11%, 19%, 24%, 2% and 1%. Unrated bonds
comprised 20% of the Fund's total investments. Unrated bonds, which are backed
by a letter of credit or guaranteed by financial institutions or agencies, may
be deemed by the Adviser or by the Investment Policy Committee ("IPC") of the
Board of Trustees to be comparable in quality to securities as to which quality
ratings have been ascribed by S&P, Moody's, Fitch or D&P based upon quality or
upon an existing rating of the issuer of the letter of credit, institution, or
agency. Unrated bonds also may be deemed to be comparable in quality to
investment grade securities by the IPC under circumstances where such unrated
bonds have credit characteristics which are comparable to those of similar rated
issuers. Based upon the weighted average of credit ratings of those bonds which
were rated by an NRSRO and unrated securities of comparable quality as
determined by either the Adviser or the IPC, as the case may be, which were held
by the Fund during the year ended December 31, 1994 computed on a monthly basis,
the percentages of the Fund's assets which were invested either in bonds rated
by an NRSRO or in bonds which, although unrated by an NRSRO, are considered by
the Adviser or the IPC to be of comparable quality to rated securities, as
separated into each rating category established by S&P, Moody's, Fitch or D&P as
described above, were respectively 23%, 14%, 22%, 27%, 2% and 1%. Bonds which
were neither rated by an NRSRO nor considered by the Adviser or the IPC to be
comparable to rated securities constituted 11% of the Fund's total assets.
Management of Credit Risk
Because 20% of the Fund's assets which are invested in tax-exempt
obligations may be invested in securities which are rated below the lowest
investment grade categories rated by an NRSRO, or in securities which are
unrated, the Fund is dependent on the Adviser's judgment, analysis and
experience in evaluating the quality of such obligations. In evaluating the
credit quality of a particular issue, whether rated or unrated, the Adviser will
normally take into consideration, among other things, the financial resources of
the issuer (or, as appropriate, of the underlying source of the funds for debt
service), its sensitivity to economic conditions and trends, any operating
history of and the community support for the facility financed by the issue, the
ability of the issuer's management and regulatory matters. The Adviser will
attempt to reduce the risks inherent in
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investments in such obligations through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets.
Default
The Fund will also take such action as it considers appropriate in the
event of anticipated financial difficulties, default or bankruptcy of either the
issuer of any such obligation or of the underlying source of funds for debt
service. Such action may include retaining the services of various persons and
firms to evaluate or protect any real estate, facilities or other assets
securing any such obligation or acquired by the Fund as a result of any such
event. The Fund will incur additional expenditures in taking protective action
with respect to portfolio obligations in default and assets securing such
obligations, and, as a result, the Fund's net asset value could be adversely
affected. Any income derived from the Fund's ownership or operation of assets
acquired as a result of such actions would not be tax-exempt.
DIVIDENDS AND OTHER DISTRIBUTIONS
There are two types of distributions which the Fund may make to its
shareholders, income dividends and capital gain distributions.
Income Dividends. The Fund receives income in the form of interest paid by
its investments. This income, less the expenses incurred in the Fund's
operations, is referred to as net investment income. Income dividends are
declared and recorded each day based on estimated net investment income. Such
dividends are paid monthly. Investors earn such dividends beginning on the day
payment for shares is received to the day prior to the settlement date of
redemption. For federal tax purposes, all distributions declared in the fourth
quarter of any calendar year are deemed paid in that calendar year even if they
are distributed in January of the following year. Any net gain the Fund may
realize from transactions in securities held less than the period required for
long term capital gain recognition (taking into account any carryover of capital
losses from previous years), while technically a distribution from capital
gains, is taxed as an income dividend under the Code. See "Dividends, Capital
Gains and Taxes".
Capital Gain Distributions. If, during any fiscal year, the Fund realizes a
net gain on transactions in securities held more than the period required for
long term capital gain recognition, it has a net long term capital gain. After
deduction of the amount of any net short term loss, the balance may be used to
offset any carryover of capital losses from previous years, or, if there is no
loss carryover, will be paid out to shareholders as a capital gain distribution.
Capital gain distributions, if any, will be paid to shareholders of record
prior to the end of each calendar year.
Because the value of Fund shares is based directly on the amount of net
assets, rather than on the principle of supply and demand, any distribution of
income or capital gains will result in a decrease in the value of Fund shares
equal to the amount of the distribution.
All dividends and capital gain distributions are paid in additional full
and fractional shares at net asset value for each shareholder's account unless
otherwise requested on the Account Application or by notifying the Fund in
writing or by telephone. Notice will be effective for the current dividend or
distribution only if it is received by the Fund at least five business days
before the record date. Notice received thereafter will be effective commencing
with the next dividend or distribution. Income dividends and capital gain
distributions will be credited to a shareholder's account in additional shares
valued at the closing net asset value (without a sales load).
If the U.S. Postal Service cannot deliver a shareholder's check, or if a
shareholder's check remains uncashed for six months, the Fund reserves the right
to credit the shareholder's account with additional shares of the Fund at the
then current net asset value in lieu of the cash payment and to thereafter issue
such shareholder's dividends in additional shares of the Fund.
Stock certificates will not be issued in connection with distributions
which are paid in additional shares unless a written request is received and
certain other procedures are followed. Call the Agent at 1-800-552-1129 for more
information. Shareholders will be advised of the nature of a distribution, the
number of shares issued and the price following distribution.
In certain circumstances, dividends received from the Fund may cause a
portion of Social Security benefits to be subject to federal income tax. See Tax
Matters in the SAI.
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HOW TO PURCHASE SHARES
Shares of the Fund are continuously offered through securities dealers and
financial institutions who have a sales agreement with OppenheimerFunds
Distributor, Inc. (the "Distributor"), Two World Trade Center, New York, New
York 10048-0203, the principal underwriter of the Fund. The minimum initial
investment is $2,000 and subsequent investments must be $100 or more. Such
minimum investment requirements may under certain circumstances be modified at
the discretion of the Distributor.
There Are Several Ways You Can Invest
Through the Distributor. Complete an Account Application and return it with
a check payable to the Distributor who will act as your agent in purchasing
Shares.
Through Your Investment Dealer. Many major investment dealers and financial
institutions have sales agreements with the Distributor and will be glad to
accept your order. If you do not have an account with a dealer, the Distributor
can refer you to one.
Through the Automatic Bank Draft Plan. The Automatic Bank Draft Plan is
available as a convenience to all shareholders of the Fund. Under this plan, you
may elect to make investments ($100 minimum) automatically by arranging to have
pre-authorized checks drawn on your bank account by the Agent. This plan is only
available if your bank agrees to participate. There is no charge for this
service and it may be terminated at any time upon written notice to the Agent.
See Shareholder Services.
Automatic Investment Plan. Investments of $100 or more may be made through
a shareholder's checking account by Automated Clearing House ("ACH") funds. For
information on how to establish a plan, contact the Agent at 1-800-552-1129.
Certificates
To facilitate redemptions and transfers, most shareholders elect not to
receive share certificates; however, the Fund will issue them if requested to do
so in writing or by telephone and if you have owned the shares for at least 30
days. If you lose a stock certificate, you may incur an expense to replace it.
Call the Agent for more information.
Purchase Price of Shares
Shares of the Fund are offered at the public offering price, which is the
net asset value per share, next computed after receipt by the Distributor of an
order from a qualified securities dealer, by mail, or from the investor directly
in good order, plus the applicable sales load. The sales load is a variable
percentage of the offering price depending upon the amount of the sale. The net
asset value of shares is determined once daily as of the close of the New York
Stock Exchange (the "Exchange") on each day that the Exchange is open.
For the purpose of the computation of the applicable public offering price,
orders for shares placed by the mailing of an Account Application with a check
payable to the Fund are considered "processed" upon receipt by the Distributor.
Purchase of shares through authorized dealers must be received by such dealers
prior to 4:00 p.m., New York time (the "Closing") in order to receive such
trading day's public offering price. Orders received by the Distributor
subsequent to the Closing are confirmed at the public offering price determined
as of the Closing on the next trading day. If a dealer who has a sales agreement
with the Distributor receives an order prior to the Closing and fails to
transmit such order to the Distributor prior to its close of business on that
day (5:00 p.m. New York time), any resulting loss will be borne by the dealer.
The net asset value per share of the Fund, the price at which shares are
redeemed, is computed by dividing the value of the Fund's total assets, less its
liabilities, by the total number of shares outstanding. The net asset value of
the Fund fluctuates based on the market value of the Fund's investments.
Procedures describing the method of valuation of the individual securities are
discussed in the SAI.
The Distributor may provide additional promotional incentives or
compensation to dealers that sell shares of the Fund in addition to sales loads.
In some instances, these incentives may be made available only to certain
dealers who have sold specified amounts of shares. Dealers may not use sales of
the Fund's shares to qualify for such incentives to the extent that such sales
may be prohibited by the laws of any state or self-regulatory agency such as the
National Association of Securities Dealers, Inc.
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The following table shows the sales load at various investment levels for
the purchase of shares of the Fund.
Sales Load
as % of: Reallowance
------------------- to Dealers
Net as % of:
Offering Amount Offering
Amount of Purchase Price Invested Price
------------------ -------- -------- ----------
Less than $100,000 ....................... 4.00% 4.17% 3.50%
$100,000 to less than $250,000 ........... 3.35% 3.47% 3.00%
$250,000 to less than $500,000 ........... 2.75% 2.83% 2.50%
$500,000 to less than $1,000,000 ......... 2.25% 2.30% 2.00%
$1,000,000 to less than $4,000,000 ....... 1.25% 1.27% 1.00%
Over $4,000,000 .......................... 0.75% 0.76% 0.60%
The Distributor also may make a payment out of its own resources to dealers
in an amount not to exceed 0.25% of purchases of $1,000,000 or more.
Information with regard to any of the following special purchase plans or
methods may be obtained from the Distributor.
Reduced Sales Loads
Shares of the Fund may be purchased under a variety of plans which provide
for reduced sales loads. To obtain a reduction of the sales load you or your
dealer must notify the Distributor at the time of the sale which qualifies for
the reduction.
Right of Accumulation. The total value (at the public offering price) of
shares of the Fund, and shares of Eligible Funds (as described in Exchange
Privilege) registered to you, your spouse or your children under 21, may be
combined with the amount of your current purchase in determining the sales load
to be paid.
Letter of Intent. Reduced sales loads will apply to purchases made within a
period of thirteen months by any person pursuant to a non-binding Letter of
Intent. A shareholder may include the combined value (at the applicable public
offering price) of shares of the Fund, and shares of Eligible Funds (as
described in Exchange Privilege) held by the shareholder of record as of the
date of the Letter of Intent as an "accumulation credit" toward the completion
of the intention expressed in the Letter of Intent. A shareholder's holdings in
the Fund and any Eligible Funds acquired more than 90 days before the Letter of
Intent is filed will be counted towards completion of the Letter of Intent, but
will not be entitled to a retroactive downward adjustment of sales charge.
Group Purchases. An individual who is a member of a qualified group may
also purchase shares of the Fund at the reduced sales load applicable to the
group taken as a whole. The sales load is based upon the aggregate amount of
shares previously purchased and still owned by the group, plus the securities
currently being purchased. A "qualified group" is one with more than 10 members
and which (i) has been in existence for more than six months, (ii) has a purpose
other than acquiring shares of the Fund at a discount and (iii) has satisfied
uniform criteria which enables the Distributor to realize economies of scale in
its costs of distributing shares.
Other Discounts
Shares of the Fund may also be purchased at net asset value, without a
sales load, by trust companies and bank trust departments for funds held in a
fiduciary, agency, custodial or similar capacity. Such purchases are subject to
minimum investment requirements, which may be established by the Distributor.
Currently, those criteria require that the amount invested or to be invested
during the subsequent 13 month period in the Fund or other fund in The Eligible
Funds group must total at least $100,000. If an investment by a trust company or
bank trust department at net asset value is made through a dealer who has
executed a dealer agreement with respect to The Fund, the Distributor may make a
payment, out of its own resources, to such dealer in an amount not to exceed
0.25% of the amount invested.
The Fund may also sell shares at net asset value to the following
investors: (a) the Adviser or its affiliates, (b) present or former officers,
directors, trustees and employees (and their "immediate families" as defined in
the SAI) of the Fund, the Adviser and its affiliates, and retirement plans
established by them for their employees (c) registered management investment
companies, or separate accounts of insurance companies having an agreement with
the Adviser or the Distributor for that purpose, (d) 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, (e) 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
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<PAGE>
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), (f)
dealers, brokers 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 or
adviser on the purchase of Fund shares), and (g) dealers, brokers or registered
investment advisers that have entered into an agreement with the Distributor to
sell shares to defined contribution employee retirement plans for which the
dealer, broker or investment adviser provides administrative services.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the Act, the Fund has adopted a Distribution
and/or Service Plan and Agreement (the "Distribution Plan"), which permits the
Fund to pay the Distributor a service fee in connection with the distribution of
shares of the Fund in an amount of up to 0.25% per annum of the Fund's average
daily net assets (the "Service Fee"). The Service Fee is paid to the Distributor
as reimbursement for payments which the Distributor makes to compensate
broker-dealers and financial institutions for personal services performed and/or
expenses incurred in connection with the maintenance of shareholder accounts.
Although the terms of the Distribution Plan permit aggregate payments by the
Fund thereunder of up to 0.25% per annum of the Fund's average daily net assets,
the Board of Trustees of the Fund has approved aggregate payments thereunder of
only 0.15% per annum of its average daily net assets.
SHAREHOLDER SERVICES
Account Information
Shareholders with inquiries on accounts not held by their dealer may call
the Fund or the Agent, at 1-800-552-1129 (9:00 a.m.-5:00 p.m. New York time) or
write to the Agent.
Exchange Privilege
The Rochester Funds group currently consists of two investment companies in
addition to the Fund: Limited Term New York Municipal Fund (LTNYX) and The Bond
Fund For Growth (RCVGX) each of which has a distinct investment objective and
policies. As described below, a shareholder may exchange shares of the Fund for
Class A shares of another of The Rochester Funds or of certain other funds which
are managed by the Adviser (the "Oppenheimer" funds) which are eligible for sale
in the shareholder's state of residence (collectively the "Eligible Funds"). A
list indicating which funds are Eligible Funds can be obtained by calling the
Agent. Shareholders wishing to make an exchange into an Eligible Fund should
obtain and review a prospectus of the appropriate Eligible Fund before making
the exchange. No exchange of shares of an Oppenheimer fund for shares of any
fund in The Rochester Fund group is allowed.
Shares of an Eligible Fund may be exchanged for Class A shares of another
Eligible Fund on the basis of the relative net asset values of each Fund's
shares, at the time of the exchange (without sales charge) except that exchanges
of Class A shares held in LTNYX for less than six months for shares of the Fund
will be charged an incremental sales load of 2% with a 1.75% dealer reallowance.
Shareholders may effect exchanges of noncertificated shares by telephone.
The privilege is available to all shareholders unless requested otherwise by the
shareholder on the Account Application Telephone Exchange Authorization Forms
are available from the Distributor upon request. In order to effect an exchange
by telephone, shareholders may call the Agent weekdays (except holidays) between
9:00 a.m. and 5:00 p.m. (New York time). All exchanges will be made on the basis
of the relative net asset value of the two funds next determined after the
request is received in good order. Exchange requests received after the close of
regular trading on the Exchange, generally 4:00 p.m. (New York time) will be
processed at the net asset value determined as of the close of business on the
following business day. A sales load differential may apply. Telephone exchanges
are available only in nonretirement accounts registered in the same name.
Shareholders are limited to one telephone exchange within any 30-day period for
each account authorized to make such exchanges.
The Fund, the Agent and their affiliates will not be liable for any loss,
damage, cost or expense arising out of any instruction (or any interpretation of
such instruction)
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<PAGE>
received by telephone which they reasonably believe to be authentic. In
acting upon telephone instructions, the Agent utilizes procedures which are
reasonably designed to ensure that such instructions are genuine. Your telephone
call will be recorded and a written confirmation of the exchange will be mailed
to you. If reasonable procedures are not followed by the Fund, it may be liable
for losses due to unauthorized or fraudulent telephone exchanges. The Fund
reserves the right, in its sole discretion, upon 60 days' notice, to materially
modify or discontinue the telephone exchange privilege. During times of drastic
economic or market conditions, telephone exchanges may be difficult to
implement. If you experience difficulty in making a telephone exchange, you may
transmit your request in writing to the Agent and it will be implemented at the
next determined net asset value (subject to any applicable sales charge)
following receipt in good order by the Agent.
See Tax Matters for an explanation of the tax consequences of exercising
the exchange privilege.
Reinvestment Privilege
If you redeem shares of the Fund and then decide to reinvest in the Fund,
you may, within 90 calendar days of the date of redemption, use all or any part
of the proceeds of the redemption to reinvest, free of sales load, in shares of
the Fund. Your investment will be reinvested at the net asset value per share
next determined after your request is accepted. You must inform the Agent that
this purchase represents a reinvestment. If you redeem shares of the Fund and
immediately invest the proceeds of the redemption in a money market fund, you
may, upon notification to the Fund within one year of such transaction,
reinvest, free of sales load, the exact amount of the proceeds of the redemption
in shares of the Fund. Your investment will be reinvested at the net asset value
per share established at the closed of business of the Exchanges on the day your
request is accepted. There may be certain limits on facilitating such a
transaction with respect to wire orders. Shareholders should consult with their
dealers with respect to facilitating such transactions. The Fund reserves the
right to require proof of the validity of any request for reinvestment pursuant
to this service. You may use these respective reinvestment privileges only once
a calendar year.
Exercise of the reinvestment privilege does not alter the federal income
tax status of any capital gain realized on a sale of Fund shares, but to the
extent that any shares are sold at a loss and the proceeds are reinvested in
shares of the same Fund, some or all of the loss may not be allowed as a
deduction depending upon the percentage of proceeds reinvested. See Tax Matters.
HOW TO REDEEM SHARES
By Mail. A shareholder may redeem shares at any time and receive the value
of the Fund's shares by forwarding a written request signed by all registered
owners to the Agent. The shareholder will then receive from the Fund the value
of the shares based upon the net asset value per share next computed after a
written request in good order is received by the Agent. Redemption requests
received after the time at which the net asset value is calculated each day (at
the close of the Exchange) will be processed at the net asset value determined
as of the close of business on the following business day. Any certificates
representing Fund shares being redeemed must be submitted with the written
redemption request.
For the shareholder's protection, and to be considered in good order,
signature(s) must be guaranteed if the redemption request involves any of the
following:
(1) the proceeds of the redemption are over $100,000;
(2) the proceeds (in any amount) are to be paid to someone other than
the registered owner(s) of the account; or
(3) the proceeds (in any amount) are to be sent to any address other
than the shareholder's address of record, preauthorized bank account or
brokerage firm account.
Eligible signature guarantors are determined in accordance with standards
and procedures adopted by the Agent from time to time. A notarized signature is
not acceptable.
Payment for the redeemed shares will be sent to the shareholder within
seven business days after receipt of the request in good order, except that the
Fund may delay the mailing of the redemption check or a portion thereof until
the Fund's depository bank has made fully available for withdrawal the proceeds
from the check used to purchase Fund shares, which may take up to 15 days.
Through Your Investment Dealer. For the convenience of its shareholders,
the Fund has authorized the
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<PAGE>
Distributor to act as its agent to accept orders from dealers' authorized
order rooms for the redemption of Fund shares. The Fund may revoke or suspend
this authorization at any time. The redemption price is the net asset value next
determined following the time at which the shares are offered for redemption to
the dealer. Payment of the redemption proceeds is made to the dealer who placed
the order within five days after receipt of the order provided that within this
time, delivery of certificates for shares in good order is received, or for open
accounts, upon the receipt of a written request for redemption as described
above, and, if required, any supporting documents. If a shareholder is unable to
execute a transaction by telephone to his dealer, or a dealer is unable to
execute a transaction by telephone to the Distributor (for example, during times
of unusual market activity), the shareholder or dealer should consider placing
the order by mail.
Systematic Withdrawal Plan. A Systematic Withdrawal Plan ("SWP") is
available to shareholders which provides for monthly payments by ACH funds or
check. For information on how to establish a SWP, contact the Agent at
1-800-552-1129.
Required Redemption. The Fund may, in order to reduce its expenses, require
any shareholder with shares having a net asset value in the aggregate of less
than $1,500 to redeem such shares. Such required redemption would relate only to
a shareholder whose holdings had fallen to below $1,500 by reason of redemption.
Notice of any required redemption (which would be made only in cash at net asset
value without payment of any redemption fee or charge) would be given to any
such shareholder at least 30 days prior to any such required redemption, during
which time the shareholder would have the opportunity to bring the account to a
value of $1,500. The provisions relating to the reinvestment privilege would not
be applicable to any such redeemed shares. Required redemptions are not
applicable where a shareholder is making continuous regular investments in the
Fund through an Automatic Bank Draft Plan or automatic investment plan.
PERFORMANCE
Advertisements and other sales literature for the Fund may refer to its
"yield," "tax equivalent yield" and its "average annual total return." When the
Fund advertises its yield or tax equivalent yield it will also advertise its
average annual total return for the most recent one-year period, the most recent
five-year period and for the life of the Fund. Such calculations are determined
in accordance with the rules and regulations established by the Securities and
Exchange Commission and are applicable to all investment companies and are not
indicative of the dividends or other distributions which were or will be paid to
the Fund's shareholders. Dividends or other distributions paid to shareholders
are reflected in the current distribution rate or taxable equivalent
distribution rate which may be quoted to shareholders.
The advertised yield of the Fund will be based upon a 30-day period stated
in the advertisement. Yield is calculated by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period. The result is then "annualized" using a formula that
provides for semiannual compounding of income.
Tax equivalent yield is calculated by applying the stated federal and state
income tax rate only to that portion of the yield which is exempt from taxation.
The tax-exempt portion of the yield is divided by the number one minus the
stated income tax rate (e.g., 100-38% = 62%). The result is then added to that
portion of the yield, if any, that is not tax-exempt.
The average annual total return of Shares of the Fund is computed by
finding the average annual compounded rate of return of a class over a period
that would equate the initial amount invested in that class to the ending
redeemable value. The calculation assumes that the maximum sales load charge is
deducted from an initial $1,000 investment in Class A Shares, and that the CDSC
is deducted in the case of Class B Shares. The calculation also assumes that
dividends and capital gains distributions are reinvested at net asset value. The
calculation includes all recurring fees that are charged to all shareholder
accounts.
For additional information regarding the calculation of yield and total
return, see "Performance of the Fund" in the SAI. Further information about the
Fund's performance is set forth in the Fund's Annual Report to Shareholders,
which may be obtained upon request without charge.
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<PAGE>
TAX MATTERS
Taxation of the Fund
During the taxable year ended December 31, 1995, the Fund qualified for
treatment as a regulated investment company under Subchapter M of the Code. The
Fund generally intends to continue to so qualify for future taxable years. The
Fund intends to avoid incurring liability for federal income tax and a 4% excise
tax on its investment company taxable income (consisting generally of taxable
net investment income and net short-term capital gains) and net capital gains by
distributing all of that income and gain and by meeting other applicable
requirements of the Code.
Taxation of Shareholders
By meeting certain requirements of the Code, including the requirement that
at the close of each quarter of its taxable year at least 50% of the value of
its total assets consists of obligations the interest on which is excludable
from gross income under section 103(a) of the Code, the Fund intends to continue
to qualify to pay "exempt" interest dividends to its shareholders. Exempt
interest dividends designated as such by the Fund may be excluded from a
shareholder's gross income for federal income tax purposes. To the extent that
dividends are derived from earnings on interest attributable to obligations of
New York and its political subdivisions, Puerto Rico, or other U.S. possessions,
they will also be excluded from a New York shareholder's gross income for State
and New York City personal income tax purposes.
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, will give rise to a tax preference
item which could subject a shareholder to, or increase a shareholder's liability
under, the Federal alternative minimum tax, depending on the shareholder's
individual tax situation.
To the extent dividends are derived from options trading, temporary taxable
investments, an excess of net short-term capital gain over net long-term capital
loss or accretion of market discount those dividends are taxable as ordinary
income for federal income tax purposes whether a shareholder has elected to
receive dividends in cash or additional Fund shares. Such dividends will not
qualify for the dividends-received deduction for corporations. Interest on
indebtedness incurred or continued to purchase or carry shares of the Fund is
not deductible to the extent the Fund's distributions consist of exempt-interest
dividends. Distributions, if any, of net capital gain, when designated as such,
will be treated as long-term capital gains by each shareholder regardless of the
length of time the shareholder has owned Fund shares and whether the shareholder
received them in cash or additional Fund shares.
Information as to the tax status of Fund distributions will be provided
annually including information as to which portions are taxable or tax exempt.
In addition, information will be provided annually identifying the portion of
exempt-interest dividends that constitutes a tax preference item for
shareholders in determining their liability for alternative minimum tax.
Shareholders who have not been in the Fund for a full fiscal year may get
distributions of income and/or capital gains which are not equivalent to the
actual amount applicable to the period for which they have held shares.
