Registration No. 33-3692
File No. 811-3614
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. ___ / /
POST-EFFECTIVE AMENDMENT NO. 18 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/ X /
Amendment No. 23 / X /
ROCHESTER FUND MUNICIPALS
------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
350 LINDEN OAKS, ROCHESTER, NEW YORK 14625
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(Address of Principal Executive Offices)
800-552-1149
------------------------------------------------------------------------
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b)
/ / On ___________, pursuant to paragraph (b)
/ X/ 60 days after filing, pursuant to paragraph (a)(1)
/ / On ___________, pursuant to paragraph (a)(1)
/ / 75 days after filing, pursuant to paragraph (a)(2)
/ / On _______, pursuant to paragraph (a)(2)of Rule 485.
- -------------------------------------------------------------------
The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment
Company Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal year ended
December 31, 1995 was filed on February 28, 1996.
<PAGE>
FORM N-1A
ROCHESTER FUND MUNICIPALS
Cross Reference Sheet
-------------------------
Part A of
Form N-1A
Item No. Prospectus Heading
- ---------- ------------------
1 Cover Page
2 Expenses; A Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes; How the Fund is
Managed -- Organization and History; The Transfer Agent
7 How to Exchange Shares; Special Investor Services; Service
Plan for Class A shares; Distribution and Service Plan
for Class B Shares; Distribution and Service Plan for
Class C Shares; How to Buy Shares; How to Sell Shares;
Shareholder Account Rules and Policies
8 How to Sell Shares; How to Exchange Shares; Special
Investor Services
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information or
- ---------- ----------------------------------------------------
Prospectus
----------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Other Investment Restrictions
14 How the Fund is Managed -- Trustees and Officers of the
Fund
15 How the Fund is Managed -- Major Shareholders
16 How the Fund is Managed; Additional Information about the
Fund; Distribution and Service Plans; Back Cover
17 How the Fund is Managed
18 Additional Information about the Fund
19 About Your Account -- How to Buy Shares, How to Sell
Shares, How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Additional Information about the
Fund - The Distributor; Distribution and Service Plans
22 Performance of the Fund
23 Financial Statements
- ---------------
*Not applicable or negative answer.
<PAGE>
ROCHESTER FUND MUNICIPALS
Prospectus dated March ___, 1997
Rochester Fund Municipals is a non-diversified mutual fund with the
investment objective of providing shareholders with as high a level of income
exempt from Federal, 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 Fund intends to achieve
its objective by investing primarily in New York State municipal and public
authority debt obligations, the interest from which is exempt from such taxes.
Except for temporary defensive purposes, at least 80% of the Fund's net assets
will be invested in tax exempt municipal securities. There can be no assurance
that the Fund will achieve its objective.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it for
future reference. You can find more detailed information about the Fund in the
March ___, 1997 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
[logo]OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
-1-
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Policies and Strategies
Investment Considerations
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements for Class
A Shareholders
Appendix B: Special Sales Charge Arrangements
-2-
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The calculations are
based on the Fund's expenses during its last fiscal year ended December 31,
1996. On March ___, 1997, the Fund redesignated as "Class A shares" all of its
shares which had been outstanding prior to that date and authorized the issuance
of new classes of shares ("Class B shares" and "Class C shares.") The
information for Class B shares and Class C shares has been estimated based upon
expenses expected to be incurred through December 31, 1997.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," for an
explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ---
Maximum Sales Charge 4.75% None None
on Purchases (as a %
of offering price)
- ------------------------------------------------------------------------------------------------------------------
- -----
Maximum Deferred Sales None(1) 5% in the first 1% if
Charge (as a % of the year, declining redeemed
lower of the original to 1% in the within 12
offering price or sixth year and months of
redemption proceeds) eliminated purchase(3)
thereafter(2)
- ------------------------------------------------------------------------------------------------------------------
- -----
Maximum Sales Charge on None None None
Reinvested Dividends
- ------------------------------------------------------------------------------------------------------------------
- ------
Redemption Fee None None(1) None(2)
- ------------------------------------------------------------------------------------------------------------------
- ------
Exchange Fee None None None
-3-
<PAGE>
- ----------------------------------------------------------------------------
<FN>
(1) If you invest $1 million or more in Class A shares, you may have to pay a
sales charge of up to 1% if you sell your shares within 18 calendar months from
the end of the calendar month during which you purchased those shares. See "How
to Buy Shares - Buying Class A Shares," below. (2) See "How to Buy Shares -
Class B Shares" below for more information on contingent deferred sales charges.
(2) See "How to Buy Shares - Class C Shares" below for more information on
contingent deferred sales charges.
</FN>
</TABLE>
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment advisor, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth in "How the Fund is Managed" below. The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds the Fund's portfolio securities, audit fees and legal
expenses. Those expenses are detailed in the Fund's Financial Statements in the
Statement of Additional Information.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Management Fees
- ----------------------------------------------------------------------------------------------------
12b-1 Plan Fees (1)
- ----------------------------------------------------------------------------------------------------
Other Expenses
- ----------------------------------------------------------------------------------------------------
Total Fund Operating Expenses (2)
- ----------------------------------------------------------------------------------------------------
<FN>
(1) Although the Fund's Service Plan for Class A shares permits payment of a
service fee of up to 0.25% of the Fund's average daily net assets per annum, the
Board of Trustees has authorized payment of a service fee of only 0.15% per
annum of the Fund's average daily net assets. For Class B and Class C shares,
the 12b-1 Plan fees are the service fees (the maximum service fee is 0.25% of
average annual net assets of that class) and the asset-based sales charge of
0.75%.
(2) Actual Total Operating Expenses for Class A shares during the fiscal
year ended December 31, 1996 were ____% (including interest expense) and ____%
(excluding interest expense). For the fiscal year ending December 31, 1996, the
Fund's interest expense was substantially offset by the incremental interest
income generated on bonds purchased with borrowed funds.
</FN>
</TABLE>
-4-
<PAGE>
The numbers in the table above with respect to Class A shares are based
on the Fund's expenses in its last fiscal year. These amounts are shown as a
percentage of the average net assets for Class A shares for that year. The
expenses shown for Class B shares and Class C shares are estimates since those
classes were not offered during the fiscal year ended December 31, 1996.
The actual expenses for shares in future years may be more or less than
the numbers in the above table, depending on a number of factors, including the
actual value of the Fund's assets.
o Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown below.
Assume that you make a $1,000 investment in shares of the Fund, and that the
Fund's annual return is 5%, and that its operating expenses are the ones shown
in the Annual Fund Operating Expenses table above. If you were to redeem your
shares at the end of each period shown below, your investment would incur the
following expenses by the end of 1, 3, 5 and 10 years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $ $ $ $
Class B Shares $ $ $ $
Class C Shares $ $ $ $
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $ $ $ $
Class B Shares $ $ $ $
Class C Shares $ $ $ $
</TABLE>
In the first example, expenses include the Class A initial sales charge
and the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not include contingent deferred sales charges. Because
of the effect of the asset-based sales charge and contingent deferred sales
charge imposed on Class B and Class C shares, long-term holders of Class B and
Class C shares could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations. For Class B
shareholders, the automatic conversion of Class B shares to Class A shares is
-5-
<PAGE>
designed to minimize the likelihood that this will occur. See "How to Buy Shares
- - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment returns of
the Fund, which may be more or less than the amounts shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What Is The Fund's Investment Objective? The Fund's investment
objective is to provide shareholders with as high a level of income exempt from
Federal, 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. There can be no assurance that the Fund
will achieve its objective.
o What Does The Fund Invest In? The Fund seeks to achieve its objective
by investing primarily in New York State municipal and public authority debt
obligations, the interest from which is exempt from such taxes. In addition, the
Fund may also invest its assets in obligations of municipal issuers located in
U.S. territories. See "Dividends, Capital Gains and Taxes." 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 Manager 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
-6-
<PAGE>
authorities; highly-rated corporate debt securities; prime commercial paper; or
certificates of deposit of domestic banks with assets of at least $1 billion.
o Who Manages The Fund? The Fund's investment advisor is
OppenheimerFunds, Inc. The Manager (including a subsidiary) advises investment
company portfolios having over $62 billion in assets at as of December 31, 1996.
The Manager is paid an advisory fee by the Fund, based on its assets. The Fund's
portfolio manager, who is employed by the Manager and who is primarily
responsible for the selection of the Fund's securities, is Ronald H. Fielding.
The Fund's Board of Trustees, which is elected by shareholders, oversees the
investment advisor and the portfolio manager. See "How the Fund is Managed" for
more information about the Manager and its fees.
o How Risky Is The Fund? All investments carry risks to some degree.
The Fund's investments are subject to changes in their value from a number of
factors such as changes in general bond market movements, the change in value of
particular bonds because of an event affecting the issuer, or changes in
interest rates that can affect bond prices. These changes affect the value of
the Fund's investments and its price per share. The Fund may invest in "inverse
floater" variable rate bonds, a type of derivative investment whose yields move
in the opposite direction as short-term interest rates change. The Manager tries
to reduce risks by investing in a substantial number of issuers; however, as a
non-diversified investment company, the Fund may invest a greater proportion of
its assets in a smaller number of issuers than a diversified fund. There is no
guarantee of success in achieving the Fund's objective and your shares may be
worth more or less than their original cost when you redeem them. See
"Investment Objective and Policies" for a more complete discussion.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. See "How to Buy Shares" for more details.
o Will I Pay A Sales Charge To Buy Shares? The Fund has three classes
of shares. Each class has the same investment portfolio but different expenses.
Class A shares are offered with a front-end sales charge, starting at 4.75%, and
reduced for larger purchases. Appendix A to this Prospectus sets forth special
sales charge rates that apply to additional purchases of Class A shares of the
Fund by a person who was a shareholder of the Fund on or
-7-
<PAGE>
before the effective date of this Prospectus. Class B and Class C shares are
offered without a front-end sales charge, but may be subject to a contingent
deferred sales charge if redeemed within 6 years or 12 months, respectively, of
purchase. There is also an annual asset-based sales charge on Class B and Class
C shares. See "How to Buy Shares" for more details.
o How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. See "How to Sell Shares." The Fund also offers exchange privileges to
other Oppenheimer funds, described in "How To Exchange Shares."
o How Can I Tell How The Fund Performed? The Fund measures its
performance by quoting its yield, tax equivalent yield, average annual total
return and cumulative total return, which measure historical performance. Those
yields and returns can be compared to the yields and returns (over similar
periods) of other funds. Of course, other funds may have different objectives,
investments, and levels of risk. Please remember that past performance does not
guarantee future results. See "Performance of the Fund."
Financial Highlights
The table on the following pages presents selected financial information about
the Fund, including per share data and expense ratios and other data based on
the Fund's average net assets. This information has been audited by Price
Waterhouse LLP, the Fund's independent auditors, whose report on the Fund's
financial statements for the fiscal year ended December 31, 1996, is included in
the Statement of Additional Information, which may be obtained by calling the
Transfer Agent at 1-800-525-7048. Class B shares and Class C shares were not
publicly offered during fiscal year ended December 31, 1996. Accordingly, no
information on Class B or Class C shares is reflected in the following tables or
in the Fund's other financial statements.
-8-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
1987*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Net asset value,
beginning of year........... $16.31 $19.00 $17.65 $17.01 $16.24 $16.29 $16.14
$15.31 $16.06
Income from investment operations:
Net investment income....... 1.10 1.13 1.17 1.20 1.20 1.20 1.20 1.20
1.13
Net realized and unrealized
gain (loss) on investments.......... 1.86 (2.68) 1.35 .64 .81 (.05) .15 .83
(.57)
Total from investment
operations.................. 2.96 (1.55) 2.52 1.84 2.01 1.15 1.35 2.03 .56
Less distributions to shareholders
from:
Net investment income....... (1.09) (1.13) (1.17) (1.20) (1.20) (1.20) (1.20)
(1.20) (1.20)
Undistributed net investment
income-prior year.......... -- (0.01) -- -- -- -- -- -- --
Capital gains............... -- -- -- -- (.04) -- -- -- (.11)
Total distributions.......... (1.09) (1.14) (1.17) (1.20) (1.24) (1.20) (1.20) (1.20)
(1.31)
Net asset value, end of year......... $18.18 $16.31 $19.00 $17.65 $17.01 $16.24 $16.29
$16.14 $15.31
Total return (excludes sales load).......... 18.58% (8.35%) 14.60% 11.19% 12.79% 7.28%
8.67% 13.72% 3.69%
Ratios/supplemental data:
Net assets, end of period
(000 omitted).............. $2,145,264$1,791,299$1,794,096 $997,030$497,440$260,553
$98,095 $39,277 $16,567
Ratio of total expenses
to average net assets...... 0.82%** 0.84% 0.75% 0.84% 0.87% 0.88% 1.11%
1.13% 1.2%
Ratio of total expenses
(excluding interest) to
average net assets (Y).............. 0.78%** 0.73% 0.64% 0.70% 0.74% 0.72% 0.91%
1.10% 1.2%
Ratio of net investment income
to average net assets...... 6.25% 6.43% 6.21% 6.79% 7.12% 7.21% 7.19%
7.40% 7.3%
Portfolio turnover rate.............. 14.59% 34.39% 18.27% 29.99% 48.54% 51.63%
34.76% 61.50% 72.8%
<FN>
* Includes a voluntary reimbursement of expenses by Fielding Management
Company, Inc. which amounted to$.01 per share in 1987. Without reimbursement,
the ratio of total expenses to average net assets would have been 1.2% in 1987.
Fielding Management Company, Inc. was the Fund's investment adviser from
inception through April 30, 1994, at which time Rochester Capital Advisors, L.P.
became the Fund's investment adviser.
(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.
** Effective in 1995,
the ratios do not include reductions from custodian fee offset arrangements. The
1995 ratio of total expenses and the ratio of total expenses (excluding
interest) to average net assets are 0.81% and 0.78%, respectively, after
including this reduction.
(Sad Face) On January 4, 1996, OppenheimerFunds, Inc.
acquired substantially all of the assets of Rochester Capital Advisors, L.P. and
certain affiliates and was appointed investment adviser to the Fund. Rochester
Capital Advisors, L.P. served as investment adviser to the Fund from May 1, 1994
through January 4, 1996. Per share information has been determined on the basis
of a weighted daily average number of shares outstanding during the period.
</FN>
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Information On Bank Loans
Year ended December 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
1988
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Bank Loans outstanding
at end of year(000) $17,930 $15,083 $30,886 $22,644 $18,292
$3,067 $1,139 $430
- ------------------------------------------------------------------------------------------------------------------
- -----------------
Monthly average amount
of bank loans outstanding
during the year(000) $ 8,217 $28,131 $27,137 $17,060 $ 5,317 $2,587
$ 990 $ 20
- ------------------------------------------------------------------------------------------------------------------
- ----------------
Monthly average number of
shares of the Fund out-
standing during the
year(000) 114,502 105,753 77,472 41,429 22,445 10,327
3,980 1,554
- ------------------------------------------------------------------------------------------------------------------
- ----------------
Average amount of bank
loans per share out-
standing during the year $ .07 $ .27 $ .35 $ .41 $ .24 $ .25 $
.25 $ .01
- ------------------------------------------------------------------------------------------------------------------
- ----------------
</TABLE>
Investment Objective and Policies
Objective. The Fund's investment objective is to provide as high a level of
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. There is no assurance that the Fund will achieve its
objective and there can be no guarantee that the value of an investment in Fund
shares might not decline. 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. See
"Dividends, Capital Gains and Taxes." 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 Manager determines
that market conditions could cause serious erosion of portfolio value, in which
case assets may be temporarily
-10-
<PAGE>
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.
Can the Fund's Investment Objective and Policies Change? The investment
objective and the fundamental policies of the Fund cannot be changed without
shareholder approval.
Investment Policies and Strategies
o Credit Quality. At least 75% of the Fund's total 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 the Manager, such securities are of equivalent quality
to securities so rated. Tax-exempt obligations in the lowest categories of
investment grade ratings may have speculative characteristics. A description of
rating categories is contained in Appendix A to the Statement of Additional
Information. The Fund is permitted to invest up to 25% of its total assets in
tax-exempt obligations which are rated below investment grade or, if unrated,
judged by the Manager to be in an equivalent rating category. 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 Manager will attempt
to reduce the risks inherent in investments in lower rated securities through
active portfolio management, structuring the portfolio to include a broad
spectrum of municipal securities, credit analysis and attention to current
developments and trends in the economy and financial markets. Such securities
are regarded as speculative securities. See "Investment Objective and Policies"
in the Statement of Additional Information for a discussion of the risks
associated with investments in high yield, high risk securities.
o 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 purposes for which municipal securities or bonds may be
issued include the refunding of outstanding obligations, obtaining funds for
general
-11-
<PAGE>
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 "Dividend, Capital Gains and Taxes." 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, New York State and
New York City taxes for regular tax purposes.
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 in which the
Fund may invest is a "moral obligation" bond. A moral obligation bond is a bond
which is issued by revenue authorities under circumstances where New York State
(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 Manager 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.
-12-
<PAGE>
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
multi-state 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.
o 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 policy and, as such, may be changed
by action of the Fund's Board of Trustees. The Manager monitors holdings of
Illiquid Securities on an ongoing basis and at times the Fund may be required to
sell some holdings to maintain adequate liquidity.
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
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be subject to the 15% limitation on investments in Illiquid Securities unless,
in the judgment of the Manager, 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 Manager in making
determinations concerning the liquidity and valuation of municipal leases. See
the Statement of Additional Information for a description of the guidelines
which will be utilized by the Manager 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 canceled.
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. 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.
A further discussion of such risks and the manner in which the Fund will
seek to minimize such risks is contained in the Statement of Additional
Information.
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 Manager 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. See the Statement of Additional Information for a
discussion of such factors.
o Borrowing for Leverage. The Fund may borrow money from
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banks on an unsecured basis in amounts up to 5% of its total assets for
temporary and emergency purposes, or to purchase additional portfolio
securities. Borrowing for investment purposes is a speculative investment
technique known as "leveraging." This investment technique may subject the Fund
to greater risks and costs, including the burden of interest expense, an expense
the Fund would not otherwise incur. The Fund can borrow only if it maintains a
300% ratio of assets to borrowings at all times in the manner set forth in the
Investment Company Act. The Fund's ability to borrow money from banks, subject
to this requirement, is a fundamental policy.
o Description of Additional Investment Policies and Permitted
Securities. Except as otherwise noted, the investment policies described below
and elsewhere in this Prospectus are non-fundamental investment policies and, as
such, may be changed by action of the Fund's Board of Trustees.
o Portfolio Composition. 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 issuer. 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 will 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.
o 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, New York
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 Manager
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 Statement of Additional Information.
o Inverse Floaters. The Fund may also invest in municipal
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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 Manager may acquire both portions
in an effort to reduce risk and preserve capital. The market for inverse
floaters is relatively new. The Manager believes that inverse floating
obligations represent a flexible portfolio management instrument for the Fund
which allows the Manager 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.
o 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 or sale 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. Payment for and delivery of the securities shall not exceed 120
days from the date the offer is accepted. 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
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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.
o 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
Statement of Additional Information for a list of these additional restrictions
and for additional information concerning the characteristics of municipal
securities.
Unless the Prospectus states that a percentage restriction applies on
an ongoing basis, it applies only at the time the Fund makes an investment, and
the Fund need not sell securities to meet the percentage limits if the value of
the investment increases in proportion to the size of the Fund.
Investment Considerations
In addition to those considerations discussed in "How Risky Is the Fund?",
investing in the Fund includes the following considerations.
o Concentration in New York Municipal Securities. Because the Fund will
ordinarily invest 80% or more of its assets in the obligations of New York
State, its municipalities, agencies and instrumentalities which are exempt from
Federal, New York State and New York City personal income taxes ("New York
Municipal Securities"), it is more susceptible to factors affecting the State
and other issuers of New York Municipal Securities than is a comparable
municipal bond fund whose investments are not concentrated in the obligations of
issuers located in a single
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state. Investors should consider these matters and the financial difficulties
experienced in past years by New York State and certain of its agencies and
subdivisions (particularly New York City), as well as economic trends in New
York, summarized in the Statement of Additional Information under "Investment
Considerations/Risk Factors: New York Municipal Securities." In addition, the
Fund's portfolio securities are affected by general changes in interest rates,
which result in changes in the value of portfolio securities held by the Fund,
which can be expected to vary inversely to changes in prevailing interest rates.
o Credit Quality. At least 75% of the Fund's total assets which are
invested in tax-exempt obligations will be invested in securities which have
received investment grade ratings from an NRSRO or, if not rated, judged by the
Manager to be 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 "Standard & Poor's"] 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
25% of its total assets in tax-exempt obligations that are not investment grade.
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
Manager must monitor the issuers of high yield securities in its portfolio 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, 1996, 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), and Moody's (Aaa,
Aa, A, Baa, Ba, B or lower), were, respectively, __%, __%, __%, __%, __% and
__%. Unrated bonds comprised ___% 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
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by the Manager or 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 Manager 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 the Manager which were held by the Fund during the year
ended December 31, 1996 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 Manager 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
__%, __%, __%, __%, __% and __%. Bonds which were neither rated by an NRSRO nor
considered by the Manager to be comparable to rated securities constituted __%
of the Fund's total assets. The allocation of the Fund's assets in securities in
the different rating categories will vary over time, and the proportion listed
above should not be viewed as representing the Fund's current or future
proportionate ownership of securities in particular categories.
o Management of Credit Risk. Because up to 25% of the Fund's total
assets which are invested in tax-exempt obligations may be invested in
securities which are not investment grade or (subject to the percentage
limitations described above in "Credit Quality") in securities which are
unrated, the Fund is dependent on the Manager'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 Manager 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 Manager will
attempt to reduce the risks inherent in 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.
o 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
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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.
How the Fund is Managed
Organization and History. The Fund conducted operations as a closed-end
investment company from December 1982 until May 1986, at which time it commenced
operations as an open-end investment company. The Fund is a non-diversified
management investment company with an unlimited number of authorized shares of
beneficial interest.
The Fund is a Massachusetts business trust and is governed by a Board
of Trustees, which is responsible under Massachusetts law for protecting the
interests of shareholders. The Trustees meet periodically to oversee the Fund's
activities, review its performance, and review the actions of the Manager. The
"Trustees and Officers of the Fund" section in the Statement of Additional
Information lists the Trustees and provides more information about them and the
officers of the Fund. Although the Fund will not normally hold annual meetings
of its shareholders, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a meeting to remove a
Trustee or to take other action described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All three classes invest in the same investment portfolio. Each class
has its own dividends and distributions and pays certain expenses, which may be
different for the different classes. Each class may have a different net asset
value. Each share has one vote at shareholder meetings, with fractional shares
voting proportionally on matters submitted to the vote of shareholders. Shares
of each class may have separate voting rights on matters in which interests of
one class are different from interests of another class, and only shares of a
particular class vote as a class on matters that affect that class alone. Shares
are freely transferrable.
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The Manager and its Affiliates. The Fund is managed by OppenheimerFunds, Inc.,
which is responsible for selecting the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Agreement sets forth the fees
paid by the Fund to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment advisor since 1959. The
Manager and its affiliates currently manage investment companies, including
other Oppenheimer funds, with assets of more than $62 billion as of December 31,
1996, and with more than 3 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
o Portfolio Manager. The Portfolio Manager of the Fund is
Ronald H. Fielding. He has been the person principally responsible
for the day-to-day management of the Fund's portfolio since the
Fund's inception. Mr. Fielding is Vice President of the Fund and
has also served as an officer and director of the Fund's previous
investment advisors and their affiliates.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, payable monthly, which are 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 million, 0.47% on $250 million to $2
billion, 0.46% on $2 billion to $5 billion and 0.45% in excess of $5 billion.
The Fund's management fee for its last fiscal year ended December 31, 1996 was
___% of the Fund's average daily net assets.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing costs.
Those expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
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
Manager under the Investment Advisory
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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 Manager of portfolio transac tions 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 Manager. Although such research may be used by the
Manager 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
Manager 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 Statement of Additional Information.
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.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. When deciding which brokers to use, the Manager
is permitted to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment advisor.
o The Distributor. The Fund's shares are sold through dealers, brokers
and other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager 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 Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund. Shareholders should direct inquiries about their account to
the Transfer Agent at the address and toll-free numbers shown below in this
Prospectus and on
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the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return,"
"cumulative total return," "average annual total return," "dividend yield,"
"yield" and "tax-equivalent yield" to illustrate its performance. This
performance information may be useful to help you see how well your investment
has done and to compare it to other funds or market indices. It is important to
understand that the Fund's total returns represent past performance and should
not be considered to be predictions of future returns or performance. This
performance data is described below, but more detailed information about how
total returns are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to measure and
compare the Fund's performance. The Fund's investment performance will vary over
time, depending on market conditions, the composition of the portfolio and
expenses.
o Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which the total return is shown has been deducted.
However, total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be less if
sales charges were deducted.
o Yield. The Fund calculates its yield by dividing the annualized net
investment income per share on the portfolio during a 30-day period by the
maximum offering price on the last day of the period. Tax-equivalent yield is
the equivalent yield that would be earned in absence of taxes. It is calculated
by dividing that portion of the yield that is tax-exempt by a factor equal to
one
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minus the applicable tax rate. The yield data represents a hypothetical
investment return on the portfolio, and does not measure an investment return
based on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by dividing the
dividends derived from net investment income during a stated period by the
maximum offering price on the last day of the period. Yields and dividend yields
for shares reflect the deduction of the maximum initial sales charge, but may
also be shown based on the Fund's net asset value per share.
For additional information regarding the calculation of yield,
tax-equivalent yield and total return, see "Performance of the Fund" in the
Statement of Additional Information. Further information about the Fund's
performance is set forth in the Fund's Annual Report to Shareholders, which may
be obtained upon request at no charge.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended December 31, 1996, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Managements' Discussion of Performance. [To be inserted in
an amendment to be filed under Rule 485(b)]
o Comparing the Fund's Performance to the Market. The chart below shows
the performance of a hypothetical $10,000 investment in Class A shares of the
Fund held for the ten year period ended December 31, 1996.
The performance of the Fund's Class A shares is compared to the
performance of the Lehman Brothers Municipal Bond Index, an unmanaged index of a
broad range of investment grade municipal bonds which is widely regarded as a
measure of the performance of the general municipal bond market. However,
performance represented by this index differs from the performance of the Fund
in several important respects. First, while the Lehman Brothers Municipal Bond
Index reflects the performance of municipal securities, the interest income on
which is exempt from Federal taxes, it includes mostly municipal bonds, the
interest income on which is subject to New York State and New York City personal
income taxes. Thus, many of the municipal securities included in the index would
not be purchased by the Fund. Index performance reflects the reinvestment of
dividends, but does not consider the effect of capital gains or transaction
costs. Also, the Fund's performance reflects the effect of the Fund's business
and operating expenses. None of the data shown
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considers the effect of taxes. Moreover, the index performance data
does not reflect any assessment of the risk of investments included.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investment in
Rochester Fund Municipals (Class A) and the Lehman Brothers
Municipal Bond Index
[graph]
Average Annual Total Return of Class A shares of the Fund at
12/31/96(1)
1 Year 5 years 10 years
- -------------------------------------------------------------------
% % %
Total returns at the ending account values in the graph show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information for the Lehman Brothers Municipal Bond Index in the
graph begins on January 1, 1987.
(1) Class A returns are shown net of the current applicable 4.75% maximum
initial sales charge. During the ten year period ending December 31, 1996, the
maximum sales charge on Class A shares of the Fund was 4.0%.
Past performance is not predicative of future performance. Graphs may not be
drawn to same scale.
ABOUT YOUR ACCOUNT
How To Buy Shares
Classes of Shares. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
o Class A Shares. If you buy Class A shares, you may pay an initial
sales charge on investments up to $1 million. If you purchase Class A shares as
part of an investment of at least $1 million in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if you sell any
of those shares within 18 months of buying them, you may pay a contingent
deferred sales charge. The amount of that sales charge will vary depending on
the amount you invested. Sales charge rates are described in "Buying
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Class A Shares" below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares, as described in "Buying
Class B Shares" below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
discussed in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors which you should discuss
with your financial advisor. The Fund's operating costs that apply to a class of
shares and the effect of the different types of sales charges on your investment
will vary your investment results over time. The most important factors are how
much you plan to invest and how long you plan to hold your investment. If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the maximum
sales charge rates that apply to each class, considering the effect of the
annual asset-based sales charge on Class B and Class C shares (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns and the operating
expenses borne by the class you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
-26-
<PAGE>
o How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you expect
to hold your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will also
depend on how much you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time, offset the
effect of paying an initial sales charge on your investment (which reduces the
amount of your investment dollars used to buy shares for your account), compared
to the effect over time of higher class- based expenses on Class B or Class C
shares for which no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A might be more advantageous than Class C (as well as Class B) for
investments of more than $100,000 expected to be held for 5 or 6 years (or
more). For investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and Class B). If
investing $500,000 or more, Class A may be more advantageous as your investment
horizon approaches 3 years or more.
For investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of C
shares from a single investor.
-27-
<PAGE>
o Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to your
money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to invest
more than $100,000 over the long term, Class A shares will likely be more
advantageous than Class B shares or C shares, as discussed above, because of the
effect of the expected lower expenses for Class A shares and the reduced initial
sales charges available for larger investments in Class A shares under the
Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above. Therefore, these examples
should not be relied upon as rigid guidelines.
o Are There Differences in Account Features That Matter to You? Because
some account features may not be available to Class B or Class C shareholders,
or other features (such as Automatic Withdrawal Plans) might not be advisable
(because of the effect of the contingent deferred sales charge) for Class B or
Class C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy. Additionally,
dividends payable to Class B and Class C shareholders will be reduced by the
additional expenses borne by those classes that are not borne by Class A, such
as the Class B and Class C asset-based sales charges described below and in the
Statement of Additional Information. Share certificates are not available for
Class B or Class C shares, and if you are considering using your shares as
collateral for a loan, that may be a factor to consider.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class than for
selling another class. It is important that investors understand that the
purposes of the Class B and Class C contingent deferred sales charges and
asset-based sales charges are the same as the purpose of the front-end sales
charge on sales of Class A shares: that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans:
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<PAGE>
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments for as little as $25; and subsequent purchases of at
least $25 can be made by telephone through AccountLink.
o There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other Oppenheimer funds (a list of
them appears in the Statement of Additional Information, or you can ask your
dealer or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o How are Shares Purchased? You can buy shares several ways - through
any dealer, broker or financial institution that has a sales agreement with the
Distributor, or directly through the Distributor, or automatically from your
bank account through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase and redemption orders. When you buy
shares be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you do
not list a dealer on the Application, the Distributor will act as your agent in
buying the shares. However, we recommend that you discuss your investment first
with a financial advisor to be sure it is appropriate for you.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to have the Transfer
Agent send redemption proceeds, or to transmit dividends and distributions to
your bank account.
Shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the ACH transfer to buy shares. You
can provide those instructions
-29-
<PAGE>
automatically, under an Asset Builder Plan, described below, or by telephone
instructions using OppenheimerFunds PhoneLink, also described below. You should
request AccountLink privileges on the application or dealer settlement
instructions used to establish your account. See "AccountLink" below for more
details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to
four other Oppenheimer funds) automatically each month from your account at a
bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of Additional
Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver. In most cases, to enable you to receive that day's offering price, the
Distributor or its designated agent must receive your order by the time of day
the New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of shares is determined as of that time on
each day the New York Stock Exchange is open (which is a "regular business
day").
If you buy shares through a dealer, the dealer must receive your order
by the close of the New York Stock Exchange on a regular business day and
transmit it to the Distributor so that it is received before the Distributor's
close of business that day, which is normally 5:00 P.M. The Distributor may
reject any purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth special sales charge rates that apply to additional
purchases of Class A shares of the Fund by a person who was a shareholder of the
Fund on or before the effective date of this Prospectus. Appendix B to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the former Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. In some cases, described
below, purchases are not subject to an initial sales charge, and the offering
price will be the net asset value. In some cases, reduced sales charges may be
available,
-30-
<PAGE>
as described below. Out of the amount you invest, the Fund receives the net
asset value to invest for your account. The sales charge varies depending on the
amount of your purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as a commission. The current sales
charge rates and commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge Commission
as a % of as a % of as % of
Offering Amount Offering
Amount of Purchase Price Invested Price
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- -----
Less than $50,000 4.75% 4.98% 4.00%
- ------------------------------------------------------------------------------------------------------------------
- -----
$50,000 or more but
less than $100,000 4.50% 4.71% 4.00%
- ------------------------------------------------------------------------------------------------------------------
- -----
$100,000 or more but
less than $250,000 3.50% 3.63% 3.00%
- ------------------------------------------------------------------------------------------------------------------
- -----
$250,000 or more but
less than $500,000 2.50% 2.56% 2.25%
- ------------------------------------------------------------------------------------------------------------------
- -----
$500,000 or more but
less than $1,000,000* 2.00% 2.04% 1.80%
- ------------------------------------------------------------------------------------------------------------------
- ------
<FN>
* The Distributor pays dealers of record commissions on purchases of $1 million
or more an amount equal to the sum of 1.0% of the first $2.5 million, plus 0.50%
of the next $2.5 million, plus 0.25% of shares purchased over $5 million. That
commission will be paid only on the amount of those purchases in excess of $1
million that were not previously subject to a front-end sales charge and dealer
commission.
</FN>
</TABLE>
o Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
o Purchases aggregating $1 million or more.
o Purchases by a retirement plan qualified under sections
401(a) or 401(k) of the Code, by a non-qualified deferred compensation plan (not
including Section 457 plans), employee benefit plan, group retirement plan, an
employees's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or SIMPLE plan
(all of these plans are collectively referred to as "Retirement Plans"); that:
(1) buys shares costing $500,000 or more or (2) has, at the
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<PAGE>
time of purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or more.
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are
made (1) through a broker, dealer, bank or registered investment advisor that
has made special arrangements with the Distributor for these purchases, or (2)
by a direct rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for these purchases.
Shares of any of the other Oppenheimer funds that offer only one class
of shares that has no class designation are considered "Class A" shares for this
purpose. The Distributor pays dealers of record commissions on those purchases
in an amount equal to (1) 1.0% for non-Retirement Plan accounts, and (2) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million. That commission will be
paid only on those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be paid to the
dealer, broker or financial institution on sales of Class A shares purchased
with the redemption proceeds of shares of a mutual fund offered as an investment
option in a Retirement Plan in which Oppenheimer funds are also offered as
investment option under a special arrangement with the Distributor if the
purchase occurs more than 30 days after the addition of the Oppenheimer funds as
an investment option to the Retirement Plan.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge (called the
"Class A contingent deferred sales charge") may be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gains distributions) or (2) the original
offering price (which is the original net asset value) of the redeemed shares.
The Class A contingent deferred sales charge will not exceed the aggregate
amount of the commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class A contingent
deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in
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<PAGE>
the order that you purchased them. The Class A contingent deferred sales charge
is waived in certain cases described in "Waivers of Class A Sales Charges"
below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's exchange privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 months of the end of the
calendar month of the purchase of the exchanged shares, the sales charge will
apply.
o Special Arrangements With Dealers. The Distributor may advance up to
13 months' commissions to dealers that have established special arrangements
with the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can also
include Class A and Class B shares of Oppenheimer funds you previously purchased
subject to an initial or contingent deferred sales charge to reduce the sales
charge rate for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of those shares
will be based on the greater of the amount you paid for the shares or their
current value (at offering price). The Oppenheimer funds are listed in "Reduced
Sales Charges" in the Statement of Additional Information, or a list can be
obtained from the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A shares and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period, you can reduce the sales charge rate that
applies to your purchases of Class A shares.
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<PAGE>
The total amount of your intended purchases of both Class A and Class B shares
will determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before the
date of the Letter. More information is contained in the Application and in
"Reduced Sales Charges" in the Statement of Additional Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers or registered investment advisors that have entered
into an agreement with the Distributor providing specifically for the use of
shares of the Fund in particular investment products or employee investment
plans made available to their clients (those clients may be charged the
transaction fee by their dealer, broker or advisor for the purchase or sale of
fund shares);
o (1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares for their
own accounts or the accounts of their clients; (2) Retirement Plans and deferred
compensation plans and trusts used to fund those Plans (including, for example,
plans qualified or created under sections 401(a), 403(b) or 457 of the Code),
and "rabbi
-34-
<PAGE>
trusts" that buy shares for their own accounts, in each case if those purchases
are made through a broker or agent or other financial intermediary that has made
special arrangements with the Distributor for those purchases; and (3) clients
of such investment advisors or financial planners who buy shares for their own
accounts may also purchase shares without sales charge but only if their
accounts are linked to a master account of their investment advisor or financial
planner on the books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each of these
investors may be charged a fee by the broker, agent or financial intermediary
for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment advisor (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an
appropriate agreement with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a former Quest for Value Fund were
exchanged for Class A shares of that fund due to the termination of the Class B
and C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements are
consummated and share purchases commenced by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates acts as
sponsor;
o shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor;
-35-
<PAGE>
o shares purchased and paid for with the proceeds of shares redeemed in
the past 12 months from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales charge, the
dealer agrees in writing to accept the dealer's portion of the commission
payable on the sale in installments of 1/18th of the commission per month (and
no further commission will be payable if the shares are redeemed within 18
months of purchase);
o for distributions from TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program;
o for distributions from Retirement Plans, deferred compensation plans
or other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Code) of the participant or
beneficiary (the death or disability must occur after the participant's account
was established); (2) to return excess contributions; (3) to return
contributions made due to a mistake of fact; (4) hardship withdrawals, as
defined in the plan; (5) under a Qualified Domestic Relations Order, as defined
in the Code; (6) to meet the minimum distribution requirements of the Code; (7)
to establish "substantially equal periodic payments" as described in Section
72(t) of the Code; (8) for retirement distributions or loans to participants or
beneficiaries; (9) separation from service; (10) participant-directed
redemptions to purchase shares of a mutual fund (other than a fund managed by
the Manger or its subsidiary) offered
-36-
<PAGE>
as an investment option in a Retirement Plan in which Oppenheimer funds are also
offered as investment options under a special arrangement with the Distributor;
or (11) plan termination or "in- service distributions", if the redemption
proceeds are rolled over directly to an OppenheimerFunds IRA.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares to reimburse the Distributor for a portion of its costs incurred in
connection with the personal service and maintenance of shareholder accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate that
may not exceed 0.25% of the average annual net assets of Class A shares of the
Fund. The Distributor uses all of those fees to compensate dealers, brokers,
banks and other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements, which it has not done as yet) for its other expenditures under
the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service providers or
their customers. The payments under the Plan increase the annual expenses of
Class A shares. See "Distribution and Service Plans" in the Statement of
Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by an
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge
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<PAGE>
applies to a redemption, the Fund redeems shares in the following order: (1)
shares acquired by reinvestment of dividends and capital gains distributions;
(2) shares held for over 6 years; and (3) shares held the longest during the
6-year period. The contingent deferred sales charge is not imposed in the
circumstances described in "Waivers of Class B and Class C Sales Charges,"
below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Years Since Beginning of Contingent Deferred Sales Charge
Month in Which Purchase on Redemption in that Year
Order Was Accepted (As % of Amount Subject to Charge)
<S> <C>
- -------------------------------------------------------------------
0 - 1 5.0%
- -----------------------------------------------------------------
1 - 2 4.0%
- -------------------------------------------------------------------
2 - 3 3.0%
- ------------------------------------------------------------------
3 - 4 3.0%
- ------------------------------------------------------------------
4 - 5 2.0%
- -----------------------------------------------------------------
5 - 6 1.0%
- -------------------------------------------------------------------
6 and following None
- -----------------------------------------------------------------
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the month in
which the purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
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<PAGE>
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for its costs in distributing Class B and C shares
and servicing accounts. Under the Plans, the Fund pays the Distributor an annual
"asset-based sales charge" of 0.75% per year on Class B shares that are
outstanding for six years or less and on Class C shares. The Distributor also
receives a service fee of 0.25% per year under each Plan.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class per year.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or C shares. Those
services are similar to those provided under the Class A Service Plan, described
above. The Distributor pays the 0.25% service fees to dealers in advance for the
first year after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the shares have
been held for a year, the Distributor pays the service fees to
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<PAGE>
dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the
purchase price of Class B shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more.
The Distributor's actual expenses in selling Class B and C shares may
be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and C shares. If a Fund terminates either of its
Plans, the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for distributing shares before the
Plan was terminated.
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and
Class C contingent deferred sales charges will be waived for
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<PAGE>
redemptions of shares in the following cases, if the Transfer Agent is notified
that these conditions apply to the redemption:
o distributions to participants or beneficiaries from Retirement Plans,
if the distributions are made (1) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (2) following the death or disability (as defined in the Code)
of the participant or beneficiary (the death or disability must have occurred
after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially
equal periodic payments" as permitted in Section 72(t) of the Code that do not
exceed 10% of the account value annually, measured from the date the Transfer
Agent receives the request;
o shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
o distributions from OppenheimerFunds prototype 401(k) plans (1) for
hardship withdrawals; (2) under a Qualified Domestic Relations Order, as defined
in the Code; (3) to meet minimum distribution requirements as defined in the
Code; (4) to make "substantially equal periodic payments" as described in
Section 72(t) of the Code; or (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C shares
sold or issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies
or separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; and
o shares issued in plans of reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases
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<PAGE>
of shares by telephone (either through a service representative or by PhoneLink,
described below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly to
your bank account. See the Application for details or call the Transfer Agent
for more information.
AccountLink privileges should be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can request
AccountLink privileges by sending signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder listed in
the registration on your account as well as to your dealer representative of
record unless and until the Transfer Agent receives written instructions
terminating or changing those privileges. After you establish AccountLink for
your account, any change of bank account information must be made by
signature-guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone
only after your account has been established. To purchase shares in amounts up
to $250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the Oppenheimer funds automated telephone
system that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the Oppenheimer funds exchange privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. See "How to Exchange Shares," below, for
details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. See "How to Sell Shares," below, for details.
Automatic Withdrawal And Exchange Plans. The Fund has several plans
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that enable you to sell shares automatically or exchange them to another
Oppenheimer funds account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at least
$50 on a monthly, quarterly, semi-annual or annual basis. The checks may be sent
to you or sent automatically to your bank account on AccountLink. You may even
set up certain types of withdrawals of up to $1,500 per month by telephone. You
should consult the Application and Statement of Additional Information for more
details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased subject to an initial sales charge and to Class A and Class B shares
on which you paid a contingent deferred sales charge when you redeemed them. It
does not apply to Class C shares. You must be sure to ask the Distributor for
this privilege when you send your payment. Please consult the Statement of
Additional Information for more details.
How To Sell Shares
You can arrange to take money out of your account by selling (redeeming) some or
all of your shares on any regular business day. Your shares will be sold at the
next net asset value calculated after your order is received and accepted by the
Transfer Agent. The Fund offers you a number of ways to sell your shares: in
writing or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have questions
about any of these procedures, and especially if you are redeeming shares in a
special situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for assistance.
o Certain Requests Require A Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
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writing and must include a signature guarantee in the following situations
(there may be other situations also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o The redemption check is not payable to all shareholders
listed on the account statement
o The redemption check is not sent to the address of record
on your account statement
o Shares are being transferred to a Fund account with a
different owner or name, or
o Shares are redeemed by someone other than the owners (such
as an executor)
o Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of a
corporation, partnership or other business, or as a fiduciary, you
must also include your title in the signature.
Selling Shares By Mail. Write a "letter of instructions" that
includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling o
The signatures of all registered owners exactly as the
account is registered, and
o Any special requirements or documents requested by the Transfer Agent
to assure proper authorization of the person asking to sell shares.
Use the following address for Send courier or Express Mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
Selling Shares By Telephone. You and your dealer representative of
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<PAGE>
record may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer Agent by
the close of The New York Stock Exchange that day, which is normally 4:00 P.M.,
but may be earlier on some days. You may not redeem shares held under a share
certificate by telephone.
o To redeem shares through a service representative, call
1-800-852-8457
o To redeem shares automatically on PhoneLink, call
1-800-533-3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that bank account.
o Telephone Redemptions Paid By Check. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account. This service is
not available within 30 days of changing the address on an account.
o Telephone Redemptions Through AccountLink. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH wire to your bank is initiated on the
business day after the redemption. You do not receive dividends on the proceeds
of the shares you redeemed while they are waiting to be wired.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for
additional information. See "Special Arrangements for Repurchase of Shares from
Dealers and Brokers" in the Statement of Additional Information for more
details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge.
o Shares of the fund selected for exchange must be available for sale
in your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege.
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<PAGE>
o You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them; after the account is open 7 days,
you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
o Before exchanging into a fund, you should obtain and read
its prospectus.
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A Shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of shares
which are considered "Class A" shares fr this purpose. In some cases, sales
charges may be imposed on exchange transactions. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send it
to the Transfer Agent at the addresses listed in "How to Sell
Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or by calling a service
representative at 1-800-525-7048. That list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that is in proper form by the
close of the New York Stock Exchange that day, which is normally 4:00 P.M. but
may be earlier on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it determines it
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<PAGE>
would be disadvantaged by a same-day transfer of the proceeds to buy shares. For
example, the receipt of multiple exchange requests from a dealer in a
"market-timing" strategy might require the disposition of securities at a time
or price disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the
shares of the fund you own and a purchase of shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, see "How to Exchange Shares" in the Statement of Additional
Information.
o If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange will
be exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisors permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a result,
those exchanges may be subject to notice requirements, delays and other
limitations that do not apply to shareholders who exchange their shares directly
by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
o Net asset value per share is determined for the shares as of the
close of The New York Stock Exchange, which is normally 4:00 P.M. but may be
earlier on some days, on each day the Exchange is open by dividing the value of
the Fund's net assets by the number of shares that are outstanding. The Fund's
Board of Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on market
value. There are special procedures for valuing illiquid and restricted
securities and obligations for which market values cannot be readily obtained.
These procedures are described more completely in the Statement of Additional
Information.
o The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the
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Board believes it is in the Fund's best interest to do so.
o Telephone transaction privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless and
until the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time to
time, the Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates. The redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and Class C shares. Therefore, the redemption value of your
shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
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shareholder under the redemption procedures described above) within 7 days after
the Transfer Agent receives redemption instructions in proper form, except under
unusual circumstances determined by the Securities and Exchange Commission
delaying or suspending such payments. For accounts registered in the name of a
broker-dealer, payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has cleared. That
delay may be as much as 10 days from the date the shares were purchased. That
delay may be avoided if you purchase shares by certified check or arrange to
have your bank provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if
the account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o "Backup Withholding" of Federal income tax may be applied at the rate
of 31% from dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a certified Social Security or
Employer Identification Number when you sign your Application, or if you violate
Internal Revenue Service regulations on tax reporting of income.
o The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be avoided
by redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask
that copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
There are two types of distributions which the Fund may make to its
shareholders, income dividends and capital gain distributions.
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o 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. The Fund declares dividends
separately for Class A, Class B and Class C shares from net investment income.
It is expect that dividends paid on Class A shares will generally be higher than
for Class B or Class C shares because expenses allocable to Class B and Class C
shares will generally be higher than for Class A shares. 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. There is no fixed dividend
rate and there can be no assurance that the Fund will pay any dividends.
o 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.
Distribution Options. When you open your account, specify on your
Application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
o Reinvest All Distributions In The Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
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o Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
o Receive All Distributions In Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
o Reinvest Your Distributions In Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxation of The Fund. During the taxable year ended December 31, 1996, 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 New York 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
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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 non-corporate 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 the redemption proceeds are more or
less than the shareholder's adjusted basis for the redeemed shares (which
normally includes any sales load paid).
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An exchange of Fund shares for Class A Shares of another Oppenheimer fund
generally will have similar tax consequences.
This information is only a summary of certain federal tax information
about your investment and more information is contained in the Statement of
Additional Information. 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 New York State and New York City. You should consult with your tax
advisor about the effect of an investment in the Fund on your particular tax
situation.
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APPENDIX A
Special Sales Charge Arrangements for Class A Shareholders of
the Fund Who Were Shareholders of the Fund on March _,1997
The initial and contingent deferred sales charge rates for Class A shares of the
Fund described elsewhere in this Prospectus are modified as described below for
additional purchases effected by those shareholders of the Fund who owned Class
A shares of the Fund on March ___, 1997, the effective date of this Prospectus.
The sales charge modifications described below shall remain in effect through
December 31, 1997. After December 31, 1997, the initial and contingent deferred
sales charge rates for Class A shares of the Fund described on pages ___ through
___ of this Prospectus shall apply.
<TABLE>
<CAPTION>
SPECIAL CLASS A SHARES CHARGE RATES AND COMMISSIONS
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Percentage Percentage of
of Offering of Amount Offering
Amount Price Invested Price
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- --
Less than $100,000 4.00% 4.17% 3.50%
$100, or more but less than $250,000 3.35% 3.47% 3.00%
$250,000 or more but less that $500,000 2.50% 2.56% 2.25%
$500,000 or more but less that $1,000,000 2.00% 2.04%
1.80%
Over $4,000,000* 0.75% 0.76% 0.60%
*There is no initial sales charge on purchases of Class A shares
aggregating $1 million or more. If such Class A shares are redeemed within 18
months of the end of the calendar month of their purchase, the 1% Class A
contingent deferred sales charge described on page ___ of this Prospectus may be
deducted from the redemption proceeds. At the option of the shareholder,
additional purchases over $4 million (which may be made without an initial sales
charge, but subject to the 1% Class A contingent deferred sales charge) may be
made subject to an initial sales charge of 0.75%. For those additional purchases
of over $4 million made subject to the 0.75% sales charge, the 1% Class A
contingent deferred sales charge will not apply. After December 31, 1997, this
election will not be available and the initial and contingent deferred sales
charge rates for Class A shares of the Fund described on pages ___ through ___
of
</TABLE>
A-1
<PAGE>
this Prospectus shall apply.
The Distributor pays dealers of record commissions on purchases of $1
million or more an amount equal to the sum of 1.0% of the first $2.5 million,
plus 0.50% of the next $2.5 million, plus 0.25% of shares purchased over $5
million. That commission will be paid only on the amount of those purchases in
excess of $1 million that were not previously subject to a front-end sales
charge and dealer commission.
A-2
<PAGE>
APPENDIX B
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value Global
Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment advisor to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
o Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for Class A
shares purchased by a "Qualified Retirement Plan" through a single broker,
dealer or financial institution, or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified Retirement Plan
or that Association purchased shares of any of the Former Quest for Value Funds
or received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single
employer.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
B-1
<PAGE>
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
or fewer 2.50% 2.56% 2.00%
- -----------------------------------------------------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
For purchases by Qualified Retirement plans and Associations having 50
or more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described beginning on page 29 of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
o Special Class A Contingent Deferred Sales Charge Rates. Class A
shares of the Fund purchased by exchange of shares of other Oppenheimer funds
that were acquired as a result of the merger of Former Quest for Value Funds
into those Oppenheimer funds, and which shares were subject to a Class A
contingent deferred sales charge prior to November 24, 1995 will be subject to a
contingent deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they were purchased,
at a rate equal to 1.0% if the redemption occurs within 12 months of their
initial purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the
subsequent six months. Class A shares of any of the Former Quest for Value Funds
purchased without an initial sales charge on or before November 22, 1995 will
continue to
B-2
<PAGE>
be subject to the applicable contingent deferred sales charge in effect as of
that date as set forth in the then-current prospectus for such fund.
o Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares of the Fund purchased by the following investors are not subject to any
Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased shares of
any of the Former Quest For Value Funds pursuant to a special "strategic
alliance" with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995.
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by
exchange from an Oppenheimer fund that was a Former Quest for Value Fund or into
which a former Quest for Value Fund merged, if those shares were purchased prior
to March 6, 1995: in connection with (i) distributions to participants
B-3
<PAGE>
or beneficiaries of plans qualified under Section 401(a) of the Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual Retirement
Accounts, deferred compensation plans under Section 457 of the Code, and other
employee benefit plans, and returns of excess contributions made to each type of
plan, (ii) withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a shareholder's account
if the aggregate net asset value of shares held in the account is less than the
required minimum value of such accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of the Fund acquired by exchange from an Oppenheimer fund that was a
Former Quest For Value Fund or into which such fund merged, if those shares were
purchased on or after March 6, 1995, but prior to November 24, 1995: (1)
distributions to participants or beneficiaries from Individual Retirement
Accounts under Section 408(a) of the Code or retirement plans under Section
401(a), 401(k), 403(b) and 457 of the Code, if those distributions are made
either (a) to an individual participant as a result of separation from service
or (b) following the death or disability (as defined in the Code) of the
participant or beneficiary; (2) returns of excess contributions to such
retirement plans; (3) redemptions other than from retirement plans following the
death or disability of the shareholder(s) (as evidenced by a determination of
total disability by the U.S. Social Security Administration); (4) withdrawals
under an automatic withdrawal plan (but only for Class B or C shares) where the
annual withdrawals do not exceed 10% of the initial value of the account; and
(5) liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum account value. A
shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares in this Fund
or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to Quest for
Value prototype 401(k) plans that were maintained on the TRAC-2000 record
keeping system and that were transferred to an OppenheimerFunds prototype 401(k)
plan shall be eligible for an
B-4
<PAGE>
additional one-time payment by the Distributor of 1% of the value of the plan
assets transferred, but that payment may not exceed $5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and (i) the shares held by those plans were exchanged for
Class A shares, or (ii) the plan assets were transferred to an OppenheimerFunds
prototype 401(k) plan, shall be eligible for an additional one-time payment by
the Distributor of 1% of the value of the plan assets transferred, but that
payment may not exceed $5,000.
B-5
<PAGE>
Rochester Fund Municipals
350 Linden Oaks
Rochester, New York 14625-2807
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Price Waterhouse LLP
1100 Bausch & Lomb Place
Rochester, New York 14604-2705
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-5891
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus or the Statement of Additional Information, and if given or made,
such information and repre sentations must not be relied upon as having been
authorized by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc. or any affiliate thereof. This prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any state to any person to whom it is unlawful to make such an offer in such
state.
PR0365.001.????
<PAGE>
ROCHESTER FUND MUNICIPALS
350 Linden Oaks, Rochester, New York 14625
1-800-525-7048
Statement of Additional Information dated March ___, 1997
This Statement of Additional Information of Rochester Fund Municipals
is not a Prospectus. This document contains additional information about the
Fund and supplements information in the Prospectus dated March ___, 1997. It
should be read together with the Prospectus, which may be obtained by writing to
the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217 or by calling the Transfer Agent at the toll-free number shown
above.
CONTENTS
Page
About the Fund
Investment Objective and Policies..........................................
Investment Policies and Strategies....................................
Other Investment Techniques and Strategies............................
Other Investment Restrictions.........................................
Investment Considerations/Risk Factors................................
How the Fund is Managed....................................................
Organization and History..............................................
Trustees and Officers of the Fund.....................................
The Manager and Its Affiliates........................................
Brokerage Policies of the Fund.............................................
Performance of the Fund....................................................
Distribution and Service Plans.............................................
About Your Account
How to Buy Shares..........................................................
How to Sell Shares ........................................................
How to Exchange Shares.....................................................
Dividends, Capital Gains and Taxes.........................................
Additional Information About the Fund......................................
Financial Information About the Fund
Financial Statements.......................................................
Independent Auditors' Report...............................................
Appendix A: Industry Classifications......................................A-1
Appendix B: Description of Municipal Securities Ratings...................B-1
-1-
<PAGE>
ABOUT THE FUND
Investment Objective 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
o 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
-2-
<PAGE>
facilities for water supply, gas, electricity or sewage or solid waste disposal.
o General Obligation Bonds. Issuers of general obligation bonds include
states, counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. 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.
o 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.
o 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.
o 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
-3-
<PAGE>
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 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.
o 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:
o Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenues, such as income, sales, use and
business taxes, and are payable from these specific future taxes.
o Revenue Anticipation Notes. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue, such as federal revenues
available under the Federal Revenue Sharing Programs.
o Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In most
cases, the long-term bonds then provide the money for the repayment of the
notes.
o 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.
o 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.
o Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is issued
by agencies of state and local governments to finance seasonal working capital
needs or as short-term financing in anticipation of longer term financing.
o 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
-4-
<PAGE>
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 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 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 Manager"), 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 Manager in making
determinations concerning the liquidity and valuation of a Municipal Lease. 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-
<PAGE>
5% of the Fund's assets which are invested in tax-exempt obligations may be
invested in unrated or "illiquid" Municipal Leases.
