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. 19 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 24 / X /
ROCHESTER FUND MUNICIPALS
------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
350 LINDEN OAKS, ROCHESTER, NEW YORK 14625
------------------------------------------------------------------------
(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)
/ x/ On March 16, 1997, pursuant to paragraph (b)
/ / 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, 1996 was filed on February 27, 1997.
<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>
(five ROCHESTER
bar FUND
logo) MUNICIPALS Prospectus dated March 16, 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 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
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 16, 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 Risks
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements for Class
A Shareholders
Appendix B: Special Sales Charge Arrangements
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<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 16, 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(2) None(3)
- ------------------------------------------------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
(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.
(3) See "How to Buy Shares - Class C Shares" below for more
information on contingent deferred sales charges.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (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.
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.48% 0.48% 0.48%
- --------------------------------------------------------------------------------------------------------------------------------
12b-1 Plan Fees 0.15%(1) 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.19% 0.19% 0.19%
- --------------------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses 0.82%(2) 1.67% 1.67%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 daily 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
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<PAGE>
fiscal year ended December 31, 1996 were 0.82% (including interest expense) and
0.77% (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.
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 $55 $71 $88 $138
Class B Shares $67 $83 $111 $152
Class C Shares $27 $53 $91 $198
</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 $55 $71 $88 $138
Class B Shares $17 $53 $91 $152
Class C Shares $17 $53 $91 $198
</TABLE>
*In the first example, expenses include the Class A initial
sales charge of 4.75% 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
-5-
<PAGE>
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
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 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. 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
-6-
<PAGE>
determines that market conditions could cause serious erosion of portfolio
value, in which case assets may be temporarily invested in short-term taxable
obligations as a defensive measure to preserve net asset value. Such temporary
investments will be limited substantially to obligations issued or guaranteed by
the United States government, its agencies, instrumentalities or authorities;
highly-rated corporate debt securities; prime commercial paper; or certificates
of deposit of domestic banks with assets of at least $1 billion.
The Fund is permitted to invest up to 25% of its 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. See "Investment Policies and Strategies"-"Credit
Quality" and "Investment Risks".
o Who Manages The Fund? The Fund's investment adviser (the "Manager")
is OppenheimerFunds, Inc. The Manager (including a subsidiary) advises
investment company portfolios having over $62 billion in assets 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 adviser 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
-7-
<PAGE>
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 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 Has Performed? The Fund measures its
performance by quoting its yield, tax equivalent yield, average annual total
return and cumulative total return, which measure historical performance. Those
yields and returns can be compared to the yields and returns (over similar
periods) of other funds. Of course, other funds may have different objectives,
investments, and levels of risk. The Fund's performance can also be compared to
a broad-based securities market index as we have done beginning on page ___.
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
-8-
<PAGE>
in the Statement of Additional Information. 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.
-9-
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
Year Ended December 31,
----------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987(a)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $18.18 $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 1.10 1.13 1.17 1.20 1.20 1.20 1.20 1.20 1.13
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss)
on investments (0.18) 1.86 (2.68) 1.35 0.64 0.81 (.05) 0.15 0.83 (0.57)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.92 2.96 (1.55) 2.52 1.84 2.01 1.15 1.35 2.03 0.56
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income (1.10) (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 -- -- -- -- -- (0.04) -- -- -- (0.11)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.10) (1.09) (1.14) (1.17) (1.20) (1.24) (1.20) (1.20) (1.20) (1.31)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $18.00 $18.18 $16.31 $19.00 $17.65 $17.01 $16.24 $16.29 $16.14 $15.31
- -----------------------------------------------------------------------------------------------------------------------------------
Total return (b)
(excludes sales load) 5.37% 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 (in millions) 2,308 2,145 1,791 1,794 997 497 261 98 39 17
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses
to average net assets(c) 0.82% 0.82% 0.84% 0.75% 0.84% 0.87% 0.88% 1.11% 1.13% 1.20%
- -----------------------------------------------------------------------------------------------------------------------------------
-10-
<PAGE>
Ratio of total expenses
(excluding interest)
to average net assets (c)(d) 0.77% 0.78% 0.73% 0.64% 0.70% 0.74% 0.72% 0.91% 1.10% 1.20%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 6.20% 6.25% 6.43% 6.21% 6.79% 7.12% 7.21% 7.19% 7.40% 7.30%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(e) 13.34% 14.59% 34.39% 18.27% 29.99% 48.54% 51.63% 34.76% 61.50% 72.8%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 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.
(b) Assumes a hypothetical initial
investment on the business day before the first day of the fiscal period (or
inception of offering), with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in total returns. Total returns are not annualized for periods
of less than one full year.