For individuals and certain other noncorporate shareholders, including
those who fail to certify their taxpayer identification number, taxable
dividends, capital gain distributions and proceeds of redemptions will be
subject to 31% withholding. Withholding at that rate from taxable dividends and
capital gain distributions also is required for such shareholders who otherwise
are subject to backup withholding. If the withholding requirements are
applicable to a shareholder, any such dividend, distribution or redemption
proceeds would be reduced by the amount required to be withheld. Backup
withholding from redemption orders requested for shareholders by broker-dealers
is the responsibility of those broker-dealers.
Up to 85% of a social security recipient's benefits may be included in
federal gross income for benefit recipients whose adjusted gross income
(including income from tax-exempt sources such as the Fund) plus 50% of their
benefits exceeds certain base amounts. Income from the Fund is still tax-exempt
to the extent described above; it is only included in the calculation of whether
or not a recipient's Social Security benefits are to be included in Federal
gross income.
A redemption of Fund shares may result in taxable gain or loss to the
redeeming shareholder, depending on whether
16
<PAGE>
the redemption proceeds are more or less than the share-holder's adjusted
basis for the redeemed shares (which normally includes any sales load paid). An
exchange of Fund shares for Class A shares of any Eligible Fund generally will
have similar tax consequences. However, special rules apply when a shareholder
(1) disposes of Fund shares through an exchange or redemption within 90 days
after purchase thereof and (2) subsequently acquires shares of an Eligible Fund
or reacquires Fund shares without paying a sales load due to the exchange
privilege or 90-day reinvestment privilege. (See Shareholder Services--Exchange
Privileges and--Reinvestment Privilege.) In these cases, any gain on the
disposition of the Fund shares would be increased, or loss decreased, by the
amount of the sales load paid when those shares were acquired, and that amount
will increase the basis of the subsequently acquired shares. In addition, if a
shareholder purchases Fund shares (whether pursuant to the reinvestment
privilege or otherwise) within 30 days before or after redeeming other Fund
shares at a loss, all or a portion of that loss will not be deductible and will
increase the basis of the newly purchased shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders--see the SAI
for a further discussion--and is not intended to be a substitute for careful tax
planning. There may be other federal, state or local tax considerations
applicable to a particular investor; for example, the Fund's distributions may
be wholly or partly taxable under state and/or local laws other than State and
New York City. PROSPECTIVE INVESTORS THEREFORE ARE URGED TO CONSULT THEIR OWN
TAX ADVISERS.
MANAGEMENT, SERVICES AND DISTRIBUTION
Rochester Fund Municipals. The Fund offers an unlimited number of shares of
beneficial interest, each of which is entitled to one vote. Fractional shares
have the same rights as full shares to the extent of their proportionate
interest. Each share has equal voting rights. The Fund acts as its own transfer
agent and dividend paying agent.
The Fund has a Board of Trustees which has the primary responsibility for
the overall management of the Fund. The Trustees elect the officers of the Fund
who are responsible for administering its day-to-day operations. Under the
Fund's Declaration of Trust, no annual or regular meeting of shareholders is
required, but special meetings will be called for certain purposes such as
electing trustees, changing fundamental policies or approving a management
contract. The Declaration of Trust of the Fund provides that the Trustees shall
call and give notice of a meeting of shareholders for the purpose of voting upon
removal of any trustee when requested in writing by shareholders holding not
less than 10% of the shares of the Fund.
The Adviser. The Fund is managed by the Adviser, OppenheimerFunds, Inc.,
which is responsible for selecting the Fund's investments and handles its
day-to-day business. The Adviser carries out its duties, subject to the policies
established by the Board of Trustees, under the Investment Advisory Agreement
with the Fund, which states the Adviser's responsibilities. The Adviser is
entitled to receive, pursuant to the Investment Advisory Agreement, an annual
fee, payable monthly, equal to the following percentages based on its average
daily net assets: 0.54% up to $100 million, 0.52% on $100 million to $250
milllion, 0.47% on $250 million to $2 billion, 0.46% on $2 billlion to $5
billion and 0.45% in excess of $5 billion.
The Adviser, an investment adviser registered under the Investment Advisers
Act of 1940, has operated as an investment adviser since 1959. The Adviser
(including a subsidiary) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $40 billion as of November 30, 1995
and with more than 2.8 million shareholder accounts. The Adviser is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Adviser and controlled by Massachusetts Mutual Life Insurance
Company.
On or about the date of this Prospectus, the Adviser acquired business
relationships and certain assets and liabilities of the previous adviser and
distributor to the Fund. Pursuant to this acquisition and Fund shareholder
approval received on December 20, 1995, the Fund entered into the following
agreements, effective January 4, 1996: the Investment Advisory Agreement between
the Fund and the Adviser and the Distribution and Service Plans and Agreements
between the Fund and the Distributor.
17
<PAGE>
Mr. Fielding, the Portfolio Manager of the Fund, has been primarily
responsible for management of the Fund's portfolio since the Fund's inception.
Mr. Fielding was President and a trustee of the Fund from 1991-January, 1996 and
is currently Vice President of the Fund. He also has been an officer and a
director of the Fund's previous advisers (President and director of Fielding
Management Company, Inc. since 1982 and President and director of Rochester
Capital Advisors, Inc., the general partner of Rochester Capital Advisors L.P.,
since 1993). Messrs. Michael S. Rosen and Anthony A. Tanner, also have
responsibility for the day-to-day management of the Fund's portfolio. Prior to
their employment by the Adviser, Messrs. Fielding, Rosen and Tanner were
employed by the Fund's previous investment advisers, Fielding Management
Company, Inc. and Rochester Capital Advisors, L.P.
The Agent. The Fund acts as its own transfer agent and dividend paying
agent. The Fund's shareholder servicing agent is Oppenheimer Shareholder
Services, a division of the Adviser, which acts as servicing agent for the Fund
and as transfer agent for other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Agent at the toll-free number shown on the
back cover of this Prospectus.
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 Adviser that acts as the Distributor. The Distributor also
distributes the shares of other Oppenheimer funds and is sub-distributor for
funds managed by a subsidiary of the Adviser.
18
<PAGE>
APPENDIX A
Special Factors Affecting an Investment in the Fund
The following information as to certain risk factors is provided to
investors in view of the Fund's policy of concentrating its investments in
securities issued by public entities in New York State ("State") and New York
City ("City") and, to a lesser extent, in U.S. territories and possessions. This
information, which does not purport to be a complete description of such risks
and is based on information obtained from official statements relating to
securities offerings of issuers located in New York, from independent municipal
credit reports and other sources believed to be reliable has not been
independently verified by the Fund. This section should be read in the context
of the Fund's other investment policies (see About the Fund--Investment
Objective).
Risk Factors for New York Issuers
New York State. A substantial principal amount of bonds issued by various
State agencies and authorities are either guaranteed by the State or supported
by the State through lease-purchase arrangements, other contractual obligations
or moral obligation provisions, which impose no immediate financial obligations
on the State and require appropriations by the legislature before any payments
can be made. Failure of the State to appropriate necessary amounts or to take
other action to permit the authorities and agencies to meet their obligations
could result in default. If a default were to occur, it would be likely to have
a significant adverse impact on the market price of obligations of the state and
its authorities and agencies. While debt service is normally paid out of
revenues generated by projects of the authorities and agencies, the State has
had to appropriate large amounts of funds in recent years to enable State
agencies to meet their financial obligations and, in some cases, prevent
default. Additional assistance is expected to be required in current and future
fiscal years since certain localities and authorities continue to experience
financial difficulties.
Certain State agencies, authorities and subdivisions, such as the New York
State Urban Development Corporation ("UDC"), the New York State Medical Care
Facilities Finance Agency and the Housing Finance Agency ("HFA") are dependent
upon continued financial support from the State in order to meet their bond
obligations.
To the extent State agencies and local governments require State assistance
to meet their financial obligations, the ability of the State to meet its own
obligations as they become due or to obtain additional financing could be
adversely affected. This financial situation could result not only in defaults
of State and agency obligations but also impairment of the marketability of
securities issued by the State, its agencies and local governments.
Constitutional challenges to State laws or appropriations could limit the
amount of taxes which political subdivisions may impose on real property or the
amount these entities may borrow. In 1979, the State's highest court declared
unconstitutional a State law allowing localities and school districts to impose
a special increase in real estate property taxes in order to raise funds for
pensions and other uses. However, in 1994, the State's highest court rejected a
taxpayer challenge to the constitutionality of certain debt incurred by State
agencies without voter approval. Final adverse decisions in such cases could
require extraordinary appropriations or expenditure reductions, or both, and
could have a material adverse effect upon the financial condition of the State
and various of its agencies and subdivisions.
The newly elected Governor of the State is attempting to close a $5 million
budget shortfall for the current fiscal year (ending March 31, 1996) through
dramatic reductions in certain spending categories. It is not known what
spending cuts the State Legislature will approve. The State's recurring history
of late budgets continues this year and reflects conflicting political
priorities within the State. Nonetheless, it would appear that significant
reductions in expenditures will be made. It is uncertain what impact these
reductions will have on the State's economy.
The State's economy, which was adversely affected by the recession in the
early 1990s, has begun to improve. Job growth in 1993 and the first half of 1994
outperformed estimates, but remains below the rest of the country. Future
growth, if any, is likely to be modest because of corporate downsizing of major
employers in the State and cutbacks in defense spending. Income and population
growth in the State remain among the slowest in the nation, although per
19
<PAGE>
capita income remains high. Slow growth in the economy has also increased
the disparity in income, which could lead to increased service demands.
New York City. In 1975, the City suffered several financial crises which
impaired the borrowing ability of both the City and the State. In that year, the
City lost its access to public credit markets and it was not able to sell
short-term notes to the public until 1979 nor long-term notes to the public
until 1981. To help the City out of its financial difficulties, the State
legislature created the Municipal Assistance Corporation ("MAC") in 1975. MAC
has the authority to issue bonds and notes and pay or lend the proceeds to the
City. MAC also has the authority to exchange its obligations for City
obligations. MAC bonds are payable out of certain State sales and use taxes
imposed by the City, State stock transfer taxes and per capita State aid to the
City. The State is not, however, obligated to continue these taxes, nor to
continue appropriating revenues from these taxes, nor to continue the
appropriation of per capita State aid to pay MAC obligations. MAC does not have
taxing powers, and its bonds are not obligations enforceable against either the
City or the State.
In addition, since 1975, the City's financial condition has been subject to
oversight and review by the New York State Financial Control Board (the "Control
Board") and since 1978 its financial statements have been audited by independent
accounting firms. To be eligible for guarantees and assistance, the City was
required to submit annually to the Control Board a financial plan for the next
four fiscal years, covering the City and certain agencies showing balanced
budgets determined in accordance with generally accepted accounting principles.
Although the Control Board's powers of prior approval were suspended effective
June 30, 1986, because the City had satisfied certain statutory conditions, the
City continues to submit four-year plans to the Control Board for its review. In
the event the City cannot obtain a balanced budget, there are concerns as to
whether any deficit in the City budget can be financed by MAC bonds, federal
guarantees, federal and State aid and increased revenues. Neither the State nor
the federal government is obligated to provide financial assistance of any kind
to the City in the event of future financial difficulties. The City is also a
defendant in numerous legal actions which relate to material matters.
Currently, the City projects significant budget deficits through fiscal
1998. Credit rating agencies have praised cost-cutting steps proposed in the
mayor's fiscal 1995 budget, but have criticized certain ongoing city practices,
including asset sales and debt rescheduling, because such practices may not be
sustainable. In addition, projected cost savings or revenue forecasts may not be
realized. The State's economic health is dependent to a significant extent on
the fortunes of the City, the largest city in the United States.
Conclusion. Both the State and the City face potential economic problems
which could seriously affect their ability to meet financial obligations. The
economic problems of the City adversely affect the State in numerous ways. In
addition, for decades the State economy has grown more slowly than that of the
nation as a whole, resulting in a decline in the position of the State as one of
the country's wealthiest states. The causes of this decline are varied and
complex and some causes reflect international and national trends beyond the
State's and City's control. Some analysts believe that this long term decline is
the result of State and local taxation, which is among the highest in the
nation, and which may cause corporations to locate outside the State. The
current high level of taxes may limit the ability of the State and City to
impose higher taxes in the event of future difficulties.
Risk Factors Affecting United States Territories
Other securities that provide state tax-free income include general
obligations of U.S. territories and possessions such as Guam, the Virgin
Islands, Puerto Rico, and their political subdivisions and public corporations.
The economies of United States territories are closely linked to the U.S.
economy, and will depend on many variables, some of which include the strength
of the U.S. dollar, interest rates, the price stability of oil imports, and the
continued existence of favorable tax incentives. Recent legislation reduced
these incentives, but it is impossible to predict what impact the changes will
have.
20
<PAGE>
Account Application
The Rochester Funds
- --------------------------------------------------------------------------------
Mail completed The person or persons (the "Investor") who are executing this
application to: Account Application authorize Oppenheimer Shareholder
Oppenheimer Services to open or revise an account to purchase common
Shareholder shares of the Fund indicated below (collectively "The
Services Rochester Funds") in accordance with these instructions and
350 Linden Oaks all other applicable provisions in this Account Application,
Rochester, NY and all provisions in the current Prospectus of the indicated
14625 Fund, which Prospectus the investor acknowledges having
received from its Dealer prior to, or simultaneously with,
the execution of this Account Application.
- --------------------------------------------------------------------------------
Account Type/NAME (Please Print or Type)
[ ] Individual__________________________________________________________________
First Name Middle Initial Last Name
Joint [ ] JTTEN:
[ ] Owner [ ] Ten Com:__________________________________________________________
) First Name Middle Initial Last Name
Uniform Gift/
[ ] Transfer to Minor___________________________________________________________
[ ] UTMA [ ] UGMA Custodian First Name Middle Initial Last Name
as Custodian for___________________________ ______________________________
Name of Minor(s) State in which gift is made
[ ] Trust,______________________________________________________________________
Corporation, Name of Trust or Organization as it Appears on Trust Agreement
Partnership or
Other Entity ________________________________________________________________
Name of Trustee(s) or Officer
_______________________________________________ ___________________________
For the Benefit of Date of Trust
______________________________ ___________________ ______________ ________
Address City State Zip
( ) ( )
______________________ ______________________ Telephone numbers will be used
Day Phone Evening Phone for non-soliciting purposes only
(include area code) (include area code)
YOU MUST COMPLETE THIS SECTION FOR ALL ACCOUNT TYPES
- --------------------------------------------------------------------------------
Fund and Privilege Selections
Please indicate your Mutual Fund Investment Choice(s) and circle the appropriate
Share Class (if applicable). (Please notice the minimum required investment for
the fund you choose. Subsequent purchases must be in amount of $100 or more for
each fund.)
Fund Name Share Class Amount
[ ] Rochester Fund Municipals
(minimum $2,000)
RMUNX Class A only available $_________
[ ] Limited Term NY Municipal
Fund (minimum $5,000)
LTNYX Class A $_________
LTNBX Class B $_________
[ ] The Bond Fund for Growth
(minimum $2,000)
RCVGX Class A $_________
RCVBX Class B $_________
RCVYX (Institutional
Investors only) Class Y (minimum $50,000) $_________
TOTAL: $_________
Please enclose a check for this amount
payable to Oppenheimer Funds Distributor, Inc.
21
<PAGE>
Dividend and Capital Gain
(Distributions will be reinvested in additional shares, unless specified
otherwise.)
[ ] Reinvest dividends in shares and pay capital gains in cash
[ ] Pay dividends in cash and reinvest capital gains in shares
[ ] Pay all dividends and capital gains in cash
[ ] I do not want Telephone Exchange Privileges. Telephone Exchange is
automatic (where applicable) unless otherwise specified here.
Please complete the following if dividend distributions are to be mailed to
another address or will be payable to another payee:
_____________________ __________________________ _______________________
Name Address City/State/Zip
________________________________________________________________________________
Signature Guarantee required for above transaction
A signature guarantee may be obtained at any commercial bank or from your
broker dealer.
- --------------------------------------------------------------------------------
Signature and Taxpayer Certification
I (we) am of legal age to make this purchase. Under the penalties of perjury,
I certify that the tax identifying or social security number contained herein is
true, correct and complete and I am not subject to backup withholding under
section 3406(a)(1)(C) of the Internal Revenue Code. I (we) hereby agree that,
upon acceptance by Oppenheimer Funds Distributor, Inc. ("OFDI"), this Account
Application will be a contract governed by the laws of the State of New York.
In addition, I (we) hereby agree that any controversy arising out of or in
relation to my (our) account or this contract shall be settled by arbitration
before the National Association of Securities Dealers, Inc. or any other self-
regulatory organization of which OFDI is a member.
_____________________________________ ________________________________________
Owner's Signature Date Owner's Social Security/Tax ID State in
which signed (Minor's SS# if UGMA/UTMA)
_____________________________________________
Joint Owner's Signature (if any) Date
For Tax Purposes: (check appropriate box:)
[ ] I am a citizen of US [ ] Other_________
[ ] I am a resident of US [ ] Other_________
(Non-resident Aliens must provide the W-8 form)
- --------------------------------------------------------------------------------
Registered Representative Identification (Broker/Dealer Use Only)
__________________ ______________ __________________ _______________________
First Name Middle Initial Last Name Representative Number
_______________________________________________________ _______________________
Registered Representative Signature (required) Office Phone Number
_______________________________________________________ _______________________
Firm Name Branch Number
_________________________________ __________________ ____________ _________
Address City State Zip
Please make your check payable to Oppenheimer Funds Distributor, Inc.
and mail to: 350 Linden Oaks, Rochester, NY 14625. A shareholder package
containing fund privileges will be forwarded upon processing of your
application.
The broker-dealer ("Dealer") signing the Application hereby agrees to all
applicable provisions of this Application. The Dealer will act as principal in
all purchases by the Investor of Fund shares indicated herein and authorizes and
appoints OFDI to execute such purchases and to confirm such purchases to the
Investor. OFDI will remit monthly to the Dealer the amount of any commissions
due, except that no commissions will be paid to the Dealer on any transactions
for which the Dealer's net sales commissions are less than $5.00. The Dealer
also represents that it may lawfully sell shares of the indicated Fund in the
state designated as the Investor's record address, and that it has a currently
effective Dealer Agreement with OFDI authorizing the Dealer to sell common
shares of The Rochester Funds.
The Dealer signature guarantees the signature and legal capacity of the
Investor. If the Investor does not sign this Application, the Dealer warrants
that this application is completed in accordance with the Investor's
instructions and information and agrees to indemnify OFDI and the Oppenheimer
Funds from any loss or liability from acting or relying upon such instructions
and information.
22
<PAGE>
LOGO
The Rochester Funds
A Division of OppenheimerFunds, Inc.
350 Linden Oaks
Rochester, NY 14625
Investment Adviser
OppenheimerFunds, Inc.
Distributor
OppenheimerFunds Distributor, Inc.
Shareholder Servicing Agent
Oppenheimer Shareholder Services
(800) 552-1129
- ---------------------------------------------------
Custodian
Investors Bank & Trust Company
Boston, MA
Independent Accountants
Price Waterhouse LLP
Rochester, NY
Legal Counsel
Kirkpatrick & Lockhart LLP
Washington, D.C.
- ----------------------------------------------------
For further information with respect to the Fund and
the shares offered hereby, reference is made to the
Registration Statement filed with the Securities and
Exchange Commission.
- -----------------------------------------------------
LOGO OppenheimerFunds.
PRO365.001.0196 Item #ROC512452
ROCHESTER
FUND
MUNICIPALS
Prospectus and
New Account Application
As Revised January 5, 1996
350 Linden Oaks
Rochester, NY 14625
Logo Oppenheimer Funds.
<PAGE>
ROCHESTER FUND MUNICIPALS
350 Linden Oaks, Rochester, New York 14625
1-800-552-1129
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1995, AS REVISED ON
JANUARY 5, 1996
This Statement of Additional Information of Rochester Fund Municipals (the
"Fund") is not a Prospectus. This document contains additional information about
the Fund and supplements information in the Prospectus dated May 1, 1995, as
revised on January 5, 1996. It should be read together with the Prospectus,
which may be obtained by writing to the Fund's shareholder servicing agent,
Oppenheimer Shareholder Services (the "Agent"), at P.O. Box 5270, Denver,
Colorado 80217 or by calling the Agent at the toll-free number shown above.
TABLE OF CONTENTS
PAGE
ABOUT THE FUND
Investment Objectives and Policies .................................... 2
Investment Policies and Strategies ............................... 2
Other Investment Techniques and Strategies ....................... 6
Other Investment Restrictions .................................... 8
Investment Considerations/Risk Factors ........................... 10
How the Fund is Managed ............................................... 15
Organization and History ......................................... 15
Trustees and Officers of the Fund ................................ 16
The Adviser and Its Affiliates ................................... 20
Brokerage Policies of the Fund ........................................ 21
Performance of the Fund ............................................... 23
Distribution and Service Plans ........................................ 26
ABOUT YOUR ACCOUNT
How To Buy Shares ..................................................... 27
How To Sell Shares .................................................... 28
How To Exchange Shares ................................................ 29
Dividends, Capital Gains and Taxes .................................... 30
Additional Information About the Fund ................................. 32
FINANCIAL INFORMATION ABOUT THE FUND
Financial Statements .................................................. 34
Independent Auditors' Report .......................................... 34
Appendix A: Description of Municipal Securities Ratings .............. A-1
<PAGE>
ABOUT THE FUND
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT POLICIES AND STRATEGIES. The investment objective of the Fund is to
provide shareholders with as high a level of income exempt from federal income
tax and New York State and New York City personal income taxes as is consistent
with its investment policies and prudent investment management while seeking
preservation of shareholders' capital. The investment objective of the Fund
cannot be changed without shareholder approval. The Fund will seek to achieve
its objective by investing primarily in New York State municipal and public
authority debt obligations exempt from such taxes. In addition, the Fund may
also invest its assets in obligations of municipal issuers located in U.S.
territories. Investments will be made without regard to maturity. The lack of
maturity restrictions, however, may result in greater fluctuation of bond prices
in the Fund's portfolio and greater fluctuation in net asset value because the
prices of long term bonds are more affected by changes in interest rates than
prices of short term bonds. There can be no assurance that the investment
objective of the Fund will be realized.
The Fund is classified as non-diversified within the meaning of the
Investment Company Act of 1940, as amended, (the "Investment Company Act"),
which means that the Fund is not limited by the Investment Company Act in the
proportion of its assets that it may invest in obligations of a single issuer.
The Fund intends to continue to qualify as a "regulated investment company,"
however, under the Internal Revenue Code of 1986, as amended (the "Code"). See
Dividends, Capital Gains and Taxes. In addition to satisfying other requirements
to so qualify, the Fund will limit its investments so that, at the close of each
quarter of its taxable year, (i) not more than 25% of the market value of its
total assets will be invested in the securities of a single issuer and (ii) with
respect to 50% of its total assets, not more than 5% will be invested in the
securities of a single issuer. In contrast, a fund which elects to be classified
as "diversified" under the Investment Company Act must satisfy the foregoing 5%
requirement with respect to 75% of its assets at all times. To the extent that
the Fund assumes large positions in the obligations of a small number of
issuers, the Fund's total return may fluctuate to a greater extent than that of
a diversified company as a result of changes in the financial condition or in
the market's assessment of the issuers.
MUNICIPAL OBLIGATIONS
-- MUNICIPAL BONDS. Municipal bonds include debt obligations issued to
obtain funds for various public purposes, including the construction of a wide
range of public facilities such as bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which municipal securities or bonds may be issued include the
refunding of outstanding obligations, the obtaining of funds for general
operating expenses and the obtaining of funds to loan to other public
institutions and facilities. In addition, certain types of private activity
bonds are issued by or on behalf of public authorities to obtain funds to
provide housing facilities, sports facilities, convention or trade show
facilities, airport, mass transit, port or parking facilities, manufacturing
facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste disposal.
-2-
<PAGE>
-- 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. General obligation bonds are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest. 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. Revenue Bonds are not secured by the full faith, credit
and taxing power of an issuer. Rather, the principal security for revenue bonds
is generally the net revenue derived from a particular facility, group of
facilities or, in some cases, the proceeds of a special excise tax or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects 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, from
which money may be used to make principal and interest payments on the issuer's
obligations. Housing finance authorities have a wide range of security,
including partially or fully insured mortgages, rent subsidized and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. Some authorities are provided with further security in the form of
state assurance (although without obligation) to make up deficiencies in the
debt service reserve fund.
-- INDUSTRIAL DEVELOPMENT BONDS. Industrial development bonds are, in
most cases, revenue bonds and are issued by or on behalf of public authorities
to raise money for the financing of various privately-operated facilities such
as manufacturing, housing, 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 solely
dependent on the ability of the facilities user to meet its financial
obligations and the pledge, if any, of the real and personal property so
financed as security for such payment. The Fund will purchase industrial
development bonds only to the extent that the interest paid by a particular bond
is tax-exempt pursuant to the Code, which limits the types of facilities that
may be financed with tax-exempt industrial development and private activity
bonds and the amounts of such bonds each state may issue.
-- PRIVATE ACTIVITY BONDS. The Fund will invest only in those private
activity bonds which are, in the opinion of issuer's counsel, tax exempt.