Subject to the foregoing percentage limitations on investments in
Illiquid Securities, the Fund may invest in tax-exempt leases, provided that:
(i) the Fund receives 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 receives 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 receives 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 Manager of the Fund performs 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 Manager, not of investment grade quality
(i.e. within one of the four highest ratings of an NRSRO, the Manager 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 Manager is required to perform its own credit analysis with respect to
a particular tax-exempt lease obligation, the Manager will evaluate current
information furnished by the issuer or obtained from other sources considered by
it to be reliable.
o 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
o Stand-by Commitments. The Fund 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."
o 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 is
made, but delivery and payment for the when-issued securities take
-6-
<PAGE>
place at a later date. The settlement date shall not exceed 120 days from the
date the offer is accepted; 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 the commitment for when-issued securities.
o 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 net 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.
o Illiquid Securities. As noted in the Prospectus, the Fund may invest
up to 15% of the value of its net assets in Illiquid Securities as defined
therein, which may 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 investors ("Rule 144A
Securities"). Rule 144A Securities which are determined to be liquid by the
Fund's Manager pursuant to certain guidelines which have been adopted by the
Fund's Board of Trustees (the "Board of Trustees"or "Board") will be excluded
from the 15% limitation on investments in Illiquid Securities. In addition to
the unregistered nature of the securities, the Manager will take the following
factors into consideration in reaching a determination as to whether a
particular Rule 144A Security may be "liquid": (1) the frequency (or anticipated
frequency) of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security
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and the number of other potential purchasers; (3) any dealer undertakings to
make a market in the security; and (4) the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The Manager will
also consider any other factors which in its opinion are pertinent to the
liquidity of a security.
Other Investment Restrictions
o 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 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.
(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 advisor, 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.
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(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.
For the purposes of the Fund's policy not to concentrate in securities
of issuers as described in the investment restrictions listed in the Prospectus,
the Fund has adopted the industry classifications set forth in Appendix A to
this Statement of Additional Information. This is not a fundamental policy.
o 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:
(1) 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.
(2) For purposes of Fundamental Investment Restriction No. 10 described
above, the Fund's policy with respect to concentration of investments shall be
interpreted as prohibiting the Fund from making an investment in any given
industry if, upon making the proposed investment, 25% or more of the value of
its (total) assets would be invested in such industry.
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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).
Investment Considerations/Risk Factors
o Concentration of Investments in New York Municipal Securities. As
explained in the Prospectus, the Fund is highly sensitive to the fiscal
stability of New York State (the "State") and its subdivisions, agencies,
instrumentalities or authorities, including New York City, which issue the
Municipal Securities in which the Fund concentrates its investments. The
following information on risk factors in concentrating in New York Municipal
Securities is only a summary, based on publicly available information, and
official statements relating to offerings of New York issuers of Municipal
Securities on or prior to January 24, 1996 with respect to offering of the State
and December 21, 1995 with respect to offering of New York City, and no
representation is made as to the accuracy of such information.
During the mid-1970's the State, some of its agencies,
instrumentalities and public benefit corporations (the "Authorities"), and
certain of its municipalities faced serious financial difficulties. To address
many of these financial problems, the State developed various programs, many of
which were successful in ameliorating the financial crisis. Any further
financial problems experienced by these Authorities or municipalities could have
a direct adverse effect on the New York Municipal Securities in which the Fund
invests.
o New York City. More than any other municipality, the fiscal health of
New York City (the "City") has a significant effect on the fiscal health of the
State. The national economic downturn which began in July 1990 adversely
affected the local economy which had been declining since late 1989. As a
result, the City experienced job losses in 1990 and 1991 and real Gross City
Product ("GCP") fell in those two years. Beginning in 1992, the improvement in
the national economy helped stabilize conditions in the City. Employment losses
moderated toward year-end and real GCP increased, boosted by strong wage gains.
After noticeable improvements in the City's economy during 1994, the City's
current four-year financial plan assumes that economic growth will slow in 1995
and 1996 with local employment increasing modestly. During the 1995 fiscal year,
the City experienced substantial shortfalls in payments of non-property tax
revenues from those forecasted.
For each of the 1981 through 1994 fiscal years, the City achieved
balanced operating results as reported in accordance with generally accepted
accounting principles ("GAAP") and the City's 1995 fiscal year results are
projected to be balanced in accordance with GAAP. For fiscal year 1995, the City
has adopted a budget which has halted the trend in recent years of substantial
increases in City spending from one year to the next. The adopted budget for the
fiscal year 1996 reduces City- funded spending for the second consecutive year.
There can be no assurance that the City will continue to maintain a balanced
budget, or that it can maintain a balanced budget without additional tax or
other revenue increases or reductions in City services, which could adversely
affect the City's economic base.
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The Mayor is responsible for preparing the City's four-year financial
plan, including the City's current financial plan for the 1996 through 1999
fiscal years (the "1996-1999 Financial Plan", "Financial Plan" or "City Plan").
On November 29, 1995, the City submitted to the Control Board the Financial Plan
for the 1996-1999 fiscal years, which is a modification to a financial plan
submitted to the Control Board on July 11, 1995 (the "July Financial Plan") and
which relates to the City, the Board of Education ("BOE") and the City
University of New York.
The City's projections set forth in the City Plan are based on various
assumptions and contingencies which are uncertain and which may not materialize.
Changes in major assumptions could significantly affect the City's ability to
balance its budget as required by State law and to meet its annual cash flow and
financing requirements. Such assumptions and contingencies include the condition
of the regional and local economies, the impact on real estate tax revenues of
the current downturn in the real estate market, wage increases for City
employees consistent with those assumed in the City Plan, employment growth, the
ability to implement reductions in City personnel and other cost reduction
initiatives, provision of State and Federal aid and mandate relief and the
impact on City revenues of proposals for Federal and State welfare reform.
Implementation of the City Plan is also dependent upon the City's
ability to market its securities successfully in the public credit markets. The
City's financing program for fiscal years 1996 through 1999 contemplates the
issuance of $11 billion of general obligation bonds primarily to reconstruct and
rehabilitate the City's infrastructure and physical assets and to make capital
investments. In addition, the City issues revenue and tax anticipation notes to
finance its seasonal working capital requirements. The success of projected
public sales of City bonds and notes will be subject to prevailing market
conditions, and no assurance can be given that such sales will be completed. If
the City were unable to sell its general obligation bonds and notes, it would be
prevented from meeting its planned operating and capital expenditures. Future
developments concerning the City and public discussion of such developments, as
well as prevailing market conditions, may affect the market for outstanding City
general obligation bonds and notes.
The City Comptroller and other agencies and public officials have
issued reports and make public statements which, among other things, state that
projected revenues may be less and future expenditures may be greater than
forecasted in the City Plan. It is reasonable to expect that such reports and
statements will continue to be issued and to engender public comment.
1996-1999 Financial Plan. The July Financial Plan projected revenues
and expenditures for the 1996 fiscal year balanced in accordance with GAAP. The
July Financial Plan set forth actions to close a previously projected gap of
approximately $3.1 billion in the 1996 fiscal year. The gap- closing actions for
the 1996 fiscal year include agency actions, including productivity savings and
savings from restructuring the delivery of City services; service reductions;
the sale of delinquent real property tax receivables; reduced debt service
costs, resulting from refinancing and other actions; proposed increased Federal
assistance; proposed increased State aid; and various revenue actions.
The Financial Plan also sets forth projections for the 1997 through
1999 fiscal years and outlines a proposed gap-closing program to close projected
budget gaps of $888 million, $1.5 billion
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and $1.4 billion for the 1997 through 1999 years, respectively. These
projections take into account expected increases in Federal and State
assistance. The projections for the 1996 through 1999 fiscal years assume (i)
agreement with the City's unions with respect to approximately $100 million of
savings to be derived from efficiencies in management of employee health
insurance programs and other health benefit related savings for each of the
City's unions; (ii) $200 million of additional anticipated State aid and $75
million of additional anticipated Federal aid in each of the 1997 through 1999
fiscal years; (iii) that the New York City Health and Hospitals Corporation
("HHC") and the Board of Education will each be able to identify actions to
offset substantial revenue shortfalls reflected in the Financial Plan, including
approximately $254 million annual reduction in revenues for HHC, which results
from the reduction in Medicaid payments proposed by the State and the City,
without any increase in City subsidy payments to HHC; (iv) the continuation of
the current assumption of no wage increases after fiscal year 1995 for City
employees unless offset by productivity increases; (v) $130 million of
additional revenues as a result of the increased rent payments for the City's
airports proposed by the City, which is subject to further discussion with the
Port Authority; and (vi) savings of $45 million in each of the 1997 through 1999
fiscal years which would result from the State Legislature's enactment of
proposed tort reform legislation. In addition, the 1996-1999 Financial Plan
anticipates the receipt of substantial amounts of Federal aid. Certain Federal
legislative proposals contemplate significant reductions in Federal spending,
including proposed Federal welfare reform, which could result in caps on, or
block grants of, Federal Programs.
Various actions proposed in the Financial Plan are subject to approval
by the Governor and the State Legislature, the City's municipal unions and the
Federal government. No assurance can be given that such actions will in fact be
taken or that the savings that the City projects will result from these actions
will be realized. If these measures cannot be implemented, the City will be
required to take other actions to decrease expenditures or increase revenues to
maintain a balanced financial plan.
The Financial Plan reflects certain cost and expenditure increases
including increases in salaries and benefits paid to City employees pursuant to
certain collective bargaining agreements. In the event of a collective
bargaining impasse, the terms of wage settlements could be determined through
the impasse procedure in the New York City Collective Bargaining Law, which can
impose a binding settlement.
Ratings. On July 10, 1995, Standard & Poor's Ratings Group ("Standard &
Poor's") revised downward its rating on City general obligations bonds from A-
to BBB+ and removed City bond from CreditWatch. Standard & Poor's stated that
"structural budgetary balance remains elusive because of persistent softness in
the City's economy, highlighted by weak job growth and a growing dependence on
the historically volatile financial services sector". Other factors identified
by Standard & Poor's in lowering its rating on City bonds included a trend of
using one-time measures, including debt refinancing, to close projected budget
gaps, dependence on unratified labor savings to help balance the Financial Plan,
optimistic projections of additional Federal and State aid or mandate relief, a
history of cash flow difficulties caused by State budget delays and continued
high debt levels. Fitch Investors Service, Inc. ("Fitch") continues to rate the
City general obligation bond A-. Moody's Investors Service, Inc. ("Moody's")
rating for City general obligation bonds is Baa1.
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Such ratings reflect only the views of these rating agencies, from which an
explanation of the significance of such ratings may be obtained. There is no
assurance that such ratings will continue for any given period of time or that
they will not be revised downward or withdrawn entirely. Any such downward
revision or withdrawal could have an adverse effect on the market prices of
bonds.
Outstanding Net Indebtedness. As of June 30, 1995, the City and the
Municipal Assistance Corporation for the City of New York had, respectively,
$23.258 billion and $4.033 billion of outstanding net long-term debt.
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. The State's 1995-1996
Financial Plan projects a balanced General Fund. There can be no assurance that
there will not be reductions in State aid to the City from amounts currently
projected or that State budgets in future fiscal years will be adopted by the
April 1 statutory deadline or that any such reductions or delays will not have
adverse effects on the City's cash flow or expenditures.
Litigation. The City is a defendant in a significant number of
lawsuits. Such litigation includes, but is not limited to, routine litigation
incidental to the performance of its government and other functions, actions
commenced and claims asserted against the City arising out of alleged
constitutional violations, alleged torts, alleged breaches of contracts and
other violations of law and condemnation proceedings and other tax and
miscellaneous actions. While the ultimate outcome and fiscal impact, if any, on
the proceedings and claims are not currently predictable, adverse determination
in certain of them might have a material adverse effect upon the City's ability
to carry out the City Plan. As of June 30, 1994, the City estimated its
potential future liability on account of all outstanding claims to be
approximately $2.6 billion.
o New York State. The State has historically been one of the wealthiest
states in the nation. For decades, however, the State economy has grown more
slowly than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of this relative decline are varied
and complex, in many cases involving national and international developments
beyond the State's control.
Recent Developments. The national economy began the current expansion
in 1991 and has added over 7 million jobs since early 1992. However, the
recession lasted longer in the State and State's economy recovery has lagged
behind the nation's. Although the State has added approximately 185,000 jobs
since November 1992, employment growth in the State has been hindered during
recent years by significant cutbacks in the computer and instrument
manufacturing, utility, defense, and banking industries.
The 1995-1996 New York State Financial Plan (the "State Plan") is based
on projections that the State's economy is expected to expand during 1995, but
that there will be a pronounced slow- down during the course of the year.
Although industries that export goods and services abroad are expected to
benefit from the lower dollar, growth will be slowed by government cutbacks at
all levels. On an average annual basis, employment growth will be about the same
as 1994. Both personal income and wages are expected to record moderate gains in
1995. Bonus payments in the
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securities industry are expected to increase from last year's depressed level.
Many uncertainties exist in forecasts of both the national and State
economies, including consumer attitudes toward spending, the extent of corporate
and governmental restructuring, Federal fiscal and monetary policies, the level
of interest rates, and the condition of the world economy, which could have an
adverse effect on the State. There can be no assurance that the State economy
will not experience results in the current fiscal year that are worse than
predicted, with corresponding material and adverse effects on the State's
projections of receipts and disbursements.
The 1995-96 Fiscal Year. The State's General Fund (the major operating
Fund of the State) was projected in the State Plan to be balanced on a cash
basis for the 1995-96 fiscal year. The State Plan projected General Fund
receipts and transfers from other funds at $33.110 billion, a decrease of $48
million from total receipts in the prior fiscal year, and disbursements and
transfers to other funds at $33.055 billion, a decrease of $344 million from the
total amount disbursed in the prior fiscal year.
The State issued the first of the three required quarterly updates to
the State Plan on July 28, 1995 (the "First Quarter Update"). The First Quarter
Update projected a continued balance in the State's 1995-96 Financial Plan and
incorporated few revisions to the Plan.
The State issued its second quarterly update to the State Plan (the
"Mid-Year Update") on October 26, 1995. The Mid-Year Update projected continued
balance in the State's 1995-96 Financial Plan with estimated receipts reduced by
a net $71 million and estimated disbursements reduced by a net $30 million as
compared to the First Quarter Update. The State also updated its forecast of
national and State economic activity through the end of calendar year 1996. The
national economic forecast remained basically unchanged from the initial
forecast on which the original 1995-96 State Financial Plan was based, while the
State economic forecast was marginally weaker.
The State revised the State Plan on December 15, 1995 in conjunction
with the release of the Executive Budget for the 1996-97 fiscal year. The State
Plan continues to project a balanced General Fund with reductions in projected
receipts offset by an equivalent reduction in projected disbursements. Modest
changes were made to the Mid-Year Update, reflecting two more months of actual
results, deficiency requests by State agencies and administrative efficiencies
achieved by State agencies. Total General Fund receipts are expected to be
approximately $73 million lower than estimated at the time of the Mid-Year
Update. The largest single change in these estimates in attributable to the lag
in achieving $50 million in proceeds from sales of State assets, which are
unlikely to be completed prior to the end of the fiscal year. Projected General
Fund disbursements also are reduced by a total of $73 million. The revisions
reflect re-estimates based on actual results through November 1995, the largest
of which is a reduction of $70 million in projected costs for income
maintenance.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant disparity
between tax revenues projected from a lower recurring receipts base and the
spending required to maintain state programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant actions to
align
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recurring receipts and disbursements in future fiscal years.
The 1996-97 Fiscal Year (Executive Budget Forecast. The Governor
presented his 1996-97 Executive Budget to the Legislature on December 15, 1995
(the "1996-97 Financial Plan"). The Executive Budget also contains financial
projections for the State's 1997-98 and 1998-99 fiscal years. The 1996-97
Financial Plan projects a continued balance in the General Fund. It reflects a
continuing strategy of substantially reduced State spending, including program
restructurings, reductions in social welfare spending, and efficiency and
productivity initiatives. Total General Fund receipts and transfers from other
funds are projected to be $31.32 billion, a decrease of $1.4 billion from total
receipts projected in the current fiscal year. Total General Fund disbursements
and transfers to other funds are projected to be $31.22 billion, a decrease of
$1.5 billion from spending totals projected for the current fiscal year. The
Executive Budget proposes $3.9 billion in actions to balance the 1996-97
Financial Plan, including projections of (i) over $1.8 billion in savings from
cost containment and other actions in social welfare programs, including
Medicaid, welfare and various health and mental health programs; (ii) $1.3
billion in savings from a reduced State General Fund share of Medicaid made
available from anticipated changes in the federal Medicaid program, including an
increase in the federal share of Medicaid; (iii) over $450 million in savings
from reforms and cost avoidance in educational services (including school aid
and higher education), while providing fiscal relief from certain State mandates
that increase local spending; and (iv) $350 million in savings from efficiencies
and reductions in other State programs.
The Governor has submitted several amendments to the Executive Budget.
The net impact of the amendments leaves unchanged the total estimated amount of
the General Fund spending in 1996-97, which continues to be projected at $31.22
billion.
To make progress toward addressing recurring budgetary imbalances, the
1996-97 Executive Budget proposes significant actions to align recurring
receipts and disbursements in future fiscal year. However, there can be no
assurance that the Legislature will enact the Governor's proposals or that the
State's action will be sufficient to preserve budgetary balance or to align
recurring receipts and disbursements in either 1996-97 or in future fiscal
years. The Executive Budget contains projections of a potential imbalance in the
1997-98 fiscal years of $1.44 billion and in the 1998-99 fiscal year of $2.47
billion, assuming implementation of the Executive Budget recommendations. It is
expected that the Governor will propose to close these budget gaps with further
spending reductions.
Uncertainties with regard to both the economy and potential decisions
at the federal level add further pressure on future budget balance in the State.
For example, various proposals relating to federal tax and spending policies,
such as changes to federal treatment of capital gains which would flow through
automatically to the State personal income tax and changes affecting the federal
share of Medicaid, could, if enacted, have a significant impact on the State's
financial condition in 1996- 97 and in future fiscal years.
Composition of State Governmental Funds Group. Substantially all
State non-pension financial operations are accounted for in the State's
governmental funds group. Governmental funds include the General Fund, which
receives all income not required by law to be deposited in another
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fund; Special Revenue Funds, which receive the preponderance of moneys received
by the State from the Federal government and other income the use of which is
legally restricted to certain purposes; Capital Projects Funds, used to finance
the acquisition and construction of major capital facilities by the State and to
aid in certain of such projects conducted by local governments or public
authorities; and Debt Service Funds, which are used for the accumulation of
moneys for the payment of principal of and interest on long-term debt and to
meet lease-purchase and other contractual- obligation commitments.
Local Government Assistance Corporation ("LGAC"). In 1990, as part of a
State fiscal reform program, legislation was enacted creating LGAC, a public
benefit corporation empowered to issue long-term obligations to fund certain
payments to local governments traditionally funded through the State's annual
seasonal borrowing. The legislation authorized LGAC to issue its bond and notes
in an amount not in excess of $4.7 billion (exclusive of certain refunding
bonds) plus certain other amounts. Over a period of years, the issuance of these
long-term obligations, which are to be amortized over no more than 30 years, was
expected to eliminate the need for continued short-term seasonal borrowing. The
legislation also dedicated revenues equal to one-quarter of the four cent State
sales and use tax to pay debt service on these bonds. The legislation also
imposed a cap on the annual seasonal borrowing of the State at $4.7 billion,
less net proceeds of bonds issued by LGAC and bonds issued to provide for
capitalized interest, except in cases where the Governor and the legislative
leaders have certified the need for additional borrowing and provided a schedule
for reducing it to the cap. If borrowing above the cap is thus permitted in any
fiscal year, it is required by law to be reduced to the cap by the fourth fiscal
year after the limit was first exceeded. This provision capping the seasonal
borrowing was included as a covenant with LGAG's bondholders in the resolution
authorizing such bonds.
As of June 1995, LGAC had issued bonds and notes to provide net
proceeds of $4.7 billion completing the program. The impact of LGAC's borrowing
is that the State is able to meet its cash flow needs in the first quarter of
the fiscal year without relying on short-term seasonal borrowings. The State
Plan includes no spring borrowing nor did the 1994-1995 State Financial Plan,
which was the first time in 35 years there was no short-term borrowing.
Authorities. The fiscal stability of the State is related to the fiscal
stability of its Authorities, which generally have responsibility for financing,
constructing and operating revenue-producing public benefit facilities.
Authorities are not subject to the constitutional restrictions on the incurrence
of debt which apply to the State itself, and may issue bonds and notes within
the amounts of, and as otherwise restricted by, their legislative authorization.
As of September 30, 1994, the latest data available, there were 18 Authorities
that had outstanding debt of $100 million or more. The aggregate outstanding
debt, including refunding bonds, of these 18 Authorities was $70.3 billion as of
September 30, 1994.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however, the
State has provided financial assistance through appropriations, in some cases of
a recurring nature, to certain of the 18 Authorities for operating and other
expenses and, in fulfillment of its commitments on moral obligation indebtedness
or otherwise,
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for debt service. This operating assistance is expected to continue to be
required in future years.
The State's experience has been that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities to
obtain financing in the public credit markets and the market price of the
State's outstanding bonds and notes may be adversely affected. There are certain
statutory arrangements that provide for State local assistance payments
otherwise payable to localities to be made under certain circumstances to
certain Authorities. The State has no obligation to provide additional
assistance to localities whose local assistance payments have been paid to
Authorities under these arrangements. However, in the event that such local
assistance payments are so diverted, the affected localities could seek
additional State funds.
Ratings. On January 13, 1992, Standard & Poor's reduced its ratings on
the State's general obligation bonds from A to A- and, in addition, reduced its
ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. Standard & Poor's also continued its negative
rating outlook assessment on State general obligation debt. On April 26, 1993,
Standard & Poor's revised the rating outlook assessment to stable. On February
14, 1994, Standard & Poor's raised its outlook to positive and, on July 13,
1995, confirmed its A-rating. On January 6, 1992, Moody's reduced its ratings on
outstanding limited-liability State lease purchase and contractual obligations
from A to Baa1. On July 3, 1995, Moody's reconfirmed its A rating on the State's
general obligation long-term indebtedness. Ratings reflect only the respective
views of such organizations, and an explanation of the significance of such
ratings may be obtained from the rating agency furnishing the same. There is no
assurance that a particular rating will continue for any given period of time or
that any such rating will not be revised downward or withdrawn entirely, if in
the judgment of the agency originally establishing the rating, circumstances so
warrant. A downward revision or withdrawal of such ratings, or either of them,
may have an effect on the market price of the State Municipal Securities in
which the Fund invests.
General Obligation Debt. As of March 31, 1995, the State had
approximately $5.181 billion in general obligation bonds, excluding refunding
bonds, and $149 million in bond anticipation notes outstanding. Principal and
interest due on general obligation bonds and interest due on bond anticipation
notes were $793.3 million for the 1994-95 fiscal year and are estimated to be
$774.4 million for the State's 1995-96 fiscal year, not including interest on
refunding bonds to the extent that such interest is to be paid from escrowed
funds.
Litigation. The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal laws.
These proceedings could affect adversely the financial condition of the State in
the 1995-1996 fiscal year or thereafter.
The State believes that the State Plan includes sufficient reserves for
the payment of judgments that may be required during the 1995-96 fiscal year.
There can be no assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount the State Plan reserves for the payment
of judgments and, therefore, could affect the ability of the State to maintain
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<PAGE>
a balanced 1995-1996 State Plan. In its audited financial statements for the
fiscal year ended March 31, 1995, the State reported its estimated liability for
awarded and anticipated unfavorable judgments at $676 million.
In addition, the State is party to other claims and litigations which
its counsel has advised are not probable of adverse court decisions. Although,
the amounts of potential losses, if any, are not presently determinable, it is
the State's opinion that its ultimate liability in these cases is not expected
to have a material adverse effect on the State's financial position in the
1995-96 fiscal year or thereafter.
Other Localities. Certain localities in addition to the City could have
financial problems leading to requests for additional State assistance during
the State's 1995-96 fiscal year and thereafter. The potential impact on the
State of such actions by localities is not included in the projections of the
State receipts and disbursements in the State's 1995-96 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of Yonkers
(the "Yonkers Board") by the State in 1984. The Yonkers Board is charged with
oversight of the fiscal affairs of Yonkers. Future actions taken by the Governor
or the State Legislature to assist Yonkers could result in allocation of State
resources in amounts that cannot yet be determined.
o Credit Quality. The following special considerations are risk
factors associated with the
Fund's investments in high yield (lower rated) securities:
o Risk Factors of High Yield Securities. The Fund may invest up to 25%
of its total assets which are invested in tax-exempt securities in securities of
lower rated categories or in securities which are unrated but deemed to be of
comparable quality by the Manager. 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.
o 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 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
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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 the Manager should minimize the
impact of a decrease in value of a particular security or group of securities in
the Fund's portfolio.
o 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.
o 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 Manager considers
ratings of NRSROs such as Moody's Investors Services, Inc., Standard & Poor's,
Fitch Investors Services, Inc and Duff & Phelps, the Manager 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 Manager 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 B for a description of municipal securities ratings.
o 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
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<PAGE>
available and thus the responsibility of the Board of Trustees 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 "How to Buy Shares."
o 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.
o 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:
o 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.
o Reliance on Manager's Credit Analysis. Tax-exempt lease
obligations are generally not rated by NRSROs, which places the burden for
credit analysis upon the Manager.
o 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.
o 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 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.
o 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
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<PAGE>
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. The Fund is an open-end, management investment company
which currently has three classes 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 or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in writing or
vote of two-thirds of the outstanding shares of the Fund, to remove a Trustee.
The Trustees will call a meeting of shareholders to vote on the removal of a
Trustee upon the written request of the record holders of 10% of its outstanding
shares. 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 of the same class and
entitle the holder to one vote per share (and a fraction vote for a fractional
share) on matters submitted to their vote at shareholders' meetings.
Shareholders of the Fund vote together in the aggregate on certain matters at
shareholders' meetings, such as the election of Trustees and ratification of
appointment of auditors for the Fund. Shareholders of a particular series or
class vote separately on proposals which affect that series or class, and
shareholders of a series or class which is not affected by that matter are not
entitled to vote on the proposal.
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
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loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above or insufficient insurance coverage exists. 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, 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. All of the trustees are also trustees of Rochester
Portfolio Series - Limited Term New York Municipal Fund and Bond Fund Series -
Oppenheimer Bond Fund for Growth. With the exception of Mr. Cannon, all of the
trustees are also trustees or directors of Oppenheimer Quest Growth & Income
Value Fund, Oppenheimer Quest Officers Value Fund, Oppenheimer Quest Opportunity
Value Fund, Oppenheimer Quest Small Cap Fund, Oppenheimer Quest Value Fund, Inc,
and Oppenheimer Quest Global Value Fund, Inc. Ms. Macaskill (in her capacity as
President), Messrs. Donohue, Bowen, Zack, Bishop and Farrar, respectively, hold
the same offices with the New York-based Oppenheimer funds as with the Fund. As
of January 1, 1997 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 48
President, Chief Executive Officer, and a Director of OppenheimerFunds, Inc.
(the "Manager") and HarbourView Asset Management Corporation ("HarbourView") a
subsidiary of the Manager; President and a director of Oppenheimer Acquisition
Corp. ("OAC") the Manager's parent holding company; and of Oppenheimer
Partnership Holdings, Inc.; Chairman and a director of Shareholder Services,
Inc. ("SSI"), a transfer agent subsidiary of the Manager and Shareholder
Financial Services, Inc. ("SFSI"); and a director of Oppenheimer Real Asset
Management, Inc.
JOHN CANNON, Trustee; Age 61
620 Sentry Parkway West Suite 220, Blue Bell, PA 19422
Independent Consultant; Chairman and Treasurer, CDC Associates, Inc., registered
investment adviser, 1993-February, 1996; 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 Trust, 1995-Present.
PAUL Y. CLINTON, Trustee, Age 66
160 N. Gulf Road, King of Prussia, PR 18406
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; formerly, 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 and Prime Cash Fund, each of which is a
money-market fund; Director of 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, President of Geneve Corp., a venture capital fund,
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<PAGE>
Chairman of Woodland Capital Corp., a small business investment company; Vice
President of W.R. Grace & Co.
THOMAS W. COURTNEY, Trustee; Age 63
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. and
Trustee of Quest for Value Accumulation Trust, each of which is an open-end
investment company; 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.
LACY B. HERRMANN, Trustee; Age 67
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., and Trustee of Quest for Value Accumulation Trust and The
Saratoga Advantage Trust, each of which is an open-end investment company;
Trustee of Brown University.
GEORGE LOFT, Trustee; Age 82
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of Quest Cash Reserves, Inc. and Trustee of Quest for
Value Accumulation Trust and The Saratoga Advantage Trust, each of which is an
open-end investment company and Director of the Quest for Value Dual Purpose
Fund, Inc., a closed-end investment company.