Interest on obligations which are classified as non-qualified private activity
bonds under Section 141, arbitrage bonds under Section 148 and bonds not in
registered form under Section 149 of the Code is not exempt from federal income
tax. Such obligations are excluded from the definition of municipal bonds. The
Fund will not invest in them. However, Sections 141 through 150 of the Code
provide that interest on certain types of private activity bonds will be exempt
from federal income tax except when such interest is received by "substantial
users" or persons related to substantial users as defined in Section 147 of the
Code. The Fund may invest periodically in these bonds, and therefore, the Fund
may not be an appropriate investment for entities which are substantial users of
facilities financed by private activity bonds or for investors who are "related
persons". Generally, an individual will not be a related person under the Code
unless such investor or his immediate family (spouse, brothers, sisters and
lineal 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
-3-
<PAGE>
private activity bonds. A "substantial user" of such facilities is defined
generally by Treasury regulations as a non-exempt person who regularly uses a
part of a facility financed from the proceeds of private activity bonds.
-- MUNICIPAL NOTES. Municipal notes generally fund short-term capital needs
and have maturities of one year or less. The Fund may invest in municipal notes
which include:
-- 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 revenues, such as income, sales, use and
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.
-- MISCELLANEOUS, TEMPORARY AND ANTICIPATORY INSTRUMENTS. These instruments
may include notes issued to obtain interim financing pending entering into
alternate financial arrangements such as receipt of anticipated federal, state
or other grants or aid, passage of increased legislative authority to issue
longer term instruments or obtaining other refinancing.
-- CONSTRUCTION LOAN NOTES. Construction loan notes are sold to provide
construction financing. Permanent financing, the proceeds of which are applied
to the payment of the Construction Loan Notes, is sometimes provided by a
commitment of the Government National Mortgage Association ("GNMA") to purchase
the loan, accompanied by a commitment by the Federal Housing Administration to
insure mortgage advances thereunder. In other instances, permanent financing is
provided by commitments of banks to purchase the loan. The Fund will only
purchase Construction Loan Notes that are subject to permanent GNMA or bank
purchase commitments.
-- 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 agencies
of state and local governments to finance seasonal working capital needs or as
short-term financing in anticipation of longer term financing.
-- MUNICIPAL LEASES. Municipal lease obligations or installment purchase
contract obligations (collectively, "Municipal Leases") have special risks not
normally associated with Municipal Obligations. Although Municipal Leases do not
constitute general obligations of the municipality for which the municipality's
taxing power is pledged, a Municipal Lease may be backed by the municipality's
covenant to budget for, appropriate and make the payments due under the lease
obligations. However, most lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years
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unless money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" Municipal Leases are generally secured by the leased
property, the Fund's ability to recover under the lease in the event of
non-appropriation or default will be limited solely to repossession of the
leased property without recourse to the general credit of the lessee, and
disposition of the property in the event of foreclosure might prove difficult.
In addition, Municipal Leases may be subject to an "abatement" risk. The leases
underlying certain municipal lease obligations may provide that lease payments
are subject to partial or full abatement if, because of material damage or
destruction of the leased property, there is substantial interference with the
lessee's use or occupancy of such property. The "abatement" risk may be reduced
by the existence of insurance covering the leased property, the maintenance by
the lessee of reserve funds or the provision of credit enhancements such as
letters of credit.
In addition to the "non-appropriation" and "abatement" risks, investments
in Municipal Leases represent a relatively new type of financing. As such,
Municipal Leases have not yet developed the depth of marketability associated
with more conventional Municipal Obligations. The Fund will seek to minimize
these risks by investing not more than 10% of its total assets in Municipal
Leases that contain "non-appropriation" clauses, and by investing only in those
"non-appropriation" lease obligations where (1) the nature of the leased
equipment or property is such that its ownership or use is essential to a
governmental function of the municipality, (2) the lease payments will commence
amortization of principal at an early date resulting in an average life of seven
years or less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriated, (4) the lease obligor
has maintained good market acceptability in the past, (5) the investment is of a
size that will be attractive to institutional investors, and (6) the underlying
leased equipment has elements of portability and/or use that to enhance its
marketability in the event foreclosure on the underlying equipment is ever
required.
Investments in Municipal Leases will be subject to the Fund's 15%
limitation on investments in Illiquid Securities as described in the Fund's
Prospectus unless, in the judgment of OppenheimerFunds, Inc. ("the Adviser"), a
particular Municipal Lease is liquid and has received an investment grade rating
from a nationally recognized statistical rating organization ("NRSRO"). The
Board of Trustees has adopted guidelines to be utilized by the Adviser in making
determinations concerning the liquidity and valuation of a municipal lease
obligation. Such determinations will be based on all relevant factors including
among others: (1) the frequency of trades and quotes for the obligation; (2) the
number of dealers willing to purchase or sell the security and the number of
other potential buyers; (3) the willingness of dealers to undertake to make a
market in the security; (4) the nature of the marketplace trades, including, the
time needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer; (5) the likelihood that the marketability of the
obligation will be maintained throughout the time the Fund holds the obligation;
and (6) the likelihood that the municipality will continue to appropriate
funding for the leased property. As noted in the Fund's Prospectus, no more than
an aggregate of 15% of the value of the Fund's net assets at the time of
acquisition may be invested in Illiquid Securities. Of that amount, no more than
5% of the Fund's assets which are invested in tax-exempt obligations may be
invested in unrated or "illiquid" municipal leases.
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Subject to the foregoing percentage limitations on investments in Illiquid
Securities, the Fund may invest in tax-exempt leases, provided that: (i) the
Fund receive in each instance the opinion of issuer's legal counsel experienced
in such transactions that the tax-exempt obligation will generate interest
income which is exempt from Federal and New York State income tax; (ii) the Fund
receive in all instances an opinion that as of the effective date of the lease
or at the date of the Fund's purchase, if other than on the effective date, the
lease is the valid and binding obligation of the governmental issuer; (iii) the
Fund receive in each instance an opinion of issuer's legal counsel that such
obligation has been issued in compliance with all applicable Federal and State
securities laws; (iv) the Adviser of the Fund perform its own credit analysis in
instances where a credit rating has not been provided by a recognized credit
rating agency; (v) that if a particular exempt obligation is unrated and, in the
opinion of the Adviser, not of investment grade quality (i.e. within one of the
four highest ratings of an NRSRO, the Adviser at the time of making such
investment, shall include such investment within the Fund's overall percentage
limitation on investments in illiquid securities as well as the 5% limitation on
investments in unrated tax-exempt leases. In instances where the Adviser is
required to perform its own credit analysis with respect to a particular
tax-exempt lease obligation, the Adviser will evaluate current information
furnished by the issuer or obtained from other sources considered by it to be
reliable.
-- DEFINITION OF ISSUER
For purposes of diversification under the Investment Company Act,
identification of the "issuer" of a Municipal Obligation depends on the terms
and conditions of the obligation. If 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 obligation is backed
only by the assets and revenues of the subdivision, such subdivision would be
regarded as the sole issuer. Similarly, in the case of an industrial development
revenue bond, if the bond is backed only by the assets and revenues of the
non-governmental user, the non-governmental user would be deemed to be the sole
issuer.
If, however, in either case, the creating government or some other
entity guarantees the security, such a guarantee would not be a separate
security which must be included in the Fund's limitation on investments in a
single issuer, provided the value of all securities guaranteed by a guarantor is
not greater than 10% of the Fund's total assets.
OTHER INVESTMENT TECHNIQUES AND STRATEGIES
-- STAND-BY COMMITMENTS.
The Fund cannot issue but may purchase municipal securities together with
the right to resell the securities to the seller at an agreed upon price or
yield within a specified period prior to the maturity date of the securities.
Although it is not a put option in the technical sense, such a right to resell
is commonly known as a "put" and is also referred to as a "stand-by commitment."
-- WHEN-ISSUED SECURITIES.
Municipal bonds are frequently offered on a "when-issued" basis. When so
offered, the price, which is generally expressed in yield terms, is fixed at the
time the commitment to purchase
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is made, but delivery and payment for the when-issued securities take place
at a later date. Normally, the settlement date occurs within six months of the
purchase of municipal bonds and notes; during the period between purchase and
settlement, no payment is made by the Fund to the issuer and no interest accrues
to the Fund. To the extent that assets of the Fund are held in cash pending the
settlement of a purchase of securities, the Fund would earn no income; however,
it is the Fund's intention to be fully invested to the extent practicable and
subject to the policies stated above. While when-issued securities may be sold
prior to the settlement date, the Fund intends to purchase such securities with
the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a
municipal bond on a when-issued basis, it will record the transaction and
reflect the value of the security in determining its net asset value. The Fund
does not believe that its net asset value or income will be adversely affected
by its purchase of municipal bonds on a when-issued basis. The Fund will
establish a segregated account in which it will maintain cash and marketable
securities equal in value to commitment for when-issued securities.
-- OPTIONS TRANSACTIONS
The Fund may engage in options transactions in order to provide additional
income (the writing of covered call options) or in order to afford protection
against adverse market conditions (the buying of put options). Such transactions
may, however, limit the amount of possible capital appreciation which might
otherwise be realized. The Fund may only write covered call options or purchase
put options which are listed for trading on a national securities exchange and
purchase call options and sell put options to the extent necessary to cancel
options previously written. As an operational policy, no more than 5% of the
Fund's total assets will be invested in options transactions.
Unless otherwise noted, the foregoing investment objectives and policies
are not designated as fundamental policies within the meaning of the Investment
Company Act. New forms of Municipal Obligations in which the Fund may desire to
invest are continuing to evolve. Accordingly, the descriptions herein as to
certain types of existing Municipal Obligations should be viewed as illustrative
and not exclusive. The Fund may invest in new forms of instruments or variations
of existing instruments, subject only to the Fund's criteria of investment
quality and tax exemption and to the restrictions specified in this Statement of
Additional Information. As new forms of instruments or variations of existing
instruments evolve, the Fund will revise its prospectus to reflect such
evolution prior to investing.
-- VARIABLE RATE DEMAND NOTES.
The Fund may purchase variable rate demand notes ("VRDNs") which are
tax-exempt obligations that contain a floating or variable interest rate
adjustment formula and an unconditional right of demand to receive payment of
the unpaid principal balance plus accrued interest upon a short notice period,
generally not to exceed seven days. The interest rates are adjustable at
intervals ranging from daily up to six months to some prevailing market rate for
similar investments, such adjustment formula being calculated to maintain the
market value of the VRDN at approximately the par value of the VRDN upon the
adjustment date. The adjustments are typically based upon the prime rate of a
bank or some other appropriate interest rate adjustment index.
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<PAGE>
The Fund may also invest in VRDNs in the form of participation interests
("Participating VRDNs") in variable rate tax-exempt obligations held by a
financial institution, typically a commercial bank ("institution").
Participating VRDNs provide the Fund with a specified undivided interest (up to
100%) of the underlying obligation and the right to receive payment of the
unpaid principal balance plus accrued interest on the Participating VRDNs from
the institution upon a specified number of days' notice, not to exceed seven
days (repurchase agreement). In addition, the Participating VRDN is backed by an
irrevocable letter of credit of the institution guaranteeing the timely payment
of principal and interest. In such instances the Fund has an undivided interest
in the underlying obligations and thus participates on the same basis as the
institution in such obligations except that the institution typically retains
fees out of the interest paid on the obligation for servicing the obligation,
for providing the letter of credit and issuing the repurchase commitment. To the
extent that investments in VRDNs are concentrated in a small number of issuers,
the inability of such issuers to meet their payment obligations could adversely
affect the Fund's liquidity.
OTHER INVESTMENT RESTRICTIONS
-- FUNDAMENTAL INVESTMENT RESTRICTIONS.
The Fund operates under certain investment restrictions which are
fundamental investment policies of the Fund and which cannot be changed without
approval of a majority of the outstanding voting securities of the Fund (defined
for purposes of the Prospectus and this Statement as the lesser of: (i) 67% of
the shares present or represented by proxy at a meeting at which more than 50%
of the outstanding shares are present or represented by proxy; or (ii) more than
50% of the outstanding shares). These restrictions provide that the Fund may
not:
1. Borrow money or mortgage or pledge any of its assets, except that
the Fund may borrow from a bank for temporary or emergency purposes or
for investment purposes in amounts not exceeding 5% of its total net
assets. Where borrowings are made for a purpose other than temporary or
emergency purposes, the Investment Company Act, requires that the Fund
maintain asset coverage of at least 300% for all such borrowings.
Should such asset coverage at any time fall below 300%, the Fund will
be required to reduce its borrowings within three (3) days to the
extent necessary to meet such asset coverage. To reduce its borrowings,
the Fund may have to sell investments at a time when it would be
disadvantageous to do so. Additionally, interest paid by the Fund on
its borrowings will decrease the net earnings of the Fund.
2. Buy any securities on margin or sell any securities short.
3. Lend any of its funds or other assets, except by the purchase of a
portion of an issue of publicly distributed bonds, debentures, notes or
other debt securities.
4. Act as underwriter of securities issued by other persons except
insofar as the Fund may technically be deemed an underwriter under the
federal securities laws in connection with the disposition of portfolio
securities.
5. Purchase the securities of any issuer which would result in the
Fund owning more than 10% of the voting securities of such issuer.
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<PAGE>
6. Purchase from or sell to its officers and trustees, or any firm of
which any officer or trustee is a member, as principal, any securities,
but may deal with such persons or firms as brokers and pay a customary
brokerage commission; retain securities of any issuer, if to the
knowledge of the Fund, one or more of its officers, trustees or
investment adviser, own beneficially more than 1/2 of 1% of the
securities of such issuer and all such officers and trustees together
own beneficially more than 5% of such securities.
7. Acquire, lease or hold real estate, except such as may be necessary
or advisable for (a) the maintenance of its offices, or (b) to enable
the Fund to take such action as may be appropriate in the event of
financial difficulties, default or bankruptcy of either the issuer of
or the underlying source of funds for debt service for any obligations
in the Fund's portfolio.
8. Invest in commodities and commodity contracts, puts, calls,
straddles, spreads or any combination thereof, or interests in oil, gas
or other mineral exploration or development programs. The Fund may,
however, write covered call options (or purchase put options) listed
for trading on a national securities exchange and purchase call options
(and sell put options) to the extent necessary to close out call
options previously written or put options previously purchased. At
present there are no options listed for trading on a national
securities exchange covering the types of securities which are
appropriate for investment by the Fund, and, therefore, there are no
option transactions currently available for the Fund.
9. Invest in companies for the purpose of exercising control or
management.
10. Invest more than 25% of the Fund's total assets in securities of
issuers of a particular industry, although for purposes of this
limitation, tax-exempt securities and United States government
obligations are not considered to be part of an industry, except that,
with respect to industrial development bonds and other revenue
obligations for which the underlying credit is a business or charitable
entity, the industry of that entity will be considered for purposes of
this 25% limitation.
11. Issue Senior Securities.
-- NON-FUNDAMENTAL INVESTMENT RESTRICTIONS.
The Fund operates under certain investment restrictions which are
non-fundamental investment policies of the Fund and which can be changed by the
Board without shareholder approval. These restrictions provide that the Fund may
not acquire more than 3% of the voting securities issued by any one investment
company (except where the acquisition results from a dividend or a merger,
consolidation or other reorganization) or invest more than 5% of the Fund's
assets in securities issued by any one investment company or invest more than 5%
of the Fund's assets in securities of other investment companies.
The percentage limitations (fundamental and non-fundamental) on investments
which are set forth above are applied at the time an investment is made. No
violation of the percentage limitation will occur unless the limitation is
exceeded immediately after an investment is made and as a result thereof (except
for the limitations on borrowing which are in effect at all times).
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INVESTMENT CONSIDERATIONS/RISK FACTORS
-- CONCENTRATION OF INVESTMENTS IN NEW YORK STATE ISSUERS
In view of the Fund's policy of concentrating its investments in the
obligations of New York State (the "State"), its municipalities, agencies and
instrumentalities (collectively "New York Issuers"), the following information
is provided to investors. This represents only a brief summary of the
corresponding risks inherent in the Fund and does not purport to be a complete
description. It is based on information obtained from official statements
relating to securities offerings of the State, from independent municipal credit
reports and from other sources. This information is believed to be accurate but
has not been independently verified by the Fund. Additional information may be
obtained from official statements and prospectuses issued by, and other
information reported by the State and its various public bodies and other
entities located within the State in connection with the issuance of their
respective securities.
As noted in the Fund's Prospectus, as a fundamental policy, at least 80% of
the Fund's net assets will ordinarily be invested in New York State, municipal
and public authority debt obligations, the interest from which is exempt from
Federal income tax, New York State income tax and New York City personal income
tax ("New York State Tax Exempt Securities"). Therefore, the Fund is more
susceptible to political, economic or regulatory factors and/or events affecting
the State and its political subdivisions than would a more diverse portfolio of
securities relating to a number of different states. In addition, the value of
the Fund's shares may fluctuate more widely than the value of shares of a
diversified portfolio of securities relating to a number of different states.
A national recession commenced in mid-1990. The nation then experienced a
period of weak economic growth during 1991 and 1992. In 1993, the nation's
economy grew faster than in 1992, but still at a very moderate rate, as compared
to other recoveries. The rate of economic expansion accelerated considerably in
1994. National employment and income growth in 1994 were substantial. In
response, the Federal Reserve Board shifted to a policy of monetary tightening
by raising interest rates throughout most of the year. As a result, expansion of
the economy slowed sharply during the first half of 1995 as higher interest
rates reduced the growth of consumer spending and business investment.
The economic recession was more severe in State and its recovery started
later than in the nation as a whole due in part to the significant downsizing in
the banking and financial services industries, defense related industries and
other major corporations as well as an overbuilt commercial real estate market.
The State recovery, as measured by employment, began near the start of calendar
year 1993. During the calendar year 1993, employment began to increase, though
sporadically, and the unemployment rate declined. Moderate employment growth
continued into the first half of 1994 but then came to a virtual halt in the
middle of the year. Employment growth once again picked up in 1995, though as of
September, 1995, unemployment in New York State was 6.8%.
New York State's fiscal year begins April 1 of each year. The 1995-1996
budget, adopted over two months later than the April 1, 1995 deadline, attempted
to make important changes to the State's fiscal policies. For the first time in
50 years, the State's budget called for a reduction in year to year
expenditures. At the same time, the budget attempted to close a $4.8 billion gap
identified at the beginning
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of the budget process by, in part, significantly reducing expenditures on
certain services. Through the first six months of the 1995-1996 fiscal year, the
State has made no significant revisions to the budget and still projects a
balanced budget for the year. However, with the projected slow down of the
national and State economies along with the sizes of the additional tax
reductions expected to be phased in over the next two years, the State's fiscal
outlook remains stressed.
On October 2, 1995, the State Comptroller released a report entitled
"Comptroller's Report on the Financial Condition of New York State 1995" in
which he identified several risks to the State Financial Plan and reaffirmed his
estimate that the State faces a potential imbalance in receipts and
disbursements of at least $2.7 billion for the State's 1996-1997 fiscal year and
at least $3.9 billion for the State's 1997-1998 fiscal year.
Uncertainties with regard to both the economy and potential decisions at
the federal level add further pressure on future budget balance in New York
State. Specific budget proposals being discussed at the federal level but not
included in the State's current economic forecast would, if enacted, have a
disproportionately negative impact on the longer-term outlook for the State's
economy as compared to other states.
To the extent that the State's municipalities, agencies and authorities
require State assistance to meet their financial obligations, the ability of the
State of New York to meet its own obligations as they become due or to obtain
additional financing could be adversely affected and any reduction in such
assistance and subsidies by the State could adversely affect the ability of such
issuers to meet their debt obligations. Any reduction in the actual or perceived
ability of any issuer of New York State Tax Exempt Securities to meet its
obligations (including a reduction in the rating of its outstanding securities)
would be likely to adversely affect the market value and marketability of its
obligations and could adversely affect the values of New York Tax Exempt
Securities as well.
A substantial principal amount of bonds issued by various municipalities,
agencies and authorities are either guaranteed by the State through
lease-purchase arrangements, other contractual obligations or moral obligation
provisions, which impose no immediate financial obligation on the State and
require appropriations by the legislature before any payments can be made.
Failure of the State to appropriate necessary amounts or to take other action to
permit such municipalities, agencies or authorities to meet their obligations
could result in their default. If a default were to occur, it would likely have
a significant adverse impact on the market price of obligations of the State and
its municipalities, agencies and authorities. While debt service is normally
paid out of revenues generated by projects of such issuers, the State has had to
appropriate large amounts of funds in recent years to enable such
municipalities, agencies and authorities to meet their financial obligations and
in some cases, prevent default. Additional financial assistance is expected to
be required in the current and in the future fiscal years since certain
municipalities, agencies and authorities continue to experience financial
difficulties.
The combination of state and local taxes in the State has been among the
highest in the nation for many years. The burden of state and local taxation, in
combination with the many other causes of regional economic dislocation, has
contributed to the decisions of some businesses and individuals to relocate
outside, or not relocate within, the State. The current high level of taxes
limits the ability of New York State, New York City and other municipalities to
impose higher taxes in the event of future difficulties. In addition,
constitutional challenges to State laws have limited the amount of taxes which
political subdivisions can
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impose on real property, which may have an adverse effect on the ability of
issuers to meet obligations supported by such taxes. A variety of additional
court actions have been brought against the State and certain agencies and
municipalities relating to financing, amount of real estate tax, use of tax
revenues and other matters, which could adversely affect the ability of the
State or such agencies or municipalities to pay their obligations.
The fiscal health of the State is closely related to the fiscal health of
it localities, particularly New York City (the "City"), which has required and
continues to require significant financial assistance from the State. Both the
State and the City face potential economic problems which could seriously affect
the ability of both the State and the City to meet their respective financial
obligations. On July 10, 1995, Standard & Poor's lowered its rating on the
City's general obligation bonds to BBB+ from A-. The City faces continuing and
recurring problems of economic sluggishness compounded by reductions in State
aid. Moreover, large budget gaps projected over the next three years further
indicate the City's lack of financial flexibility. Despite Mayor Giuliani's
efforts at reform, many industry analysts expect further downgrades by the
credit agencies rating in the future.
Beginning in early 1975, the State, the City and other State entities faced
serious financial difficulties which jeopardized the credit standing and
impaired the borrowing abilities of such entities and contributed to higher
interest rates on, and lower market prices for, debt obligations issued by them.
A recurrence of such financial difficulties or failure of certain financial
recovery programs could result in defaults or declines in the market values of
numerous New York obligations in which the Fund may invest.
Since 1990, S&P and Moody's Investor Service, Inc. ("Moody's") each lowered
its credit rating on New York State's general obligation bonds and certain other
obligations issued by New York State. Ratings of New York State's general
obligation bonds are among the lowest of all states. As a result, there are
special risks inherent in the Fund's concentration of investments in New York
Tax Exempt Securities.
The foregoing information as to certain New York risk factors is given
to investors in view of the Fund's policy of concentrating its investments in
New York issuers. Such information constitutes only a brief summary and does not
purport to be a complete description. See Appendix A to this Statement.
-- CREDIT QUALITY
The following special considerations are risk factors associated with the Fund's
investments in high yield (lower rated) securities:
-- RISK FACTORS OF HIGH YIELD SECURITIES. The Fund may invest up to 20% of
its assets in securities of lower rated categories or in securities which are
unrated but deemed to be of comparable quality by the Adviser. These high yield,
high risk securities (commonly referred to as "junk bonds") are subject to
certain risks that may not be present with investments of higher grade
securities. The following supplements the disclosure in the Fund's prospectus.
-- EFFECT OF INTEREST RATE AND ECONOMIC CHANGES. The prices of high yield
securities tend to be less sensitive to interest rate changes than higher-rated
investments, but may be more sensitive to adverse economic changes or individual
corporate developments. Periods of economic uncertainty and changes generally
result in increased volatility in market prices and yields of high yield
securities and thus in the
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Fund's net asset value. A strong economic downturn or a substantial period
of rising interest rates could severely affect the market for high yield
securities. In these circumstances, highly leveraged companies might have
difficulty in making principal and interest payments, meeting projected business
goals, and obtaining additional financing. Thus, there could be a higher
incidence of default. This would affect the value of such securities and thus
the Fund's net asset value. Further, if the issuer of a security owned by the
Fund defaults, the Fund might incur additional expenses to seek recovery.
Generally, when interest rates rise, the value of fixed rate debt
obligations, including high yield securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a high yield security containing a redemption or call provision
exercises either provision in a declining interest rate market, the Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if the Fund experiences unexpected net redemptions in
a rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to
which the Fund's expenses could be allocated and in a reduced rate of return for
the Fund. While it is impossible to protect entirely against this risk,
diversification of the Fund's portfolio and the careful analysis of prospective
portfolio securities by OppenheimerFunds, Inc. (the "Adviser") should minimize
the impact of a decrease in value of a particular security or group of
securities in the Fund's portfolio.
-- THE HIGH YIELD SECURITIES MARKET. The market for below investment grade
bonds expanded rapidly in the 1980's and its growth paralleled a long economic
expansion. During that period, the yields on below investment grade bonds rose
dramatically. Such higher yields did not reflect the value of the income stream
that holders of such bonds expected, but rather the risk that holders of such
bonds could lose a substantial portion of their value as a result of the
issuer's financial restructuring or default. In fact, from 1989 to 1991 during a
period of economic recession, the percentage of lower quality securities that
defaulted rose significantly, although the default rate decreased in subsequent
years. There can be no assurance that such declines in the below investment
grade market will not reoccur. The market for below investment grade bonds
generally is thinner and less active than that for higher quality bonds, which
may limit the Fund's ability to sell such securities at fair market value in
response to changes in the economy or the financial markets. Adverse publicity
and investor perceptions, whether or not based on fundamental analysis, may also
decrease the values and liquidity of lower rated securities, especially in a
thinly traded market.