ANDREW J. DONOHUE, Secretary; Age 46
Executive Vice President and General Counsel of the Manager and OppenheimerFunds
Distributor, Inc. (the Distributor"); President and a director of Centennial;
Executive Vice President, General Counsel and a director of HarbourView, SFSI,
and Oppenheimer Partnership Holdings, Inc.; President and a director of
Oppenhiemer Real Asset Management, Inc.; General Counsel of OAC; Executive Vice
President, Chief Legal Officer and a director of MultiSource Services, Inc. (a
broker-dealer); formerly Senior Vice President and Associate General Counsel of
the Manager and the Distributor, partner in Kraft & McManimon (a law firm), an
officer of First Investors Corporation
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<PAGE>
(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 60
6803 South Tucson Way, Englewood, Colorado 80012
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President, Treasurer,
Assistant Secretary and a director of Centennial Asset Management Corporation,
an investment advisory subsidiary of the Manager; Senior Vice President,
Treasurer and Secretary of SSI; Vice President, Treasurer and Secretary of SFSI;
Treasurer of OAC; Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc.; Chief Executive Officer, Treasurer and a director of
MultiSource Services, Inc.(a broker-dealer);
an officer of other Oppenheimer funds.
RONALD FIELDING, Vice President and Portfolio Manager; Age 48
350 Linden Oaks, Rochester, NY 14625
Senior Vice President of the Manager, Chairman of the Rochester Funds Division
of the Manager; formerly President and a trustee or director of the Fund,
Limited Term New York Municipal Fund and Rochester Tax Managed Fund, Inc;
President and a director, Fielding Management Company, Inc., Chairman and a
director of Rochester Fund Distributors, Inc., President and a director of
Fielding Management Company, Inc., President and a director of Rochester Capital
Advisors, Inc., President and a director of Rochester Fund Services, Inc.
ROBERT BISHOP, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager, prior to which he
was an 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 T. FARRAR, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager, prior to which he
was an International Mutual Fund Supervisor for Brown Brothers, Harriman Co., a
bank, and previously a Senior Fund Accountant for State Street Bank & Trust
Company.
ROBERT G. ZACK, Assistant Secretary; Age 48
Senior Vice President and Associate General Counsel of the Manager, Assistant
Secretary of SSI, SFSI; an officer of other Oppenheimer funds.
ADELE A. CAMPBELL, Assistant Treasurer; Age 33
350 Linden Oaks, Rochester, New York 14625
Assistant Vice President of the Manager; formerly Assistant Vice President of
Rochester Fund Services, Inc., Assistant Manager of Fund Accounting, Rochester
Fund Services, Audit Manager for Price Waterhouse, LLP.
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<PAGE>
- -------------------
*A Trustee who is an "interested" person as defined in the Investment Company
Act.
o Remuneration of Trustees. All officers of the Fund and Ms. Macaskill,
a Trustee and President, are officers or directors of the Manager 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, 1996.
<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 Expenses(1) Retirement(1) Complex(2)
<S> <C> <C> <C> <C>
John Cannon $ $ $ $
Paul Y. Clinton $ $ $ $
Thomas W. Courtney $ $ $ $
Lacy B. Herrmann $ $ $ $
George Loft $ $ $ $
- ---------------------
<FN>
(1)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 $1500 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.
(2)Includes compensation received during the fiscal year ended December 31,
1996, 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 and Oppenheimer Bond Fund for Growth.
</FN>
</TABLE>
o Major Shareholders. As of January 1, 1997 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
18,686,655.877 of Class A shares 14.55% of the outstanding Class A shares of
the Fund.
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<PAGE>
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom serve as officers of the Fund and one of
whom (Ms. Macaskill) serves as a Trustee of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees, including
portfolio managers, that would compete with or take advantage of the Fund's
portfolio transactions. Compliance with the Code of Ethics is carefully
monitored and strictly enforced by the Manager.
o The Investment Advisory Agreement. The Investment Advisory Agreement
between the Manager and the Fund which was entered into on January 4, 1996
requires the Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment, and to provide and supervise the activities of
all administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and maintenance
of records with respect to its operations, the preparation and filing of
specified reports, and the composition of proxy materials and registration
statements for continuous public sale of shares of the Fund. For these services,
the Manager 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 Manager under the Investment
Advisory Agreement or by the Distributor are paid by the Fund. The Investment
Advisory Agreement lists examples of expenses paid by the Fund, the major
categories of which relate to interest, taxes, brokerage commissions, fees to
certain Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs, and
non-recurring expenses, including litigation. For the Fund's fiscal year ended
December 31, 1996, the management fees paid by the Fund to the Manager were
$____. For the Fund's fiscal year ended December 31, 1995, the management fees
paid by the Fund to its previous investment advisor, Rochester Capital Advisors,
L.P., were $9,128,887. 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. Fielding Management Company, Inc. served as
investment advisor 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 Investment Advisory Agreement contains no expense limitation.
However, because of state regulations limiting fund expenses that previously
applied, the Manager has voluntarily undertaken that the Fund's total expenses
in any fiscal year (including the investment advisory fee but exclusive of
taxes, interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would not exceed the
most stringent state regulatory limitation applicable to the Fund. Due to
changes in federal securities laws, such state regulations no longer apply and
the Manager's undertaking is therefore inapplicable and has been
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<PAGE>
withdrawn. During the Fund's last fiscal year, the Fund's expenses did not
exceed the most stringent state regulatory limit and the voluntary undertaking
was not invoked.
The Investment Advisory Agreement provides that in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties thereunder, the Manager 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 Investment Advisory Agreement relates. The Agreement
permits the Manager to act as investment advisor 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 advisor. If the Manager
shall no longer act as investment advisor to the Fund, the right of the Fund to
use the name "Oppenheimer" as part of its name may be withdrawn.
o The Distributor. Under its General Distributor's Agreement with the
Fund, 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
Class A, Class B and Class C 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, 1994, 1995 and 1996 the aggregate amount
of sales charge on sales of the Fund's Class A shares was $16,039,947,
$8,868,211 and $________, respectively, of which the Distributor, an affiliated
broker-dealer, retained $________ and $_______ respectively. 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
"Distribution and Service Plans" below.
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer
Agent, a division of the Manager, serves as the Fund's Transfer Agent pursuant
to a Service Contract dated March 8, 1996. The Transfer Agent is responsible for
maintaining shareholder accounting records, and for shareholder servicing and
administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the Investment Advisory Agreement is to arrange the portfolio
transactions for the Fund. The Investment Advisory Agreement contains provisions
relating to the employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by the Investment
Advisory Agreement to employ broker-dealers, including "affiliated" brokers, as
that term is defined in the Investment Company Act, as may, in its best judgment
based on all relevant factors, implement the policy of the Fund to obtain, at
reasonable expense, the "best execution" (prompt and reliable execution at the
most favorable price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions paid
to the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees.
Under the Investment Advisory Agreement, the Manager is authorized to
select brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the
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Manager or its affiliates have investment discretion. The commissions paid to
such brokers may be higher than another qualified broker would have charged if a
good faith determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund and
other investment companies managed by the Manager or its affiliates as a factor
in the selection of brokers for the Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the Investment Advisory Agreement and the procedures and rules
described above, allocations of brokerage are generally made by the Manager's
portfolio traders based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the Investment Advisory
Agreement and the procedures and rules described above. In either case,
brokerage is allocated under the supervision of the Manager's executive
officers. 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 Manager 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 Manager or its
affiliates are combined. The transactions effected pursuant to such combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.
The research services provided by a particular broker may be useful in
one or more of the advisory accounts of the Manager and its affiliates. The
research services provided by brokers broaden the scope and supplement the
research activities of the Manager, 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 Investment
Advisory Agreement or the Distribution Plans described below) annually reviews
information furnished by the Manager as to the commissions paid to brokers
furnishing such services so that the Board may ascertain whether the amount of
such commissions was reasonably related to the value or benefit of such
services. The Fund did not incur costs for brokerage commissions in connection
with its portfolio transactions during the fiscal years ended December 31, 1994,
1995 and 1996.
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
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conditions could result in portfolio activity at a greater or lesser rate than
anticipated. For the fiscal years ended December 31, 1994, 1995 and 1996 the
Fund's portfolio turnover rates were 34.39%, 14.59% and ____% respectively.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from time to
time the "standardized yield," "dividend yield," "tax-equivalent yield,"
"average annual total return," "cumulative total return," "average annual total
return at net asset value" and "total return at net asset value" of an
investment in 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 each advertised class of shares 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.
|X| Standardized Yields
o 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:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense reimbursements).
c = the average daily number of shares 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.
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
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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, 1996, the standardized yields for the Fund's shares was ____%.
o 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 Manager) for the
30-day period ended December 31, 1996, for an individual New York City resident
in the 42.7% combined tax bracket was ____%.
o 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 of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price 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, 1996 were _____% and _____% when calculated at maximum offering
price and at net asset value, respectively.
o Total Return Information
o 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 )
o Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted from
the initial investment ("P") (unless the return is shown at net asset value, as
described below). In calculating total returns for Class B shares, the payment
of the contingent deferred sales charge (5% for the first year, 4% for the
second year, 3% for the third year and fourth years, 2% for the fifth year, 1%
for the sixth year and none thereafter) is applied to the investment result for
the period shown. For Class C shares, the 1% contingent deferred sales charge is
applied to the investment result for the one-year period (or less). Total
returns also assume that all dividends and capital gains distributions during
the period are reinvested to buy additional shares at net asset value per share,
and that the investment is redeemed at the end of the period. The "average
annual total returns" on an investment in Class A shares of the Fund for the
one, five and ten year periods ended December 31, 1996 were _____%, ____% and
____%, respectively. The cumulative "total return" on Class A shares of the Fund
for the period from May 15, 1986 through December 31, 1996 was _____%.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B and Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering the front-end or contingent deferred 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 Class A shares for the one
year period ended December 31, 1996 and the period from May 15, 1986 through
December 31, 1996 were _____% and ____%, respectively.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its performance 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
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dividends but do not take sales charges or taxes into consideration. From time
to time the Fund may include in its advertisement and sales literature
performance information about the Fund cited in other newspapers and periodicals
such as The New York Times, which may include performance quotations from other
sources, including Lipper and Morningstar.
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
(domestic stock, international stock, taxable bond, municipal bond and hybrid)
based on risk-adjusted investment return. Investment return measures a fund's
three, five and ten-year average annual total returns (when available) in excess
of 90-day U.S. Treasury bill returns after considering sales charges and
expenses. Risk reflects fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and return are combined to produce star rankings reflecting
performance relative to the average fund in a fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next 22.5%), three
stars is "average" (next 35%), two stars is "below average" (next 22.5%) and one
star is "lowest" (bottom 10%). Morningstar ranks the Fund in relation to that of
other New York State municipal bond funds. Rankings are subject to change.
The total return on an investment in the Fund's Class A, Class B or
Class C shares 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 Manager may publish rankings or ratings
of the Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than 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.
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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.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A Shares and Distribution and
Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of the
Investment Company Act, pursuant to which the Fund makes payments to the
Distributor for all or a portion of its costs in connection with the
distribution and/or servicing of the shares of that class, as described in the
Prospectus. Each Plan has been approved by a vote of (i) the Board of Trustees
of the 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" (as defined in the Investment Company Act) of the shares of each
class. For the Distribution and Service Plans for Class B and Class C shares,
that vote was cast by the Manager, as the sole initial holder of Class B and
class C shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform, at no cost to the Fund. The Distributor
and the Manager may, in their sole discretion, increase or decrease the amount
of payments they make to Recipients from their own resources.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically approved
at least annually by the Fund's Board of Trustees and its Independent Trustees
by a vote cast in person at a meeting called for the purpose of voting on such
continuance. A Plan for a particular class may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of the holders of
a "majority" (as defined in the Investment Company Act) of the outstanding
shares of that class. None of the Plans may be amended to increase materially
the amount of payments to be made unless such amendment is approved by
shareholders of the class affected by the amendment. In addition, because Class
B shares of the Fund automatically convert into Class A shares after six years,
the Fund will seek the approval of Class B as well as Class A shareholders for a
proposed amendment to the Class A Plan that would materially increase the amount
to be paid under the Class A Plan. Such approval must be by a "majority" of the
Class A and Class B shares (as defined in the Investment Company Act), voting
separately by class. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly on
the amount of all payments made pursuant to each Plan, the purpose for which the
payments were made and the identity of each Recipient that received any payment.
The report for the Class B Plan shall also include the Distributor's
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distribution costs for that quarter, and such costs for previous fiscal periods
that have been carried forward, as explained in the Prospectus and below. Those
reports, including the allocations on which they are based, will be subject to
the review and approval of the Independent Trustees in the exercise of their
fiduciary duty. Each Plan further provides that while it is in effect, the
selection and nomination of those Trustees of the Fund who are not "interested
persons" of the Fund is committed to the discretion of the Independent Trustees.
This does not prevent the involvement of others in such selection and nomination
if the final decision on selection or nomination is approved by a majority of
the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers, did not exceed a minimum amount, if any,
that may be determined from time to time by a majority of the Fund's Independent
Trustees. Initially, the Board of Trustees has set the fees at the maximum rate
and has set no minimum amount of assets to qualify for payment.
Any unreimbursed expenses incurred by the Distributor with respect to
Class A shares for any fiscal year may not be recovered in subsequent years.
Payments received by the Distributor under the Plan for Class A shares will not
be used to pay any interest expense, carrying charge, or other financial costs,
or allocation of overhead by the Distributor.
The Class B and the Class C Plans allow the service fee payment to be
paid by the Distributor to Recipients in advance for the first year such shares
are outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of Class B and
Class C shares sold. An exchange of shares does not entitle the Recipient to an
advance service fee payment. In the event Class B or Class C shares are redeemed
during the first year that the shares are outstanding, the Recipient will be
obligated to repay to the Distributor a pro rata portion of the Distributor's
advance payment for those shares.
Although the Class B and Class C Plans permit the Distributor to retain
both the asset-based sales charges and the service fees on such shares, or to
pay Recipients the service fee on a quarterly basis, without payment in advance,
the Distributor presently intends to pay the service fee to Recipients in the
manner described above. A minimum holding period may be established from time to
time under the Class B Plan and the Class C Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B Plan and
the Class C Plan are subject to the limitations imposed by the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., on payments of
asset-based sales charges and service fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. Such payments
are made in recognition that the Distributor (i) pays sales commissions to
authorized brokers and dealers at the time of sale and pays service fees as
described in the Prospectus, (ii) may finance such commissions and/or the
advance of the service fee payment to Recipients under those Plans, or may
provide such financing from its own resources, or from an affiliate, (iii)
employs personnel to support distribution of shares, and (iv) may bear the costs
of sales literature, advertising and prospectuses (other than those furnished to
current shareholders), state "blue sky" registration fees and certain other
distribution expenses.
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For the fiscal year ended December 31, 1996, payments under the Class A
Service Plan, totaled $________ which consisted of service fee payments to
Recipients of $_______ and asset based sales charge payments of $________. The
aggregate service fee payments to Recipients included an amount of $________
paid to MML Investor Services, Inc., an affiliate of the Distributor.
ABOUT YOUR ACCOUNT
How to Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor to
choose the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant circumstances. Investors should understand
that the purpose and function of the deferred sales charge and asset-based sales
charge with respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the other. The
Distributor normally will not accept any order for $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of the
Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and expenses. The net income attributable to Class A, Class B and
Class C shares and the dividends payable on such shares will be reduced by
incremental expenses borne solely by those classes, including the asset-based
sales charges.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax advisor, to the effect
that the conversion of B shares does not constitute a taxable event for the
holder under Federal income tax law. If such a revenue ruling or opinion is no
longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to a class
are allocated pro rata to the shares of each class, based on the percentage of
the net assets of such class to the Fund's total assets, and then equally to
each
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outstanding share within a given class. Such general expenses include (i)
management fees, (ii) legal, bookkeeping and audit fees, (iii) printing and
mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, (iv) fees to
Independent Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses, to the
extent that such expenses pertain to a specific class rather than to the Fund as
a whole.
Determination of Net Asset Value Per Share. The net asset value per share of
Class A, Class B, and Class C 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) long-term debt
securities having a remaining maturity in excess of 60 days are valued based on
the mean between the "bid" and "ask" prices determined by a portfolio pricing
service approved by the Fund's Board of Trustees or obtained by the Manager from
two active market makers in the security on the basis of reasonable inquiry;
(ii) debt instruments having a maturity of more than 397 days when issued, and
non-money market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are valued at the
mean between the "bid" and "ask" prices determined by a pricing service approved
by the Fund's Board of Trustees or obtained by the Manager from two active
market makers in the security on the basis of reasonable inquiry; (iii) money
market debt securities that had a maturity of less than 397 days when issued
that have a remaining maturity of 60 days or less are valued at cost, adjusted
for amortization of premiums and accretion of discounts; and (iv) securities
(including restricted securities) not having readily-available market quotations
are valued at fair value determined under the Board's procedures. If the Manager
is unable to locate two market makers willing to give quotes (see (i) and (ii)
above), the security may be priced at the mean between the "bid" and "ask"
prices provided by a single active market maker (which in certain cases may be
the "bid" price if no "ask" price is available).
In the case of U.S. Government Securities and mortgage-backed
securities, where last sale information is not generally available, such pricing
procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity and other special factors
involved. The Manager may use pricing services approved by the Board of Trustees
to price
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U.S. Government Securities for which last sale information is not generally
available. The Manager will monitor the accuracy of such pricing services, which
may include comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
In the case of Municipal Securities, when last sale information is not
generally available, such pricing procedures may include "matrix" comparisons to
the prices for comparable instruments on the basis of quality, yield, maturity,
and other special factors involved (such as the tax-exempt status of the
interest paid by Municipal Securities). The Manager may use pricing services
approved by the Board of Trustees to price any of the types of securities
described above. The Manager will monitor the accuracy of such pricing services,
which may include comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
Puts and calls are valued at the last sales price on the principal
exchange on which they are traded or on NASDAQ, as applicable, as determined by
a pricing service approved by the Board of Trustees or by the Manager. If there
were no sales that day, value shall be the last sale price on the preceding
trading day if it is within the spread of the closing "bid" and "ask" prices on
the principal exchange or on NASDAQ on the valuation date, or, if not, value
shall be the closing "bid" price on the principal exchange or on NASDAQ on the
valuation date. If the put or call is not traded on an exchange or on NASDAQ, it
shall be valued at the mean between "bid" and "ask" prices obtained by the
Manager from two active market makers (which in certain cases may be the "bid"
price if no "ask" price is available).
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House (ACH)
transfer to buy shares. Dividends will begin to accrue on shares purchased by
the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. See "How to Purchase Shares" in the Prospectus for a
description of how Shares are offered to the public and how the excess of public
offering price over the net amount invested, if any, is allocated to authorized
dealers. The Prospectus describes several special purchase plans and methods by
which Shares may be purchased. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for 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, a spouse's siblings, aunts, uncles, nieces and nephews.
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o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
include the following:
Limited Term New York Municipal Fund*
Oppenheimer Bond Fund
Oppenheimer Bond Fund for Growth
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Income Fund
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Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer Value Stock Fund
Oppenheimer World Bond Fund
Rochester Fund Municipals
The New York Tax Exempt Income Fund, Inc.
the following "Money Market Funds":
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
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*Upon the exchange of shares of athe Fund for Class A shares of another
Oppenheimer fund, those shares acquired upon exchange may not subsequently be
exchanged for Class A shares of Limited Term New York Municipal Fund unless the
original exchange involved an exhchange of shares of the Fund for Class A shares
of either Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves.
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund shares
may be subject to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent ("Letter") is an investor's
statement in writing to the Distributor of the intention to purchase Class A or
Class A and Class B shares of the Fund (and of other eligible Oppenheimer funds)
during a 13-month period from the investor's first purchase pursuant to the
Letter (the "Letter of Intent period"), which may, at the investor's request,
include purchases made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of purchases
(excluding any purchases made by reinvestment of dividends or distributions or
purchases made at net asset value without sales charge) which, together with the
investor's holdings of such funds (calculated at their respective public
offering prices calculated on the date of the Letter), will equal or exceed the
amount specified in the Letter. The Letter enables the investor to count the
shares to be purchased under the Letter to obtain the reduced sales charge rate
(as set forth in the Prospectus) that applies under the Right of Accumulation to
current purchases of Class A shares. Each purchase of Class A shares under the
Letter will be made at the public offering price (including the sales charge)
that applies to a single lump-sum purchase of shares in the amount intended to
be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering
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price) of the investor's holdings of shares on the last day of that period, do
not equal or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set forth in
"Terms of Escrow" below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended purchase amount
will be held in escrow by the Transfer Agent subject to the Terms of Escrow.
Also, the investor agrees to be bound by the terms of the Prospectus, this
Statement of Additional Information and the Application used for such Letter of
Intent, and if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing Letters of
Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility of the dealer of record and/or
the investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
(1) Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
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(2) If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
(3) If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If such difference in sales charges is not paid within twenty days after
a request from the Distributor or the dealer, the Distributor will, within sixty
days of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the redemption
proceeds.
(4) By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
(5) The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of a Letter) include (a) Class A
shares sold with a front-end sales charge or subject to a Class A contingent
deferred sales charge, (b) Class B shares of other Oppenheimer funds acquired
subject to a contingent deferred sales charge, and (c) Class A shares or Class B
shares acquired in exchange for either (i) Class A shares of one of the other
Oppenheimer funds that were acquired subject to a Class A initial or contingent
deferred sales charge or (ii) Class B shares of one of the other Oppenheimer
funds that were acquired subject to a contingent deferred sales charge.
(6) Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply to shares
purchased by Asset Builder payments. An application should be obtained from the
Distributor, completed and returned, and a prospectus of the selected fund(s)
should be obtained from the Distributor or your financial advisor before
initiating Asset Builder payments. The amount of the Asset Builder investment
may be changed or the automatic investments may be terminated at any time by
writing to the Transfer Agent. A reasonable period (approximately 15 days) is
required after the Transfer Agent's receipt of such instructions to implement
them. The Fund reserves the right to amend, suspend, or discontinue offering
such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
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number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below supplements the terms and conditions for redemptions set forth
in the Prospectus.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $200 or such lesser amount as the Board
may fix. The Board of Trustees will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of 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.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchased subject to an initial sales charge or (ii) Class B shares on which you
paid a contingent deferred sales charge when you redeemed them without sales
charge. This privilege does not apply to Class C shares. The reinvestment may be
made without payment of the sales charge only in Class A shares of the Fund or
any of the other Oppenheimer funds into which shares of the Fund are
exchangeable as described below, at the net asset value next computed after the
Transfer Agent receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any capital gain
that was realized when the shares were redeemed is taxable, and reinvestment
will not alter any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be tax
deductible, depending on the timing and amount of the reinvestment. Under the
Internal Revenue Code, if the redemption proceeds of Fund shares on which a
sales charge was paid are reinvested in shares of the Fund or another of the
Oppenheimer funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed may not include
the amount of the sales charge paid. That would reduce the loss or increase the
gain recognized from the redemption. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from a dealer or broker after the close of the New
York Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from its
customers prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to and received
by the Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have
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been redeemed upon the Distributor's receipt the required redemption documents
in proper form, with the signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of either class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B or the Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of a payment on the date requested and reserves the right to
amend, suspend or discontinue offering such plans at any time without prior
notice. Because of the sales charge assessed on Class A share purchases,
shareholders should not make regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B and Class C shareholders
should not establish withdrawal plans, because of the imposition of the
contingent deferred sales charge on such withdrawals (except where the Class B
or the Class C contingent deferred sales charge is waived as described in the
Prospectus in "Waivers of Class B and Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below and
in the provisions of the OppenheimerFunds Application relating to such Plans, as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed instructions)
to exchange a pre-determined amount of shares of the Fund for shares (of the
same class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales charge
will be redeemed first and shares
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acquired with reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount withdrawn, the
investor's principal may be depleted. Payments made under withdrawal plans
should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. The Transfer
Agent and the Fund shall incur no liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased for and held
under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the Transfer
Agent upon receiving directions to that effect from the Fund. The Transfer Agent
will also terminate a Plan upon receipt of evidence satisfactory to it of the
death or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Share certificates are not issued for Class B shares or Class
C shares. Upon written request from the Planholder, the Transfer Agent will
determine the number of Class A shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
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If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer funds
having more than one class of shares may be exchanged only for shares of the
same class of other Oppenheimer funds. Shares of the Oppenheimer funds that have
a single class without a class designation are deemed "Class A Shares" for this
purpose. All of the Oppenheimer funds offer Class A, Class B and Class C shares
except Centennial America Fund, L.P., Centennial California Tax Exempt Trust,
Centennial Government Trust, Centennial Money Market Trust, Centennial New York
Tax Exempt Trust, Centennial Tax Exempt Trust, Daily Cash Accumulation Fund,
Inc. and Oppenheimer Money Market Fund, Inc., which offer only Class A shares,
and Limited Term New York Municipal Fund and Oppenheimer Main Street California
Municipal Fund which offer only Class A and Class B shares. (Class B and Class C
shares of Oppenheimer Cash Reserves are generally only available by exchange
from the same class of other Oppenheimer funds or thorough OppenheimerFunds
sponsored 401(k) plans). A current list showing which funds offer which class
can be obtained by calling the Distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months prior
to that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds (except Oppenheimer Cash
Reserves) or from any unit investment trust for which reinvestment arrangements
have been made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds. No contingent deferred sales charge is
imposed on exchanges of shares of any class purchased subject to a contingent
deferred sales charge. However, when Class A shares acquired by exchange of
Class A shares of other Oppenheimer funds purchased subject to a Class A
contingent deferred sales charge are redeemed within 18 months of the end of the
calendar month of the initial purchase of the exchanged Class A shares, the
Class A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class B
contingent deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within 6 years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales charge is
imposed on Class C shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability
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and rate of any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning shares of more
than one class must specify whether they intend to exchange Class A, Class B or
Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans, Checkwriting, if available, and retirement
plan contributions will be switched to the new account unless the Transfer Agent
is instructed otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations), shareholders might
not be able to request exchanges by telephone and would have to submit written
exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and
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the Transfer Agent are unable to provide investment, tax or legal advice to a
shareholder in connection with an exchange request or any other investment
transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value. 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 Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money Market
Fund, Inc., as promptly as possible after the return of such checks to the
Transfer Agent, in order to enable the investor to earn a return on otherwise
idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio, and
expenses borne by the Fund or borne separately by a class, as described in
"Alternative Sales Arrangements -- Class A, Class B and Class C Shares," above.
Dividends are calculated in the same manner, at the same time and on the same
day for shares of each class. However, dividends on Class B and Class C shares
are expected to be lower than dividends on Class A shares as a result of the
asset-based sales charges on Class B and Class C shares, and Class B and Class C
dividends will also differ in amount as a consequence of any difference in net
asset value between the classes.
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.
-47-
<PAGE>
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
advisors 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 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.
-48-
<PAGE>
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 advisors 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. Citibank, N.A., whose principal business address is 399 Park
Avenue New York, NY 10043, is currently the custodian of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the custodian may have with the
Manager and its affiliates. Prior to July, 1996 the Fund's custodian was
Investors Bank & Trust Company.
Independent Auditors. Price Waterhouse LLP, 1100 Bausch & Lomb Place, 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
Manager and its affiliates.
-49-
<PAGE>
APPENDIX A
INDUSTRY CLASSIFICATIONS
Electric Resource Recovery
Gas
Water Higher Education
Sewer Education
Telephone
Lease Rental
Adult Living Facilities
Hospital Non Profit Organization
General Obligation Highways
Special Assessment Marine/Aviation Facilities
Sales Tax
Multi Family Housing
Manufacturing, Non Durables Single Family Housing
Manufacturing, Durables
Pollution Control
A-1
<PAGE>
APPENDIX B
DESCRIPTION OF SECURITIES RATINGS
Below is a description of the two highest rating categories for Short Term Debt
and Long Term Debt by the "Nationally-Recognized Statistical Rating
Organizations" which the Manager evaluates in purchasing securities on behalf of
the Trust. The ratings descriptions are based on information supplied by the
ratings organizations to subscribers.
Short Term Debt Ratings.
Moody's Investors Service, Inc. ("Moody's"): The following rating designations
for commercial paper (defined by Moody's as promissory obligations not having
original maturity in excess of nine months), are judged by Moody's to be
investment grade, and indicate the relative repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be evidenced by
the following characteristics: (a) leveling market positions in well-established
industries; (b) high rates of return on funds employed; (c) conservative
capitalization structures with moderate reliance on debt and ample asset
protection; (d) broad margins in earning coverage of fixed financial charges and
high internal cash generation; and (e) well established access to a range of
financial markets and assured sources of alternate liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced by many
of the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are designated
"Moody's Investment Grade" ("MIG"). Short-term notes which have demand features
may also be designated as "VMIG". These rating categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by established cash
flows, superior liquidity support or demonstrated broadbased access to the
market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample although not so
large as in the preceding group.
Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of no more
than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2: Satisfactory capacity for timely payment. However, the relative
degree of safety is not as high as for issues designated "A-1".
S&P's ratings for Municipal Notes due in three years or less are:
B-1
<PAGE>
SP-1: Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have a demand
or double feature as part of their provisions. The first rating addresses the
likelihood of repayment of principal and interest as due, and the second rating
addresses only the demand feature. With short-term demand debt, S&P's note
rating symbols are used with the commercial paper symbols (for example,
"SP-1+/A-1+").
Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the following short-
term ratings to debt obligations that are payable on demand or have original
maturities of generally up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of assurance for
timely payment.
F-1: Very strong credit quality; assurance of timely payment is only slightly
less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned "F-1+" or "F-1"
ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities, when issued, of
under one year), asset-backed commercial paper, and certificates of deposit (the
ratings cover all obligations of the institution with maturities, when issued,
of under one year, including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors
are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term ratings, including
commercial paper (with maturities up to 12 months), are as follows:
A1: Obligations supported by the highest capacity for timely repayment.
A1: Obligations supported by a very strong capacity for timely repayment.
B-2
<PAGE>
A2: Obligations supported by a strong capacity for timely repayment, although
such capacity may be susceptible to adverse changes in business, economic, or
financial conditions.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply to
commercial paper, certificates of deposit, unsecured notes, and other
securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding timely
repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".
Long Term Debt Ratings. These ratings are relevant for securities purchased by
the Trust with a remaining maturity of 397 days or less, or for rating issuers
of short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
positions of such issues.
Aa: Judged to be of high quality by all standards. Together with the "Aaa" group
they comprise what are generally known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuations of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the security ranks in the higher
end of its generic rating category; the modifier "2" indicates a mid-range
ranking; and the modifier "3" indicates that the issue ranks in the lower end of
its generic rating category.
Standard & Poor's: Bonds (including municipal bonds) are rated as follows:
AAA: The highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and differ
from "AAA" rated issues only in small degree.
Fitch:
AAA: Considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
B-3
<PAGE>
AA: Considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Plus (+) and minus (-) signs are used
in the "AA" category to indicate the relative position of a credit within that
category.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated "F-1+".
Duff & Phelps:
AAA: The highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions. Plus
(+) and minus (-) signs are used in the "AA" category to indicate the relative
position of a credit within that category.
IBCA: Long-term obligations (with maturities of more than 12 months) are rated
as follows:
AAA: The lowest expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial such that adverse changes in business,
economic, or financial conditions are unlikely to increase investment risk
significantly.
AA: A very low expectation for investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic, or
financial conditions may increase investment risk albeit not very significantly.
A plus (+) or minus (-) sign may be appended to a long term rating to denote
relative status within a rating category.
TBW: TBW issues the following ratings for companies. These ratings assess the
likelihood of receiving payment of principal and interest on a timely basis and
incorporate TBW's opinion as to the vulnerability of the company to adverse
developments, which may impact the market's perception of the company, thereby
affecting the marketability of its securities.
A: Possesses an exceptionally strong balance sheet and earnings record,
translating into an excellent reputation and unquestioned access to its natural
money markets. If weakness or vulnerability exists in any aspect of the
company's business, it is entirely mitigated by the strengths of the
organization.
A/B: The company is financially very solid with a favorable track record and no
readily apparent weakness. Its overall risk profile, while low, is not quite as
favorable as for companies in the highest rating category.
B-4
<PAGE>
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Price Waterhouse LLP
1100 Bausch & Lomb Place
Rochester, NY 14604-2705
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
<PAGE>
ROCHESTER FUND MUNICIPALS
FORM N-1A
PART C
Other Information
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements:
(1) Financial Highlights - See Parts A and B:
filed with Registrant's Post Effective Amendment
No. 17 filed March 5, 1996 - incorporated by
reference
(2) Report of Independent Accountants- See Part B:
filed with Registrant's Post Effective Amendment
No. 17 filed March 5, 1996 - incorporated by
reference
(3) Statement of Investments - See Part B: filed
with Registrant's Post Effective Amendment No. 17
filed March 5, 1996 - incorporated by reference
(4) Statement of Assets and Liabilities - See Part
B: filed with Registrant's Post Effective Amendment
No. 17 filed March 5, 1996 - incorporated by
reference
(5) Statement of Operations - See Part B: filed
with Registrant's Post Effective Amendment No. 17
filed March 5, 1996 - incorporated by reference
(6) Statement of Changes in Net Assets - See Part
B: filed with Registrant's Post Effective Amendment
No. 17 filed March 5, 1996 - incorporated by
reference
(7) Notes to Financial Statements - See Part B:
filed with Registrant's Post Effective Amendment
No. 17 filed March 5, 1996 - incorporated by
C-1
<PAGE>
reference
(b) Exhibits:
(1) Amended and Restated Declaration of Trust as filed with
the Commonwealth of Massachusetts on February 8, 1995, as
amended on November 7, 1995 ("Amended and Restated Declaration
of Trust:) filed with Registrant's Post Effective Amendment
No. 16 filed January 11, 1996 - incoporated by reference
(2) Bylaws - filed with Registrant's Post
Effective Amendment No. 13 filed May 1, 1993 -
incorporated by reference
(3) Not applicable
(4) (i) Specimen Class A Share Certificate:
Filed herewith.
(ii) Specimen Class B Share Certificate: Filed
herewith.
(iii) Specimen Class C Share Certificate:
Filed herewith.
(5) Investment Advisory Agreement dated January 4,
1996 with Oppenheimer Management Corporation -
filed with Registrant's Post Effective Amendment
No. 16 filed January 11, 1996 - incoporated by
reference.
(6) (a) General Distributor's Agreement dated
January 4, 1996 with Oppenheimer Funds
Distributor, Inc. - filed with
Registrant's Post Effective Amendment No.
16 filed January 11, 1996 - incoporated
by reference.
(b) Form of Oppenheimer Funds Distributor
Inc. Dealer Agreement - Filed with Post-
Effective Amendment No. 14 of Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850) filed
September 30,1994 - incorporated by reference.
C-2
<PAGE>
(c) Form of Oppenheimer Funds Distributor
Inc. Broker Agreement - Filed with Post-
Effective Amendment No. 14 of Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), filed
September 30,1994 -incorporated by reference.
(d) Form of Oppenheimer Funds Distributor
Inc. Agency Agreement - Filed with Post-
Effective Amendment No. 14 of Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), filed
September 30,1994 - incorporated by reference.
(7) Amended and Restated Retirement Plan for Independent
Trustees of Registrant adopted on January 26, 1995, as amended
and restated October 16, 1995 - filed with Registrant's Post
Effective Amendment No. 16 filed January 11, 1996 -
incoporated by reference.
(8) Custodian Agreement dated as of July 5, 1996
between the Registrant and Citibank, N.A. - Filed
herewith.
(9) Service Contract dated March 8, 1996 between the
Registrant and OppenheimerFunds Services Filed herewith.
(10) Consent of Counsel - incorporated by reference to the
Registrant's Rule 24f-2 Notice filed on February 28,1996 -
incorporated by reference.
(11) Independent Auditor's Consent - filed
herewith.
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) (i) Amended and Restated Service Plan and
Agreement with Oppenheimer Funds
Distributor, Inc. dated January 4, 1996
for Class A Shares - filed with
Registrant's Post Effective Amendment No.
C-3
<PAGE>
16 filed January 11, 1996 - incoporated
by reference.
(ii) Form of Distribution and Service Plan and
Agreement for Class B Shares under Rule 12b-1
of the Investment Company Act of 1940: Filed
herewith.
(iii) Form of Distribution and Service Plan and
Agreement for Class C Shares under Rule 12b-1 of the
Investment Company Act of 1940:
Filed herewith.
(16) Performance Computation Schedule - filed with
Registrant's Post Effective Amendment No. 17 filed
March 5, 1996 - incorporated by reference
(17) (i) Financial Data Schedule for Class A
shares -filed with Registrant's Post
Effective Amendment No. 17 filed March 5,
1996 - incorporated by reference
(ii) Financial Data Schedule for Class B
shares - not applicable.
(iii) Financial Data Schedule for Class C
shares - not applicable.
(18) Oppenheimer Fund Multiple Class Plan under Rule 18f-3
dated January 5, 1996 - filed with Registrant's Post Effective
Amendment No. 16 filed January 11, 1996 - incoporated by
reference.
--- Powers of Attorney - filed with Registrant's
Post Effective Amendment. 16 filed January 11,1996
- incorporated by reference.
Item 25. Persons Controlled by or under Common Control with
- -------- ---------------------------------------------------
Registrant
- ----------
The Board of Trustees of the Registrant is identical to the
Boards of of Trustees of Bond Fund Series - Oppenheimer Bond Fund
C-4
<PAGE>
for Growth and Limited Term New York Municipal Fund (collectively
"The Rochester Funds").
Item 26. Number of Holders of Securities
- -------- --------------------------------
Title of Class Number of Record Holders as
of January 1, 1997
Class A shares of beneficial interest 50,937
Class B shares of beneficial interest 0
Class C shares of beneficial interest 0
Item 27. Indemnification
- -------- ---------------
Registrant's Amended and Restated Agreement and Declaration of Trust
(the "Declaration of Trust"), which is referenced herein, (see Exhibit 1),
contains certain provisions relating to the indemnification of Registrant's
officers and trustees. Section 6.4 of Registrant's Declaration of Trust provides
that Registrant shall indemnify (from the assets of the Fund or Funds in
question) each of its trustees and officers (including persons who served at
Registrant's request as directors, officers or trustees of another organization
in which Registrant has any interest as a shareholder, creditor or otherwise
hereinafter referred to as a "Covered Person") against all liabilities,
including but not limited to, amounts paid for satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been threatened, while in
office or thereafter, by reason of being or having been such a trustee or
officer, director or trustee, except with respect to any matter as to which it
has been determined in one of the manners described below, that such Covered
Person (i) did not act in good faith in the reasonable belief that such Covered
Person's action was in or not opposed to the best interest of Registrant or (ii)
had acted with willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct described in (i) and (ii) being
referred to hereafter as "Disabling Conduct".
Section 6.4 provides that a determination that the Covered
C-5
<PAGE>
Conduct may be made by (i) a final decision on the merits by a court or other
body before whom the proceeding was brought that the person to be indemnified
was not liable by reason of Disabling Conduct, (ii) dismissal of a court action
or an administrative proceeding against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination, based upon a
review of the facts, that the indemnity was not liable by reason of Disabling
Conduct by (a) a vote of a majority of a quorum of trustees who are neither
"interested persons" of Registrant as defined in Section 2(a)(19) of the 1940
Act nor parties to the proceeding, or (b) an independent legal counsel in a
written opinion.
In addition, Section 6.4 provides that expenses, including accountants'
and counsel fees so incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines or penalties), may
be paid from time to time in advance of the final disposition of any such
action, suit or proceeding, provided that the Covered Person shall have
undertaken to repay the amounts so paid to the Sub-trust in question if it is
ultimately determined that indemnification of such expenses is not authorized
under Article 6 and (i) the Covered Person shall have provided security for such
undertaking, (ii) Registrant shall be insured against losses arising by reason
of any lawful advances, or (iii) a majority of a quorum of disinterested
trustees who are not a party to the proceeding, by an independent legal counsel
in a written opinion, based upon a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
Section 6.1 of Registrant's Agreement and Declaration of Trust
provides, among other things, that nothing in the Agreement and Declaration of
Trust shall protect any trustee or officer against any liability to Registrant
or the shareholders to which such trustee or officer would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of trustee or such
officer.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such
C-6
<PAGE>
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant;
it and certain subsidiaries and affiliates act in the same capacity to other
registered investment companies as described in Parts A and B hereof and listed
in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each officer
and director of OppenheimerFunds, Inc. is, or at any time during the past two
fiscal years has been, engaged for his/her own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name & Current Position Other Business and Connections with
OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- --------------------------------------
<S> <C>
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real
Asset Management, Inc. ("ORAMI");
formerly Vice President of Equity
Derivatives at Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds; a
Chartered
Financial
Analyst;
Senior Vice
President of
HarbourView;
prior to
March, 1996 he
was the senior
equity
C-7
<PAGE>
portfolio manager for the Panorama
Series Fund, Inc. (the "Company") and
other mutual funds and pension funds
managed by G.R. Phelps & Co. Inc.
("G.R. Phelps"), the Company's former
investment adviser, which was a
subsidiary of Connecticut Mutual Life
Insurance Company; was also responsible
for managing the common stock
department and common stock investments
of Connecticut Mutual Life Insurance
Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds;
formerly a
Vice President
and Senior
Portfolio
Manager at
First of
America
Investment
Corp.
Ellen Batt,
Assistant Vice President None
Kathleen Beichert,
Assistant Vice President Formerly employed by Smith Barney, Inc.
David Bernard,
Vice President Previously a Regional Sales Director
for Retirement Plan Services at Charles
Schwab & Co., Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the Oppenheimer
Funds (listed below); previously a Fund
Controller for OppenheimerFunds, Inc.
(the "Manager").
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
C-8
<PAGE>
Assistant
Secretary and
Treasurer of
the
Denver-based
Oppenheimer
Funds. Vice
President and
Treasurer of
OppenheimerFunds
Distributor,
Inc. (the
"Distributor")
and
HarbourView
Asset
Management
Corporation
("HarbourView"),
an investment
adviser
subsidiary of
the Manager;
Senior Vice
President,
Treasurer,
Assistant
Secretary and
a director of
Centennial
Asset
Management
Corporation
("Centennial"),
an investment
adviser
subsidiary of
the Manager;
Vice
President,
Treasurer and
Secretary of
Shareholder
Services, Inc.
("SSI") and
Shareholder
Financial
Services, Inc.
("SFSI"),
transfer agent
subsidiaries
of the
Manager;
Director,
Treasurer and
Chief
Executive
Officer of
MultiSource
Services,
Inc.; Vice
President and
Treasurer of
Oppenheimer
Real Asset
Management,
Inc.;
President,
Treasurer and
Director of
Centennial
Capital
Corporation;
Vice President
and Treasurer
of Main Street
Advisers.
Scott Brooks,
Assistant Vice President None.
Susan Burton,
Assistant Vice President Previously a Director of Educational
Services for H.D. Vest Investment
Securities, Inc.
Michael A. Carbuto,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds; Vice
President of
Centennial.
Ruxandra Chivu,
Assistant Vice President None.
C-9
<PAGE>
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed Income
for State Street Research & Management
Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President and
Director An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
John Doney,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Secretary of the New York-based
Oppenheimer Funds; Vice President and
Secretary of the Denver-based
Oppenheimer Funds; Secretary of the
Oppenheimer Quest and Oppenheimer
Rochester Funds; Executive Vice
President, Director and General Counsel
of the Distributor; President and a
Director of Centennial; Chief Legal
Officer and a Director of MultiSource
Services, Inc.; President and a
Director of Oppenheimer Real Asset
Management, Inc.; Executive Vice
President, General Counsel and Director
of SFSI and SSI; formerly Senior Vice
President and Associate General Counsel
of the Manager and the Distributor.
George Evans,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Scott Farrar,
Vice President Assistant Treasurer of the New York-
based and Denver-based Oppenheimer
funds.
C-10
<PAGE>
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
OppenheimerFunds Distributor, Inc.;
Secretary of HarbourView Asset
Management Corporation, MultiSource
Services, Inc. and Centennial Asset
Management Corporation; Secretary, Vice
President and Director of Centennial
Capital Corporation; Vice President and
Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds.
Formerly Chairman of the Board and
Director of Rochester Fund
Distributors, Inc. ("RFD"), President
and Director of Fielding Management
Company, Inc. ("FMC"), President and
Director of Rochester Capital Advisors,
Inc. ("RCAI"), Managing Partner of
Rochester Capital Advisors, L.P.,
President and Director of Rochester
Fund Services, Inc. ("RFS"), President
and Director of Rochester Tax Managed
Fund, Inc.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds; Secretary and
General Counsel of Rochester Capital
Advisors, L.P. and Secretary of
Rochester Tax Managed Fund, Inc.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President and
Counsel of OAC; formerly he held the
following positions: Vice President and
a director of HarbourView and
Centennial, a director of SFSI and SSI,
C-11
<PAGE>
an officer of other Oppenheimer Funds.
Linda Gardner,
Assistant Vice President None.
Janelle Gellermann,
Assistant Vice President None.
Jill Glazerman, None.
Assistant Vice President
Ginger Gonzalez,
Vice President, Director of
Marketing Communications Formerly 1st Vice President/ Director
of Graphic and Print Communications for
Shearson Lehman Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Caryn Halbrecht,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds;
formerly Vice
President of
Fixed Income
Portfolio
Management at
Bankers Trust.
Barbara Hennigar,
Executive Vice President and
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI;
President and Chief Executive Officer
of SSI.
Dorothy Hirshman,
Assistant Vice President None.
Alan Hoden,
Vice President None.
C-12
<PAGE>
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Ronald Jamison,
Vice President Formerly Vice President andAssociate
General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Formerly a
Managing
Director of
Global
Equities at
Paine Webber's
Mitchell
Hutchins
division.
Heidi Kagan,
Assistant Vice President None.
Thomas W. Keffer,
Vice President Formerly Senior Managing Director of
Van Eck Global.
Avram Kornberg,
Vice President Formerly a Vice President with Bankers
Trust.
Paul LaRocco,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Securities Analyst for Columbus Circle
Investors.
C-13
<PAGE>
Michael Levine,
Assistant Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March, 1996 he
was the senior bond portfolio manager
for Panorama Series Fund, Inc., other
mutual funds and pension accounts
managed by G.R. Phelps; was also
responsible for managing the public
fixed-income securities department at
Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of the
New York-based and the Denver-based
Oppenheimer funds; President and a
Director of OAC, HarbourView and
Oppenheimer Partnership Holdings, Inc.;
Director of ORAMI; Chairman and
Director of SSI; a Director of
Oppenheimer Real Asset Management, Inc.
Timothy Martin,
Assistant Vice President Formerly Vice President, Mortgage
Trading, at S.N. Phelps & Co., Salomon
Brothers, and Kidder Peabody.
Sally Marzouk,
Vice President None.
C-14
<PAGE>
Lisa Migan,
Assistant Vice President, None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Portfolio Manager with Phoenix
Securities Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
John Pirie,
Assistant Vice President Formerly a Vice President with Cohane
Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Formerly
Senior
Investment
Officer and
Portfolio
Manager with
Chemical Bank.
C-15
<PAGE>
Russell Read,
Vice President Consultant for Prudential Insurance on
behalf of the General Motors Pension
Plan.
Thomas Reedy,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Securities Analyst for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President Formerly a Product Manager for
Metropolitan Life Insurance Company.
Michael S. Rosen
Vice President; President:
Rochester Division An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly
Vice President of RFS, President and
Director of RFD, Vice President and
Director of FMC, Vice President and
director of RCAI, General Partner of
RCA, an officer and/or portfolio
manager of certain Oppenheimer funds.
David Rosenberg,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly
Vice President and Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of Dollar Dry
Dock Bank.
C-16
<PAGE>
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly Vice President of Citicorp
Investment Services.
Diane Sobin,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds;
formerly a
Vice President
and Senior
Portfolio
Manager for
Dean Witter
InterCapital,
Inc.
Richard A. Soper, None.
Assistant Vice President
Nancy Sperte,
Executive Vice President
None.
Donald W. Spiro,
Chairman Emeritus Vice
Chairman and
Trustee of the
New York-based
Oppenheimer
Funds;
formerly
Chairman of
the Manager
and the
Distributor.
Arthur Steinmetz,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
Ralph Stellmacher,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
John Stoma,
Senior Vice President,
Director Retirement Plans Formerly Vice President of U.S. Group
Pension Strategy and Marketing for
Manulife Financial.
Michael C. Strathearn,
C-17
<PAGE>
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March, 1996 he
was an equity portfolio manager for
Panorama Series Fund, Inc. and other
mutual funds and pension accounts
managed by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or
Managing Partner of the Denver-based
Oppenheimer Funds; President and a
Director
of Centennial; formerly President and
Director of OAMC, and Chairman of the
Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Discovery Fund, Oppenheimer
Global Emerging Growth Fund and
Oppenheimer Enterprise Fund. Formerly
Managing Director of Buckingham Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor
and SFSI.
Ashwin Vasan,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
C-18
<PAGE>
Jerry A. Webman,
Senior Vice President
Director of
New
York-basedtax-exempt
fixed income
Oppenheimer
Funds;
Formerly
Managing
Director and
Chief Fixed
Income
Strategist at
Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Vice President of
HarbourView; prior to March, 1996 he
was an equity portfolio manager for
Panorama Series Fund, Inc. and other
mutual funds and pension funds managed
by G.R. Phelps.
William L. Wilby,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds; Vice
President of
HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice
President of Centennial; Vice
President, Finance and Accounting and
member of the Board of Directors of the
Junior League of Denver, Inc.
Robert G. Zack,
Senior Vice President and
Assistant Secretary
Associate
General
Counsel of the
Manager;
Assistant
Secretary of
the
Oppenheimer
Funds;
Assistant
Secretary of
SSI, SFSI; an
officer of
other
Oppenheimer
Funds.
Arthur J. Zimmer,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds; Vice
President of
Centennial.
</TABLE>
C-19
<PAGE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds,
the Denver-based Oppenheimer Funds, and the Quest/Rochester
Oppenheimer Funds, set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
C-20
<PAGE>
Oppenheimer Municipal Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Quest/Rochester Funds
- ---------------------------------
Limited Term New York Municipal Fund
Openheimer Bond Fund For Growth
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, Quest funds, OppenheimerFunds Distributor, Inc.,
HarbourView Asset Management Corp., Oppenheimer Partnership
Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World
Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management Corporation,
Centennial Capital Corp., Oppenheimer Real Asset Management, Inc.
and Oppenheimer Real Asset Management, Inc. is 6803 South Tucson
Way, Englewood, Colorado 80012.
The address of MultiSource Services, Inc. is 1700 Lincoln
Street, Denver, Colorado 80203.
The address of Limited Term New York Municipal Fund, Oppenheimer Bond Fund
For Growth and Rochester Fund Municipals is 350 Linden Oaks, Rochester, New York
14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the
other registered open-end investment companies for which
OppenheimerFunds, Inc. is the investment adviser, as described in
Part A and B of this Registration Statement and listed in Item
C-21
<PAGE>
28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION>
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
<S> <C> <C>
George Clarence Bowen+ Vice President & Treasurer Vice
President and
Treasurer of the
NY-based
Oppenheimer funds /
Vice President,
Secretary and
Treasurer of the
Denver-based Oppen-
heimer funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce* Senior Vice President - None
Director - Financial
Institution Div.
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Bill Coughlin Vice President None
3425 1/2 Irving Avenue So.
Minneapolis, MN 55408
Mary Crooks+ Senior Vice President None
C-22
<PAGE>
E. Drew Devereaux ++ Assistant Vice President None
Andrew John Donohue* Executive Vice Secretary of
President, General the New York-based
Counsel and Director Oppenheimerfunds/
Vice President of
the Denver-based
Oppenheimer funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding++ Vice President; Chairman:
Rochester Division None
Reed F. Finley Vice President - None
320 E. Maple, Ste. 254 Financial Institution Div.
Birmingham, MI 48009
Wendy Fishler* Vice President - None
Financial Institution Div.
Ronald R. Foster Senior Vice President None
139 Avant Lane
Cincinatti, OH 45249
Patricia Gadecki Vice President None
3906 Americana Drive
Tampa, FL 3334
C-23
<PAGE>
Luiggino Galletto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
Michael Keogh* Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Ilene Kutno* Vice President - None
Director - Regional Sales
Wayne A. LeBlang Senior Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
C-24
<PAGE>
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
Timothy G. Mulligan ++ Vice President None
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Wendy Murray Vice President None
114-B Larchmont Acres West
Larchmont, NY 10538
Joseph Norton Vice President None
2518 Fillmore Street
Apt. 1
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.,
Director -
Key Accounts
C-25
<PAGE>
Minnie Ra Vice President - None
0895 Thirty-First Ave. Financial Institution Div.
Apt. 4
San Francisco, CA 94121
Michael Raso Vice President None
30 Hommocks Road
Apt. 30
Larchmont, NY 10538
John C. Reinhardt ++ Vice President None
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
Michael S. Rosen++ Vice President, President:
Rochester Division None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. 3D
Indianapolis, IN 46240
James Ruff* President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Wasington, DC 20007
Michael Sciortino Vice President None
3114 Hickory Run
Sugarland, TX 77479
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker ++ Vice President None
Michael Stenger Vice President None
8572 Saint Ives Place
Cincinnati, OH 45255
C-26
<PAGE>
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
Philip Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
* Two World Trade Center, New York, NY 10048-0203
+ 6803 South Tucson Way, Englewood, Colorado 80012
++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester Division")
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records
- -------- ------------------------------------
All accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act and the General Rules and
Regulations promulgated thereunder, are in possession of OppenheimerFunds, Inc.
at its offices at 6803 South Tucson Way, Englewood, Colorado, except that
records with regard to items covered by Registrant's Custodian Agreement, are
maintained by, or under agreement with, its Custodian,Citibank, N.A., 399 Park
Avenue, New York, New York 10043.
Item 31. Management Services
- -------- -------------------
Not applicable.
C-27
<PAGE>
Item 32. Undertakings
- -------- --------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
C-28
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York on the 14th day of January, 1997.
ROCHESTER FUND MUNICIPALS
/s/ Bridget A. Macaskill
------------------------------*
By: Bridget A. Macaskill
Bridget A. Macaskill, Chairman
of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Bridget A. Mackaskill
- --------------------------*
Bridget A. Macaskill Chairman of the Board,
President (Principal January 14, 1997
Executive Officer) and
Trustee
/s/ George C. Bowen
- ------------------------* Treasurer (Principal January 14, 1997
George C. Bowen Financial and Accounting
Officer)
/s/ John Cannon
- -------------------------* Trustee January 14, 1997
John Cannon
/s/ Paul Y. Clinton
- -------------------------* Trustee January 14, 1997
Paul Y. Clinton
/s/ Thomas W. Courtney
- --------------------------* Trustee January 14, 1997
Thomas W. Courtney
<PAGE>
/s/ Lacy B. Hermann
- --------------------------* Trustee January 14, 1997
Lacy B. Herrmann
/s/ George Loft
- -------------------------* Trustee January 14, 1997
George Loft
*By: /s/ Rober G. Zack
----------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
<PAGE>
FORM N-1A
ROCHESTER FUND MUNICIPALS
EXHIBIT INDEX
Item No. Description
- -------- -----------
24(b)(4)(i) Specimen Stock Certificate for Class A
shares
24(b)(4)(ii) Specimen Stock Certificate for Class B
shares
24(b)(4)(iii) Specimen Stock Certificate for Class C
shares
24(b)(8) Custodian Agreement dated July 5, 1996
with Citibank, N.A.
24(b)(9) Service Contract dated March 8, 1996 with
OppenheimerFunds Services
24(b)(11) Independent Auditor's Consent
24(b)(15(ii) Form of Distribution and Service Plan and
Agreement for Class B Shares
24(b)(15(iii) Form of Distribution and Service Plan and
Agreement for Class C Shares
Exhibit 24(b)(4)(i)
Rochester Fund Muncipals
Class A Share Certificate (8-1/2" x 11")
IFRONT OF CERTIFICATE (All text and other matter lies within decorative border)
(upper left) box with heading: NUMBER (OF SHARES)
(upper right) box with heading: CLASS A SHARES;
(centered Rochester Fund Municipals
below boxes)
A MASSACHUSETTS BUSINESS TRUST
(at left)THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with number
CUSIP 771362100
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF
BENEFICIAL INTEREST OF
ROCHESTER FUND MUNICIPALS
(hereinafter called the "Fund"), transferable only on
the books of the Fund by the holder hereof in person
or by duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate
and the shares represented hereby are issued and
shall be held subject to all of the provisions of the
Declaration of Trust of the Fund to all of which the
holder by acceptance hereof assents. This certificate
is not valid until countersigned by the Transfer
Agent.
WITNESS the facsimile seal of the Fund and the
signatures of its duly authorized officers.
(at left (at right
of seal) of seal)
(signature) (signature)
Dated:
----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
Exhibit 24(b)(4)(i)
Page 2
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
ROCHESTER FUND MUNICIPALS
SEAL
1986
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (CO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as tenants with rights of survivorship and not as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA _____________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................. hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
Exhibit 24(b)(4)(i)
Page 3
- -------------------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------------------------------
________________________________________________ Class A Shares of beneficial
interest represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: ____________________________
Signature of Officer/Title
(text printed
vertically to right NOTICE: The signature(s) to this assignment must
paragraph) correspond with the name(s) as written upon the face of
the certificate in every particular without
alteration or enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature guarantee) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this logotype
watermark:
- -----------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(ii)
Rochester Fund Muncipals
Class B Share Certificate (8-1/2" x 11")
I.FRONT OF CERTIFICATE (All text and other matter lies within decorative border)
(upper left) box with heading: NUMBER (OF SHARES)
(upper right) box with heading: CLASS B SHARES;
(centered Rochester Fund Municipals
below boxes)
A MASSACHUSETTS BUSINESS TRUST
(at left)THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with number
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF
BENEFICIAL INTEREST OF
ROCHESTER FUND MUNICIPALS
(hereinafter called the "Fund"), transferable only on
the books of the Fund by the holder hereof in person
or by duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate
and the shares represented hereby are issued and
shall be held subject to all of the provisions of the
Declaration of Trust of the Fund to all of which the
holder by acceptance hereof assents. This certificate
is not valid until countersigned by the Transfer
Agent.
WITNESS the facsimile seal of the Fund and the
signatures of its duly authorized officers.
(at left (at right
of seal) of seal)
(signature) (signature)
Dated:
----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
Exhibit 24(b)(4)(ii)
Page 2
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
ROCHESTER FUND MUNICIPALS
SEAL
1986
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (CO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as tenants with rights of survivorship and not as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA _____________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................. hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
Exhibit 24(b)(4)(ii)
Page 3
- -------------------------------------------------------------------------------
(Please print or type name and address of assignee)
- -------------------------------------------------------------------------------
________________________________________________ Class B Shares of beneficial
interest represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: ____________________________
Signature of Officer/Title
(text printed
vertically to right NOTICE: The signature(s) to this assignment must
paragraph) correspond with the name(s) as written upon the face of
the certificate in every particular without
alteration or enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature guarantee) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this logotype
watermark:
- -----------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(iii)
Rochester Fund Muncipals
Class C Share Certificate (8-1/2" x 11")
I.FRONT OF CERTIFICATE (All text and other matter lies within decorative border)
(upper left) box with heading: NUMBER (OF SHARES)
(upper right) box with heading: CLASS C SHARES;
(centered Rochester Fund Municipals
below boxes)
A MASSACHUSETTS BUSINESS TRUST
(at left)THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with number
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS C SHARES OF
BENEFICIAL INTEREST OF
ROCHESTER FUND MUNICIPALS
(hereinafter called the "Fund"), transferable only on
the books of the Fund by the holder hereof in person
or by duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate
and the shares represented hereby are issued and
shall be held subject to all of the provisions of the
Declaration of Trust of the Fund to all of which the
holder by acceptance hereof assents. This certificate
is not valid until countersigned by the Transfer
Agent.
WITNESS the facsimile seal of the Fund and the
signatures of its duly authorized officers.
(at left (at right
of seal) of seal)
(signature) (signature)
Dated:
----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
Exhibit 24(b)(4)(iii)
Page 2
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
ROCHESTER FUND MUNICIPALS
SEAL
1986
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (CO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as tenants with rights of survivorship and not as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA _____________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................. hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
Exhibit 24(b)(4)(iii)
Page 3
- -----------------------------------------------------------------------------
(Please print or type name and address of assignee)
- -----------------------------------------------------------------------------
________________________________________________ Class C Shares of beneficial
interest represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: ____________________________
Signature of Officer/Title
(text printed
vertically to right NOTICE: The signature(s) to this assignment must
paragraph) correspond with the name(s) as written upon the face of
the certificate in every particular without
alteration or enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature guarantee) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this logotype
watermark:
- -----------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
CUSTODIAN AGREEMENT
I. DESIGNATION OF CUSTODIAN
ROCHESTER FUND MUNICIPALS (the "Fund"), an open-end management
investment company organized as a Massachusetts business trust having an office
at 350 Linden Oaks, Rochester, New York 14625, hereby designates Citibank, N.A.
(the "Bank"), a National Banking Corporation incorporated under the laws of the
United States of America and having an office at 399 Park Avenue, New York, NY
10043, as Custodian of the Property (as defined in Section III) of the Fund. By
its acceptance, the Bank agrees to serve as such Custodian upon the terms and
conditions set forth in this Agreement.
II. DELIVERY OF DOCUMENTS
(a) Documents delivered. The Fund delivers to the Bank
herewith the following documents:
(i) Resolutions authorizing the appointment of the
Bank as the custodian of the Fund and the
execution by the Fund of this Agreement;
(ii) copies, certified by the appropriate officer or
officers, of the charter and the by-laws of the
Fund; and
(iii) incumbency and signature certificates identifying
and containing the signatures of the officers of
the Fund and/or other signatories authorized to
sign Instructions (as defined below) on behalf of
the Fund, specifying the number of signatures
required for Instructions and identifying the
trustees and the other officers, if any, of the
Fund.
(b) Changes. In case of any change or changes affecting any of the
documents described in this Section II, the Fund shall deliver new documents to
the Bank, to the extent necessary to reflect such change or changes. Unless and
until such new documents are delivered and an authorized signatory of the Bank
has issued a receipt for the delivery thereof, the Bank shall be under no
obligation to act (or omit to act), in accordance with any such
-1-
<PAGE>
change, nor shall the Bank be liable for failure so to act (or omit to act), but
the Bank shall act in accordance with the documents which such new documents are
to replace.
(c) Additional information. The Fund shall furnish to the Bank any
additional information and documentation relating to the Fund and the Fund's
management company (if any) which the Bank may reasonably request.
(d) "Resolutions" defined. The term "Resolutions," as used in this
Agreement, means (i) if the trustees of the Fund are authorized to transact
business of the Fund by signing an instrument setting forth such business,
resolutions signed by the number of trustees of the Fund so authorized and (ii)
in all other cases, copies of resolutions of the trustees of the Fund, certified
by the appropriate officer or officers of the Fund.
(e) "Depository" defined. The term "Depository" as used in this
Agreement means any "system" or "person" contemplated by Section 17 (f) of the
Investment Company Act of 1940 in which the Bank may, under that Section and any
rules, regulations or orders thereunder, deposit all or part of the Fund's
securities with the consent of the Fund, and to which the Fund has consented.
(f) "Receipt" of payment defined. Whenever this Agreement contemplates
receipt of payment by the Bank, such receipt shall mean receipt by the Bank of
(i) cash or check of a national securities exchange certified or issued by a
bank (which term, as used in this Agreement, shall include a trust company and a
Federal Reserve Bank), or a Depository; or (ii) written or telegraphic advice
from a bank, registered clearing agency or a Depository that funds have or will
be credited to the account of the Fund or the Bank at one or more of the
foregoing; or (iii) a bank wire from a correspondent bank of the Bank; or (iv)
payment other than the foregoing, if specified in Instructions relating to the
transaction in question.
III. THE PROPERTY
(a) Property delivered. The Fund shall deliver the Property, or cause
the Property to be delivered, to the Bank or a Depository, subject to the
provisions of this Agreement. Upon delivery, the securities at the time included
in the Property, unless held by a Depository, shall be in bearer form or shall
be registered in the name of a nominee of the Bank (with or without indication
of
-2-
<PAGE>
fiduciary status) or shall be properly endorsed and in form for
transfer satisfactory to the Bank.
(b) "Property" defined. The term "Property," as used in the
Agreement, means:
(i) any and all securities and other property which
the Fund may from time to time deposit, or cause
to be deposited, with the Bank or a Depository,
(ii) all income, including option premiums, in respect
of any of such securities or other property,
(iii) all proceeds of the sale of any such securities or
other property,
(iv) all proceeds of the sale of securities issued by
the Fund, which are received by the Bank from time
to time from the Fund or its transfer agent, and
(v) any stocks, shares, bonds, financial futures
contracts, indexes, debentures, notes, mortgages
and other obligations, and any certificates,
receipts, warrants or other financial instruments
representing absolute or conditional rights or
options to receive, purchase, subscribe for or
sell the same or evidencing or representing any
other rights or interests therein, or any other
property or assets, irrespective of their form,
the name by which they may be described, whether
considered as securities or commodities, or the
character or form of the entities by which they
are issued or created.
(c) Holding of Securities. The Bank shall hold in a separate account,
and physically segregate at all times from those of any other persons, firms or
corporations, pursuant to the provisions hereof, all securities which are part
of the Property, other than those held by a Depository. All such securities are
to be held or disposed of by the Bank, or by a Depository, subject at all times
to Instructions pursuant to the terms of this Agreement. The Bank shall have no
power or authority to (or to cause a Depository to) assign, hypothecate, pledge,
or otherwise dispose of any such securities except pursuant to Instructions and
only for the account of the Fund, as set forth in Section VI of this Agreement.
-3-
<PAGE>
The Bank will, upon receipt of proper Instructions, segregate
cash and/or securities of the Fund into escrow accounts in the name of a
designated broker or exchange clearing organization which is a party with the
Fund to an agreement relating to the financial futures contracts described in
paragraph (b) of this Section III. The Bank will confirm the terms of such
escrow to the broker or clearing organization and provide a copy of such
confirmation to the Fund. The Bank will not, however, make any payment or
transfer from any such escrow account except to the named broker or clearing
organization upon receipt of written notice by such broker or clearing
organization representing that the Fund is in default of a specified obligation
for which the escrow was established and setting forth the amount represented to
be due by the Fund to such broker or clearing organization.
IV. REGISTRATION OF SECURITIES:
COMMERCIAL ACCOUNTS; OVERDRAFTS; RECEIPT OF SECURITIES
(a) Registration of securities. The securities included in the Property
shall, unless held by a Depository, be held in bearer form or in the name of one
or more nominees of the Bank.
(b) Commercial accounts. The Bank shall open and maintain a commercial
account or accounts in the name of the Fund, subject only to the Bank's draft or
order after receipt of Instructions, and the Bank shall deposit in such account
or accounts all cash constituting, or which is to become, part of the Property.
The Bank shall make payments of cash to or for the account, of the Fund from
such cash accounts only pursuant to Section VI of this Agreement or as otherwise
specifically provided in this Agreement.
(c) Overdrafts. At the sole discretion of the Bank, the Bank will
permit the incurrence of cash overdrafts in any account of the Fund with the
Bank (i) in aid of the timely and orderly clearance of securities transactions
in the course of the Fund's normal business, trading and investment operations
or (ii) in connection with payments to Shareholders all or a portion of whose
shares in the Fund have been or are being Redeemed, but only upon receipt by the
Bank of Instructions to do so. The Bank shall not be obligated to incur or
permit the incurrence of any such overdraft and the Bank shall not be liable to
the Fund or any third party for any refusal, failure or neglect on the part of
the Bank to incur or permit the incurrence of any such overdraft. As used in
this Agreement, the terms "Redeem" and "Redemption" refer to
-4-
<PAGE>
redemptions, purchases and other acquisitions by the Fund of shares in the Fund
from Shareholders, and the term "Shareholder" means a shareholder or former
shareholder of the Fund.
(d) Payment of overdrafts; interest. The Fund shall pay to the Bank,
and the Bank may deduct from the Property, the amount of each overdraft referred
to in Section IV (c), together with interest thereon at such rate as the Bank
may from time to time notify to the Fund (such rate not to exceed the rate at
such time charged by the Bank to its prime commercial borrowers by more than
1-1/2 percentage points), upon the Bank's demand therefore.
(e) "Receipt" of securities defined. Whenever this Agreement
contemplates receipt of securities by the Bank, such receipt shall mean receipt
by the Bank of (i) securities in bearer form or in form of transfer satisfactory
to the Bank; or (ii) written or telegraphic advice from a Depository that
securities have been credited to the account of the Fund or the Bank at the
Depository; or (iii) written or telegraphic advice from any bank or responsible
commercial agent doing business in the United States or any foreign country and
designated by the Bank as its agent for this purpose that such securities have
been deposited with it.
V. INSTRUCTIONS
(a) "Instructions" defined. As used in this Agreement, the term
"Instructions" means instructions, with respect to any specified transaction
(except as otherwise indicated in this Agreement), in writing or by telecopier,
tested telegram, cable or Telex or by facsimile sending device, signed in the
name of the Fund by the requisite number of Fund officers or authorized
signatories of the Fund as the Board of Trustees or executive committee of the
Fund has authorized to give the particular class of Instructions in question.
Different persons may be authorized to give Instructions for different purposes.
Instructions may be general or specific in terms.
(b) Instructions consistent with charter, etc. Although the Bank may
take cognizance of the provisions of the charter and by-laws of the Fund as from
time to time amended, the Bank may assume that any Instructions received
hereunder are not in any way inconsistent with any provision of such charter or
by-laws or any vote, resolution or proceeding of the shareholders or the
trustees, or of any committee of either thereof, of the Fund.
-5-
<PAGE>
(c) Authority of Fund's signatories. The incumbency and signature
certificates most recently delivered to the Bank pursuant to Section II (a)
(iii) shall constitute evidence of the authority of the signatories designated
therein to act on behalf of the Fund.
VI. TRANSACTIONS REQUIRING INSTRUCTIONS
(a) Payments of cash. The Bank shall make payments of cash
to or for the account of the Fund only as follows or as otherwise
specifically provided in this Agreement:
(i) upon receipt of Instructions to do so, the Bank
shall make payment for and receive all securities
purchased for the account of the Fund (insofar as
cash is available, or insofar as the Bank is
willing to permit an overdraft or overdrafts in
the Fund's account or accounts with the Bank, for
such purpose), payment to be made only upon
receipt of the securities, provided that, if any
--------
such securities (or any securities to be received
free for the Fund's account) are not received by
the Bank on or before the thirtieth day following
the date of the Bank's receipt of the Instructions
to receive such securities, the Bank may, but need
not, consider such Instructions cancelled unless
and until the Bank received further Instructions
reinstating such original Instructions;
(ii) upon receipt of Instructions to do so, the Bank
shall make payment to a bank of principal of or
interest on bank loans made to the Fund;
(iii) upon receipt of Instructions to do so, the Bank
shall make payments for the Redemption of shares of
the Fund (subject to the provisions of Section VIII
(a) of this Agreement);
(iv) upon receipt of Instructions to do so, the Bank
shall make payments for the payment of dividends,
taxes, management or supervisory fees or operating
expenses (including, without limitation thereto,
fees for legal, accounting and auditing services);
(v) upon receipt of Instructions to do so, the Bank
shall make payments in connection with conversion,
-6-
<PAGE>
exchange or surrender of securities owned or
subscribed to by the Fund held by or to be
received by the Bank;
(vi) upon receipt of Instructions to do so, the Bank
will make payments pursuant to a specified
agreement for loaning the Fund's securities (which
Instructions shall identify the loan agreement
under which the payment is to be made, the date of
payment, the name of the borrower and the
securities to be received, if any in exchange for
the payment); and
(vii) upon receipt of Instructions to do so, the Bank
shall make payment for other proper corporate
purposes, but only on receipt of a Resolution
certified as set forth in the definition of that
term and countersigned by another officer of the
Fund specifying the amount of such payment,
setting forth the purpose for which such payment
is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
(b) Transfer, Exchange or Delivery of Securities. The Bank shall
transfer, exchange or deliver securities which are part of the Property only as
follows: upon receipt of Instructions to do so, the Bank shall deliver (or cause
a Depository to deliver) securities against such payment or other consideration
or written receipt therefor as shall be specified in such Instructions, in the
following cases: (i) upon sales of such securities for the account of the Fund
and receipt by the Bank of payment therefor; (ii) for examination by a broker
selling for the account of the Fund in accordance with street delivery custom;
(iii) for payment when such Property has been called, redeemed or retired, or
has otherwise become payable at the option of the holder thereof; (iv) in
exchange for, or for conversion into, other securities and/or cash pursuant to
any plan of merger, consolidation or reorganization, recapitalization,
readjustment or other rearrangement of the issuer; (v) for deposit with a
reorganization committee or protective committee pursuant to a deposit
agreement; (vi) for conversion into or exchange for other securities, or into or
for other securities and cash, in accordance with any conversion or exchange
right or option relating thereto; (vii) in the case of warrants, rights or other
similar securities, upon the exercise
-7-
<PAGE>
thereof; (viii) in the case of interim receipts or temporary securities, upon
the surrender thereof for definitive securities; (ix) upon the exercise of a
call written by the Fund for which the Bank (or a Depository) has written an
escrow receipt (which term, as used in this Agreement, shall include an option
guarantee letter), subject to the provisions of Section VI(e); (x) for the
deposit of securities in a Depository; (xi) for the purpose of Redemption in
kind of shares of the Fund (subject to Section VIII(a) of this Agreement); (xii)
for the purpose of loaning securities against receipt by the Bank of collateral
therefor (the Instructions as to which shall specify the securities to be
delivered, the loan agreement under which the delivery is to be made, the date
of delivery, the name of the borrower and the amount of collateral to be
received in connection therewith); and (xiii) for other proper corporate
purposes. The Bank shall make a delivery described in Section VI(c)(xiii) only
on receipt of a Resolution certified as set forth in the definition of that term
and countersigned by another officer of the Fund specifying the securities,
setting forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose and naming the person or persons to
whom said delivery is to be made.
(c) Exercise of rights, etc. The Bank shall deal with rights, warrants
and similar securities received by it hereunder only in the manner and to the
extent ordered by Instructions received by the Bank.
(d) Voting. Neither the Bank nor its nominees shall vote any of the
securities included in the Property or authorize the voting of any such
securities or give any consent, approval or waiver with respect thereto, except
as directed by Instructions received by the Bank. The Bank shall promptly
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials with relation to such securities, such proxies to
be executed by the registered holder of such securities (if registered otherwise
than in the name of the Fund) but without indicating the manner in which such
proxies are to be voted.
(e) Escrow receipts. In accordance with mutually agreed-upon
arrangements and upon receipt of Instructions to do so, the Bank will execute,
or cause a Depository to execute, an escrow receipt relating to a call written
by the Fund upon receipt of payment for the premium therefor. Such Instructions
shall contain all information necessary for the issuance of such receipts and
will
-8-
<PAGE>
authorize the deposit of the securities named in such Instructions into an
escrow account of the Fund. Securities so deposited into an escrow account will
be held by the Bank or Depository subject to the terms of such escrow receipt.
However, the Bank agrees that it will not deliver, or cause a Depository to
deliver, any securities deposited in an escrow account pursuant to an exercise
notice unless the Bank has received Instructions to do so or (i) the Bank has
duly requested the issuance of such Instructions, (ii) at least two business
days have elapsed since the receipt of such request by the Fund, and (iii) the
Fund has not advised the Bank by Instructions that it has purchased securities
that are to be delivered by the Bank or a Depository pursuant to the exercise
notice. The Fund agrees that it will not issue any Instructions to the Bank with
respect to the Property which shall conflict with the terms of any escrow
receipt executed by the Bank or any Depository in relation to the Fund and which
is then in effect. The parties understand that the Fund may write calls on
securities ("underlying securities") which are not part of the Property and
issue Instructions to the Bank to execute, or cause a Depository to execute, an
escrow receipt on securities ("convertible securities") which are, or are to be,
part of the Property and are convertible into the underlying securities. In such
event, the Fund agrees that (i) any Instructions by it as to the execution of
the escrow receipt will relate only to such convertible securities, and (ii) any
Instructions by it as to the delivery of securities relating to such call will
relate only to such convertible securities without responsibility on the part of
the Bank to effect any conversion thereof.
VII. TRANSACTIONS NOT REQUIRING INSTRUCTIONS
(a) Collection of income and other payments. In the absence
of contrary instructions, the Bank shall:
(i) collect and receive, for the account of the Fund,
all income and other payments and distributions,
including (without limitation) stock dividends,
rights, warrants and similar items, included or to
be included in the Property, and promptly advise
the Fund of such receipt;
(ii) take any action which may be necessary and proper
in connection with the collection and receipt of
such income and other payments and distributions,
including (without limitation) the execution of
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ownership and exemption certificates, the
presentation of coupons and other interest items,
the presentation for payment of securities which
have become payable as a result of their being
called, redeemed or retired, or otherwise becoming
payable, otherwise than at the option of the holder
thereof, and the endorsement for collection of
checks, drafts and other negotiable instruments;
and
(iii) receive and hold for the account of the Fund all
securities received as a distribution on
securities held by the Fund as a result of a stock
dividend, share split-up or reorganization,
recapitalization, readjustment or other
rearrangement or distribution of rights or similar
securities issued with respect to any securities
of the Fund held by the Bank hereunder, provided
---------
that the Bank shall not be required to transact
any item of business referred to in this Section
VII(a) with respect to a security which is not
covered by a published securities manual
reasonably available to the Custodian Services
Department of the Bank (or the successor to such
Department in the event of any administrative
rearrangement of the Bank) unless and until such
Custodian Services Department (or its successor)
has received a notice specifying (x) the item of
business in question and (y) such additional
information as will permit the Bank to transact
such item of business properly and without
unreasonable inconvenience to such Custodian
Services Department (or its successor).
(b) Cash disbursements. In the absence of contrary Instructions, the
Bank may make cash disbursements for minor expenses in handling securities and
for similar items in connection with the Bank's duties under this Agreement. The
Bank shall promptly advise the Fund of disbursements so made.
(c) Delivery of information and documents. The Bank shall promptly
deliver to the Fund all information and documents received by the Bank and
relating to the Property including (without limitation) pendency of calls and
maturities of securities and expiration of rights in connection therewith
received by the Bank
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from issuers of securities being held for the Fund. With respect to tender or
exchange offers, the Bank shall transmit promptly to the Fund all written
information received from issuers of the securities whose tender or exchange is
being sought and from the party (or his agents) making the tender or exchange
offer.
VIII TRANSACTIONS REQUIRING SPECIAL INSTRUCTIONS
(a) Redemptions. Upon receipt of Instructions to do so, the Bank shall
deliver Property in connection with Redemptions (insofar as monies or, in a case
referred to in clause (iii) below, other Property is available, or insofar as
the Bank is willing to permit an overdraft or overdrafts in the Fund's account
or accounts with the Bank for such purpose), provided that the Instructions
covering each Redemption shall contain (i) the number of shares Redeemed, (ii)
the net asset value (determined pursuant to the regulations of the Fund, as from
time to time amended, which govern determination of net asset value) of such
shares on the effective date of such Redemption and (iii) specification of any
Property other than cash which the Bank is to deliver pursuant thereto.
(b) Extraordinary transactions. In the case of any of the
following transactions, not in the ordinary course of the business
of the Fund:
(i) the merger or consolidation of the Fund and
another investment company,
(ii) the sale by the Fund of all or substantially all
of its assets, or
(iii) liquidation of the Fund or dissolution of the Fund
and distribution of its assets,
the Bank shall deliver Property only upon receipt of Instructions and advice of
counsel satisfactory to the Bank (who may be counsel for the Fund, at the option
of the Bank) to the effect that all necessary corporate action therefor has been
taken, or will be taken concurrently with the Bank's action.
IX. RIGHT TO RECEIVE ADVICE
(a) Advice of Fund. If the Bank shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall
receive, from the Fund directions or advice, including Instructions
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where appropriate.
(b) Advice of counsel. If the Bank shall be in doubt as to any
questions of law involved in any action to be taken or omitted by the Bank, it
may request advice from counsel of its own choosing (who may be counsel for the
Fund, at the option of the Bank).
(c) Conflicting advice. In case of conflict between directions, advice
or Instructions received by the Bank pursuant to Section IX(a) and advice
received by the Bank pursuant to Section IX(b), the Bank shall be entitled to
rely on and follow the advice received pursuant to Section IX(b) alone.
(d) Absolute protection to Bank. The Bank shall be absolutely protected
in any action or inaction which it takes in reliance on any directions, advice
or Instructions received pursuant to Section IX(a) or (b) or which the Bank,
after receipt of any such directions, advice or Instructions, in good faith
believes to be consistent with such directions, advice or Instructions, as the
case may be. However, nothing in this Section IX shall be construed as imposing
upon the Bank any obligation (i) to seek such directions, advice or
Instructions, or (ii) to act in accordance with such directions or advice when
received, unless, under the terms of another provision of this Agreement, the
same is a condition to the Bank's properly taking or omitting to take such
action.
X. STATEMENTS
The Bank shall render to the Fund statements of the transactions in the
accounts of the Fund at the following times: the Bank shall furnish the Fund
both on a daily and a monthly basis with a statement summarizing all
transactions and entries for the account of the Fund. The Bank shall furnish the
Fund at the end of every month with a list of the portfolio securities held by
it or a Depository as custodian for the Fund, adjusted for all commitments
confirmed by the Fund as of such time, certified by a duly authorized officer of
the Bank. The books and records of the Bank pertaining to its actions under this
Agreement shall be open to inspection and audit at all times by officers of the
Fund, its auditors and officers of its investment adviser.
XI. COMPENSATION
(a) Ordinary services. The Fund shall pay to the Bank, and
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the Bank may deduct from the Property, for its services under this Agreement
(other than the services referred to in Section XI(c)) compensation based on a
schedule of charges to be agreed from time to time.
(b) Expenses. The Fund shall reimburse the Bank for all expenses, taxes
and other charges (including, without limitation, interest and other items
charged by brokers in respect of debit balances and delayed deliveries) paid by
the Bank with respect to the property of the Fund, or incurred by the Bank on
behalf of the Fund in the performance of the Bank's duties hereunder, provided
that the Bank shall be entitled to reimbursement with respect to the fees and
disbursements of counsel only (i) as set forth in Sections XI(c) and XII or (ii)
when the Fund breaches or threatens to breach, or the Fund's management company
(if any) threatens to cause a breach, of this Agreement or when it would
reasonably appear to a man untrained in the law that such a breach exists or is
threatened, to the extent that the fees and disbursements of such counsel relate
to such actual or apparent breach or threatened breach. If the Bank submits to
the Fund a bill for such reimbursement and the Fund does not, within 15 days
after such submission, notify the Bank that the bill is disapproved and make a
reasonable counter-offer in writing, the bill shall be deemed approved and the
Bank may deduct such reimbursement from the Property.
(c) Extraordinary services. The Fund shall pay to the Bank, and the
Bank may deduct from the Property, for its services as the Fund's agent in
paying a Shareholder consideration, consisting wholly or partially of property
other than cash, in connection with the Redemption of all or any part of such
Shareholder's shares in the Fund compensation equal to 1/10 of 1% of the amount
computed by subtracting from the aggregate Redemption price of such shares the
cash, if any, paid to such Shareholder in respect of such Redemption. Without
limiting the generality of the provisions of Section XI(b), the Fund shall
reimburse to the Bank, and the Bank may deduct from the Property reimbursement
for, the fees and disbursements of the Bank's counsel attributable to such
counsel's services in respect of each such Redemption.
XII. INDEMNIFICATION
The Fund, as sole owner of the Property, will indemnify the Bank and
each of the Bank's nominees, and hold the Bank and such
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nominees harmless, and the Bank may deduct from the Property indemnification,
against all costs, liabilities (including, without limitation, liabilities under
the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment
Company Act of 1940 and any state and foreign securities and blue sky laws, all
as from time to time amended) and expenses, including (without limitation)
attorney's fees and disbursements, arising directly or indirectly (i) from the
fact that securities included in the Property are registered in the name of any
such nominee, or (ii) without limiting the generality of the foregoing clause
(i), from any action or thing which the Bank takes or does or omits to take or
do, (A) at the request or on the directions or in reliance on the advice of the
Fund, or of the Fund's management company (if any), or (B) upon Instructions,
provided that neither the Bank nor any of its nominees shall be indemnified
against any liability to the Fund or to its Shareholders (or any expense
incident to such liability) arising out of (x) the Bank's or such nominee's own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
under this Agreement or (y) the Bank's own negligent failure to perform its
duties under Section VII(a)(ii).
XIII. RESPONSIBILITY: COLLECTIONS
(a) Responsibility of Bank. The Bank shall be under no duty to take any
action on behalf of the Fund except as specifically set forth herein or as may
be specifically agreed to by the Bank in writing. In the performance of the
Bank's duties hereunder, the Bank shall be obligated to exercise care and
diligence, but the Bank shall not be liable for any act or omission which does
not constitute gross negligence, willful misfeasance or bad faith on the part of
the Bank or reckless disregard by the Bank of its duties under this Agreement,
provided that the Bank shall be responsible for its own negligent failure to
perform any of its duties under this Agreement. Without limiting the generality
of the foregoing or of any other provisions of this Agreement, the Bank shall
not be under any duty or obligation to inquire into and shall not be liable for
or in respect of (i) the validity or invalidity or authority or lack thereof of
any Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which the Bank reasonably believes
to be genuine, or (ii) the validity or invalidity of the issuance of any
securities included or to be included in the Property, the legality or
illegality of the purchase of such securities, or the propriety or impropriety
of the amount paid therefor, or (iii) the legality or illegality of the sale (or
exchange) of any Property or
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the propriety or impropriety of the amount for which such Property is sold (or
exchanged), nor shall the Bank be under any duty or obligation to ascertain
whether any property at any time delivered to or held by the Bank may properly
be held by or for the Fund.