-- CREDIT RATINGS. The credit ratings issued by credit rating services may
not fully reflect the true risks of an investment. For example, credit ratings
typically evaluate the safety of principal and interest payments, not market
value risk, of high yield securities. Also, credit rating agencies may fail to
change timely a credit rating to reflect changes in economic or company
conditions that affect a security's market value. Although the Adviser considers
ratings of recognized rating services such as Moody's Investors Services, Inc.,
Standard & Poor's Rating Group, Fitch Investors Services, Inc and Duff & Phelps,
("NRSRO" or "NRSROs") the Adviser primarily relies on its own credit analysis,
which includes a study of existing debt, capital issuer's sensitivity to
economic conditions, its operating history and the current trend of earnings.
The Adviser continually monitors the investments in the Fund's portfolio and
carefully evaluates whether to dispose of or retain high yield securities whose
credit ratings have changed. See Appendix A for a description of corporate bond
ratings.
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-- LIQUIDITY AND VALUATION. Lower-rated bonds typically are traded among a
smaller number of broker-dealers than in a broad secondary market. Purchasers of
high yield securities tend to be institutions, rather than individuals, which is
a factor that further limits the secondary market. To the extend that no
established retail secondary market exists, many high yield securities may not
be as liquid as higher-grade bonds. A less active and thinner market for high
yield securities than that available for higher quality securities may limit the
Fund's ability to sell such securities at that fair market value in response to
changes in the economy or the financial markets. The ability of the Fund to
value or sell high yield securities also will be adversely affected to the
extent that such securities are thinly traded or illiquid. During such periods,
there may be less reliable objective information available and thus the
responsibility of the Fund's Board of Trustees (the "Board of Trustees" or the
"Board") to value high yield, high risk securities becomes more difficult, with
judgement playing a greater role. Further, adverse publicity about the economy
or a particular issuer may adversely affect the public's perception of the
value, and thus liquidity, of a high yield security, whether or not such
perceptions are based on a fundamental analysis. See Purchase of Shares.
-- LEGISLATION. Provisions of the Revenue Reconciliation Act of 1989 limit
a corporate issuer's deduction for a portion of the original issue discount on
"high yield discount" obligations (including certain pay-in-kind securities).
This limitation could have a materially adverse impact on the market for certain
high yield securities. From time to time, legislators and regulators have
proposed other legislation that would limit the use of high yield debt
securities in leveraged buyouts, mergers and acquisitions. It is not certain
whether such proposals, which could also adversely affect high yield securities,
will be enacted into law.
- -- INVESTMENT IN MUNICIPAL LEASES
Investments in tax-exempt lease obligations, which are commonly referred to as
"municipal leases," present certain special risks which are not associated with
investments in other tax-exempt obligations such as general obligation bonds or
revenue bonds. The principal risks involved in investments in tax-exempt lease
obligations are the following:
-- LIMITED LIQUIDITY. An investment in tax-exempt lease obligations is
generally less liquid than an investment in comparable tax-exempt obligations
such as general obligation bonds or revenue bonds because (i) tax-exempt lease
obligations (other than Certificate of Participation Leases) are usually issued
in private placements and contain legal restrictions on transfer and (ii) there
is only a limited secondary trading market for such obligations.
-- RELIANCE ON ADVISER'S CREDIT ANALYSIS. Tax-exempt lease obligations are
generally not rated by national credit rating firms, which places the burden for
credit analysis upon the Adviser.
-- NON-APPROPRIATION. The ability of a purchaser to perform a meaningful
credit analysis is limited by the inclusion in most tax-exempt leases of
"non-appropriation" clauses which provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless funds are
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis.
-- LIMITED REMEDIES. The remedies of a purchaser of a tax-exempt lease
obligation may be limited solely to repossession of the collateral for such
obligation for resale upon failure of a municipality
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<PAGE>
to make necessary appropriations or upon default by the governmental issuer
of such obligation without any recourse to the general credit of the
governmental issuer or to acceleration of the rental payments due solely for the
remaining fiscal year of the governmental issuer. In addition, the resale value
of the collateral may be significantly reduced at the time of repossession due
to depreciation.
-- REDUCTION IN YIELD. Prepayments on underlying leases due to loss or
destruction of equipment or exercise of an option of the lessee to purchase such
equipment may reduce the purchaser's yield to the extent that interest rates
have declined below the level prevailing when the tax-exempt lease obligation
was initially purchased. This reduction in yield may occur because the purchaser
might be required to invest such prepayments in obligations yielding a lower
rate of interest.
HOW THE FUND IS MANAGED
ORGANIZATION AND HISTORY. Rochester Fund Municipals, a Massachusetts business
trust, is an open-end, management investment company which currently has one
class of shares outstanding. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to remove a
Trustee. The Trustees will call a meeting of shareholders to vote on the removal
of a Trustee upon the written request of the record holders of 10% of its
outstanding shares. In addition, if the Trustees receive a request from at least
10 shareholders (who have been shareholders for at least six months) holding
shares of the Fund valued at $25,000 or more or holding at least 1% of the
Fund's outstanding shares, whichever is less, stating that they wish to
communicate with other shareholders to request a meeting to remove a Trustee,
the Trustees will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set forth
under Section 16(c) of the Investment Company Act.
Each Share of the Fund represents an interest in the Fund proportionately
equal to the interest of each other share and entitles the holder to one vote
per share (and a fractional vote for a fractional share) on matters submitted to
their vote at shareholders' meetings. The Trustees are authorized to create new
series and classes of series. The Trustees may reclassify unissued shares of the
Fund or its series or classes into additional series or classes of shares. The
Trustees may also divide or combine the shares of a class into a greater or
lesser number of shares without thereby changing the proportionate beneficial
interest of a shareholder in the Fund. Shares do not have cumulative voting
rights or preemptive or subscription rights. Shares may be voted in person or by
proxy.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its
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<PAGE>
obligations described above. Any person doing business with the Trust, and
any shareholder of the Trust, agrees under the Trust's Declaration of Trust to
look solely to the assets of the Trust for satisfaction of any claim or demand
which may arise out of any dealings with the Trust, and the Trustees shall have
no personal liability to any such person, to the extent permitted by law.
TRUSTEES AND OFFICERS OF THE FUND. The Fund's Trustees and officers, one of
which is the Fund's portfolio manager, are listed below, together with principal
occupations and business affiliations during the past five years. The address of
each is Two World Trade Center, New York, New York 10048, except as noted. As of
January 5, 1996 the Trustees and officers of the Fund as a group owned less than
1% of the outstanding shares of class of the Fund.
BRIDGET A. MACASKILL, CHAIRMAN OF THE BOARD OF TRUSTEES AND PRESIDENT*; AGE: 47.
Chairman of the Board, President and Trustee of the Fund, Rochester Portfolio
Series-Limited Term New York Municipal Fund and Rochester Fund Series-The Bond
Fund For Growth; Chief Executive Officer of the Adviser; President and Chief
Operating Officer of the Adviser; prior thereto, Chief Operating Officer of the
Adviser and Executive Vice President of the Adviser from 1987-1989. Vice
President and a Director of Oppenheimer Acquisition Corp., Director of
Oppenheimer Partnership Holdings, Inc., Chairman and a Director of Oppenheimer
Shareholder Services, Director of Main Street Advisers, Inc., and Director of
HarbourView Asset Management Corporation, all of which are subsidiaries of the
Adviser; a Trustee of the New York-based Oppenheimer funds.
JOHN CANNON, TRUSTEE; AGE: 65
620 Sentry Parkway West, Suite 220, Blue Bell, Pennsylvania 19422
Chairman and Treasurer, CDC Associates, Inc., registered investment adviser,
1993-present; prior thereto, President, AMA Investment Advisers, Inc., a mutual
fund investment adviser, 1976-1991; Senior Vice President AMA Investment
Advisers, Inc., 1991-1993; Director, Neuberger & Berman Income Managers Trust,
Neuberger & Berman Income Funds and Neuberger & Berman Income Trust,
1995-present; Trustee of Rochester Portfolio Series-Limited Term New York
Municipal Fund and Rochester Fund Series-The Bond Fund For Growth since 1992.
PAUL Y. CLINTON, DIRECTOR; AGE: 64
946 Morris Avenue, Bryn Mawr, Pennsylvania 19010
Director, External Affairs, Kravco Corporation, a national real estate owner and
property management corporation; formerly President of Essex Management
Corporation, a management consulting company; Trustee of Capital Cash Management
Trust, Prime Cash Fund and Short Term Asset Reserves, each of which is a
money-market fund; Director of Oppenheimer Quest Value Fund, Inc., Oppenheimer
Quest Global Value Fund, Inc., and Quest Cash Reserves, Inc. and Trustee of
Quest For Value Accumulation Trust, all of which are open-end investment
companies. Formerly a general partner of Capital Growth Fund, a venture capital
partnership; formerly a general partner of Essex Limited Partnership, an
investment partnership; formerly President of Geneve Corp., a venture capital
fund; formerly Chairman of Woodland Capital Corp., a small business investment
company; formerly Vice President of W.R. Grace & Co. Trustee of Rochester
Portfolio Series-Limited Term New York Municipal Fund and Rochester Fund
Series-The Bond Fund For Growth.
- ---------
* A Trustee who is an "interested person" as defined in the Investment Company
Act.
-16-
<PAGE>
THOMAS W, COURTNEY, DIRECTOR; AGE: 62
P.O. Box 580, Sewickley, Pennsylvania 15143
Principal of Courtney Associates, Inc., a venture capital firm; former
General Partner of Trivest Venture Fund, a private venture capital fund; former
President of Investment Counseling Federated Investors, Inc.; Trustee of Cash
Assets Trust, a money market fund; Director of Quest Cash Reserves, Inc.,
Oppenheimer Quest Value Fund, Inc. and Oppenheimer Quest Global Value Fund, Inc.
and Trustee of Quest for Value Accumulation Trust, all of which are open-end
investment companies; former President of Boston Company Institutional
Investors; Trustee of Hawaiian Tax-Free Trust and Tax Free Trust of Arizona,
tax-exempt bond funds; Director of several privately owned corporations; former
Director of Financial Analysts Federation; Trustee of Rochester Portfolio
Series-Limited Term New York Municipal Fund and Rochester Fund Series-The Bond
Fund For Growth.
LACY B. HERRMANN, DIRECTOR; AGE: 66
380 Madison Avenue, Suite 2300, New York, New York 10017
President and Chairman of the Board of Aquila Management Corporation, the
sponsoring organization and Administrator and/or Sub-Adviser to the following
open-end investment companies, and Chairman of the Board of Trustees and
President of each: Churchill Cash Reserves Trust, Short Term Asset Reserves,
Pacific Capital Cash Assets Trust, Pacific Capital U.S. Treasuries Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund, Narragansett
Insured Tax-Free Income Fund, Tax-Free Fund For Utah, Churchill Tax-Free Fund of
Kentucky, Tax-Free Fund of Colorado, Tax-Free Trust of Oregon, Tax-Free Trust of
Arizona, Hawaiian Tax-Free Trust, and Aquila Rocky Mountain Equity Fund; Vice
President, Director, Secretary, and formerly Treasurer of Aquila Distributors,
Inc., distributor of the above funds; President and Chairman of the Board of
Trustees of Capital Cash Management Trust ("CCMT"), and an Officer and
Trustee/Director of its predecessors; President and Director of STCM Management
Company, Inc., sponsor and adviser to CCMT; Chairman, President and a Director
of InCap Management Corporation, formerly sub-adviser and administrator of Prime
Cash Fund and Short Term Asset Reserves; Director or Trustee of Quest Cash
Reserves, Inc., Oppenheimer Quest Global Value Fund, Inc. and Oppenheimer Quest
Value Fund, Inc. and Trustee of Quest for Value Accumulation Trust and The
Saratoga Advantage Trust, each of which is an open-end investment company;
Trustee of Rochester Portfolio Series-Limited Term New York Municipal Fund and
Rochester Fund Series-The Bond Fund For Growth; Trustee of Brown University.
GEORGE LOFT, DIRECTOR, AGE: 80
51 Herrick Road
Sharon, Connecticut 06069
Private Investor; Director of Quest Cash Reserves, Inc., Oppenheimer Quest for
Value Fund, Inc. and Oppenheimer Quest Global Value Fund, Inc. and Trustee of
Quest for Value Accumulation Trust and The Saratoga Advantage Trust, all of
which are open-end investment companies, and Director of the Quest for Value
Dual Purpose Fund, Inc., a closed-end investment company; Trustee of Rochester
Portfolio Series-Limited Term New York Municipal Fund and Rochester Fund
Series-The Bond Fund For Growth.
RONALD H. FIELDING, VICE PRESIDENT; AGE: 46
350 Linden Oaks, Rochester, New York 14625
Vice President of the Fund and Rochester Portfolio Series-Limited Term New York
Municipal Fund, January 5, 1996-present; Senior Vice President and Portfolio
Manager of the Adviser, January 5, 1996-present; President of the Rochester
Division of the Adviser, January 4, 1996-present; President and Trustee of the
Fund, 1986-January 5, 1996; Portfolio Manager of the Fund, 1986-present;
President and Trustee of
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<PAGE>
Rochester Portfolio Series - Limited Term New York Municipal Fund,
1991-January 4, 1996; President and Trustee of Rochester Fund Series - The Bond
Fund For Growth, 1986-January 4, 1996; President and Director of Rochester Tax
Managed Fund, Inc., 1985-1995; President and a director, Fielding Management
Company, Inc. (1988-present); President and a director, Rochester Fund
Distributors, Inc. (1990-present); President and a director, Rochester Capital
Advisors, Inc. (1993-present); President and a director, Rochester Fund
Services, Inc. (1986-present).
ANDREW J. DONOHUE, SECRETARY; AGE: 45
Secretary of the Fund, Rochester Portfolio Series-Limited Term New York
Municipal Fund and Rochester Fund Series-The Bond Fund For Growth; Executive
Vice President and General Counsel of the Adviser and the Distributor; an
officer of other Oppenheimer funds; formerly Senior Vice President and Associate
General Counsel of the Adviser 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.
GEORGE C. BOWEN, TREASURER; AGE: 59
3410 South Galena Street Denver, Colorado 80231
Treasurer of the Fund, Rochester Portfolio Series-Limited Term New York
Municipal Fund and Rochester Fund Series-The Bond Fund For Growth; Senior Vice
President and Treasurer of the Adviser; Vice President and Treasurer of the
Distributor and HarbourView Asset Management Corporation; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial Asset Management
Corporation, an investment advisory subsidiary of the Adviser; Vice President,
Treasurer and Secretary of the Agent and Shareholder Financial Services, Inc., a
transfer agent subsidiary of the Adviser; an officer of other Oppenheimer funds.
ROBERT G. ZACK, ASSISTANT SECRETARY; AGE: 47
Assistant Secretary of the Fund, Rochester Portfolio Series-Limited Term New
York Municipal Fund and Rochester Fund Series-The Bond Fund For Growth; Senior
Vice President and Associate General Counsel of the Adviser; Assistant Secretary
of SSI and SFSI; an officer of other Oppenheimer funds.
ROBERT BISHOP, ASSISTANT TREASURER; AGE: 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Treasurer of the Fund, Rochester Portfolio Series-Limited Term New
York Municipal Fund and Rochester Fund Series-The Bond Fund For Growth;
Assistant Vice President of the Adviser/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously a Fund Controller for the Adviser, 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: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Treasurer of the Fund, Rochester Portfolio Series-Limited Term New
York Municipal Fund and Rochester Fund Series-The Bond Fund For Growth;
Assistant Vice President of the Adviser/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously a Fund Controller for the Adviser, 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.
-18-
<PAGE>
-- REMUNERATION OF TRUSTEES. All officers of the Fund and Ms. Macaskill,
a Trustee and President, are officers or directors of the Adviser and receive no
salary or fee from the Fund. The following table sets forth the aggregate
compensation received by the non-interested Trustees from the Fund during the
fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Estimated Total
Compensation Accrued as Annual Compensation
from the Part of Fund Benefits Upon From Fund
Name of Person Fund(1) Expenses(2) Retirement(2) Complex(3)
<S> <C> <C> <C> <C>
John Cannon ................ $19,900 $43,667 $13,500 $29,400
Paul Y. Clinton ............ $ $
Thomas W. Courtney ......... $ $
Lacy B. Herrmann ........... $ $
George Loft ................ $ $
</TABLE>
- -----------
(1) During the fiscal year ended December 31, 1995, only one of the Fund's
current trustees, John Cannon, served as a Trustee of the Fund.
(2) The Board of Rochester Fund Municipals has adopted a Retirement Plan for
Independent Trustees of that Fund. Under the terms of the Retirement Plan, as
amended and restated on October 16, 1995, an eligible Trustee (an Independent
Trustee who has served as such for at least three years prior to retirement) may
receive an annual benefit equal to the product of $1,500 multiplied by the
number of years of service as an Independent Trustee up to a maximum of nine
years. The maximum annual benefit which may be paid to an eligible Trustee under
the Retirement Plan is $13,500. The Retirement Plan will be effective for all
eligible Trustees who have dates of retirement occurring on or after December
31, 1995. Subject to certain exceptions, retirement is mandatory at age 72 in
order to qualify for the Retirement Plan. Although the Retirement Plan permits
Eligible Trustees to elect early retirement at age 63, retirement benefits are
not payable to Eligible Trustees who elect early retirement until age 65. The
Retirement Plan provides that no Independent Trustee who is elected as a Trustee
of Rochester Fund Municipals after September 30, 1995, will be eligible to
receive benefits thereunder. Mr. Cannon is the only current Independent Trustee
who may be eligible to receive benefits under the Retirement Plan. The estimate
of annual benefits payable to Mr. Cannon under the Retirement Plan is based upon
the assumption that Mr. Cannon, who was first elected as a Trustee of the Fund
in 1992, will serve as an Independent Trustee for nine years.
(3) Includes compensation received during the fiscal year ended December 31,
1995, from all registered investment companies within the Fund Complex during
that year which consisted of the Fund Rochester Portfolio Series-Limited Term
New York Municipal Fund, Rochester Fund Series - The Bond Fund For Growth, and
Rochester Tax Managed Fund, Inc. On June 28, 1995, Rochester Fund Series - The
Bond Fund For Growth acquired all of the assets and assumed all of the
liabilities of Rochester Tax Managed Fund, Inc.
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<PAGE>
- --MAJOR SHAREHOLDERS. As of December 15, 1995, no person owned of record or was
known by the Fund to own beneficially 5% or more of outstanding voting
securities of the Fund except Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive, EFL 3, Jacksonville, Florida 32246 which was the record owner of 15%
of the outstanding shares of the Fund.
THE ADVISER AND ITS AFFILIATES. The Adviser 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 Adviser's
directors and officers, some of whom serve as officers of the Fund and one of
whom (Ms. Macaskill) serves as a Trustee of the Fund.
The Adviser 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 Adviser.
- --THE INVESTMENT ADVISORY AGREEMENT. The Investment Advisory Agreement between
the Adviser and the Fund which was entered into on January 4, 1996 ("Advisory
Agreement") requires the Adviser, 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. For
these services, the Adviser will receive from the Fund an annual fee, computed
and payable monthly as a percentage of average daily net assets, as follows:
0.54% of average daily net assets up to $100 million; 0.52% of average daily net
assets on the next $150 million; 0.47% of average daily net assets on the next
$1,750 million; 0.46% of the next $3 billion; and 0.45% of average daily net
assets over $5 billion.
Expenses not expressly assumed by the Adviser under the Advisory Agreement
or by the Distributor 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. For the Fund's fiscal year ended December 31, 1995, the management
fees paid by the Fund to its previous investment adviser, Rochester Capital
Advisors, L.P. During the fiscal year ended December 31, 1994, management fees
paid by the Fund consisted of $5,010,516 paid to Rochester Capital Advisors,
L.P. for the period from May 1, 1994 to December 31, 1994, and $2,552,432 paid
to Fielding Management Company, Inc. for the period from January 1, 1994 to
April 30, 1994. During the fiscal year ended December 31, 1993, the Fund paid
investment advisory fees of $5,955,268 to Fielding Management Company, Inc.
Fielding Management Company, Inc. served as investment adviser to the Fund from
the commencement of its operations as an open-end investment company on May 15,
1986 through April 30, 1994. Rochester Capital Advisors, Inc. is the general
partner of Rochester Capital Advisors, L.P.
The Advisory Agreement contains no expense limitation. However,
independently of the Agreement, the Adviser has voluntarily undertaken that the
total expenses of the Fund in any fiscal year (exclusive of
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<PAGE>
taxes, interest, brokerage commissions, and any extraordinary non-recurring
expenses, such as litigation costs) shall not exceed the most stringent state
regulatory limitation on Fund expenses applicable to the Fund. The payment of
the management fee will be reduced so that at no time will there be any accrued
but unpaid liability under the above expense limitation. The Adviser reserves
the right to amend or terminate this expense limitation at any time.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties thereunder, the Adviser shall not be liable for any loss
sustained by reason of good faith errors or omissions on its part with respect
to any matters to which the Advisory Agreement relates. The Agreement permits
the Adviser 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. If the Adviser
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,
which was entered into on January 4, 1996, the Distributor acts as the Fund's
principal underwriter in the continuous public offering of the Fund's shares of
beneficial interest, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (other than those paid 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 and 1995, the aggregate amount of sales charge on sales
of the Fund's shares was $ , $16,041,443, and $8,868,211, respectively,
of which Rochester Fund Distributors, Inc., the Fund's previous principal
underwriter, retained $3,347,397, $2,015,030 and $1,086,283 in those respective
years. For additional information about distribution of the Fund's shares and
the payments made by the Fund to the Distributor in connection with such
activities, please refer to "The Fund's Service Plan," below.
- --THE TRANSFER AGENT; THE SHAREHOLDER SERVICES AGENT. The Fund currently acts as
its own transfer agent. Oppenheimer Shareholder Services, the Fund's shareholder
services agent, a division of the Adviser, is responsible for maintaining
shareholder accounting records, and for shareholder servicing and administrative
functions. The Agent is compensated on the basis of a fixed fee per account. The
compensation paid by the Fund for such services under a comparable arrangement
with Rochester Fund Services, Inc., the Fund's previous shareholder services
agent, for the fiscal years ending December 31, 1993, 1994 and 1995 was
$724,431, $1,152,456 and $1,267,809, respectively.
- --ACCOUNTING AND RECORDKEEPING SERVICES. The Adviser also provides certain
accounting and recordkeeping services to the Fund pursuant to an Accounting and
Administration Agreement entered into on January 4, 1996. The services provided
pursuant to the Fund thereunder include the maintenance of general ledger
accounts and records relating to the business of the Fund in the form required
to comply with the Investment Company Act and the calculation of the daily net
asset value of the Fund. The compensation paid by the Fund for such services to
Rochester Fund Services, Inc. its previous shareholder services agent, for the
fiscal years ended December 31, 1993, 1994 and 1995 was $442,850, $556,700 and
$607,025.
BROKERAGE POLICIES OF THE FUND
BROKERAGE PROVISIONS OF THE INVESTMENT ADVISORY AGREEMENT. One of the duties of
the Adviser under
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<PAGE>
the Advisory Agreement is to arrange the portfolio transactions for the
Fund. The Advisory Agreement contains provisions relating to the employment of
broker-dealers ("brokers") to effect the Fund's portfolio transactions. In doing
so, the Adviser is authorized by the Advisory Agreement to employ
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 Adviser 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 Adviser is authorized to select brokers
that provide brokerage and/or research services for the Fund and/or the other
accounts over which the Adviser 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 Adviser that the
commission is fair and reasonable in relation to the services provided. Subject
to the foregoing considerations, the Adviser may also consider sales of shares
of the Fund and other investment companies managed by the Adviser or its
affiliates as a factor in the selection of brokers for the Fund's portfolio
transactions.
DESCRIPTION OF BROKERAGE PRACTICES FOLLOWED BY THE ADVISER. Subject to the
provisions of the Advisory Agreement and the procedures and rules described
above, allocations of brokerage are generally made by the Adviser's portfolio
traders based upon recommendations from the Adviser's portfolio managers. In
certain instances, portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the Advisory Agreement and the
procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Adviser's executive officers. Transactions in
securities other than those for which an exchange is the primary market are
generally done with principals or market makers. As stated in the prospectus,
the portfolio securities of the Fund are generally traded on a net basis and, as
such, do not involve the payment of brokerage commissions. It is the policy of
the Adviser to obtain the best net results in conducting portfolio transactions
for the Fund, taking into account such factors as price (including the
applicable dealer spread) and the firm's general execution capabilities. Where
more than one dealer is able to provide the most competitive price, both the
sale of Fund shares and the receipt of research may be taken into consideration
as factors in the selection of dealers to execute portfolio transactions for the
Fund. The transaction costs associated with such transactions consist primarily
of the payment of dealer and underwriter spreads. Brokerage commissions are paid
primarily for effecting transactions in listed securities and or for certain
fixed-income agency transactions, in the secondary market, otherwise only if it
appears likely that a better price or execution can be obtained. When possible,
concurrent orders to purchase or sell the same security by more than one of the
accounts managed by the Adviser 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 in one
or more of the advisory accounts of the Adviser and its affiliates. The research
services provided by brokers broaden the scope and supplement the research
activities of the Adviser, by making available additional views for
consideration and comparisons. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the Advisory Agreement
or the Distribution Plans described below) annually reviews information
furnished by the Adviser as to the commissions paid to
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<PAGE>
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. The Fund did not incur costs for brokerage commissions in
connection with its portfolio transactions during the fiscal years ended
December 31, 1993, 1994 and 1995.
A change in securities held by the Fund is known as "portfolio
turnover". As portfolio turnover increases, the Fund can be expected to incur
brokerage commission expenses and transaction costs which will be borne by the
Fund. In any particular year, however, market conditions could result in
portfolio activity at a greater or lesser rate than anticipated. For the fiscal
years ended December 31, 1993, 1994, and 1995 the Fund's portfolio turnover
rates were and 18.27%, 34.39% and 14.54%, respectively.
PERFORMANCE OF THE FUND
YIELD AND TOTAL RETURN INFORMATION. As described in the Prospectus, from time to
time the "standardized yield," "dividend yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset value" and
"total return at net asset value" of an investment in shares of the Fund may be
advertised. An explanation of how these total returns are calculated 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 of the Fund for the 1, 5, and 10-year periods 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 returns
and share prices 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. Returns for any given past period are not a prediction or
representation by the Fund of future returns.
- -- STANDARDIZED YIELDS
-- YIELD. The Fund's "yield" (referred to as "standardized yield") for a
given 30-day period 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:
2-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 outstanding during the
30-day period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period,
adjusted for undistributed net investment income.
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The standardized yield 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", described below. For the 30-day period ended
December 31, 1995, the standardized yields for the Fund's shares was 5.50%.
-- TAX-EQUIVALENT YIELD. The Fund's "tax-equivalent yield" 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. The
Fund's tax-equivalent yield (after expense assumptions by the Adviser) for the
30-day period ended December 31, 1995, for an individual New York City resident
in the 42.7% combined tax bracket was 9.6%.
-- DIVIDEND YIELD AND DISTRIBUTION RETURN. From time to time the Fund may
quote a "dividend yield" or a "distribution return". 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 Dividends of the Class
of the Class = ----------------------- / Number of Days (accrual period) X 365
Max. Offering Price of
the Class (last day of
period)
The maximum offering price includes the maximum front-end sales charge.
From time to time similar yield or distribution return calculations may
also be made using the net asset value (instead of its maximum offering price)
at the end of the period. The dividend yield for the 30-day period ended
December 31, 1995 were 5.31% and 5.43% when calculated at maximum offering price
and at net asset value, respectively.
- -- TOTAL RETURN INFORMATION
-- Average Annual Total Returns. The "average annual total return" 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:
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( ERV )(1/n)
(-----) -1 = Average Annual Total Return
( P )
-- 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 return, the current maximum sales charge of 4.0% (as a
percentage of the offering price) is deducted from the initial investment ("P")
(unless the return is shown at net asset value, as described below). 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 shares of the Fund for the one and
five year periods ended December 31, 1995 and for the period from May 15, 1986
through December 31, 1995, were 13.83%, 8.44% and 8.36%, respectively. The
cumulative "total return" on shares of the Fund for the period from May 15, 1986
through December 31, 1995 was 115.97%.
-- 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. 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 shares of the Fund (without considering the front-end sales
charge) and takes into consideration the reinvestment of dividends and capital
gains distributions. The Fund's cumulative total return at net asset value for
the one year period ended December 31, 1995 and the period from May 15, 1986
through December 31, 1995 was 18.58% and 124.92%, respectively.
OTHER PERFORMANCE COMPARISONS. From time to time the Fund may publish the
ranking of its shares by Lipper Analytical Services, Inc. ("Lipper"), a
widely-recognized independent 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 funds (excluding money
market funds) and (ii) all other New York municipal bond funds. The Lipper
performance rankings are based on total returns that include the reinvestment of
capital 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 its performance 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
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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 performance of the Fund in relation to that of other New York State
municipal bond funds. Rankings are subject to change.
The total return on an investment in the Fund may be compared with
performance for the same period of comparable indices, including but not limited
to The Bond Buyer Municipal Bond Index and the Lehman Brothers Municipal Long
Bond Index. The Bond Buyer Municipal Bond Index is an unmanaged index which
consists of 40 long-term municipal bonds. The index is based on price quotations
provided by six municipal bond dealer-to-dealer brokers. The Lehman Brothers
Municipal Bond Index is a broadly based, widely recognized unmanaged index of
municipal bonds. Whereas the Fund's portfolio comprises bonds principally from
New York State, the Indices are comprised of bonds from all 50 states and many
jurisdictions. Index performance reflects the reinvestment of income but does
not consider the effect of capital gains or transaction costs. Any other index
selected for comparison would be similar in composition to one of these two
indices.
Investors may also wish to compare the return on the Fund's shares 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 as to
principal and interest by the U.S. government.
From time to time, the Fund's Adviser may publish rankings or ratings of
the Adviser (or other service providers) or the investor services provided by
them to shareholders of the Oppenheimer funds, other than performance rankings
of the Oppenheimer funds themselves. Those ratings or rankings of
shareholder/investor services by third parties 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.
The performance of the Fund's shares may also 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.
THE FUND'S SERVICE PLAN
The Fund has adopted a Service Plan 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 shares as described in the
Prospectus. The Service Plan permits the Fund to pay its Distributor a service
fee in connection with the distribution of shares of the Fund in an amount of up
to 0.25% per annum of the
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<PAGE>
Fund's average daily net assets (the "Service Fee"). The Service Fee is
utilized to compensate broker-dealers and financial institutions, including the
Distributor (collectively, "Recipients"), for services performed and/or expenses
incurred in servicing shareholder accounts. Although the terms of the Service
Plan permit aggregate payments thereunder of up to 0.25% per annum of the Fund's
average daily net assets, the Board of Trustees of the Fund has approved
aggregate payments thereunder of only 0.15% per annum.
The Service Plan has been approved by a vote of (i) the Board of Trustees
of the Fund, including a majority of the "Independent Trustees", cast in person
at a meeting called for the purpose of voting on that Plan, and (ii) the holders
of a "majority of the outstanding voting securities" of the Fund (as defined in
the Investment Company Act). Unless terminated as described below, the Service
Plan will continue in effect from year to year but only as long as such
continuance is specifically approved at least annually by the Fund's Board of
Trustees, including the Independent Trustees, by a vote cast in person at a
meeting called for the purpose of voting on such continuance. The Service 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 of the outstanding voting
securities" of the Fund (as defined in the Investment Company Act). The Service
Plan may not be amended to increase materially the amount of payments to be made
unless such amendment is approved by the holders of a "majority of the
outstanding voting securities" of the Fund (as defined in the Investment Company
Act).
While the Service Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board of Trustees at least quarterly for
its review, detailing the amount of all payments made pursuant to the Service
Plan, the identity of each Recipient that received any such payment, and the
purpose of the payments. Those reports will be subject to the review and
approval of the Independent Trustees in the exercise of their fiduciary duty.
The Service Plan further provides that while it is in effect, the selection or
replacement and nomination of those Trustees of the Fund who are not "interested
persons" of the Fund is committed to the discretion of the Independent Trustees.
This 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 such Independent Trustees.
For the fiscal year ended December 31, 1995, payments under the Fund's
previous Distribution Plan, which was in effect during that year, totalled
$3,452,348, which consisted of Service Fee payments to Recipients of $2,757,558
and asset based sales charge payments of $694,790. The aggregate Service Fee
payments to Recipients included an amount of $2,503,608 paid to Rochester Fund
Distributors, Inc., the Fund's previous principal underwriter for its services
in maintaining shareholder accounts as to which it was the dealer of record.
Rochester Fund Distributors Inc. paid a total of $2,698,619 to broker dealers in
service fees in 1995. The Fund's previous Distribution Plan was amended,
effective as of May 1, 1995, to eliminate the asset based sales charge component
of the Distribution Plan.
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
See How to Buy Shares in the Prospectus for a description of how shares of
the Fund are offered to the Public and how the excess of the public offering
price over the net amount invested is allocated to authorized dealers. The
Prospectus also describes several special purchase plans and methods by which
shares may be purchased at reduced sales loads, including certain classes of
persons who may purchase
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<PAGE>
shares at net asset value. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for the purchase of shares under Right of
Accumulation and Letters of Intent because of the economies of sales efforts and
expenses realized by the Distributor, dealers and brokers making such sales. No
sales charge is imposed in certain circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, parents, grandparents, parents-in-law, brothers and sisters,
sons- and daughters-in-law, siblings, a sibling's spouse and a spouse's
siblings.
DETERMINATION OF NET ASSET VALUE PER SHARE. The net asset value per share of
shares of the Fund is 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 Exchanges most recent annual holiday
schedule (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. Trading may
occur in debt securities and in foreign securities when the Exchange is closed
(including weekends and holidays). 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 Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities, generally as follows: (i) equity securities traded on
a securities exchange or on the Nasdaq National Market System ("Nasdaq") are
valued at the last reported sale prices on their primary exchange or Nasdaq that
day (or, in the absence of sales that day, at values based on the last sale
prices of the preceding trading day, or closing bid and asked prices); (ii)
securities actively traded on a foreign securities exchange are valued at the
last sales price available to the pricing service approved by the Fund's Board
of Trustees or to the Adviser as reported by the principal exchange on which the
security is traded; (iii) unlisted foreign securities or listed foreign
securities not actively traded are valued as in (i) above, if available, or at
the mean between "bid" and "asked" prices obtained from active market makers in
the security on the basis of reasonable inquiry; (iv) long-term debt securities
having a remaining maturity in excess of 60 days are valued at the mean between
the "bid" and "asked" prices determined by a portfolio pricing service approved
by the Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (v) debt instruments having a
maturity of more than one year when issued, and non-money market type
instruments having a maturity of one year or less when issued, which have a
remaining maturity of 60 days or less are valued at the mean between "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained from active market makers in the security on the basis of
reasonable inquiry; (vi) money market-type debt securities having a maturity of
less than one year when issued that having a remaining maturity of 60 days or
less are valued at cost, adjusted for amortization of premiums and accretion of
discounts; and (vii) securities (including restricted securities) not having
readily-available market quotations are valued at fair value under the Board's
procedures.
HOW TO SELL SHARES
Information on how to sell shares of the Fund is stated in the Prospectus.
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<PAGE>
-- INVOLUNTARY REDEMPTIONS. As described in the Prospectus, the Fund's
Board of Trustees has the right to cause the involuntary redemption of the
shares held in any account if the aggregate net asset value of those shares is
less than $1,500 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.
HOW TO EXCHANGE SHARES
As stated in the Prospectus, shares of the Fund or of certain other funds
which are managed by the Adviser (the "Oppenheimer funds") having more than one
class of shares may be exchanged only for shares of the same class of other
Oppenheimer funds which are eligible for sale in the shareholder's state of
residence. For purposes of the Exchange Privilege as defined in the Prospectus,
the following funds in addition to the Fund are referred to as "The Rochester
Funds": Rochester Fund Municipals and Rochester Portfolio Series -- Limited Term
New York Municipal Fund. 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 currently offer Class A shares. Shareholders of The
Rochester Funds may obtain a list showing which funds offer which class by
calling the Agent at 1-800-552-1129. At the present time, shareholders of
Oppenheimer funds other than The Rochester Funds may not exchange their shares
for shares of The Rochester Funds.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. 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 dividend
reinvestment will be switched to the new account unless the 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 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,
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<PAGE>
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. The Fund, the Distributor, and the 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. However, 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. If all shares in an account are redeemed, all dividends
accrued on shares in the account will be paid together with the redemption
proceeds. 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).
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the 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 Agent, in order
to enable the investor to earn a return on otherwise idle funds.
TAX STATUS OF THE FUND'S DIVIDENDS AND DISTRIBUTIONS. The Federal tax treatment
of the Fund's dividends and distributions is explained in the Prospectus under
the caption Dividends, Distributions and Taxes. In order to continue to qualify
for treatment as a regulated investment company ("RIC") under the Code, the Fund
must distribute to its shareholders for each taxable year at least 90% of the
sum of its investment company taxable income (consisting generally of taxable
net investment income and net short-term capital gain) plus its interest income
excludable from gross income under Section 103(a) of the Code ("tax-exempt
income") and must meet several additional requirements. These requirements
include the following: (1) the Fund must derive at least 90% of its gross income
each taxable year from dividends, interest and payments with respect to
securities loans and gains from the sale or other disposition of securities, or
other income (including gains from options) derived with respect to its business
of investing in securities ("Income Requirement"); (2) the Fund must derive less
than 30% of its gross income each taxable year from the sale or other
disposition of securities or options that were held for less than three months
("Short-Short Limitation"); and (3) at the close of each quarter of the Fund's
taxable year, (i) at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs and other securities that are limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets and
does not represent more than 10% of the issuer's outstanding voting securities,
and (ii) not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities or the securities of other
RICs) of any one issuer.
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Dividends paid by the fund will qualify as exempt-interest dividends, and
thus will be excludable from gross income by its shareholders, if the Fund
satisfied the additional requirement that, at the close of each quarter of its
taxable year, at least 50% of the value of its total assets consists of
securities the interest on which is tax-exempt income; the Fund intends to
continue to satisfy this requirement. The aggregate exempt-interest dividends
may not be greater than the excess of the Fund's tax-exempt income over certain
amounts disallowed as deductions. The shareholders' treatment of dividends from
the Fund under local and state income tax laws may differ from the treatment
thereof under the Code.
As noted in the Prospectus, the Fund annually reports to its shareholders
regarding the amounts and status of distributions paid during the year. Such
report allocates dividends among tax-exempt, taxable and alternative minimum
taxable income in approximately the same proportions as they bear to the Fund's
total income for the year. Accordingly, income derived from each of these
sources by the Fund in any particular distribution period may vary substantially
from the allocation reported to shareholders annually. The proportion of
dividends that constitute taxable income will depend on the relative amounts of
assets invested in taxable securities, the yield relationships between taxable
and tax-exempt securities, and the period of time for which such securities are
held.
Because the taxable portion of the Fund's investment income consists
primarily of interest and income from options transactions, its dividends,
whether or not treated as "exempt-interest dividends", generally will not
qualify for the dividends-received deduction available to corporations.
Dividends and other distributions declared by the Fund, and payable to
shareholders of record on a date, in the last quarter of any calendar year, are
deemed to have been paid by the Fund and received by the shareholders on
December 31 of that year if the distributions are paid by the Fund during the
following January. Accordingly, those distributions will be taxed to
shareholders for the year in which that December 31 falls.
Interest on indebtedness incurred or continued by shareholders to purchase
or carry shares of the Fund is usually not deductible for federal income tax
purposes. Under rules applied by the Internal Revenue Service to determine
whether borrowed funds are used for the purpose of purchasing or carrying
particular assets, the purchase of Fund shares may, depending upon the
circumstances, be considered to have been made with borrowed funds even though
the borrowed funds are not directly traceable to the purchase of those shares.
If you redeem shares of the Fund held for six months or less at a loss,
that loss will not be recognized for federal income tax purposes to the extent
of exempt-interest dividends you have received with respect to those shares. If
any such loss exceeds the amount of the exempt-interest dividends you received,
that excess loss will be treated as a long-term capital loss to the extent you
receive any capital gain distribution with respect to those shares.
Persons who are "substantial users" (or persons related thereto) of
facilities financed by industrial development bonds should consult their own tax
advisers before purchasing shares. Such persons may find investment in the Fund
unsuitable for tax reasons. Generally, an individual will not be a "related
person" under the Code unless he or his immediate family (spouse, brothers,
sisters, ancestors, and lineal descendants) owns, directly or indirectly, in the
aggregate more than 50% of the equity of a corporation or partnership that is a
"substantial user" of a facility financed from the proceeds of industrial
development
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bonds. "Substantial user" of such facilities is defined generally as a
non-exempt person who regularly uses a part of such facility in his trade or
business.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on December 31 of that year, plus certain other amounts.
The use of hedging strategies, such as writing (selling) and purchasing
options, involves complex rules that will determine for income tax purposes the
character and timing of recognition of the gains and losses the Fund realizes in
connection therewith. Income from transactions in options derived by the Fund
with respect to its business of investing in securities will qualify as
permissible income under the Income Requirement. However, income from the
disposition of options will be subject to the Short-Short Limitation if they are
held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. The Fund
will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Fund does not so qualify, it may be
forced to defer the closing out of certain options beyond the time when it
otherwise would be advantageous to do so, in order for the Fund to continue to
qualify as RIC.
Corporate investors may wish to consult their own tax advisers before
purchasing Fund shares. Corporations may find investment in the Fund unsuitable
for tax reasons, because the interest on all Municipal Obligations held by the
Fund passed through to corporate shareholders will be includible in calculating
adjusted current earnings for purposes of both the alternative minimum tax and
the environmental tax. In addition, certain property and casualty insurance
companies, financial institutions, and U.S. branches of foreign corporations may
be adversely affected by the tax treatment of the interest on municipal
securities.
ADDITIONAL INFORMATION ABOUT THE FUND
THE CUSTODIAN. Investors Bank & Trust Company ("Custodian"), whose principal
business address is 89 South Street Boston, MA 02111 is the Custodian of the
Fund's assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the delivery of such
securities to and from the Fund. It will be the practice of the Fund to deal
with the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Adviser and its affiliates.
INDEPENDENT AUDITORS. Price Waterhouse LLP, 1900 Chase Square, Rochester, NY
14604, serves as the Fund's independent accountants. The services provided by
Price Waterhouse LLP include auditing services and review and consultations on
various filings by the Fund with the Securities and Exchange Commission and tax
authorities. They also act as auditors for certain other funds advised by the
Adviser and its affiliates.
-32-
<PAGE>
INVESTMENT ADVISER
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
DISTRIBUTOR
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
SHAREHOLDER SERVICES AGENT
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-552-1129
CUSTODIAN OF PORTFOLIO SECURITIES
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
INDEPENDENT AUDITORS
Price Waterhouse LLP
1900 Chase Square
Rochester, NY 14604
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 M Street, N.W.