(b) Collections. All collections of monies or other property
in respect, or which are to become part, of the Property shall be
at the sole risk of the Fund.
(c) Depositories. In using the facilities of a Depository, the Bank
undertakes to comply with the requirements of Rule 17f- 4(d) insofar as the same
apply to a custodian, and shall be responsible for the prompt and effective
enforcement of its rights against the Depository in respect of the property
including the proper replacement of any certificated security which has been
lost, destroyed, wrongfully taken, mislaid or erroneously delivered while in the
custody of the Depository.
XIV. ADVERTISING
No printed or other matter in any language which mentions the Bank's
name other than in the context of the Bank's rights, powers or duties as the
custodian of the Fund shall be issued by the Fund or on the Fund's behalf unless
the Bank shall first have been given notice thereof.
XV. EFFECTIVE DATE; TERMINATION; SUCCESSOR; DISSOLUTION
(a) Effective date. This Agreement shall become effective as of the
date entered in the final paragraph of this Agreement and shall continue in
effect until terminated in the manner set forth below.
(b) Termination. Either party to this Agreement may terminate this
Agreement, without penalty, upon at least two weeks' prior written notice to the
other. The effective date of such notice shall be specified in such notice,
except that, at the option of the party receiving the notice of termination, the
effective date of termination may be postponed, by notice (given prior to the
effective date specified in the termination notice) to the other party, to a
date not more than sixty days from the date of the notice of termination,
provided that the Fund shall have no right so to postpone the effective date of
termination if the Fund is at the time in default under the provisions of
Section XIV.
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<PAGE>
(c) Successor custodian. The Bank shall, in the event of such
termination, deliver the Property, or cause it to be delivered, to any new
custodian which may be designated in Instructions received by the Bank.
(d) Successor custodian not available. In the event that no new
custodian can be found by the Fund at the time of termination of this Agreement,
the Fund shall, before authorizing the delivery of the Property to anyone other
than a successor custodian, submit to its shareholders the question of whether
the Fund shall be liquidated or shall function without a custodian. The Bank
shall, pending the finding of such a new custodian, the dissolution of the Fund
or the decision of the Fund's shareholders that the Fund shall function without
a custodian, continue to hold the Property in safekeeping subject to the terms
of this Agreement, but the Bank will not carry out any transaction requiring
Instructions, the Instructions with respect to which are received by the Bank
subsequent to the effective date of the termination of this Agreement, or issue
any advice provided for by Section VII or any statement provided for by Section
X, provided that, upon its receipt of Instructions to do so, the Bank will
deliver the Property to a new custodian (which shall be a person, firm or
corporation having aggregate capital, surplus and undivided profits of at least
$2,000,000 as shown by its last published report, and meeting such other
requirements as may be imposed by applicable law), distribute the Property
(after liquidating any part of the Property which does not consist of cash, if
such Instructions so order) upon dissolution of the Fund or deliver the Property
to any other person if the Fund's shareholders have decided that the Fund shall
function without a custodian. The Bank shall not be liable to the Fund or any
third party on account of any incidents or omissions occurring during such
period of safekeeping except those arising through the Bank's own willful
misconduct or negligence.
(e) Dissolution; no successor custodian. Upon its receipt of
Instructions to do so, the Bank shall distribute the Property (after liquidating
any part of the Property which does not consist of cash, if such Instructions so
order) upon dissolution of the Fund or deliver the Property to any person who is
to take the place of the Fund's custodian if the Fund's shareholders have
decided that the Fund shall function without a custodian, provided, in either
case, that such Instructions shall be accompanied by a certified copy of the
minutes of the meeting of the Fund's shareholders at which the same was
approved.
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<PAGE>
XVI. NOTICES
All notices and other communications, including Instructions
(collectively referred to as "Notices" in this Section XVI), hereunder shall be
in writing or by tested telegram, cable or Telex. Notices shall be addressed (i)
if to the Bank, at the Bank's address set forth at the head of this Agreement,
marked for the attention of the Custodian Services Department (or its successor,
referred to in Section VII(a)), (ii) if to the Fund, at the address of the Fund
set forth at the head of this Agreement, or (iii) if to either of the foregoing,
at such other address as shall have been notified to the sender of any such
Notice or other communication. If the location of the sender of a Notice and the
address of the addressee thereof are, at the time of sending, more than 100
miles apart, the Notice shall be sent by airmail, in which case it shall be
deemed given three days after it is sent, or by tested telegram, cable or Telex,
in which case it shall be deemed given immediately, and, if the location of the
sender of a Notice and the address of the addressee thereof are, at time of
sending, not more than 100 miles apart, the Notice may be sent by first-class
mail, in which case it shall be deemed given two days after it is sent, or by
messenger, in which case it shall be deemed given on the day it is delivered, or
by tested telegram or Telex, in which case it shall be deemed given immediately,
provided that the Bank shall in no event be liable in respect of any delay in
its actual receipt of any Notice. All postage, cable, telegraph and Telex
charges arising from the Sending of a Notice hereunder shall be paid by the
sender.
XVII. DEPOSITORIES; ASTRA
The Fund authorizes the Bank, for any securities held hereunder, to use
the services of any United States central securities depository permitted to
perform such services for registered investment companies and their custodians
under Rule 17f-4 under the Act ("System"), the use of which is subject to the
terms and conditions of this Section XVII.
The terms of the use of any System under this Agreement shall be
governed by the terms and conditions of Rule 17f-4 under the Investment Company
Act of 1940, to which terms and conditions the parties hereto agree as if set
forth in full in this Agreement. The parties also agree that such terms and
conditions shall supersede any conflicting provisions of this Agreement. Nothing
herein shall be deemed to require that the Custodian ascertain, as
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a condition to the use of any System, that any required action has been taken by
the Board of Trustees of the Fund.
If and to the extent that a System permits the withdrawal of a security
from that System in certificate form and the Fund requires a certificate for
making a loan or otherwise, the Bank shall take all necessary and appropriate
action to obtain such certificate upon receipt of an officer's certificate
requesting the same.
The liability of the Bank to the Fund in connection with the use of any
System shall be subject to the provisions of Section XIII of this Agreement.
The Bank agrees that it will effectively enforce such rights as it may
have against any System and will use its best efforts, and will enforce any such
rights as it may have against any System, to require that such System shall take
all appropriate and necessary steps to obtain replacement of any certificated
security in such System which has been lost, apparently destroyed, wrongfully
taken, mislaid or erroneously delivered while in the custody of the System.
The Fund can have dial-up access to its own custodian account in the
Bank's computerized accounting system (the "ASTRA System") in order to: (i)
accept or reject executed securities transactions (other than in foreign
securities) as submitted for confirmation by brokers and dealers through the
Institutional Delivery ("ID") System of Depository Trust Company ("DTC") in
which the Bank is a participant; and (ii) issue instructions for the settlement
of accepted transactions by the Bank (through the ID System of DTC or otherwise)
pursuant to the terms of this Agreement.
1. The Bank will provide such current instructions and password as may
be necessary for the Fund to have dial-up access to its own custody account in
the ASTRA System, which instructions and password, including any changed
instructions or password, will be delivered personally or by certified mail,
return receipt requested, to such officer(s) of the Fund as may, from time to
time, be designated in a written instruction given by the Fund in accordance
with Article V of this Agreement and signed by the Secretary, Assistant
Secretary or Treasurer of the Fund.
2. The Bank will change such instructions or password as
frequently as may reasonably be requested by the Fund for security
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reasons.
3. The Bank is obligated and authorized to act and rely upon any
instructions received by it through the ASTRA System, as fully as in the case of
instructions given pursuant to Article V of this Agreement, regardless of
whether such instructions have been authorized by the Fund, provided that such
instructions are accompanied by the code password and account identification
information furnished, from time to time, by the Bank to the Fund as hereinabove
provided. Any such instructions received by the Bank through the ASTRA System
will be considered "Instructions" for all purposes under this Agreement,
including without limitation the indemnification provisions of Article XII
hereof.
4. Both the Fund and the Bank will keep for at least five years and
produce on request, in machine readable form, copies of any instructions sent or
received pursuant to the provisions hereof.
XVIII. MISCELLANEOUS
(a) Amendments, etc. This Agreement or any part hereof may be changed
or waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought. The headings in this Agreement
are for convenience of reference only, are not a part of this Agreement and
shall be disregarded in connection with any interpretation of all or any part of
this Agreement.
(b) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings, relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to delegated and/or oral Instructions.
(c) Successors and assigns; assignment. All terms of this Agreement
shall be binding upon the respective successors and assigns of the parties
hereto, the Fund's management company (if any) and the Fund's shareholders and
shall inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns, provided that this Agreement shall not be
assignable in whole or in part by either party hereto without the written
consent of the other party hereto.
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(d) Counterparts. This Agreement may be executed simultaneously in
several counterparts, each of which shall be deemed an original but all of
which, taken together, shall constitute one and the same Agreement.
(e) Disclaimer of Shareholder Liability. The Bank understands that the
obligations of the Fund under this Agreement are not binding upon any trustee or
shareholder of the Fund personally, but bind only the Fund and the Fund's
property. The Bank represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming shareholder liability for acts or
obligations of the Fund.
(f) Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the hands of their signatories thereunto duly authorized on the 5th
day of July, 1996.
CITIBANK, N.A.
By:/s/ Gene Fauquier
Gene Fauquier, Vice President 6/14/96
(Name and Title)
ROCHESTER FUND MUNICIPALS
By:/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
(Name and Title)
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SERVICE CONTRACT
THIS AGREEMENT is signed this 8th day of March, 1996, between ROCHESTER
FUND MUNICIPALS (hereinafter referred to as the "Fund"), a Massachusetts
business trust, having its principal place of business at 350 Linden Oaks,
Rochester, New York 14625, and OPPENHEIMERFUNDS SERVICES (hereinafter referred
to as "OFS"), a division of OppenheimerFunds, Inc., a Colorado corporation,
having its principal place of business at 3410 South Galena Street, Denver,
Colorado 80231.
WITNESSETH:
WHEREAS, OppenheimerFunds, Inc. (hereinafter referred to as "OFI")
doing business as OFS, a division of OFI, is a registered transfer agent under
Section 17A(c)(1) of the Securities Exchange Act of 1934 and provides registrar
and transfer agent, dividend and distribution disbursing agent, redemption
agent, clearing agent and exchange agent and service agent services to mutual
funds, and
WHEREAS, the Fund desires that OFS perform certain registrar and
transfer agency services for the Fund, as more specifically set forth in
Schedule A to this Agreement.
THEREFORE, the parties hereto agree as follows:
1. Services to be Performed by OFS
The services to be performed for the Fund by OFS are set forth
in Schedule A to this Agreement, which Schedule is incorporated as part of this
Agreement. OFS shall perform such services as registrar, transfer agent,
dividend and distribution disbursing agent, redemption agent, clearing agent and
exchange agent or as service agent for the Fund.
2. Fees and Expenses
A. For performance by OFS pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios of the Fund to pay OFS the annual
basic charge for each shareholder account and the out-of pocket expenses
incurred by OFS as set out in Schedule B attached hereto.
B. The Fund agrees on behalf of each of the Portfolios to pay
all fees and reimbursable expenses within five days following the mailing of
the respective billing notice.
C. After the third year anniversary of this Agreement, OFS
may increase the fees and charges set forth on the attached fee schedule in the
following circumstances:
(i) At any time but no more than once a year, OFS may, upon at
least ninety (90) days prior written notice, increase its fees or charges to the
Fund or change the manner of payment;
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(ii) Irrespective of (i) above, for new Fund features that
are not consistent with OFS's current processing requirements; and
(iii) Irrespective of (i) above, if changes in existing laws,
rules or regulations: (a) require substantial system modifications or (b)
increase cost of performance hereunder.
In the event of (i) above, if the Fund does not agree to the
revised fees and charges or manner of payment, the Fund shall notify OFS thereof
in writing (the "Refusal Notice") within thirty (30) days of receipt of OFS's
notice. If the parties are unable to agree to a rate or manner within the next
thirty (30) days after OFS's receipt of the Refusal Notice, this Agreement shall
terminate ninety (90) days from the date on which OFS received the Refusal
Notice.
In the event of (ii) above, the parties shall confer,
diligently and in good faith, and agree upon a new fee to cover such new fund
feature.
In the event of (iii) above, fees shall increase by the amount
necessary, but not more than such amount, to reimburse OFS for the cost of
developing or acquiring the new software to comply with regulatory changes and
for the increased cost of operating its shareholder system.
3. Effective Date and Term.
This Agreement shall become effective on the Conversion Date,
shall supersede any prior agreements among the parties hereto relating to the
subject matter hereof, and shall continue in full force and effect until
terminated by any party upon six months' prior written notice of termination
addressed to all other parties. The Conversion Date shall be the close of
business on March 8, 1996, or such other date as the parties may agree to for
OFS to assume the functions of transfer agent for the Fund pursuant to the terms
herein.
4. Standard of Care.
OFS will make every reasonable effort and take all reasonably
available measures to assure the adequacy of its personnel and facilities as
well as the accurate performance of all services to be performed by it hereunder
within, at a minimum, the time requirements of any statute, rule or regulation
pertaining to investment companies and any time requirements set forth in the
then-current prospectus of the Fund. OFS shall promptly correct any error or
omission made by it in the performance of its duties hereunder provided that it
shall have received notice in writing of such error or omission and any
necessary substantiating data or has otherwise become aware of such error or
omission. In effecting any such corrections, OFS shall take all reasonable steps
necessary to trace and to correct any related errors or omissions, including,
without limitation, those which might cause an over-issue of the Fund's shares
and/or the excess payment of dividends or distributions. The allocable costs of
corrections shall be charged to the
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Fund and the liability of OFS under this Section shall be subject to the
limitations provided in Section 9 hereof.
5. Records Retention and Confidentiality.
OFS shall keep and maintain on behalf of the Fund all records
which the Fund or its transfer agent is, or may be required, to keep and
maintain pursuant to any applicable statutes, rules and regulations relating to
the maintenance of records in connection with the services to be performed
hereunder. OFS also shall maintain, for a period of at least 6 years, all
records and documents which may be needed or required to support or document the
actions taken by OFS in its performance of services hereunder. OFS recognizes
and agrees that all such records and documents (but not the computer data
processing programs and any related documentation used or prepared by, or on
behalf of, OFS for the performance of its services hereunder) are the property
of the Fund; shall be open to audit or inspection by the Fund or its agents
during OFS's normal business hours; shall be maintained in such fashion as to
preserve the confidentiality thereof and to comply with applicable federal
and/or state laws and regulations; and shall, in whole or any specified part, be
surrendered and turned over to the Fund or its duly authorized agents at any
time upon OFS's receipt of an appropriate written request.
6. Clearing Accounts.
The Fund shall open and/or maintain such bank account or
accounts as shall reasonably be required by OFS for controlling payments, the
disbursement of dividends, capital gains distributions and share redemption
payments pursuant to the provisions hereof, and any other accounts deemed
necessary by OFS or the Fund to carry out the provisions of this Agreement, with
a bank or banks selected by OFS with the prior approval of the Fund's Board.
Such account may be an omnibus account used for all Funds for which OFS or one
of its subsidiaries acts as transfer agent. The Fund shall authorize officers or
employees of OFS to act as authorized signatories to disburse funds held in such
accounts. OFS shall be accountable to the Fund for the management of such
accounts by OFS (and the funds at any time on deposit therein).
7. Reports.
OFS will furnish to the Fund, at the Fund's cost, and to such
other persons or parties as are designated herein or shall be designated in
writing by an authorized officer of the Fund, such reports at such times as are
required for the performance of the services referred to in Schedule A.
8. Indemnification of OFS and OFI.
The Fund shall indemnify OFS and OFI and hold OFS and OFI and
each of their officers, directors, employees and agents harmless from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against all judgments, liabilities, losses, damages,
costs, charges, counsel fees and other expenses arising from or relating to any
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<PAGE>
action taken or omitted to be taken by it in good faith or as a result of
ordinary negligence in reliance upon:
(a) The authenticity of any letter or any other
instrument or communication reasonably believed by it
to be genuine and to have been properly made or
signed by an authorized officer or agent of the Fund
or by a shareholder or the authorized agent of a
shareholder, as the case may be and which complies
with the terms of this Agreement which pertain
thereto;
(b) The accuracy of any records or information provided
to it by the Fund except to the extent the same may
contain patently obvious errors or omissions;
(c) Any certificate by an authorized officer of the Fund
or any other person authorized by the Fund's Board as
conclusive proof of any fact or matter required to be
ascertained by OFS hereunder;
(d) Instructions at any time given by an authorized
officer of the Fund with respect to OFS's duties and
responsibilities hereunder, including, as to legal
matters pertaining to the performance of its duties
hereunder, such advice or instructions as may be
given to OFS by the Fund's general counsel or any
legal counsel appointed by such counsel or by any
authorized officer of the Fund;
(e) Instructions regarding redemptions, exchanges or
other treatment of the shares of the Fund, together
with all dividends and capital gain distributions
thereon and any reinvestment thereof, held or shown
to the credit of any shareholder account, if such
instructions satisfy the requirements of the Fund as
contained in its then current prospectus, or the
Fund's policies or as communicated in writing to OFS,
its subcontractors or agents by the Fund; or
(f) The advice or opinion of legal counsel furnished to
OFS pursuant to Section 10 hereof.
9. Limitations of OFS's and OFI's Liability.
In addition to the limitations on OFS's and OFI"s liability
stated in Sections 8 and 10 hereof, neither OFS nor OFI assumes any liability
hereunder and shall not be liable hereunder for any damage, loss of data, delay
or other loss caused by circumstances or events beyond its control which it
could not reasonably have anticipated. OFS shall not have any liability beyond
the insurance coverage it has obtained for loss or damage arising from its own
errors or omissions, except to the extent such errors or omissions are
attributable to gross negligence or purposeful fault on the part of OFS, its
officers, agents and/or employees; and in no event will
4
<PAGE>
OFS be liable to the Fund for punitive damages. The Fund shall indemnify and
hold OFS and OFI harmless from and against any liabilities and defense expenses
arising by reason of claims of third parties, based on errors or omissions of
OFS, which are greater in amount than the limitations of liability described
above, except to the extent such errors or omissions are attributable to gross
negligence or purposeful fault on the part of OFS, its officers, directors,
agents and/or employees.
10. Legal Advice and Instructions.
OFS at any time may request instructions from any authorized
officer of the Fund with respect to the performance of its duties and
responsibilities hereunder and may consult with counsel for the Fund or counsel
of its own choosing, who is acceptable to the Fund, relative to any such matter
and shall not be liable hereunder for any action taken or omitted by it in good
faith in accordance with such instructions or with an opinion of such counsel or
of counsel appointed by an authorized officer of the Fund to deal with inquiries
or requests for instructions by OFS. Nothing in this section shall be construed
as imposing upon OFS any obligation to seek such instructions or counseling or
to act in accordance with such instructions or counsel.
11. Documents and Information.
As soon as feasible prior to the effective date of the
Agreement, and if not heretofore provided, the Fund will supply to OFS a
statement, certified by the treasurer of the Fund, stating the number of shares
of the Fund authorized, issued, held in treasury, outstanding and reserved as of
such date, together with copies of specimen signatures of the Fund's officers
and such other documents and information, including without limitation the
then-current prospectus of the Fund, which OFS may determine in its reasonable
discretion to be necessary or appropriate to enable it to perform the services
to be performed hereunder, and the Fund thereafter will supply all amendments or
supplemental documents with respect thereto as soon as the same shall be
effective or available for distribution. The Fund assumes full responsibility
for the preparation, accuracy, content and clearance of its prospectus under
federal and/or state securities laws and any rules or regulations thereunder. If
the Fund shall make any change in its prospectus affecting the services and
functions to be performed by OFS hereunder, such additional services and
functions shall be deemed to be incorporated in Schedule A.
12. Additional Funds.
In the event that the Fund established one or more series of
shares in addition to the Rochester Fund Municipals Portfolio with respect to
which it desires to have OFS render services as transfer agent under the terms
hereof, it shall so notify OFS in writing, and if OFS agrees in writing to
provide such services, such series of shares shall become a Portfolio hereunder.
13. Termination.
5
<PAGE>
This Agreement may be terminated by any party only upon
written notice as provided in Section 3 hereof, except that the Fund may
terminate this Agreement without prior notice to preserve the integrity of its
shareholder records from material and continuing errors and omissions on the
part of OFS. In the event of any termination, OFS will provide full cooperation,
assistance and documentation within its capabilities as shall be necessary or
desirable, in the reasonable judgment of the Fund, to ensure that any transfer
of the duties and responsibilities of OFS is accomplished with maximum
efficiency and with minimum cost and disruption to the Fund's activities. Such
cooperation will include the delivery of all files, documents and records used,
kept or maintained by OFS in the performance of its services hereunder (except
records or documents destroyed when consistent with the provisions hereof or
with the approval of the Fund or which relate solely to the documentation of the
computer data processing programs of OFS) together with, in machine-readable
form, such of the Fund's records as may be maintained by OFS in a form other
than written form, as well as such summary and/or control data relating thereto
used by or available to OFS as may be requested by the Fund. The cost of all
such termination services on the part of OFS shall be paid by the Fund without
prejudice, however, to the rights of the Fund to recover any amounts so paid in
the event that OFS shall be liable to the Fund under Section 9 hereof. In the
course of its performance of the services set forth in Schedule A hereto, as
such services may from time to time be modified or amended, OFS will enter into
leases for equipment. If this Agreement is terminated by the Fund, and if, as a
result of such termination, such equipment specifically leased by OFS to perform
such services can no longer be utilized economically by OFS in its performance
of services for any other entities with which OFS has continuing transfer agency
or other service contracts, OFS may in its discretion cancel such leases.
However, the Fund shall not have any responsibility for termination penalties,
if any, which may be payable under the terms of such equipment leases, unless
otherwise agreed by the Fund prior to the time such lease is entered into.
14. Notices.
Any notice hereunder shall be sufficiently given when sent by
registered or certified mail, return receipt requested, to any party hereto at
the address of such party set forth above or at such other address as such party
may from time to time specify in writing to the other parties.
15. Construction; Governing Law.
The headings used in this Agreement are for convenience only
and shall not be deemed to constitute a part hereof. This Agreement, and the
rights and obligations of the parties hereunder, shall be governed by and
construed and interpreted under and in accordance with the laws of the State of
New York applicable to contracts made and to be performed in that state.
16. Assignment; Delegation.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their successors and assigns, including without
limitation, any successor to any party resulting by reason of corporate merger
or consolidation; provided however that this Agreement
6
<PAGE>
and the rights and duties hereunder shall not be assigned by any of the parties
hereto except upon the specific prior written consent of all parties hereto.
OFS may, without further consent on the part of the Fund,
subcontract for the performance hereof with any entity which is duly registered
as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act
of 1934, provided, however, that OFS shall be as fully responsible to the Fund
for the acts and omissions of any subcontractors or agent as it is for its own
acts and omissions.
OFS may enter into written agreements with sub-transfer
agents, third party administrators and other similar clearing firms which permit
OFI to maintain an omnibus account in the name of the shareholder of record with
the individual beneficial owners of the account being serviced by a sub-transfer
agent, third party administrator or other similar clearing firm. Such agreements
shall comply with the criteria and parameters approved and adopted from time to
time by OFI and by the Board of the Fund.
17. Interpretive Provisions.
OFS and the Fund may agree from time to time in writing on
provisions interpretative of, or supplemental to, the provisions of this
Agreement.
18. Other Agreements.
This Agreement shall not preclude the Fund from entering into
transfer agency agreements or sub-transfer agency agreements with others.
19. Disclaimer of Liability.
OFS understands and agrees that the obligations of the Fund
under this Agreement are not binding upon any shareholder of the Fund or member
of its Board of Trustees personally, but only the Fund and the Fund's property;
OFS represents that it has notice of the provisions of the Declaration of Trust
of the Fund disclaiming liability for acts or obligations of the Fund.
20. Severability.
If any clause or provision of this Agreement is determined to
be illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, then such clause or provision shall be
considered severed herefrom, and the remainder of this Agreement shall continue
in full force and effect.
21. Entire Agreement.
Except as otherwise provided herein, this Agreement, including
Schedule A and Schedule B annexed hereto, constitutes the entire and complete
Agreement between the parties
7
<PAGE>
hereto relating to the subject matter hereof; supersedes and merges all prior
contracts and discussions between the parties hereto; and may not be modified or
amended except by written document signed by all parties hereto against whom
such modification or amendment is to be enforced.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first written above.
OPPENHEIMERFUNDS SERVICES (a
division of OppenheimerFunds,Inc.)
ATTEST:
/s/ George C. Bowen By:/s/Barbara Hennigar
Barbara Hennigar, President and Chief
Executive Officer
ROCHESTER FUNDS MUNICIPALS
ATTEST:
/s/George C. Bowen By:/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
8
<PAGE>
SCHEDULE A
SERVICE CONTRACT
SCHEDULE OF SERVICES
To the extent that a Fund's then-current Prospectus requires the
following services, and to the extent that such services are not, or may not
hereafter be, provided by broker-dealers or other financial institutions with
respect to accounts for which such broker-dealer or financial institution
provides services in connection with the distribution of that Fund's shares,
OppenheimerFunds Services ("OFS") shall do the following:
I. Registrar of Fund Shares
1. Register and control the issuance of full and/or fractional shares of each
Class of Shares of the Fund either for payment of applicable net asset value or
upon surrender of an equivalent number of shares for transfer, or for
reinvestment of dividends or capital gains distributions and, in connection
therewith, maintain appropriate records (which may include the shareholder
accounts referred to below) recording the issuance, transfer and redemption of
all outstanding shares of each Class of Shares of the Fund, showing all shares
of each Class of Shares of the Fund issued and represented by outstanding
certificates, and showing issuance of all uncertificated shares of the Fund;
prepare entries to transfer redeemed or repurchased shares to the Fund's
treasury share account or, if applicable, cancel such shares for retirement;
retain records of issuance of new certificates for lost or stolen certificates
or for cancellation of lost or stolen certificates, and the indemnity bonds
furnished by shareholders in connection therewith.
2. Maintain daily balance controls for the issuance and redemption of shares as
well as all cash receipts and disbursements handled on behalf of the Fund.
3. Furnish to the Fund such information as it may request for preparation of
filings with federal and state authorities.
II. Shareholder Accounts
1. Open new accounts upon receipt of properly executed instructions from a
dealer or the Fund's Distributor, a properly completed and signed account
application, exchange application or request for transfer of an existing
account, or properly authorized telephone exchange or redemption instructions,
and maintain current records for all new and existing categories of shareholder
accounts described in the then-current Prospectus of the Fund, showing as to
each registered owner (to the extent such information is available or
obtainable):
a. Name(s) and address(es), with zip code;
b. Category of account and taxpayer identification number;
c. Dealer and/or any representative affiliated with the account;
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<PAGE>
d. Number of shares currently registered;
e. Account transaction history, including records of initial and
additional purchases, transfers and redemptions, surrender of
certificates, dividends and other distributions, and related
tax information;
f. Identification of any certificate(s) issued and the number of
shares evidenced by each such certificate;
g. Shares held in escrow against performance of any obligation; and
h. Identification of account using the broker's identification.
2.Maintain files containing account applications, requests or other
correspondence from or on behalf of shareholders, as well as copies of all
responses thereto.
3. Process all changes or corrections to a shareholder's registration and
address records authorized orally or in writing by or on behalf of the
shareholder.
4. Process such reinvestments of the proceeds of a redemption of Fund shares as
may properly have been elected by a shareholder pursuant to a privilege
described in the then-current Prospectus of the Fund.
5. Process investments in shares of the Fund at its then-current net asset value
as may properly be requested by a shareholder of any of the other investment
companies having such privilege as described in the then-current Prospectus of
the Fund or information supplied to OFS by the Fund.
6. Prepare and transmit by mail to the affected shareholder a
statement/confirmation of all transactions affecting the account of such
shareholder including initial and additional purchases, reinvestments of
dividends and distributions, adjustments, exchanges, transfers to and from the
account and redemptions of all kinds.