Washington, D.C. 20036
-33-
<PAGE>
FINANCIAL STATEMENT
ROCHESTER
[ARTWORK] FUND
MUNICIPALS
PORTFOLIO OVERVIEW
Based on the market value as of December 31, 1994
Total Net Assets $1,791,299,053
Shares Outstanding 109,859,283
Number of Issues 694
Largest Sectors:
Housing (Multi-family) 16.2%
Health Care 13.8%
Municipal Tax Obligations (GO) 11.5%
Electric and Gas Utilities 9.6%
Non-Profit, Other 8.3%
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of Rochester Fund Municipals
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Rochester Fund Municipals (the
"Fund") at December 31, 1994, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1994 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
[Signature]
Price Waterhouse LLP
Rochester, New York
January 20, 1995
-34-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HOUSING, Albany Hsg. Auth. 0.000% 10/01/12 $ 560 $ 99,550
MULTI-FAMILY Albany IDA (HHRH) 9.500 12/01/95 3,005 3,089,591
16.2% Albany IDA (MARA Mansion Rehab) 6.500 02/01/23 1,715 1,622,133
$290,846,538 Batavia Hsg. Auth. (Washington) 6.500 01/01/23 515 500,158
Battery Park City Auth. 5.650 12/01/13 11,460 9,829,013
Battery Park City Auth. 5.750 06/01/23 11,220 9,379,583
Battery Park City Auth. 8.625 06/01/05 (p) 60 71,654
Battery Park City Auth. 10.000 06/01/23 700 721,000
Bayshore HDC 7.500 02/01/23 1,480 1,539,777
Bleeker Terrace HDC 8.100 07/01/01 35 35,700
Bleeker Terrace HDC 8.350 07/01/04 45 45,900
Bleeker Terrace HDC 8.750 07/01/07 900 927,000
Elmira HDC 7.500 08/01/07 10 10,253
Guam Economic Devel. 9.375 11/01/18 3,035 3,264,719
Guam Economic Devel. 9.500 11/01/18 2,520 2,716,106
Hamilton Elderly Hsg. 11.250 01/01/15 725 775,750
Holiday Square HDC 5.800 01/15/24 2,000 1,716,700
Macleay Hsg. (Larchmont Woods) 8.500 01/01/31 3,995 4,349,756
Monroe HDC 7.000 08/01/21 300 298,008
North Tonawanda HDC 6.800 12/15/07 585 604,855
North Tonawanda HDC 7.375 12/15/21 3,295 3,340,570
NYC HDC (Albert Einstein) 6.500 12/15/17 343 316,966
NYC HDC (Amsterdam) 6.500 08/15/18 956 880,717
NYC HDC (Atlantic Plaza) 7.034 02/15/19 1,480 1,435,902
NYC HDC (Boulevard) 6.500 08/15/17 2,984 2,759,494
NYC HDC (Bridgeview) 6.500 12/15/17 515 475,450
NYC HDC (Cadman Plaza) 6.500 11/15/18 1,377 1,271,300
NYC HDC (Cadman Plaza) 7.000 12/15/18 499 482,966
NYC HDC (Candia) 6.500 06/15/18 203 187,186
NYC HDC (Clinton) 6.500 07/15/17 3,889 3,597,409
NYC HDC (Contello III) 7.000 12/15/18 306 296,552
NYC HDC (Cooper Gram) 6.500 08/15/17 1,619 1,496,928
NYC HDC (Court Plaza) 6.500 08/15/17 1,235 1,142,146
NYC HDC (Crown Gardens) 7.250 01/15/19 1,668 1,648,707
NYC HDC (Esplanade Gardens) 7.000 01/15/19 3,463 3,350,104
NYC HDC (Essex) 6.500 07/15/18 89 81,661
NYC HDC (Forest Park) 6.500 12/15/17 553 510,472
NYC HDC (Gouverneur Gardens) 7.034 02/15/19 1,650 1,601,196
NYC HDC (Heywood) 6.500 10/15/17 394 363,904
NYC HDC (Hudsonview) 6.500 09/15/17 4,434 4,099,031
NYC HDC (Janel) 6.500 09/15/17 1,255 1,160,213
NYC HDC (Kings Arms) 6.500 11/15/18 249 228,752
NYC HDC (Kingsbridge) 6.500 08/15/17 438 405,105
NYC HDC (Leader) 6.500 03/15/18 1,334 1,231,157
NYC HDC (Lincoln Amsterdam) 7.250 11/15/18 1,706 1,688,446
NYC HDC (Middagh) 6.500 11/15/18 225 207,216
NYC HDC (Montefiore) 6.500 10/15/17 2,946 2,722,046
NYC HDC (Multi-Family) 5.600 11/01/20 5 4,491
NYC HDC (Multi-Family) 6.500 05/01/06 80 78,800
NYC HDC (Multi-Family) 6.600 04/01/30 38,880 36,608,242
NYC HDC (Multi-Family) 7.300 06/01/10 30 30,677
NYC HDC (Multi-Family) 7.350 06/01/19 1,080 1,111,255
NYC HDC (Multi-Family) 7.500 05/01/23 1,340 1,377,520
NYC HDC (Multi-Family) 8.250 01/01/11 1,395 1,432,665
NYC HDC (Multi-Family) 8.750 08/01/16 115 119,863
</TABLE>
-35-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYC HDC (Multi-Family) 9.000% 05/01/22 $ 200 $ 208,000
NYC HDC (New Amsterdam) 6.500 08/15/18 935 861,573
NYC HDC (Residential Charter) 7.375 04/01/17 3,295 3,352,860
NYC HDC (Riverbend) 6.500 11/15/18 1,171 1,077,551
NYC HDC (Riverside Park) 7.250 11/15/18 6,424 6,353,575
NYC HDC (RNA House) 7.000 12/15/18 441 427,303
NYC HDC (Robert Fulton) 6.500 12/15/17 742 685,044
NYC HDC (Rosalie Manning) 7.034 11/15/18 248 240,503
NYC HDC (Scott Tower) 7.000 12/15/18 659 637,872
NYC HDC (Seaview) 6.500 01/15/18 973 898,495
NYC HDC (Sky View) 6.500 11/15/18 1,817 1,671,951
NYC HDC (South Bronx) 8.100 09/01/23 1,555 1,666,058
NYC HDC (South Williamsburg) 7.900 02/01/23 985 1,039,953
NYC HDC (Stevenson) 6.500 05/15/18 1,843 1,696,030
NYC HDC (Stryckers Bay) 7.034 11/15/18 492 477,367
NYC HDC (St. Martin) 6.500 11/15/18 403 370,796
NYC HDC (Tivoli) 6.500 01/15/18 1,852 1,710,176
NYC HDC (Towers) 6.500 08/15/17 399 369,245
NYC HDC (Townhouse) 6.500 11/15/18 252 231,584
NYC HDC (Tri-Faith House) 7.000 01/15/19 359 346,842
NYC HDC (University) 6.500 08/15/17 1,648 1,523,830
NYC HDC (Washington Square) 7.000 01/15/19 457 442,018
NYC HDC (West Side) 6.500 11/15/18 446 412,468
NYC HDC (West Village) 6.500 11/15/13 5,117 4,776,901
NYC HDC (Westview) 6.500 10/15/17 118 109,098
NYC HDC (Woodstock Terrace) 7.034 02/15/19 609 591,272
NYS HFA (Admiral Halsey Sr. Village) 8.000 05/01/19 355 363,875
NYS HFA (Children's Rescue) 7.625 05/01/18 3,555 3,673,097
NYS HFA (Clinton Plaza) 7.625 11/01/19 1,395 1,425,760
NYS HFA (Dominican Village) 6.600 08/15/27 4,650 4,446,284
NYS HFA (Ft. Schulyer) 7.750 11/01/18 15 15,124
NYS HFA (Health Facilities) 8.000 11/01/08 2,920 3,132,897
NYS HFA (HELP/Bronx) 7.850 05/01/99 1,040 1,098,074
NYS HFA (HELP/Bronx) 7.850 11/01/99 1,080 1,143,990
NYS HFA (HELP/Bronx) 8.050 11/01/05 13,080 13,870,163
NYS HFA (HELP/Suffolk) 8.100 11/01/05 1,210 1,268,116
NYS HFA (Henry Phipps) 8.000 05/01/18 3,560 3,673,920
NYS HFA (Marble Hail) 8.000 05/01/16 5 5,050
NYS HFA (Multi-Family) 7.450 11/01/28 2,460 2,571,635
NYS HFA (Multi-Family) 0.000 11/01/17 12,695 2,751,641
NYS HFA (Multi-Family) 0.000 11/01/15 15,590 3,878,792
NYS HFA (Multi-Family) 0.000 11/01/14 15,730 4,224,292
NYS HFA (Multi-Family) 0.000 11/01/13 17,985 5,160,796
NYS HFA (Multi-Family) 0.000 11/01/12 15,000 4,679,250
NYS HFA (Multi-Family) 0.000 11/01/10 17,100 6,078,708
NYS HFA (Multi-Family) 0.000 11/01/09 16,340 6,290,246
NYS HFA (Multi-Family) 0.000 11/01/08 6,090 2,500,250
NYS HFA (Multi-Family) 6.250 08/15/25 750 700,733
NYS HFA (Multi-Family) 6.700 08/15/25 11,980 11,469,532
NYS HFA (Multi-Family) 6.950 08/15/24 2,970 2,936,558
NYS HFA (Multi-Family) 6.950 08/15/12 75 75,305
NYS HFA (Multi-Family) 7.050 08/15/24 5,350 5,328,386
NYS HFA (Non-Profit) 6.400 11/01/10 5 4,550
NYS HFA (Non-Profit) 6.400 11/01/13 25 23,000
NYS HFA (Non-Profit) 6.600 11/01/10 25 24,625
</TABLE>
-36-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS HFA (Non-Profit) 6.600% 11/01/13 $ 20 $ 19,400
NYS HFA (Non-Profit) 6.600 11/01/08 20 19,400
NYS HFA (Non-Profit) 6.875 11/01/10 9 8,568
NYS HFA (Pepper Tree) 7.750 11/01/09 2,740 2,789,320
NYS HFA (Phillips Village) 7.750 08/15/17 5,000 5,180,000
NYS HFA (S E Tower) 7.750 11/01/18 435 448,050
NYS HFA (Service Contract) 7.700 03/15/06 150 157,881
NYS HFA (Service Contract) 7.700 09/15/01 (p) 100 112,124
NYS HFA (Shorehill Hsg.) 7.500 05/01/08 1,415 1,471,600
NYS HFA (St. Luke's) 6.250 08/15/23 735 663,830
NYS HFA (Urban Rent) 8.250 11/01/19 1,245 1,301,025
NYS HFA (Urban) 6.000 11/01/13 50 45,000
Pilgrim Village HDC 6.800 02/01/21 1,160 1,126,859
Portchester CDC (Southport) 7.300 08/01/11 65 66,215
Puerto Rico HB&F 7.500 10/01/15 210 217,852
Puerto Rico HFA 7.300 10/01/06 10 10,357
Puerto Rico HFC 7.500 04/01/22 8,665 8,808,492
Rensselaer Hsg. Auth. (Renwyck) 7.650 01/01/11 25 25,730
Riverhead HDC 8.250 08/01/10 45 47,642
Rochester Hsg. Auth. (Stonewood) 5.900 09/01/09 960 892,762
Scotia Hsg. Auth. (Holyrood House) 7.000 06/01/09 175 175,144
Sunnybrook EHC 11.250 12/01/14 3,150 3,370,500
Syracuse IDA (James Square) 0.000 08/01/25 54,095 6,499,514
Syracuse Senior Citizens Hsg. 8.000 12/01/10 375 395,745
Tonawanda HDC 10.000 05/01/03 25 26,125
Tonawanda Senior Citizens Hsg. 7.875 02/01/11 570 599,127
Tupper Lake HDC 8.125 10/01/10 75 79,028
UFA Devel. Corp. (Loretta Utica) 5.950 07/01/35 6,870 5,911,085
Union Elderly Hsg. 10.000 04/01/13 1,305 1,357,200
Union Hsg. Auth. (Methodist Homes) 7.625 11/01/16 745 734,376
Union Hsg. Auth. (Methodist Homes) 8.050 04/01/99 105 111,429
Union Hsg. Auth. (Methodist Homes) 8.150 04/01/00 110 120,216
Union Hsg. Auth. (Methodist Homes) 8.250 04/01/01 120 129,418
Union Hsg. Auth. (Methodist Homes) 8.350 04/01/02 150 164,807
Union Hsg. Auth. (Methodist Homes) 8.500 04/01/12 2,010 2,143,243
Utica Senior Citizen Hsg. 0.000 07/01/02 25 12,647
Utica Senior Citizen Hsg. 0.000 07/01/26 2,110 207,160
V. I. HFA 8.100 12/01/18 30 32,063
White Plains HDC (Armory Plaza) 9.000 02/01/25 965 998,775
White Plains (Battle Hill) 9.875 04/01/25 30 31,500
- ------------------------------------------------------------------------------------------------------------------------
HEALTHCARE Albany IDA (Albany Medical Center) 8.250 08/01/04 3,330 3,444,818
13.8% Cayuga County COP (Auburn Hospital) 6.000 01/01/21 15,000 13,461,600
$246,435,735 Erie IDA (Hospital Lease) 8.400 08/01/96 2,725 2,765,692
Erie IDA (Mercy Hospital) 6.250 06/01110 1,355 1,237,359
Groton Community Health 0.000 07/15/21 945 78,416
Groton Community Health 7.450 07/15/21 2,100 2,150,190
Groton Community Health 0.000 01/15/02 95 50,879
Groton Community Health 0.000 07/15/12 70 13,786
Groton Community Health 11.500 01/15/99 75 79,892
Lyons Community Health 6.800 09/01/24 3,685 3,470,644
Monroe IDA (Genesee Hospital) 7.000 11/01/18 1,500 1,465,080
Newark/Wayne Community Hospital 5.875 01/15/33 4,750 4,165,988
NYC Health & Hospital 6.300 02/15/20 32,925 29,536,688
NYC Health & Hospital LEVRRS 5.752 (f) 02/15/11 12,500 9,846,250
NYS Medcare (St. Luke) IVRC 5.266 (f) 05/12/05 22,000 14,245,000
</TABLE>
-37-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS Dorm (Brookhaven) 8.700% 07/01/06 $ 270 $ 278,640
NYS Dorm (Cornwall Hospital) 8.750 07/01/07 980 1,001,560
NYS Dorm (Crouse Irving) 10.500 07/01/17 400 411,360
NYS Dorm (Department of Health) 7.250 07/01/11 3,750 3,812,063
NYS Dorm (Department of Health) 7.350 08/01/29 90 93,608
NYS Dorm (Highlands) 6.600 02/01/34 4,455 4,251,540
NYS Dorm (James G. Johnson) 5.750 08/01/23 4,100 3,474,422
NYS Dorm (Manhattan E,E&T) 11.500 07/01/09 1,200 1,243,200
NYS Dorm (Montefiore) 8.625 07/01/10 105 107,100
NYS Dorm (New Rochelle) 10.000 01/01/10 260 266,760
NYS Dorm (Presbyterian) 6.500 08/01/34 2,200 2,083,818
NYS Dorm (RGH) RITES 4.384 (f) 08/15/33 12,750 8,179,763
NYS Dorm (Society Hospital) 9.750 07/01/15 7,150 7,307,300
NYS Dorm (St. Vincent) 7.750 07/15/15 150 152,100
NYS Dorm (White Plains Hospital) 8.500 07/01/06 30 30,750
NYS HFA (H&N) 6.875 11/01/11 5 4,950
NYS Medcare (Bronx Leb) 7.100 02/15/27 6,015 5,822,580
NYS Medcare (Bronx Leb) 7.100 02/15/27 2,050 2,060,906
NYS Medcare (Central Suffolk) 6.125 11/01/16 5,810 5,167,763
NYS Medcare (Central Suffolk) 10.125 01/15/24 850 869,550
NYS Medcare (Huntington) 6.500 11/01/14 1,500 1,407,840
NYS Medcare (H&N) 6.375 08/15/33 1,000 924,320
NYS Medcare (H&N) 6.500 02/15/34 2,250 2,117,003
NYS Medcare (H&N) 6.600 02/15/31 250 240,363
NYS Medcare (H&N) 6.650 08/15/32 9,020 8,729,376
NYS Medcare (H&N) 7.250 02/15/12 25 25,657
NYS Medcare (H&N) 7.400 11/01/16 3,555 3,626,100
NYS Medcare (H&N) 7.700 08/15/98 (p) 180 187,695
NYS Medcare (H&N) 7.900 02/15/08 10 10,549
NYS Medcare (H&N) 8.000 08/15/97 (p) 5 5,196
NYS Medcare (H&N) 9.000 02/15/26 10 10,252
NYS Medcare (H&N) 9.000 11/01/95 5 5,125
NYS Medcare (H&N) 9.375 11/01/16 4,775 5,085,375
NYS Medcare (H&N) 10.000 11/01/06 1,105 1,176,825
NYS Medcare (H&N) 10.500 01/15/24 80 82,048
NYS Medcare (Insured Mtg. Nursing) 9.500 01/15/24 405 417,150
NYS Medcare (Insured Mtg.) 6.450 08/15/34 4,000 3,736,080
NYS Medcare (Insured Mtg.) 6.600 08/15/34 6,490 6,192,628
NYS Medcare (Mental Health) 0.000 08/15/98 (p) 265 47,809
NYS Medcare (Mental Health) 0.000 08/15/18 130 21,874
NYS Medcare (Mental Health) 6.500 02/15/19 190 177,112
NYS Medcare (Mental Health) 7.500 02/15/21 810 826,637
NYS Medcare (Mental Health) 7.625 08/15/17 810 835,402
NYS Medcare (Mental Health) 7.750 08/15/11 95 98,692
NYS Medcare (Mental Health) 7.750 02/15/01 (p) 240 268,118
NYS Medcare (Mental Health) 7.875 08/15/15 705 736,175
NYS Medcare (Mercy) 9.500 11/01/03 30 30,600
NYS Medcare (Mercy) 9.800 11/01/16 565 581,950
NYS Medcare (Nyack) 8.200 11/01/04 3,000 3,176,070
NYS Medcare (Nyack) 8.300 11/01/13 2,835 3,007,595
NYS Medcare (N. General) 7.150 02/15/01 10 10,187
NYS Medcare (N. General) 7.350 08/15/09 4,600 4,661,778
NYS Medcare (N. General) 7.400 02/15/19 1,695 1,739,765
NYS Medcare (N. General) 10.250 01/01/24 1,410 1,467,810
NYS Medcare (Secured Hospital) 6.250 02/15/24 1,950 1,691,528
</TABLE>
-38-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS Medcare (St. Luke) RITES 4.323 (f) 02/15/29 $ 12,500 $ 8,093,500
NYS Medcare (St. Luke) RITES 4.381 (f) 02/15/29 8,400 5,438,832
NYS Medcare (St. Luke) RITES 4.438 (f) 02/15/29 5,750 3,723,010
NYS Medcare (Vassar Brothers) 8.250 11/01/13 4,590 4,927,686
NYS Medcare (Wychoff) 7.350 08/15/11 50 50,416
NYS Medcare (Wychoff) 7.400 08/15/21 5,240 5,233,240
Oneida Healthcare Corp. 7.100 08/01/11 10 9,774
Onondaga IDA (CGH) 6.625 01/01/18 1,400 1,226,722
Onondaga IDA (Crouse Irving) 7.800 01/01/03 220 234,214
Puerto Rico ITEME (Ryder Hospital) 6.400 05/01/09 1,045 990,514
Puerto Rico ITEME (Ryder Hospital) 6.700 05/01/24 5,250 4,973,273
Rensselaer Municipal Leasing Corp. 6.900 06/01/24 15,000 14,416,650
Syracuse IDA (St. Joseph's) 7.500 06/01/18 3,770 3,875,296
Tompkins Health Care 5.875 02/01/33 2,800 2,402,092
Tompkins Health Care 10.800 02/01/28 25 30,014
Valley Health Devel. 11.300 02/01/23 55 65,938
Yonkers IDA (St. Joseph's Hospital) 7.500 12/30/03 1,345 1,382,135
Yonkers IDA (St. Joseph's Hospital) 8.500 12/30/13 3,270 3,371,730
- ----------------------------------------------------------------------------------------------------------------------
MUNICIPAL TAX Albany GO 6.250 10/01/12 360 350,557
OBLIGATIONS Lowville GO 7.200 09/15/05 100 102,993
11.5% Lowville GO 7.200 09/15/07 75 76,554
$206,638,107 Lowville GO 7.200 09/15/12 100 102,509
Lowville GO 7.200 09/15/13 100 102,580
Lowville GO 7.200 09/15/14 100 102,646
Newburgh GO 7.100 09/15/07 185 184,819
Newburgh GO 7.100 09/15/08 185 184,811
Newburgh GO 7.150 09/15/10 150 149,139
Newburgh GO 7.150 09/15/09 180 180,623
Newburgh GO 7.200 09/15/12 155 154,822
Newburgh GO 7.200 09/15/11 155 154,826
Newburgh GO 7.250 09/15/13 160 153,661
Newburgh GO 7.250 09/15/14 155 147,208
NYC GO 0.000 (c) 05/15/14 1,690 855,478
NYC GO 0.000 05/15/11 270 82,450
NYC GO 0.000 (c) 08/15/96 (p) 60 48,602
NYC GO 0.000 11/15/11 4,990 1,457,679
NYC GO 0.000 (c) 08/01/15 1,000 493,300
NYC GO 0.000 05/15/12 200 56,144
NYC GO 0.000 (c) 08/01/14 500 241,895
NYC GO 0.000 05/15/10 250 81,713
NYC GO 0.000 (c) 10/01/15 1,000 472,730
NYC GO 0.000 08/01/08 740 283,908
NYC GO 0.000 (c) 08/15/16 70 44,298
NYC GO 0.000 08/01/11 940 280,440
NYC GO 5.625 08/01/17 300 248,793
NYC GO 6.000 08/01/11 2,495 2,245,475
NYC GO 6.250 08/01/20 2,000 1,798,420
NYC GO 6.250 08/01/16 12,545 11,491,345
NYC GO 6.750 10/01/15 2,000 1,932,700
NYC GO 7.000 10/01/13 3,375 3,388,500
NYC GO 7.000 02/01/15 30 29,850
NYC GO 7.000 02/01/10 25 25,735
NYC GO 7.000 02/01/22 4,600 4,566,466
NYC GO 7.000 02/01/20 650 645,392
NYC GO 7.000 10/01/12 625 628,069
</TABLE>
-39-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYC GO 7.100% 02/01/11 $ 1,765 $ 1,787,204
NYC GO 7.100 02/01/09 1,000 1,012,580
NYC GO 7.100 02/01/10 4,000 4,050,280
NYC GO 7.200 02/01/14 4,000 4,121,600
NYC GO 7.200 02/01/15 2,800 2,844,464
NYC GO 7.400 02/01/02 330 350,156
NYC GO 7.500 08/15/20 6,180 6,338,270
NYC GO 7.500 02/01/03 2,000 2,126,820
NYC GO 7.500 08/01/20 7,500 7,692,225
NYC GO 7.500 08/01/21 1,000 1,023,590
NYC GO 7.500 08/01/19 1,865 1,916,455
NYC GO 7.500 02/01/18 1,500 1,540,395
NYC GO 7.500 02/01/16 3,000 3,084,390
NYC GO 7.625 02/01/14 270 277,946
NYC GO 7.625 02/01/13 3,845 3,958,158
NYC GO 7.750 02/01/10 1,500 1,551,900
NYC GO 7.750 08/15/13 1,000 1,036,250
NYC GO 7.750 02/01/13 6,000 6,246,300
NYC GO 7.750 08/15/17 2,050 2,130,975
NYC GO 7.750 08/15/12 1,000 1,039,500
NYC GO 8.000 08/15/01 (p) 245 279,261
NYC GO 8.000 03/15/16 1,000 1,121,620
NYC GO 8.000 08/01/18 45 48,383
NYC GO 8.000 08/15/01 (p) 1,390 1,584,378
NYC GO 8.000 08/15/21 5 5,377
NYC GO 8.000 08/15/20 10 10,754
NYC GO 8.250 11/15/20 20 21,816
NYC GO 8.250 08/01/01 (p) 1,590 1,833,032
NYC GO 8.250 08/01/13 1,450 1,578,021
NYC GO 8.250 08/01/14 35 38,090
NYC GO 8.250 11/15/15 80 87,265
NYC GO 8.250 08/01/12 125 136,036
NYC GO 8.250 11/15/01 (p) 920 1,065,176
NYC GO 8.250 11/15/01 (p) 2,760 3,195,500
NYC GO 8.250 11/15/01 (p) 180 208,404
NYC GO 8.250 11/15/18 240 261,794
NYC GO CARS 7.820 (f) 08/12/10 16,387 14,259,804
NYC GO CARS 7.820 (f) 09/01/11 8,387 7,260,626
NYC GO RIBS 6.015 (f) 08/01/09 6,200 4,769,040
NYC GO RIBS 6.015 (f) 08/01/10 4,200 3,183,306
NYC GO RIBS 6.113 (f) 08/27/15 3,050 2,198,501
NYC GO RIBS 6.113 (f) 08/22/13 5,400 3,968,406
NYC GO RIBS 7.549 (f) 08/08/13 13,150 10,207,688
NYC GO RITES 5.498 (f) 10/01/l1 15,000 14,139,450
Ocean Beach GO 5.800 11/01/08 130 118,339
Ocean Beach GO 5.875 11/01/10 130 119,496
Ocean Beach GO 5.875 11/01/11 130 118,767
Ocean Beach GO 5.875 11/01/12 130 118,041
Oneida County GO 5.850 03/15/12 800 719,016
Oswego County GO (Res Rec) 6.500 06/01/04 1,805 1,763,377
Puerto Rico GO RITES 6.690 (f) 07/01/22 1,600 1,334,912
Puerto Rico GO YCN 6,140 (f) 07/01/15 1,000 840,430
Puerto Rico GO YCN 7.842 (f) 07/01/20 11,750 9,717,250
Roxbury CSD 5.600 08/01/08 50 45,340
Roxbury CSD 5.600 08/01/09 50 44,884
</TABLE>
-40-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Roxbury CSD 5.600% 08/01/10 $ 50 $ 44,683
Suffolk GO 6.375 11/01/16 725 683,849
Suffolk GO (Sewer) 6.750 08/01/10 15 14,550
Troy GO TANS 7.250 02/01/95 3,550 3,550,923
V.I. Public Finance Auth. 7.125 10/01/04 1,135 1,157,337
V.I. Public Finance Auth. 7.250 10/01/18 25,475 24,907,162
V.I. Public Finance Auth. 7.375 10/01/10 1,735 1,738,713
V.I. (GO/HUGO) 7.750 10/01/06 440 462,722
- ------------------------------------------------------------------------------------------------------------------------
ELECTRIC AND American Samoa Power Auth. 6.800 09/01/00 400 409,556
GAS UTILITIES American Samoa Power Auth. 6.850 09/01/01 400 412,004
9.6% American Samoa Power Auth. 6.900 09/01/02 400 409,276
$171,127,738 American Samoa Power Auth. 6.950 09/01/03 500 514,370
American Samoa Power Auth. 7.000 09/01/04 500 497,165
American Samoa Power Auth. 7.100 09/01/01 800 839,192
American Samoa Power Auth. 7.200 09/01/02 800 832,864
Guam Power Auth. 6.300 10/01/22 6,200 5,380,670
Guam Power Auth. 6.750 10/01/24 3,500 3,295,180
NYS Energy & Research (Con Ed) 7.125 03/15/22 125 122,685
NYS Energy & Research (Con Ed) 7.375 07/01/24 15,500 15,770,630
NYS Energy & Research (Con Ed) 7.500 11/15/21 500 505,195
NYS Energy & Research (Con Ed) 7.750 01/01/24 1,730 1,770,759
NYS ERDA (Brooklyn Union Gas) 7.125 12/01/20 100 102,612
NYS ERDA (Brooklyn Union Gas) RIBS 5.856 (f) 07/08/26 3,000 2,321,940
NYS ERDA (Brooklyn Union Gas) RIBS 8.040 (f) 04/01/20 7,000 6,137,460
NYS ERDA (Brooklyn Union Gas) RIBS 9.421 (f) 07/15/26 9,300 8,451,375
NYS ERDA (Con Ed) 6.000 03/15/28 1,920 1,664,621
NYS ERDA (Con Ed) 7.250 11/01/24 8,495 8,513,689
NYS ERDA (LILCO) 6.900 08/01/22 7,940 7,028,567
NYS ERDA (LILCO) 6.900 08/01/22 5,275 4,669,536
NYS ERDA (LILCO) 7.150 06/01/20 5,000 4,601,300
NYS ERDA (LILCO) 7.150 02/01/22 15,500 14,239,540
NYS ERDA (LILCO) 7.150 09/01/19 20,540 18,916,518
NYS ERDA (LILCO) 7.150 12/01/20 16,650 15,314,004
NYS ERDA (LILCO) 7.150 09/01/19 19,500 17,958,915
NYS ERDA (LILCO) 7.150 02/01/22 13,920 12,788,026
NYS ERDA (LILCO) 7.800 12/01/09 85 87,975
NYS ERDA (LILCO) 8.250 10/01/97 (e) 100 101,500
NYS ERDA (RG&E) 8.375 12/01/28 95 103,962
Puerto Rico Electric 6.000 07/01/14 60 53,400
Puerto Rico Electric LEVRRS 7.238 (f) 07/01/23 12,400 10,323,000
V.I. Water & Power Auth. 7.400 07/01/11 6,665 6,990,252
- ------------------------------------------------------------------------------------------------------------------------
NON-PROFIT, Albany IDA (Albany Rehabilitation) 8.375 06/01/23 1,055 1,122,172
OTHER Beacon IDA (Craig House) 9.000 07/01/11 220 224,950
8.3% Bethany Retirement Home 7.450 02/01/24 1,000 1,033,040
$148,957,114 Brookhaven IDA (Interdisciplinary School) 8.500 12/01/04 640 673,018
Brookhaven IDA (Interdisciplinary School) 9.500 12/01/19 3,220 3,381,322
Columbia IDA (ARC) 7.750 06/01/05 820 856,646
Columbia IDA (ARC) 8.650 06/01/18 2,660 2,789,622
Columbia IDA (Berkshire Farms) 6.900 12/15/04 895 863,693
Columbia IDA (Berkshire Farms) 7.500 12/15/14 1,855 1,843,536
Geneva IDA (FLCP) 8.250 11/01/04 895 957,892
Islip IDA (Leeway School) 9.000 08/01/21 990 1,051,152
Middleton IDA (Southwinds) 8.375 03/01/18 3,740 3,838,287
Monroe IDA (DePaul Properties) 8.300 09/01/02 585 625,289
Monroe IDA (DePaul Properties) 8.800 09/01/21 4,605 4,932,323
</TABLE>
-41-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Monroe IDA (DePaul CF) 6.450% 02/01/14 $ 880 $ 849,094
Monroe IDA (DePaul CF) 6.500 02/01/24 1,285 1,199,509
Montgomery IDA (New Dimension) 8.900 05/01/16 1,160 1,247,220
Nassau IDA (ACLDD) 8.125 10/01/22 2,725 2,861,986
NYC IDA (BHMS) 8.400 09/01/02 285 302,576
NYC IDA (BHMS) 8.900 09/01/11 660 695,257
NYC IDA (BHMS) 9.200 09/01/21 1,690 1,796,757
NYC IDA (Blood Bank) 7.200 05/01/12 500 490,790
NYC IDA (Blood Center) 7.250 05/01/22 3,000 2,927,850
NYC IDA (Eden II) 7.750 06/01/04 490 499,731
NYC IDA (Eden II) 8.750 06/01/19 2,505 2,541,272
NYC IDA (EPG) 7.500 07/30/03 10,355 10,765,058
NYC IDA (Graphic Artists) 8.250 12/30/23 1,305 1,305,979
NYC IDA (Hebrew Academy) 10.000 03/01/21 2,355 2,574,462
NYC IDA (JBFS) 6.750 12/15/12 6,040 5,750,684
NYC IDA (Lighthouse) 6.500 07/01/22 1,000 952,180
NYC IDA (NY Hostel Co) 6.750 01/01/04 1,420 1,428,648
NYC IDA (NY Hostel Co) 7.600 01/01/17 4,400 4,415,884
NYC IDA (OHEL) 8.250 03/15/23 3,435 3,436,477
NYC IDA (PRFFP) 7.000 10/01/16 815 811,275
NYC IDA (Psycho Therapy) 9.625 04/01/10 805 881,201
NYC IDA (Summit School) 7.250 12/01/04 220 214,982
NYC IDA (Summit School) 8.250 12/01/24 1,485 1,491,534
Orange IDA (Glen Arden) 8.250 01/01/02 18,000 17,999,820
Orange IDA (Glen Arden) 8.875 01/01/25 20,985 20,864,966
Orange IDA (Mental) 7.800 07/01/11 495 516,834
Saratoga IDA (ARC) 8.400 03/01/13 1,395 1,409,899
Schenectady IDA (ASSC) 6.400 05/01/14 500 441,580
Schenectady IDA (ASSC) 6.450 05/01/24 2,655 2,492,567
Suffolk IDA (Devel. Disabilities) 7.375 03/01/03 1,250 1,260,988
Suffolk IDA (Devel. Disabilities) 8.750 03/01/23 9,675 10,161,749
Tompkins IDA (Kendall at Ithaca) 7.625 06/01/09 925 927,923
Tompkins IDA (Kendall at Ithaca) 7.875 06/01/24 5,000 4,998,550
Tompkins IDA (Kendall at Ithaca) 7.875 06/01/15 2,790 2,817,007
Wayne IDA (ARC) 7.250 03/01/03 625 631,419
Wayne IDA (ARC) 8.375 03/01/18 2,925 2,981,511
Westchester IDA (Clearview School) 9.375 01/01/21 1,530 1,676,926
Westchester IDA (JBFS) 6.750 12/15/12 2,220 2,113,684
Yonkers IDA (Westchester) 7.375 12/30/03 475 468,730
Yonkers IDA (Westchester) 8.750 12/30/23 3,375 3,559,613
- ----------------------------------------------------------------------------------------------------------------------
RESOURCE Babylon IDA (Ogden Martin) 8.500 01/01/19 140 154,727
RECOVERY Babylon IDA (Res Rec) (h) 8.875 (d) 03/01/11 1,395 837,000
POLLUTION CONTROL Franklin SWMA 6.125 06/01/09 2,150 1,928,615
REVENUE Franklin SWMA 6.250 06/01/15 2,900 2,567,950
8.1% Hemstead IDA (Resco) 7.400 12/01/10 4,020 4,127,173
$145,756,050 Islip Res Rec 6.125 07/01/13 2,100 1,943,718
NYS Envir (Huntington) 7.500 10/01/12 46,100 46,355,855
Onondaga Res Rec 6.875 05/01/06 11,150 10,429,153
Onondaga Res Rec 7.000 05/01/15 53,400 48,867,942
Peekskill IDA (Karta) 9.000 07/01/10 2,199 2,341,946
Warren/Washington IDA (NAP) 8.375 09/15/05 1,415 1,513,102
Warren/Washington IDA (Res Rec) 8.000 12/15/12 8,230 7,796,197
Warren/Washington IDA (Res Rec) 8.200 12/15/10 8,500 8,221,455
Warren/Washington IDA (Res Rec) 8.200 12/01/10 8,965 8,671,217
</TABLE>
-42-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HOUSING, NYS (SONYMA) Mortgage, 1st Series 0.000% 10/01/14 $ 40 $ 6,566
SINGLE FAMILY NYS (SONYMA) Mortgage, 5th Series 0.000 10/01/01 125 65,764
6.7% NYS (SONYMA) Mortgage, 5th Series 0.000 10/01/99 90 58,043
$119,157,007 NYS (SONYMA) Mortgage, 5th Series 0.000 04/01/01 60 33,129
NYS (SONYMA) Mortgage, 5th Series 0.000 10/01/00 70 40,899
NYS (SONYMA) Mortgage, 5th Series 0.000 04/01/00 60 36,858
NYS (SONYMA) Mortgage, 5th Series 0.000 04/01/99 80 53,921
NYS (SONYMA) Mortgage, 5th Series 9,625 10/01/05 15 15,530
NYS (SONYMA) Mortgage, 6th Series 0.000 04/01/01 20 11,382
NYS (SONYMA) Mortgage, 6th Series 0.000 (c) 04/01/10 4,190 3,675,049
NYS (SONYMA) Mortgage, 7th Series 0.000 04/01/01 105 62,042
NYS (SONYMA) Mortgage, 7th Series 0.000 10/01/01 460 260,351
NYS (SONYMA) Mortgage, 7th Series 0.000 10/01/02 160 82,696
NYS (SONYMA) Mortgage, 7th Series 0.000 (c) 10/01/14 1,820 1,381,562
NYS (SONYMA) Mortgage, 7th Series 0.000 04/01/00 105 67,721
NYS (SONYMA) Mortgage, 7th Series 0.000 04/01/02 85 46,017
NYS (SONYMA) Mortgage, 8th Series 8.100 10/01/17 80 82,491
NYS (SONYMA) Mortgage, 8th Series 8,400 10/01/17 170 177,574
NYS (SONYMA) Mortgage, 8th Series 8.300 10/01/06 35 36,421
NYS (SONYMA) Mortgage, 9th Series 7.300 04/01/17 185 188,254
NYS (SONYMA) Mortgage, 9th Series 8.300 10/01/17 10 10,390
NYS (SONYMA) Mortgage, 9th Series 8.375 04/01/18 20 20,991
NYS (SONYMA) Mortgage, Series 1 0.000 10/01/98 100 73,528
NYS (SONYMA) Mortgage, Series 2 0.000 10/01/14 13,125 2,099,344
NYS (SONYMA) Mortgage, Series 8-D 8.200 10/01/06 100 103,763
NYS (SONYMA) Mortgage, Series 12 0.000 (c) 04/01/17 620 511,934
NYS (SONYMA) Mortgage, Series 27 6.450 04/01/04 25 25,049
NYS (SONYMA) Mortgage, Series 28 7.050 10/01/23 8,250 8,173,440
NYS (SONYMA) Mortgage, Series 30-A 4.375 10/01/23 15 11,250
NYS (SONYMA) Mortgage, Series 30-B 6.650 10/01/25 12,505 11,803,344
NYS (SONYMA) Mortgage, Series 36-A 6.625 04/01/25 11,500 10,788,265
NYS (SONYMA) Mortgage, Series 38 RITES 5.116 (f) 04/01/25 14,020 9,778,950
NYS (SONYMA) Mortgage, Series 40-A 6.700 04/01/25 6,435 6,096,390
NYS (SONYMA) Mortgage, Series 40-B 6.600 04/01/25 5,720 5,439,949
NYS (SONYMA) Mortgage, Series 42 6.650 04/01/26 13,600 12,882,192
NYS (SONYMA) Mortgage, Series 8-A 6.875 04/01/17 115 110,621
NYS (SONYMA) Mortgage, Series 8-F 8.000 10/01/17 60 61,549
NYS (SONYMA) Mortgage, Series BB-2 7.950 10/01/15 150 153,710
NYS (SONYMA) Mortgage, Series EE 7.750 10/01/10 95 98,423
NYS (SONYMA) Mortgage, Series EE-1 8.000 10/01/10 45 46,824
NYS (SONYMA) Mortgage, Series EE-2 7.450 10/01/10 100 101,911
NYS (SONYMA) Mortgage, Series EE-2 7.500 04/01/16 40 41,201
NYS (SONYMA) Mortgage, Series EE-3 7.700 10/01/10 275 280,671
NYS (SONYMA) Mortgage, Series EE-3 7.750 04/01/16 15 15,471
NYS (SONYMA) Mortgage, Series GG 7.600 10/01/18 215 219,300
NYS (SONYMA) Mortgage, Series GG 8.125 10/01/17 295 306,726
NYS (SONYMA) Mortgage, Series GG 8.125 04/01/20 210 217,071
NYS (SONYMA) Mortgage, Series HH-1 7.875 10/01/21 10 10,200
NYS (SONYMA) Mortgage, Series HH-1 8.200 10/01/09 3,190 3,310,423
NYS (SONYMA) Mortgage, Series HH-1 8.250 04/01/22 55 58,256
NYS (SONYMA) Mortgage, Series HH-2 7.600 10/01/21 50 51,167
NYS (SONYMA) Mortgage, Series HH-2 7.700 10/01/09 450 465,818
NYS (SONYMA) Mortgage, Series HH-2 7.850 04/01/22 40 41,607
NYS (SONYMA) Mortgage, Series HH-3 7.600 10/01/21 485 493,643
NYS (SONYMA) Mortgage, Series HH-3 7.875 10/01/09 300 314,835
</TABLE>
-43-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS (SONYMA) Mortgage, Series HH-3 7.950% 04/01/22 $ 435 $ 448,863
NYS (SONYMA) Mortgage, Series HH-4 7.700 10/01/21 40 41,324
NYS (SONYMA) Mortgage, Series HH-4 8.050 04/01/22 70 73,543
NYS (SONYMA) Mortgage, Series II 0.000 04/01/08 170 63,998
NYS (SONYMA) Mortgage, Series II 0.000 04/01/05 100 47,900
NYS (SONYMA) Mortgage, Series Il 0.000 01/01/06 90 39,977
NYS (SONYMA) Mortgage, Series II 0.000 10/01/09 480 161,088
NYS (SONYMA) Mortgage, Series II 0.000 10/01/07 100 39,142
NYS (SONYMA) Mortgage, Series II 0.000 10/01/08 120 43,806
NYS (SONYMA) Mortgage, Series II 0.000 04/01/20 1,285 173,758
NYS (SONYMA) Mortgage, Series JJ 7.500 10/01/17 375 384,206
NYS (SONYMA) Mortgage, Series KK 7.650 04/01/19 125 128,898
NYS (SONYMA) Mortgage, Series KK 7.800 10/01/20 230 239,304
NYS (SONYMA) Mortgage, Series MM-1 7.500 04/01/13 85 86,636
NYS (SONYMA) Mortgage, Series MM-1 7.750 10/01/05 25 25,954
NYS (SONYMA) Mortgage, Series MM-2 7.700 04/01/05 100 105,043
NYS (SONYMA) Mortgage, Series NN 7.550 10/01/17 35 36,437
NYS (SONYMA) Mortgage, Series RR 7.700 10/01/10 90 92,978
NYS (SONYMA) Mortgage, Series RR 7.750 10/01/17 80 82,446
NYS (SONYMA) Mortgage, Series SS 7.500 10/01/19 505 515,100
NYS (SONYMA) Mortgage, Series TT 6.950 10/01/02 5 5,053
NYS (SONYMA) Mortgage, Series UU 7.150 10/01/22 130 132,600
NYS (SONYMA) Mortgage, Series UU 7.750 10/01/23 1,370 1,419,484
NYS (SONYMA) Mortgage, Series VV 0.000 10/01/23 119,242 14,169,527
NYS (SONYMA) Mortgage, Series VV 7.375 10/01/11 195 198,102
Puerto Rico HFA 0.000 08/01/26 8,690 1,002,739
Puerto Rico HFA 6.850 10/15/24 2,500 2,502,825
Puerto Rico HFA 7.650 10/15/22 35 36,442
Puerto Rico HFA BULLS 6.662 (f) 08/01/14 5,750 5,371,018
Puerto Rico HFA RIBS 8.785 (f) 08/04/25 14,500 10,888,340
- ----------------------------------------------------------------------------------------------------------------------
TRANSPORTATION Albany IDA (Port of Albany) 7.250 02/01/24 1,395 1,344,278
6.6% Guam Airport 6.500 10/01/23 1,500 1,343,175
$119,011,134 Guam Airport 6.600 10/01/10 1,230 1,152,178
Guam Airport 6.700 10/01/23 41,805 38,425,902
MTA YCR 5.405 (f) 07/01/13 9,400 7,181,036
MTA YCR 5.405 (f) 07/01/22 3,000 2,181,450
MTA (Transit) IVRC 4.929 (f) 07/01/11 10,000 7,762,500
NYC IDA (Amer. Airlines) 6.900 08/01/24 19,160 17,442,306
NYC IDA (Amer. Airlines) 7.750 07/01/19 1,795 1,810,347
NYC IDA (Amer. Airlines) 8.000 07/01/20 3,310 3,377,656
NYS Thruway 0.000 01/01/04 2,000 1,086,120
NYS Thruway 0.000 01/01/05 260 131,300
NYS Thruway 0.000 01/01/03 1,000 583,410
Port Auth. NY/NJ 0.000 (c) 12/01/14 25 21,333
Port Auth. NY/NJ 8.250 04/01/23 30 30,750
Port Auth. NY/NJ 76th Series 6.500 11/01/26 60 55,899
Port Auth. NY/NJ (US Air) 9.000 12/01/06 6,685 7,201,149
Port Auth. NY/NJ (US Air) 9.000 12/01/10 415 447,042
Port Auth. NY/NJ (US Air) 9.125 12/01/15 22,280 24,131,245
Puerto Rico Port Auth. 7.300 07/01/07 30 30,600
V.I. Port Auth. (CEK Airport) 8.100 10/01/05 1,670 1,773,974
Westchester IDA (Airport Assoc.) 5.950 08/01/24 1,720 1,497,484
</TABLE>
-44-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GOVERNMENT AND Albany IDA (Upper Hudson Library) 8.750% 05/01/07 $ 250 $ 271,105
PUBLIC FACILITIES Albany IDA (Upper Hudson Library) 8.750 05/01/22 955 1,040,893
6.5% Albany Parking Auth. 0.000 11/01/17 1,770 344,336
$117,120,804 Babylon IDA (WWH Ambulance) 7.375 09/15/08 1,330 1,346,386
Clifton Park COP (Clifton Commons) 8.500 08/01/08 985 1,047,134
Franklin IDA (Correctional Facilities) 6.750 11/01/12 2,790 2,697,205
Monroe COP 8.050 01/01/11 500 522,265
NYS COP (BOCES) 7.875 10/01/00 1,120 1,181,634
NYS COP (Hanson Redevelopment) 8.250 11/01/01 250 262,495
NYS COP (John Jay College) 7.250 08/15/07 70 71,516
NYS Dorm (Suffolk-Judicial) 9.500 04/15/14 14,200 16,699,200
NYS UDC 0.000 01/01/08 6,360 2,583,750
NYS UDC 0.000 01/01/10 33,590 11,709,810
NYS UDC 0.000 01/01/10 1,250 438,288
NYS UDC 0.000 01/01/09 25,160 9,460,412
NYS UDC 0.000 01/01/09 1,250 473,188
NYS UDC 0.000 01/01/11 97,405 31,119,923
NYS UDC 0.000 01/01/03 15 8,785
NYS UDC 0.000 01/01/98 (p) 235 42,356
NYS UDC 0.000 01/01/08 900 367,929
NYS UDC 0.000 01/01/11 80 27,021
NYS UDC 7.500 04/01/20 10,725 10,994,412
NYS UDC 7.500 01/01/01 (p) 4,000 4,433,880
NYS UDC 7.500 04/01/11 305 312,091
NYS UDC 7.750 01/01/00 (p) 385 428,667
NYS UDC 9.375 09/01/99 670 695,460
Schroon Lake Fire District 7.250 03/01/09 630 623,870
Troy IDA (City of Troy) 8.000 03/15/12 3,250 3,336,548
Troy IDA (City of Troy) 8.000 03/15/22 13,250 13,602,980
Vigilant EHL (Thomatson) 7.500 11/01/12 950 977,265
- ------------------------------------------------------------------------------------------------------------------------
WATER AND Erie County Water Revenue 4th Series 0.000 12/01/17 12,590 2,423,953
TELEPHONE Montgomery/IDA (Amsterdam) 7.250 01/01/19 5,860 5,840,193
UTILITIES NYC Municipal Water Finance Auth. IVRC 5.942 (f) 06/15/17 30,000 25,012,500
3.9% NYS Envir (Consolidated Water) 7.150 11/01/14 1,840 1,706,066
$70,606,259 NYS Envir (Jamaica Water) 11.000 08/01/03 2,240 2,357,331
NYS Envir (L.I. Water) 10.000 10/01/17 500 558,195
NYS Envir (NYS Water Svc) 8.375 01/15/20 7,500 8,053,875
Puerto Rico Telephone Auth. RIBS 6.403 (f) 01/01/20 10,000 8,442,500
Puerto Rico Telephone Auth. RIBS 6.458 (f) 01/01/15 2,700 2,025,000
St. Lawrence County (Solid Waste) 8.250 01/01/02 10 10,771
St. Lawrence County (Solid Waste) 8.875 01/01/08 100 108,806
Suffolk IDA (Ocean Park Water) 7.500 11/01/22 715 727,620
V.I. Water & Power Auth. 7.600 01/01/12 6,850 6,961,313
V.I. Water & Power Auth. 8.500 01/01/10 5,900 6,378,136
- ------------------------------------------------------------------------------------------------------------------------
NON-PROFIT, Allegany IDA (Alfred University) 7.500 09/01/11 10,070 10,418,019
HIGHER EDUCATION Brookhaven IDA (Dowling College) 6.750 03/01/23 6,965 6,772,000
3.6% Cattaraugus IDA (St. Bonaventure) 8.300 12/01/10 9,155 9,771,223
$64,627,427 Dutchess IDA (Bard College) 7.000 11/01/17 3,500 3,448,585
Erie IDA (Medaille College) 8.000 12/30/22 3,230 3,220,698
Monroe IDA (Roberts Wesleyan College) 7.400 09/01/11 2,015 2,090,663
New Rochelle IDA (CNR) 6.750 07/01/22 3,000 2,812,140
NYC IDA (MMC) 7.000 07/01/23 3,700 3,569,612
NYS Dorm (City U) 0.000 07/01/18 (p) 205 35,246
NYS Dorm (City U) 6.500 07/01/16 150 136,178
NYS Dorm (City U) 7.875 07/01/00 (p) 425 475,877
</TABLE>
-45-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS Dorm (City U) 10.000% 07/0l/02 $ 65 $ 67,583
NYS Dorm (State U) 0.000 05/15/07 50 21,216
NYS Dorm (State U) 7.000 05/15/16 165 163,357
NYS Dorm (St. Thomas Aquinas) 6.250 07/0l/14 1,100 1,008,579
NYS Dorm (UCC) 7.300 07/01/01 (p) 2,000 2,207,660
NYS Dorm (UCC) 7.750 07/01/18 (p) 135 147,559
Puerto Rico ITEME (Polytech University) 5.700 08/01/13 5 4,188
Rockland IDA (DC) 8.000 03/01/13 2,090 2,120,075
Suffolk IDA (Dowling College) 6.625 06/01/24 2,000 1,862,360
Suffolk IDA (Dowling College) 8.250 12/01/20 990 1,057,261
University of V. I. 7.250 10/01/04 1,205 1,229,775
University of V. I. 7.700 10/01/19 3,570 3,569,357
University of V. I. 7.750 10/01/24 5,175 5,174,069
Yates IDA (Keuka College) 8.750 08/01/15 2,000 2,054,200
Yates IDA (Keuka College) 9.000 08/01/11 1,095 1,189,947
- ----------------------------------------------------------------------------------------------------------------------
MANUFACTURING, Brookhaven IDA (Farber) 6.375 (g) 12/01/02 870 861,300
DURABLE GOODS Brookhaven IDA (Farber) 6.375 (g) 12/01/04 490 475,300
3.0% Brookhaven IDA (Modular Devices) 7.000 11/01/95 100 100,155
$52,998,331 Brookhaven IDA (Modular Devices) 7.375 11/01/96 235 235,092
Broome IDA (Simulator) 8.250 01/01/02 1,010 1,084,336
Cattaraugus IDA (Cherry Creek) 9.800 09/01/10 2,105 2,381,113
City of Port Jervis (Future Home Tech) 10.000 11/01/08 780 885,846
Cortland IDA (Paul Bunyon Products) 8.000 07/01/00 140 152,530
Erie IDA (Great Lakes Orthodontic) 12.099 05/01/00 184 200,754
Herkimer IDA (Burrows Paper) 8.000 01/01/09 1,440 1,399,982
Monroe IDA (Brazill Merk) 7.900 12/15/14 3,080 3,246,690
Monroe IDA (Melles Griot) 9.500 12/01/09 1,675 1,804,796
Montgomery IDA (Breton Industries) 8.150 04/01/10 590 640,947
Nassau IDA (Structural Industries) 7.750 02/01/12 500 520,810
NYC IDA (Display Creations) 9.250 06/01/97 (b) 2,200 2,319,526
NYC IDA (HiTech Res Rec) 8.750 08/01/08 480 514,742
NYC IDA (HiTech Res Rec) 9.250 08/01/08 695 730,966
NYC IDA (House of Spices) 9.000 10/15/01 635 681,120
NYC IDA (House of Spices) 9.250 10/15/11 2,140 2,280,726
NYC IDA (Nekboh) 9.625 05/01/11 6,300 6,733,881
NYC IDA (Penguin Air Conditioning) 12.222 12/01/99 279 304,394
NYC IDA (Pop Display) 6.750 12/15/04 1,365 1,349,494
NYC IDA (Pop Display) 7.900 12/15/14 2,645 2,653,438
NYC IDA (Priority Mailers) 9.000 03/01/10 1,910 2,012,070
NYC IDA (Quality Braid) 8.500 04/30/00 560 599,256
NYC IDA (Quality Braid) 8.950 01/30/16 4,555 4,992,599
NYC IDA (Ultimate Display) 8.750 10/15/00 420 446,796
NYC IDA (Ultimate Display) 9.000 10/15/11 1,910 1,987,030
Onondaga IDA (Coltec) 7.250 06/01/08 520 499,200
Onondaga IDA (Coltec) 9.875 10/01/10 625 650,000
Onondaga IDA (Gear Motion) 8.400 12/15/01 820 858,966
Onondaga IDA (Gear Motion) 8.900 12/15/11 1,820 1,994,174
Peekskill IDA (Wenco) 8.875 12/01/08 1,130 1,180,816
Rensselaer IDA (MMP) 8.500 12/15/02 20 21,123
Suffolk IDA (Marbar Assoc) 8.300 03/01/08 190 198,294
Suffolk IDA (Marbar Assoc) 8.300 03/01/09 190 197,646
Suffolk IDA (Microwave Power) 7.750 06/30/02 425 453,186
Suffolk IDA (Microwave Power) 8.500 06/30/22 4,320 4,579,200
Syracuse IDA (Piscitell Stone) 8.400 12/01/11 725 770,037
</TABLE>
-46-
<PAGE>
ROCHESTER FUND MUNICIPALS
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PRIVATE LEASE Albany IDA (100 State Street) 8.750% 12/31/10 $ 2,500 $ 2,524,300
REVENUE Albany IDA (Kenwood Associates) 9.250 09/01/10 2,815 3,127,437
1.4% Broome IDA (Industrial Park) 7.550 12/01/00 190 195,700
$24,406,631 Broome IDA (Industrial Park) 7.600 12/01/01 195 200,850
Erie IDA (Air Cargo) 8.250 10/01/07 1,610 1,639,785
Erie IDA (Air Cargo) 8.500 10/01/15 2,380 2,548,385
Erie IDA (Prudential Associates) 8.100 06/01/95 100 100,723
Fulton IDA (Crossroads Incubator) 8.500 12/15/98 (a) 160 163,840
Hudson IDA (Northside) 9.000 12/01/09 490 559,830
Islip IDA (WJL Realty) 7.800 03/01/03 50 52,182
Islip IDA (WJL Realty) 7.850 03/01/04 100 104,578
Islip IDA (WJL Realty) 7.900 03/01/05 100 104,791
Islip IDA (WJL Realty) 7.950 03/01/10 500 528,355
Monroe IDA (Canal Ponds) 7.000 06/15/13 900 885,339
Monroe IDA (Cottrone Devel.) 9.500 12/01/10 2,507 2,822,112
Monroe IDA (Morrell/Morrell) 7.000 12/01/07 2,389 2,319,815
Monroe IDA (West End Business) 6.750 12/01/04 625 618,231
Monroe IDA (West End Business) 6.750 12/01/04 155 153,321
Monroe IDA (West End Business) 8.000 12/01/14 1,375 1,371,989
Monroe IDA (West End Business) 8.000 12/01/14 345 348,574
Niagara IDA (Maryland Maple) 10.250 11/15/09 1,165 1,251,664
Suffolk IDA (Rimland Facilities) 6.375 (g) 12/01/09 1,670 1,624,376
Syracuse IDA (Rockwest Center) 8.000 06/01/13 1,150 1,160,454
- ------------------------------------------------------------------------------------------------------------------------
SERVICE Albany IDA (Albany Golf) 7.500 05/01/12 400 399,408
COMPANIES Auburn IDA (Wegmans) 7.250 12/01/98 246 249,807
0.9% Dutchess IDA (Merchants Press) 7.950 06/30/02 1,800 1,839,600
$16,893,221 Dutchess IDA (Merchants Press) 9.000 06/30/22 4,590 4,670,922
Erie IDA (Affordable Hospitality) 9.250 12/01/15 3,765 4,028,550
Monroe IDA (De Carolis) 7.500 01/30/05 469 471,160
Niagara IDA (Sevenson Hotel) 6.600 05/01/07 1,900 1,827,678
NYC IDA (Loehmanns) 9.500 12/31/04 580 597,400
Oswego IDA (Riverside) (h) 9.000 (d) 12/01/96 100 60,000
Syracuse IDA (Genesee Inn) (h) 10.000 (d) 05/01/05 2,701 1,620,439
Yonkers Parking Auth. 7.750 12/01/04 1,115 1,128,257
- ------------------------------------------------------------------------------------------------------------------------
MANUFACTURING, Monroe IDA (Cohber) 7.550 12/01/01 10 10,721
NON-DURABLE Monroe IDA (Cohber) 7.650 12/01/02 10 10,683
Goods Monroe IDA (Cohber) 7.700 12/01/03 10 10,700
0.2% Monroe IDA (Cohber) 7.850 12/01/09 170 184,637
$2,972,881 Ulster IDA (Brooklyn Bottling) 7.800 06/30/02 725 752,246
Ulster IDA (Brooklyn Bottling) 8.600 06/30/22 1,915 2,003,894
--------------
Total municipal bond investments (cost $1,896,501,659) (100.3%) $1,797,554,977
Other assets and liabilities (net) (-0.3%) (6,255,924)
--------------
Net assets at market (100.0%) $1,791,299,053
==============
Net asset value per share (109,859,283 shares outstanding) $16.31
==============
<FN>
- --------
(a) Date of mandatory put; final maturity 12/15/2008.