7. Maintain records when made available to OFS according to properly executed
and authorized instructions relating to rights of accumulation, letters of
intent and other special pricing provisions including, without limitation, group
purchase plans and minimum account sizes.
8. Record and maintain the amount of pre-authorized or automatic investments,
including the shareholder's bank account number and time periods for such
investments; and draw the authorized investment amount from the shareholder's
bank account at the specified time periods and issue shares with respect to such
investments.
9. Maintain records of special account instructions such as wire/telephone
redemption or exchange authorizations.
10.Retain records and amounts of payment items (including interest, dividends,
distributions and redemption proceeds) that are returned undelivered and
undeliverable from investors' addresses and
-10-
<PAGE>
maintain such records in accordance with applicable regulations; and invest such
amounts, in accordance with the terms of the Fund's then-current Prospectus, for
the benefit of the shareholder(s) of record.
11. Reconcile account data for account information transmitted by magnetic tape
by broker-dealers maintaining shareholder accounts in nominee name and perform
other services enumerated hereunder to the extent required for such accounts.
12. Process new and additional payments made by shareholders for investment at
their current offering price.
13. Maintain records required under Rule 17Ad-10(e) under the Securities
Exchange Act of 1934.
III. Redemptions and Automatic Withdrawals
1. Receive and ascertain the adequacy of all redemption requests on the basis of
the requirements set forth in the then-current Prospectus of the Fund and the
Fund's policies to the extent applicable from time to time and otherwise in
accordance with the generally accepted practices of transfer agents.
2. Adjust a shareholder's account to reflect the number of shares redeemed.
3. Requisition from the Fund's custodian and remit the properly-computed amount
of the proceeds of each redemption to, or as directed by, individual
shareholders pursuant to appropriately-executed written instructions or
appropriately-submitted redemption requests by wire or telephone in the case of
shareholder accounts having appropriate authorization on file (including payment
to one or more of the other investment companies with which the Fund permits
exchanges in the case of an exchange of investments).
4. On accounts for which periodic withdrawals are specified in a properly-
executed account application:
a. Redeem shares sufficient for the amounts of the specified
withdrawals at the specified time period; and
b. Receive and remit the proceeds of such redemption in like manner
to other redemptions.
IV. Payment of Interest, Dividends and Distributions
1. Upon receipt of properly-executed instructions from the Fund upon declaration
of any dividend and/or distribution, compute and credit the accounts of all
shareholders electing to reinvest dividends and/or distributions with the proper
number of whole and fractional shares, computed as of the reinvestment date and
price specified by the relevant resolution of the Fund's trustees for such
dividend or distribution; and compute for all other shareholders of record, on
the ex-dividend date specified by such resolution, the dollar amount payable in
cash in respect of such dividend or distribution.
-11-
<PAGE>
2. Requisition from the Fund's custodian and remit the properly-computed amounts
of dividends or distributions payable in cash to shareholders electing such
payment or as directed by individual shareholders pursuant to
appropriately-executed written instructions; and prepare and mail share
certificates for reinvested amounts to shareholders electing to receive
certificates for shares.
3. Adjust the amount of dividend or distribution payments for accounts having
unsettled investments or repurchases as of the record date with appropriate
accounting adjustments to the Fund's distribution accounts and remittances to
its custodian.
4. Reconcile dividends and distributions with the Fund.
V. Issuing and Accounting for Certificates
1. Safekeep and account for blank certificate forms.
2. Prepare, issue and mail certificates for full shares on request or according
to permanent account instructions as provided in the Fund's then-current
Prospectus, provided that sufficient deposit shares are available in the
shareholder's account and proper authorization is received.
3. Receive certificates properly endorsed for transfer which are returned for
deposit to a shareholder's account and, provided there is no stop-transfer or
cancellation order pending relative to the specific certificate, make
appropriate adjustments to the shareholder's account.
4. Physically cancel and otherwise account for certificates returned and
deposited.
5. Keep and maintain certificate transcript records reflecting the issuance
and holder of all outstanding certificates as well as all stop-transfers,
cancellations and deposits of certificates.
6. Handle the replacement of lost certificates upon applications meeting the
requirements of the Fund's then-current insurance coverage or, in the event such
insurance is not obtainable, the instructions of the officers of the Fund or its
counsel.
7. Receive and deal with stop-transfer instructions in accord with the
generally-accepted practices of transfer agents.
VI. Recapitalization or Capital Adjustment
1. In the case of any negative share split, recapitalization or other capital
adjustment requiring a change in the form of share certificates of any Class,
OFS will, in the case of accounts represented by uncertificated shares, cause
the account records to be adjusted, as necessary, to reflect the number of
shares held for the account of each such shareholder as a result of such change,
or, in the case of shares represented by certificates, will issue share
certificates in the new form in exchange for, or upon transfer of, outstanding
share certificates in the old form, in either case upon receiving:
a. A Certificate authorizing the issuance of share certificates in the
new form;
-12-
<PAGE>
b. A certified copy of any amendment to the Company's Articles
of Incorporation with respect to the change;
c. Specimen share certificates for each class of shares in the
new form approved by the Board of the Company, with a Certificate signed by the
Secretary of the Company as to such approval; and
d. An opinion of counsel for the Fund or the Company with
respect to the matters set forth in Section 13 of the Service Contract as to
such shares.
2. The Company shall furnish OFS with a sufficient supply of blank share
certificates in the new form, and from time to time will replenish such supply
upon the request of OFS. Such blank share certificates shall be properly signed
by Officers of the Company authorized by law or the By-Laws to sign share
certificates and, if required, shall bear the Company's seal or facsimile
thereof.
VII. Escrowing of Shares
1. Earmark and hold escrowed shares in a shareholder's account to secure
compliance with executed letters of intent or for other purposes as provided in
authorization instructions.
2. Pay dividends and distributions to the registered owner, or reinvest
such dividends and distributions, on shares held in escrow.
3. Release or redeem shares held in escrow in accordance with appropriate
instructions.
VIII. Transfers
1. Respond to or process transfer instructions received by or on behalf of the
registered owners of shares in accordance with the generally-accepted practices
of transfer agents and any requirements set forth in the Fund's then-current
Prospectus.
2. Pass upon the adequacy of documents submitted, prepare any documents
required, and effect the transfer of shares to a shareholder account for the
transferee, including the establishment of the new account.
IX. Exchanges
1. Receive and process exchanges in accordance with duly-executed or telephonic
exchange authorizations which comply with the provisions of the Fund's
then-current Prospectus.
2. Establish, if necessary, a shareholder's account and register the new
shares in accordance with duly executed or telephonic exchange instructions.
X. Shareholder Communications
-13-
<PAGE>
1. Maintain appropriate logs and other controls of all shareholder
communications reflecting the promptness with which they are handled and the
number of unresolved questions, inquiries and complaints outstanding at any
time.
2. Receive and answer promptly all correspondence, telephone calls, or other
inquiries from or on behalf of shareholders concerning the administration of
their accounts. In the case of individual inquiries with respect to shares held
in broker "street-name" accounts for the broker's customer, refer such inquiry
to the appropriate broker for response, providing such information to such
broker as OFS may reasonably ascertain from its records with respect thereto.
3. Refer to the Company's investment adviser or Distributor questions or
matters related to their functions.
4. Prepare such reports and summaries of shareholder communications as may be
requested by the Company's officers for the preparation of reports to the
Company's Board and appropriate regulatory authorities.
5. Attempt to collect or engage other agents or attorneys to collect on behalf
of the Fund or the Company the amount of any over-payment or erroneous payment
to a shareholder or other person by the Fund.
XI. Handling of Proxies
1. In accordance with instructions by an officer of the Company, prepare proxy
cards for each shareholder of record as of the date specified by a resolution of
the Company's Board providing for a meeting of its shareholders.
2. Mail to each shareholder of record, at the address shown in the shareholder
records of the Fund kept pursuant hereto (or as directed by the respective
broker as to broker transmission accounts), a completed proxy card together with
such other written material, including notices of the meeting and proxy
statements, as may be supplied for that purpose by the Fund.
3. Furnish to the Fund a list of shareholders eligible to vote at the meeting,
showing address of record and shares held together with an affidavit or other
appropriate certificate of the mailing referred to above.
4. Receive and tabulate proxies, furnishing the Fund with a properly-certified
report of such tabulation.
XII. Annual and Other Reports
1. Process the mailing of such prospectuses and annual, semi-annual, or
quarterly reports as shall be received from the Fund for that purpose and
coordinate such mailings to appropriate categories of shareholders.
-14-
<PAGE>
2. Prepare and mail to shareholders appropriate periodic statements of
their accounts as contemplated by this Agreement.
3. Insert such other material with regular shareholder mailings as may be
requested and furnished by the Fund.
4. Prepare and forward to the Fund such daily, periodic or special reports
concerning shareholder records and any other functions performed pursuant to
this schedule of services as may be requested by an officer of the Fund.
XIII. Tax Matters
1. Prepare and file with the I.R.S. such Federal information returns with
respect to Fund shareholders as may be specified by the I.R.S. from time to
time and mail copies thereof to shareholders.
2. Prepare and file appropriate Federal information returns and pay
Federal income taxes withheld from distributions made to non-resident aliens.
3. Prepare magnetic tapes for brokers to determine taxable accruals as to broker
transmission accounts to enable brokers to prepare appropriate information
returns.
4. Pay Federal income taxes withheld from dividends, distributions and
redemptions made to shareholders; process and retain records of withholding
exemption certificates filed by shareholders.
5. Comply with backup withholding and taxpayer identification
requirements issued by the I.R.S. which are applicable to transfer agents.
-15-
<PAGE>
ROCHESTER FUND MUNICIPALS
SERVICE CONTRACT
SCHEDULE B
FEE SCHEDULE
The Transfer Agent will provide the transfer agent services listed in the
Service Contract for the Fund at the rate set forth below:
Annual Per Account Fee*:
Class A - $19.71
Out -of-Pocket Expenses:
Out-of-pocket expenses may be incurred by either the Fund or the Transfer Agent
and are not included in the annual Transfer Agent Fees. Those out-of-pocket
expenses directly incurred by the Transfer Agent will be billed to the Fund on a
monthly basis. These out-of-pocket expenses include, but are not limited to the
printing of forms, envelopes, postage for the shareholder mailings, equipment
and system access costs, post-conversion research on pre-conversion transactions
performed by the former transfer agent and billed to the successor transfer
agent, overnight express mail charges, extraordinary items, check signature
plates and stamps, and programmer/analyst and testing technician time beyond
that agreed to in writing. Bank charges and earnings credit will be billed
directly to the Fund by Bank of Boston (or other banks). The Transfer Agent may
require the prior payment of anticipated out-of-pocket expenses, from time to
time.
Conversion Costs:
The Transfer Agent shall be responsible for its costs and expenses relating to
the initial conversion. The Fund shall be responsible for its costs and
expenses, including but not limited to the charges of the former transfer agent.
*Based on the number of accounts in existence at the end of the month, by fund,
and payable weekly based on estimates.
-16-
Exhibit 24(b)(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 18 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 30, 1996, relating to the financial statement and schedule of financial
highlights of Rochester Fund Municipals, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Financial Highlights" in such
Prospectus.
/s/ Price Waterhouse LLP
- -------------------------
PRICE WATERHOUSE LLP
Rochester, New York
January 14, 1997
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
ROCHESTER FUND MUNICIPALS
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the ___ day
of
____, 1996, by and between ROCHESTER FUND MUNICIPALS (the "Fund") and
OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 (the
"Rule") under the Investment Company Act of 1940 (the "1940 Act"), pursuant to
which the Fund will compensate the Distributor for its services in connection
with the distribution of Shares, and the personal service and maintenance of
shareholder accounts that hold Shares ("Accounts"). The Fund may act as
distributor of securities of which it is the issuer, pursuant to the Rule,
according to the terms of this Plan. The Distributor is authorized under the
Plan to pay "Recipients," as hereinafter defined, for rendering (1) distribution
assistance in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are intended to have
certain rights as third-party beneficiaries under this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Article III, Section 26, of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., or its successor (the "NASD
Rules of Fair Practice") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution, to which the Fund is
subject under any order on which the Fund relies, issued at any time by the
Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan. Notwithstanding the
foregoing, a majority of the Fund's Board of Trustees (the "Board") who
are not "interested persons" (as defined in the 1940 Act) and who have
no direct or indirect financial interest in the operation of this Plan
or in any agreements relating to this Plan (the "Independent Trustees")
may remove any broker, dealer, bank or
<PAGE>
other person or entity as a Recipient, whereupon such person's or
entity's rights as a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed owned
by more than one Recipient for purposes of this Plan. In the event that
more than one person or entity would otherwise qualify as Recipients as
to the same Shares, the Recipient which is the dealer of record on the
Fund's books as determined by the Distributor shall be deemed the
Recipient as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i) within
forty-five (45) days of the end of each calendar quarter, in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares computed as of the close of each business day (the "Service
Fee"), plus (ii) within ten (10) days of the end of each month, in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average
during the month of the aggregate net asset value of Shares computed as
of the close of each business day (the "Asset-Based Sales Charge")
outstanding for six years or less (the "Maximum Holding Period"). Such
Service Fee payments received from the Fund will compensate the
Distributor and Recipients for providing administrative support
services with respect to Accounts. Such Asset-Based Sales Charge
payments received from the Fund will compensate the Distributor and
Recipients for providing distribution assistance in connection with the
sales of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not be
limited to, the following: answering routine inquiries concerning the
Fund, assisting in the establishment and maintenance of accounts or
sub-accounts in the Fund and processing Share redemption transactions,
making the Fund's investment plans and dividend payment options
available, and providing such other information and services in
connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably
request.
The distribution assistance in connection with the sale of
Shares to be rendered by the Distributor and Recipients may include,
but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current
holders of the Fund's Shares ("Shareholders"), and providing such other
information and services in connection with the distribution of Shares
as the Distributor or the Fund may reasonably request.
-2-
<PAGE>
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it to
payments under the Plan. In the event that either the Distributor or
the Board should have reason to believe that, notwithstanding the level
of Qualified Holdings, a Recipient may not be rendering appropriate
distribution assistance in connection with the sale of Shares or
administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a
written report or other information to verify that said Recipient is
providing appropriate distribution assistance and/or services in this
regard. If the Distributor or the Board of Trustees still is not
satisfied, either may take appropriate steps to terminate the
Recipient's status as such under the Plan, whereupon such Recipient's
rights as a third-party beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum
period (the "Minimum Holding Period"), if any, to be set from time to
time by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make
service fee payments ("Advance Service Fee Payments") to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed (i) 0.25% of the average during the
calendar quarter of the aggregate net asset value of Shares, computed
as of the close of business on the day such Shares are sold,
constituting Qualified Holdings sold by the Recipient during that
quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of Shares
computed as of the close of each business day, constituting Qualified
Holdings owned beneficially or of record by the Recipient or by its
Customers for a period of more than one (1) year, subject to reduction
or chargeback so that the Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by
Article III, Section 26, of the NASD Rules of Fair Practice. In the
event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated and will repay to the Distributor
on demand a pro rata portion of such Advance Service Fee Payments,
based on the ratio of the time such shares were held to one (1) year.
The Advance Service Fee Payments described in part (i) of this
paragraph (b) may, at the Distributor's sole option, be made more often
than quarterly, and sooner than the end of the calendar
-3-
<PAGE>
quarter. However, no such payments shall be made to any Recipient for
any such quarter in which its Qualified Holdings do not equal or
exceed, at the end of such quarter, the minimum amount ("Minimum
Qualified Holdings"), if any, to be set from time to time by a majority
of the Independent Trustees.
A majority of the Independent Trustees may at any time or from
time to time decrease and thereafter adjust the rate of fees to be paid
to the Distributor or to any Recipient, but not to exceed the rate set
forth above, and/or direct the Distributor to increase or decrease the
Maximum Holding Period, the Minimum Holding Period or the Minimum
Qualified Holdings. The Distributor shall notify all Recipients of the
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding
Period, if any, and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within
thirty (30) days after any change in these provisions. Inclusion of
such provisions or a change in such provisions in a revised current
prospectus shall constitute sufficient notice. The Distributor may make
Plan payments to any "affiliated person" (as defined in the 1940 Act)
of the Distributor if such affiliated person qualifies as a Recipient.
(c) The Service Fee and the Asset-Based Sales Charge on Shares are
subject to reduction or elimination of such amounts under the limits to
which the Distributor is, or may become, subject under Article III,
Section 26, of the NASD Rules of Fair Practice. The distribution
assistance and administrative support services to be rendered by the
Distributor in connection with the Shares may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker,
dealer, bank or other person or entity that sells Shares, and\or paying
such persons Advance Service Fee Payments in advance of, and\or greater
than, the amount provided for in Section 3(b) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor who
support distribution of Shares by Recipients; (iii) obtaining financing
or providing such financing from its own resources, or from an
affiliate, for the interest and other borrowing costs of the
Distributor's unreimbursed expenses incurred in rendering distribution
assistance and administrative support services to the Fund; (iv) paying
other direct distribution costs, including without limitation the costs
of sales literature, advertising and prospectuses (other than those
furnished to current Shareholders) and state "blue sky" registration
expenses; and (v) providing any service rendered by the Distributor
that a Recipient may render pursuant to part (a) of this Section 3.
Such services include distribution assistance and administrative
support services rendered in connection with Shares acquired by the
Fund (i) by purchase, (ii) in exchange for shares of another investment
company for which the Distributor serves as distributor or sub-
distributor, or (ii) pursuant to a plan of reorganization to which the
Fund is a party. In the event that the Board should have reason to
believe that the Distributor may not be rendering appropriate
distribution assistance or administrative support services in
-4-
<PAGE>
connection with the sale of Shares, then the Distributor, at the
request of the Board, shall provide the Board with a written report or
other information to verify that the Distributor is providing
appropriate services in this regard.
(d) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC), from
its own resources, from Asset-Based Sales Charge payments or from its
borrowings.
(e) Notwithstanding any other provision of this Plan, this Plan does
not obligate or in any way make the Fund liable to make any payment
whatsoever to any person or entity other than directly to the
Distributor. In no event shall the amounts to be paid to the
Distributor exceed the rate of fees to be paid by the Fund to the
Distributor set forth in paragraph (a) of this section 3.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of those persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of such Disinterested Trustees. Nothing herein shall prevent
the Disinterested Trustees from soliciting the views or the involvement of
others in such selection or nomination if the final decision on any such
selection and nomination is approved by a majority of the incumbent
Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made and the purpose for which the payments were made. The reports
shall be provided quarterly and shall state whether all provisions of Section 3
of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act); (iii) it shall go into effect when approved by a vote
of the Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such agreement; and (iv) it shall, unless terminated as
herein provided, continue in effect from year to year only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
-5-
<PAGE>
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person at a
meeting called on _____ __, 1996 for the purpose of voting on this Plan, and
shall take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until ______ __, 1996 and from
year to year thereafter or as the Board may otherwise determine only so long as
such continuance is specifically approved at least annually by a vote of the
Board and its Independent Trustees cast in person at a meeting called for the
purpose of voting on such continuance. This Plan may not be amended to increase
materially the amount of payments to be made without approval of the Class B
Shareholders, in the manner described above, and all material amendments must be
approved by a vote of the Board and of the Independent Trustees. This Plan may
be terminated at any time by vote of a majority of the Independent Trustees or
by the vote of the holders of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities of the Class. In the event of such
termination, the Board and its Independent Trustees shall determine whether the
Distributor shall be entitled to payment from the Fund of the Service Fee and/or
the Asset- Based Sales Charge in respect of Shares sold prior to the effective
date of such termination.
8. Disclaimer of Shareholder Liability. The Distributor understands that the
obligations of the Fund under this Plan are not binding upon any Trustee or
shareholder of the Fund personally, but bind only the Fund and the Fund's
property. The Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming shareholder and Trustee liability
for acts or obligations of the Fund.
ROCHESTER FUND MUNICIPALS
By:__________________________________
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:__________________________________
Katherine P. Feld, Vice President
& Secretary
-6-
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
ROCHESTER FUND MUNICIPALS
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the ___ day
of
____, 1996, by and between ROCHESTER FUND MUNICIPALS (the "Fund") and
OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 (the
"Rule") under the Investment Company Act of 1940 (the "1940 Act"), pursuant to
which the Fund will compensate the Distributor for its services in connection
with the distribution of Shares, and the personal service and maintenance of
shareholder accounts that hold Shares ("Accounts"). The Fund may act as
distributor of securities of which it is the issuer, pursuant to the Rule,
according to the terms of this Plan. The Distributor is authorized under the
Plan to pay "Recipients," as hereinafter defined, for rendering (1) distribution
assistance in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are intended to have
certain rights as third-party beneficiaries under this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Article III, Section 26, of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., or its successor (the "NASD
Rules of Fair Practice") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution, to which the Fund is
subject under any order on which the Fund relies, issued at any time by the
Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan. Notwithstanding the
foregoing, a majority of the Fund's Board of Trustees (the "Board") who
are not "interested persons" (as defined in the 1940 Act) and who have
no direct or indirect financial interest in the operation of this Plan
or in any agreements relating to this Plan (the "Independent Trustees")
may remove any broker, dealer, bank or
<PAGE>
other person or entity as a Recipient, whereupon such person's or
entity's rights as a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed owned
by more than one Recipient for purposes of this Plan. In the event that
more than one person or entity would otherwise qualify as Recipients as
to the same Shares, the Recipient which is the dealer of record on the
Fund's books as determined by the Distributor shall be deemed the
Recipient as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i) within
forty-five (45) days of the end of each calendar quarter, in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares computed as of the close of each business day (the "Service
Fee"), plus (ii) within ten (10) days of the end of each month, in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average
during the month of the aggregate net asset value of Shares computed as
of the close of each business day (the "Asset-Based Sales Charge")
outstanding for six years or less (the "Maximum Holding Period"). Such
Service Fee payments received from the Fund will compensate the
Distributor and Recipients for providing administrative support
services with respect to Accounts. Such Asset-Based Sales Charge
payments received from the Fund will compensate the Distributor and
Recipients for providing distribution assistance in connection with the
sales of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not be
limited to, the following: answering routine inquiries concerning the
Fund, assisting in the establishment and maintenance of accounts or
sub-accounts in the Fund and processing Share redemption transactions,
making the Fund's investment plans and dividend payment options
available, and providing such other information and services in
connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably
request.
The distribution assistance in connection with the sale of
Shares to be rendered by the Distributor and Recipients may include,
but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current
holders of the Fund's Shares ("Shareholders"), and providing such other
information and services in connection with the distribution of Shares
as the Distributor or the Fund may reasonably request.
-2-
<PAGE>
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it to
payments under the Plan. In the event that either the Distributor or
the Board should have reason to believe that, notwithstanding the level
of Qualified Holdings, a Recipient may not be rendering appropriate
distribution assistance in connection with the sale of Shares or
administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a
written report or other information to verify that said Recipient is
providing appropriate distribution assistance and/or services in this
regard. If the Distributor or the Board of Trustees still is not
satisfied, either may take appropriate steps to terminate the
Recipient's status as such under the Plan, whereupon such Recipient's
rights as a third-party beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum
period (the "Minimum Holding Period"), if any, to be set from time to
time by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make
service fee payments ("Advance Service Fee Payments") to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed (i) 0.25% of the average during the
calendar quarter of the aggregate net asset value of Shares, computed
as of the close of business on the day such Shares are sold,
constituting Qualified Holdings sold by the Recipient during that
quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of Shares
computed as of the close of each business day, constituting Qualified
Holdings owned beneficially or of record by the Recipient or by its
Customers for a period of more than one (1) year, subject to reduction
or chargeback so that the Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by
Article III, Section 26, of the NASD Rules of Fair Practice. In the
event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated and will repay to the Distributor
on demand a pro rata portion of such Advance Service Fee Payments,
based on the ratio of the time such shares were held to one (1) year.
The Advance Service Fee Payments described in part (i) of this
paragraph (b) may, at the Distributor's sole option, be made more often
than quarterly, and sooner than the end of the calendar
-3-
<PAGE>
quarter. However, no such payments shall be made to any Recipient for
any such quarter in which its Qualified Holdings do not equal or
exceed, at the end of such quarter, the minimum amount ("Minimum
Qualified Holdings"), if any, to be set from time to time by a majority
of the Independent Trustees.
A majority of the Independent Trustees may at any time or from
time to time decrease and thereafter adjust the rate of fees to be paid
to the Distributor or to any Recipient, but not to exceed the rate set
forth above, and/or direct the Distributor to increase or decrease the
Maximum Holding Period, the Minimum Holding Period or the Minimum
Qualified Holdings. The Distributor shall notify all Recipients of the
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding
Period, if any, and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within
thirty (30) days after any change in these provisions. Inclusion of
such provisions or a change in such provisions in a revised current
prospectus shall constitute sufficient notice. The Distributor may make
Plan payments to any "affiliated person" (as defined in the 1940 Act)
of the Distributor if such affiliated person qualifies as a Recipient.
(c) The Service Fee and the Asset-Based Sales Charge on Shares are
subject to reduction or elimination of such amounts under the limits to
which the Distributor is, or may become, subject under Article III,
Section 26, of the NASD Rules of Fair Practice. The distribution
assistance and administrative support services to be rendered by the
Distributor in connection with the Shares may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker,
dealer, bank or other person or entity that sells Shares, and\or paying
such persons Advance Service Fee Payments in advance of, and\or greater
than, the amount provided for in Section 3(b) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor who
support distribution of Shares by Recipients; (iii) obtaining financing
or providing such financing from its own resources, or from an
affiliate, for the interest and other borrowing costs of the
Distributor's unreimbursed expenses incurred in rendering distribution
assistance and administrative support services to the Fund; (iv) paying
other direct distribution costs, including without limitation the costs
of sales literature, advertising and prospectuses (other than those
furnished to current Shareholders) and state "blue sky" registration
expenses; and (v) providing any service rendered by the Distributor
that a Recipient may render pursuant to part (a) of this Section 3.
Such services include distribution assistance and administrative
support services rendered in connection with Shares acquired by the
Fund (i) by purchase, (ii) in exchange for shares of another investment
company for which the Distributor serves as distributor or sub-
distributor, or (ii) pursuant to a plan of reorganization to which the
Fund is a party. In the event that the Board should have reason to
believe that the Distributor may not be rendering appropriate
distribution assistance or administrative support services in
-4-
<PAGE>
connection with the sale of Shares, then the Distributor, at the
request of the Board, shall provide the Board with a written report or
other information to verify that the Distributor is providing
appropriate services in this regard.
(d) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC), from
its own resources, from Asset-Based Sales Charge payments or from its
borrowings.
(e) Notwithstanding any other provision of this Plan, this Plan does
not obligate or in any way make the Fund liable to make any payment
whatsoever to any person or entity other than directly to the
Distributor. In no event shall the amounts to be paid to the
Distributor exceed the rate of fees to be paid by the Fund to the
Distributor set forth in paragraph (a) of this section 3.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of those persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of such Disinterested Trustees. Nothing herein shall prevent
the Disinterested Trustees from soliciting the views or the involvement of
others in such selection or nomination if the final decision on any such
selection and nomination is approved by a majority of the incumbent
Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made and the purpose for which the payments were made. The reports
shall be provided quarterly and shall state whether all provisions of Section 3
of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act); (iii) it shall go into effect when approved by a vote
of the Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such agreement; and (iv) it shall, unless terminated as
herein provided, continue in effect from year to year only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
-5-
<PAGE>
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person at a
meeting called on _____ __, 1996 for the purpose of voting on this Plan, and
shall take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until ______ __, 1996 and from
year to year thereafter or as the Board may otherwise determine only so long as
such continuance is specifically approved at least annually by a vote of the
Board and its Independent Trustees cast in person at a meeting called for the
purpose of voting on such continuance. This Plan may not be amended to increase
materially the amount of payments to be made without approval of the Class B
Shareholders, in the manner described above, and all material amendments must be
approved by a vote of the Board and of the Independent Trustees. This Plan may
be terminated at any time by vote of a majority of the Independent Trustees or
by the vote of the holders of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities of the Class. In the event of such
termination, the Board and its Independent Trustees shall determine whether the
Distributor shall be entitled to payment from the Fund of the Service Fee and/or
the Asset- Based Sales Charge in respect of Shares sold prior to the effective
date of such termination.
8. Disclaimer of Shareholder Liability. The Distributor understands that the
obligations of the Fund under this Plan are not binding upon any Trustee or
shareholder of the Fund personally, but bind only the Fund and the Fund's
property. The Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming shareholder and Trustee liability
for acts or obligations of the Fund.
ROCHESTER FUND MUNICIPALS
By:__________________________________
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:__________________________________
Katherine P. Feld, Vice President
& Secretary
-6-