(b) Date of mandatory put; final maturity 6/1/2008.
(c) Security will convert to a fixed coupon at a future date prior to maturity.
(d) Partial-income producing security.
(e) Date of optional put; final maturity 10/1/2012.
(f) Interest rate is subject to change periodically and inversely to the
prevailing market rate. The interest rate shown is the rate in effect at
December 31, 1994.
(g) Variable rate security that fluctuates as a percentage of prime rate.
(h) Fair valued security.
(p) Date of pre-refunded call.
</FN>
</TABLE>
See accompanying notes to financial statements.
-47-
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Rochester Fund Municipals' holdings in the Portfolio
of Investments, we have abbreviated the descriptions of many of the securities
per the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ACLDD Adults and Children with Learning H&N Hospital and Nursing
and Developmental Disabilities IDA Industrial Development Authority
ARC Association of Retarded Citizens ITEME Industrial Tourist Educational Medical
ASSC Annie Schaffer Senior Center and Environmental
BHMS Brooklyn Heights Montessori School IVRC Inverse Variable Rate Certificate
BOCES Board of Cooperative Educational Services JBFS Jewish Board Family Services
CARS Complimentary Auction Rate Security LEVRRS Leveraged Reverse Rate Security
CDC Community Development Corporation LILCO Long Island Lighting Corporation
CEK Cyril E. King MMC Marymount Manhattan College
CF Community Facilities MMP Millbrook Millwork Project
CGH Community General Hospital MTA Metropolitan Transit Authority
CNR College of New Rochelle NAP North American Plastics
COP Certificate of Participation PRFFP Puerto Rico Family Foundation Project
CSD Central School District Res Rec Resource Recovery Facility
DC Dominican College RGH Rochester General Hospital
EHC Elderly Housing Corporation RG&E Rochester Gas & Electric
EHL Engine Hook & Ladder RIBS Residual Interest Bonds
EPG Elmhurst Parking Garage RITES Residual Interest Tax Exempt Security
ERDA Energy Research and Development Authority SONYMA State of New York Mortgage Agency
E,E&T Ear, Eye and Throat SWMA Solid Waste Management Authority
FLCP Finger Lakes Cerebral Palsy TANS Tax Anticipation Notes
GO General Obligation UCC Upstate Community College
HB&F Housing Bank and Finance UDC Urban Development Corporation
HDC Housing Development Corporation UFA Utica Free Academy
HELP Homeless Economic Loan Program WWH Wyandach/Wheatley Heights
HFA Housing Finance Agency YCN Yield Curve Note
HFC Housing Finance Corporation YCR Yield Curve Receipt
HHRH Historic Hudson River Heritage V.I. United States Virgin Islands
==========================================================================================================
</TABLE>
ASSET COMPOSITION TABLE
DECEMBER 31, 1994 (Unaudited)
(As a percentage of total investments)
Percentage
Rating of Investments
---------------------------
AAA ......... 17.7%
AA .......... 15.6%
A ........... 18.7%
BBB ......... 31.7%
BB .......... 1.6%
B ........... 1.8%
CCC ......... 0.0%
CC .......... 0.0%
C ........... 0.0%
Not Rated ... 12.9%
------
Total ....... 100.0%
======
All unrated bonds are backed by mortgage liens and guarantees by the issuer.
Bonds which are backed by a letter of credit or by other financial institutions
or agencies may be assigned an investment grade rating by the Investment Policy
Committee of the Board of Trustees, which reflects the quality of the guarantor,
institution or agency. Unrated bonds may also be assigned a rating when the
issuer has rated bonds outstanding with comparable credit characteristics, or
when, in the opinion of the Investment Policy Committee, the bond itself
possesses credit characteristics which allow for rating. The unrated bonds in
the portfolio are predominantly smaller issuers which have not applied for a
bond rating. Only those unrated bonds which subsequent to purchase have not been
designated investment grade are included in the "Not Rated" category. For
further information see "Credit Quality" in the Prospectus.
-48-
<PAGE>
ROCHESTER FUND MUNICIPALS
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES -- DECEMBER 31, 1994
ASSETS
Investments at market (Cost $1,896,501,659) ........... $1,797,554,977
Interest receivable ................................... 32,495,185
Receivable for capital shares sold .................... 4,172,736
Receivable for investments sold ....................... 2,680,946
Other assets .......................................... 2,857,903
--------------
Total assets ........................................ 1,839,761,747
--------------
LIABILITIES
Payable for investments purchased ..................... 21,673,718
Payable for capital shares repurchased ................ 11,487,672
Demand note payable to Bank Interest at prime
(8.50% at 12/31/94) ................................. 15,082,550
Other liabilities ..................................... 218,754
--------------
Total liabilities ................................... 48,462,694
--------------
NET ASSETS ............................................ $1,791,299,053
==============
REPRESENTED BY
Paid in capital ....................................... $1,933,385,654
Undistributed net investment income ................... 1,863,208
Accumulated net realized loss on
investment transactions ............................. (45,003,127)
Net unrealized depreciation of investments ............ (98,946,682)
--------------
Total -- Representing net assets
applicable to capital shares outstanding ............ $1,791,299,053
==============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption
price per share ($1,791,299,053
divided by 109,859,283 shares) .................... $16.31
==============
Offering price pet share (100/96 of $16.31)* ........ $16.99
==============
* On single retail sales of less than $100,000. On sales of Sl00,000
or more and on group sales the offering price is reduced.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
INVESTMENT INCOME:
Interest ............................................ $134,473,542
------------
EXPENSES:
Management fees ..................................... 7,562,948
Distribution fees ................................... 3,150,402
Shareholder servicing agent fees .................... 1,152,456
Accounting and auditing ............................. 603,122
Shareholder communications .......................... 289,608
Registration fees ................................... 278,930
Custodian fees ...................................... 174,256
Trustees' fees ...................................... 80,600
Legal fees .......................................... 47,654
Miscellaneous ....................................... 199,137
Interest ............................................ 2,051,652
-------------
Total expenses .................................... 15,590,765
-------------
Net investment income ................................. 118,882,777
-------------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on investments .................... (40,072,783)
Net decrease in unrealized
appreciation of investments ....................... (243,302,977)
-------------
Net loss on investments ............................... (283,375,760)
-------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................... ($164,492,983)
=============
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31,
-----------------------------------
1994 1993
--------------- ---------------
(Decrease) increase in net assets --
Operations:
Net investment income ................ $ 118,882,777 $ 89,621,303
Net realized loss
from security transactions ......... (40,072,783) (2,075,710)
(Decrease) increase in unrealized
appreciation ....................... (243,302,977) 96,868,956
--------------- ---------------
(Decrease) increase in net assets
resulting from operations ............ (164,492,983) 184,414,549
--------------- ---------------
Distributions to shareholders from:
Net investment income ................ (120,341,434) (89,611,310)
--------------- ---------------
Fund share transactions:
Net proceeds from shares sold ........ 476,656,393 753,078,059
Value of shares issued in
reinvestment of distributions ...... 61,703,204 41,498,116
Cost of shares repurchased ........... (256,321,686) (92,314,246)
--------------- ---------------
Increase in net assets derived
from Fund share transactions ....... 282,037,911 702,261,929
--------------- ---------------
(Decrease) increase in net assets ...... (2,796,506) 797,065,168
Net assets:
Beginning of year ...................... 1,794,095,559 997,030,391
--------------- ---------------
End of year (including undistributed
net investment income of $1,863,208 --
1994 and $3,321,865 -- 1993) ......... $ 1,791,299,053 $ 1,794,095,559
=============== ===============
See accompanying notes to financial statements.
-49-
<PAGE>
ROCHESTER FUND MUNICIPALS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES:
Rochester Fund Municipals (the "Fund") was organized as a corporation under the
laws of New York State in 1928. The Fund was registered in December, 1982 under
the Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. Shareholders voted for the Fund's reclassification to an
open-end investment company (mutual fund) on March 27, 1986, when they also
approved the name change from Martek Investors, Inc. to Rochester Fund
Municipals, Inc. In April, 1992, the Fund received shareholder approval to
reorganize from a New York corporation to a Massachusetts business trust. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements:
SECURITY VALUATION AND TRANSACTIONS. Investments are valued at market value
using information available from an approved pricing service, quotations from
bond dealers, market transactions in comparable securities, and various
relationships between securities. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Board of Trustees. Security transactions are accounted for on the trade date.
Cost is determined and realized gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes. Interest income is recorded on the accrual basis. In computing net
investment income, the Fund amortizes premiums and accretes original issue
discount. For municipal bonds purchased after April 30, 1993 and subsequently
sold at a gain, market discount is accreted at the time of sale (to the extent
of the lesser of the accrued market discount or the disposition gain) and is
treated as taxable income, rather than capital gain.
SECURITIES PURCHASED ON A WHEN ISSUED BASIS. The Fund may purchase portfolio
securities on a when issued or delayed delivery basis. These securities have
been registered by a municipality or government agency, but have not been issued
to the public. The Fund may contract to purchase these securities in advance of
issuance. Delivery of the security and payment therefor may take place a month
or more after the date of the transaction. At the time of purchase, the Fund
sets aside sufficient investment securities as collateral to meet such purchase
commitments. Such securities are subject to market fluctuations during this
period. The current value of these securities is determined in the same manner
as for other portfolio securities.
DISTRIBUTIONS TO SHAREHOLDERS. Income distributions are declared and recorded
each day based on the projected net investment income for a period, usually one
month, calculated as if earned pro rata throughout the period on a daily basis.
Such distributions are paid monthly. Capital gain distributions, if any, are
recorded on the ex-dividend date and paid annually.
FEDERAL INCOME TAXES. During any particular year, the Fund is required to
distribute certain minimum amounts of net realized capital gains and net
investment income in order to avoid a federal income or excise tax. It is the
Fund's intention to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable and tax-exempt income to shareholders. Therefore, the Fund was not
required to record a liability for either federal income or excise tax.
RECLASSIFICATION OF CAPITAL ACCOUNTS. In 1993, the Fund adopted the provisions
of Statement of Position 93-2 "Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions by
Investment Companies" (SOP). The SOP requires the Fund to report the
undistributed net investment income (accumulated loss) and accumulated net
realized gain (loss) accounts in such a manner as to approximate amounts
available for future tax distributions (or to offset future realized capital
gains). The implementation of the SOP did not have a significant impact on the
Fund.
OTHER. There are certain risks arising from geographic concentration in any
state. Certain revenue or tax related events in a state may impair the ability
of certain issuers of municipal securities to pay principal and interest on
their obligations.
NOTE 2. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATED PARTIES:
Ronald H. Fielding, President and a trustee of the Fund, is also an officer,
director and controlling shareholder of Fielding Management Company, Inc. (FMC),
the Fund's investment advisor through April 30, 1994. The Fund received
shareholder approval to change the investment advisor from FMC to Rochester
Capital Advisors, L.P. (RCA, L.P.) effective May 1, 1994. RCA, L.P. is managed
by Rochester Capital Advisors, Inc. (RCA), which serves as the general partner
of RCA, L.P. Mr. Fielding is President, director, and controlling shareholder of
RCA, as well as an officer,
-50-
<PAGE>
director and controlling shareholder of Rochester Fund Distributors, Inc. (RFD),
the Fund's principal underwriter and an officer, director and controlling
shareholder of Rochester Fund Services, Inc. (RFS), the Fund's shareholder
servicing, accounting and pricing agent.
The management fee payable to FMC was based on an annual rate of .50% of average
daily net assets up to $100 million, .45% of average daily net assets on the
next $150 million, and .40% of average daily net assets in excess of $250
million. For the four month period ending April 30, 1994, FMC received fees of
$2,552,432 for management and investment advisory services. The management fee
payable to RCA, L.P. is based on an annual fee of .50% of its average daily net
assets up to $100 million, .45% of its average daily net assets on the next $150
million, .40% of its average daily net assets in excess of $250 million but less
than $2 billion, and .39% of its average daily net assets in excess of $2
billion. For the eight month period from May 1, 1994 to December 31, 1994, RCA,
L.P. received fees of $5,010,516 for management and investment advisory
services.
For the year ended December 31, 1994, RFD purchased shares from the Fund at net
asset value to fill orders received from dealers and retained net underwriting
discounts of $2,015,030. The Fund has adopted a distribution plan pursuant to
Rule 12b-l of the Investment Company Act of 1940, as amended, which permits the
Fund to pay an asset based sales charge of up to .l% per annum of its average
daily net assets for certain sales related distribution expenses and a service
fee of up to .25% per annum of average daily net assets for expenses incurred in
connection with the maintenance of shareholder accounts. For the year ended
December 31, 1994, the Fund paid distribution fees of $3,150,402 to RFD. From
this amount, RFD made service fee payments of $1,609,589 to broker dealers and
financial institutions.
For the year ended December 31, 1994, RFS received $1,709,156 in shareholder
servicing agent, pricing and accounting fees from the Fund. The shareholder
servicing agent fee charged by RFS to the Fund is based on a monthly maintenance
fee of $2.01 for each shareholder account. During 1994, the Fund was charged
$556,700 for pricing and accounting services.
For the year ended December 31, 1994, the Fund directly sold to and purchased
from the Limited Term New York Municipal Fund, an affiliated investment company,
investments at market value in the amount of $9,573,313 and $28,188,218,
respectively. There were no commissions or other charges associated with these
transactions.
NOTE 5. PORTFOLIO INFORMATION:
Purchases at cost and proceeds from sales of investment securities for the year
ended December 31, 1994 were $882,893,851 and $638,746,573, respectively.
The Fund held $227,282,837 in inverse floating rate municipal bonds at December
31, 1994, comprising approximately 12.7% of net assets.
During 1994, 9.31% of interest income was derived from investments in U.S.
territories which are exempt from federal, all states, and New York City income
taxes.
Unrealized appreciation (depreciation) at December 31, 1994 based on cost of
securities for federal income tax purposes of $1,896,632,582 was:
Gross unrealized appreciation $28,457,079
Gross unrealized depreciation (127,534,684)
------------
Net unrealized depreciation ($99,077,605)
============
At December 31, 1994, capital loss carryovers available (to the extent provided
in regulations) to offset future realized gains were approximately as follows:
Year of Expiration Capital Loss Carryover
------------------ ----------------------
2000 $ 564,400
2001 1,954,100
2002 42,293,600
-----------
$44,812,100
===========
The availability of these loss carryovers may be limited in a given year but
will be used to the extent possible to offset any future realized gains.
-51-
<PAGE>
In March, 1994, the Fund entered into a conditional contract to purchase a total
of $9,710,000 of Islip Resource Recovery Series D Refunding Bonds as detailed
below:
Face
Amount Coupon Maturity
---------- ------ --------
$2,420,000 6.05% 2004
2,565,000 6.15% 2005
2,725,000 6.25% 2006
2,000,000 6.50% 2009
----------
$9,710,000
==========
The bonds will be issued and delivered on August 15, 1995 if the following terms
and conditions are met: 1) Counsel must render opinions that the interest on the
Series D bonds is exempt for federal income tax purposes and is not a tax
preference item for the purposes of computing alternative minimum tax and 2)
AMBAC Indemnity Corporation must still have an AAA rating from at least one
Nationally Recognized Securities Rating Organization (NRSRO) at the time they
issue their insurance policy on the bonds. The Fund has not recorded this
commitment as of December 31, 1994, due to the uncertainties relating to the
aforementioned terms and conditions with respect to this bond issuance; however,
the Fund has segregated sufficient investment securities to cover the potential
commitment.
NOTE 4. BANK BORROWINGS:
The Fund has available a $50,000,000 unsecured line of credit with a bank.
Borrowings are payable on demand and bear interest at the bank's prime rate.
The Fund bad berrowings of $15,082,550 outstanding at December 31, 1994. For the
year ended December 31, 1994, the average monthly loan balance was $28,131,413
at a weighted average interest rate of 7.15%. The maximum amount of borrowings
outstanding at any month-end was $46,846,500.
NOTE 5. SHARES OF BENEFICIAL INTEREST:
The Agreement and Declaration of Trust permits the Fund to issue an unlimited
number of shares of beneficial interest, par value $.01 per share. Transactions
in capital stock were as follows:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
1994 1993
----------- ----------
<S> <C> <C>
Shares sold 26,972,429 40,667,109
Shares issued on reinvestment of distributions 3,569,917 2,226,134
Shares repurchased (15,115,012) (4,947,800)
----------- ----------
Net increase in shares outstanding 15,427,334 37,945,443
Shares outstanding, beginning of year 94,431,949 56,486,506
----------- ----------
Shares outstanding, end of year 109,859,283 94,431,949
=========== ==========
</TABLE>
-52-
<PAGE>
ROCHESTER FUND MUNICIPALS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ...... $19.00 $17.65 $17.01 $16.24 $16.29
---------- ---------- -------- -------- --------
Income from investment operations:
Net investment income ................. 1.13 1.17 1.20 1.20 1.20
Net realized and unrealized gain
(Loss) on investments ............... (2.68) 1.35 0.64 0.81 (0.05)
---------- ---------- -------- -------- --------
Total from investment operations .. (1.55) 2.52 1.84 2.01 1.15
---------- ---------- -------- -------- --------
Less distributions:
Dividends from net investment income .. (1.13) (1.17) (1.20) (1.20) (1.20)
Dividends from undistributed
net investment income - prior year .. (0.01) -- -- -- --
Distributions from capital gains ...... -- -- -- (0.04) --
Returns of capital .................... -- -- -- -- --
---------- ---------- -------- -------- --------
Total distributions ............... (1.14) (1.17) (1.20) (1.24) (1.20)
---------- ---------- -------- -------- --------
Net asset value, end of year ............ $16.31 $19.00 $17.65 $17.01 $16.24
========== ========== ======== ======== ========
Total return (excludes sales load) ...... (8.35%) 14.60% 11.19% 12.79% 7.28%
Ratios/supplemental data:
Net assets, end of year
(000 omitted) ....................... $1,791,299 $1,794,096 $997,030 $497,440 $260,553
Ratio of total expenses
to average net assets ................. 0.84% 0.75% 0.84% 0.87% 0.88%
Ratio of total expenses (excluding
interest) to average net assets* ...... 0.73% 0.64% 0.70% 0.74% 0.72%
Ratio of net investment income to
average net assets .................... 6.43% 6.21% 6.79% 7.12% 7.21%
Portfolio turnover rate ................. 34.39% 18.27% 29.99% 48.54% 51.63%
</TABLE>
- ----------
* During the periods shown above, the Fund's interest expense was offset by
the incremental interest income generated on bonds purchased with borrowed
funds.
Per share information has been determined on the basis of the weighted average
number of shares outstanding during the period.
-53-
<PAGE>
APPENDIX A
DESCRIPTION OF MUNICIPAL SECURITIES RATINGS
STANDARD & POOR'S RATING GROUP
A brief description of the applicable Standard & Poor's Corporation rating
symbols and their meanings (as published by Standard & Poor's Corporation)
follows:
A Standard & Poor's corporate or municipal debt rating is a current assessment
of the creditworthiness of an obligator with respect to a specific debt
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer and
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangements under
the laws of bankruptcy and other laws affecting creditors' rights.
Long-Term Municipal Bonds
AAA Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small
degree.
A Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
A-1
<PAGE>
BBB Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
BB-D Debt rated "BB", "B", "CCC" and "CC" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. "BB"
indicates the lowest degree of speculation and "CC" the highest degree
of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions. The "C" is reserved for
income bonds on which no interest is being paid. Debt rated "D" is in
default, and payment of interest and/or repayment of principal is in
arrears.
Plus (+) or minus (-): The ratings from "AA" to "BBB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "P" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investors should
exercise his own judgement with respect to such likelihood and risk.
Short-Term Tax-Exempt Notes
Standard & Poor's tax exempt note ratings are generally given to such notes that
mature in three years or less. The three rating categories are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will
be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal interest.
SP-3 Speculative capacity to pay principal and interest.
Tax-Exempt Commercial Paper
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
165 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. The four categories are as
follows:
A Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further
refined with the designation 1, 2, and 3 to indicate the relative
degree of safety. These issues determined to posses overwhelming safety
characteristics are denoted with a plus (+) sign designation.
A-2
<PAGE>
A-1 This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".
A-3 Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying
the higher designation.
B Issues rated "B" are regarded as having only an adequate capacity for
timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.
C & D These ratings indicate that the issue is either in default or
expected to be in default upon maturity.
MOODY'S INVESTORS SERVICE, INC.
A brief description of the applicable Moody's Investors Service, Inc. rating
symbols and their meanings follow:
Long-Term Municipal Bonds
Aaa Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large, or by an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are more unlikely to impair the fundamentally strong
position of such issues. With the occasional exception of oversupply in
a few specific instances, the safety of obligations of this class is so
absolute that their market value is affected solely by money market
fluctuations.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuations of protective elements may be of greater amplitude or
there may be other elements present which make the one-term risks
appear somewhat larger than the Aaa securities. These Aa bonds are high
grade, their market value virtually immune to all but money market
fluctuations.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as higher medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to A-rated bonds
may be influenced to some degree by credit circumstances during a
sustained period of depressed business conditions. During periods of
normalcy, bonds of this quality frequently move in parallel with Aaa
and Aa obligations, with the occasional exception of oversupply in a
few specific instances.
A-3
<PAGE>
Baa Bonds which are rated Baa are considered as lower medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments but certain protective elements may be
lacking or may be characteristically unreliable or over any great
length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well. The market value
of Baa-rated bonds is more sensitive to change in economic
circumstances, and aside from occasional speculative factors applying
to some bonds of this class, Baa market valuations move in parallel
with Aaa, Aa and A obligations during periods of economic normalcy,
except in instances of oversupply.
Ba-C 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
of bonds, and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Moody's bond rating symbols may contain numerical modifiers of a generic rating
classification. The modifier 1 indicates that the bond ranks at the high end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
Con. Bonds for which the security depends upon the completion of some act or
the fulfillment of some conditions are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operating experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit status upon completion of construction or elimination
of basis of condition.
Short-Term Tax-Exempt Notes
The four ratings of Moody's for short-term notes are MIG 1, MIG 2, MIG 3, and
MIG 4; MIG 1 denotes "best quality, enjoying strong protection from established
cash flows"; MIG 2 denotes "high quality" with "ample margins of protection";
MIG 3 notes are of "favorable quality... but lacking the undeniable strength of
the preceding grades"; MIG 4 notes are of "adequate quality, carrying specific
risk but having protection...and not distinctly or predominantly speculative".
Tax-Exempt Commercial Paper
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
A-4
<PAGE>
Issuers rated Prime 1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime 2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations.
Issuers rated Prime 3 (or related supporting institutions) 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.
FITCH INVESTORS SERVICE, INC.
A brief description of the applicable Fitch Investors Service rating symbols and
their meanings follow:
Long Term Municipal Bonds
AAA Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high quality. "The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bond rating "AAA".
A Bonds considered to be investment grade and of high quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have an adverse impact on these bonds, and therefore impair
timely payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB-C BB bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes,
however, business and financial alternatives can be identified which could
assist the obligor in satisfying debt service requirements. B bonds are
considered highly speculative. While debt service payments are currently being
met, the probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety. CCC bonds have certain
identifiable characteristics which, if not remedied, may lead to default; CC
bonds are minimally protected and default in payment of interest and/or
principal seems probable over time; C bonds are in imminent default in payment
of interest or principal.
DDD Bonds rated DDD, DD, D are in default on interest and/or principal payments.
Such bonds are extremely speculative. "DDD" represents the highest probability
for recovery on these bonds, "D" represents the lowest probability for recovery.
A-5
<PAGE>
Plus (+) Minus(-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs are not used in the "AAA", "DDD", "DD", or "D" categories.
Conditional: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
A-6