(c) Beginning in fiscal 1995, the expense ratios
reflect the effect of gross expenses paid indirectly by the Fund. Prior year
expense ratios have not been adjusted.
(d) 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.
(e) The lesser of
purchases or sales of portfolio securities for a period, divided by the monthly
average of the market value of portfolio securities owned during the period.
Securities with a maturity or expiration date at the time of acquisition of one
year or less are excluded from the calculation. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
December 31, 1996 were $449,938,295 and $290,605,385, respectively.
(f)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 based on average number of shares
outstanding during the period.
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<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) $27,100 $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) $14,152 $ 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) 123,596 114,502 105,753 77,472 41,429 22,445 10,327 3,980 1,554
- ----------------------------------------------------------------------------------------------------------------------------------
Average amount of bank
loans per share out-
standing during the year $ .11 $ .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 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. 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
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<PAGE>
erosion of portfolio value, in which case assets may be temporarily invested in
short-term taxable obligations as a defensive measure to preserve net asset
value. Such temporary investments will be limited substantially to obligations
issued or guaranteed by the United States government, its agencies,
instrumentalities or authorities; highly-rated corporate debt securities; prime
commercial paper; or certificates of deposit of domestic banks with assets of at
least $1 billion.
Can the Fund's Investment Objective and Policies Change? The Fund has an
investment objective, described above, as well as investment policies it follows
to try to achieve its objective. Additionally, the Fund uses certain investment
techniques and strategies in carrying out those investment policies. The Fund's
investment policies and techniques are not "fundamental" unless this Prospectus
or the Statement of Additional Information says that a particular policy is
"fundamental." The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act of 1940, as amended, (the
"Investment Company Act") to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional Information).
The Fund's Board of Trustees may change non-fundamental policies without
shareholder approval, although significant changes will be described in
amendments to this Prospectus.
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 C 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
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<PAGE>
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 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
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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.
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. 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
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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 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
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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 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
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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 the Investment Company 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 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 rate 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
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"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. When the Fund is the buyer in such a transaction,
however, it will identify with its custodian certain assets which may include
liquid assets of any type, including debt securities of any grade having an
aggregate value equal to the amount of such purchase commitments until payment
is made. In addition, the Fund would mark the "when-issued" security to market
each day for purposes of portfolio valuation. To the extent the Fund engages in
"when-issued" and "delayed delivery" transactions, it will do so for the purpose
of acquiring securities for the Fund's portfolio consistent with its investment
objective and policies and not for the purpose of investment leverage. As a
fundamental policy, securities purchased on a "when-issued" and "delayed
delivery" basis may not constitute more than 10% of the Fund's net assets.
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
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proportion to the size of the Fund.
Investment Risks
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for investors who are
investing for the long term. It is not intended for investors seeking assured
income. While the Manager tries to reduce risks by carefully researching
securities before they are purchased, and in some cases by using hedging
techniques, changes in overall market prices can occur at any time, and because
the income earned on securities is subject to change, there is no assurance that
the Fund will achieve its investment objective. When you redeem your shares,
they may be worth more or less than what you paid for them.
o 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 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 - Special Investment
Considerations-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.
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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,(AAA, AA, A, BBB, BB, B or lower) were,
respectively, 17.85%, 11.67%, 20.68%, 19.82%, 5.37% and 2.33%. If a bond was not
rated by S&P, but was rated by another NRSRO (including Moody's, Fitch Investor
Services, Inc. or Duff and Phelps) it is included in the comparable S&P
category. If a bond was rated by more than one NRSRO, placement in the S&P
category is determined by the highest rating received. In addition, included in
these respective categories are bonds which, although not rated by an NRSRO, are
backed by a letter of credit or guaranteed by a financial institution or agency,
in which case placement in the S&P category is determined by an existing rating
of the issuer of the letter of credit or the institution or agency providing the
guaranty. Unrated bonds comprised 22.27% of the Fund's total assets during this
period. 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
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weighted average of credit ratings of (i)those bonds which were either rated by
an NRSRO or backed by a letter of credit or guaranty, and (ii)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 (including those bonds which, although not rated by an NRSRO, were backed
by a letter of credit or guaranteed), or in unrated bonds which are considered
by the Manager to be of comparable quality to rated securities, as separated
into each rating category established by S&P were respectively 17.85%, 14.70%,
23.42%, 24.36%, 15.11% and 4.56%. 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 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.
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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.
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
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the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser 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 advisers 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
0.48% 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 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
transactions to brokers is the attainment of the best execution of all such
transactions. If more than one broker is able to provide the best execution,
securities may be purchased from or sold to brokers who have furnished research
to the Manager. Although such
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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 adviser.
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 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
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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 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
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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 and the Consumer Price Index.
o Management's Discussion of Performance. During the Fund's fiscal year
ended December 31, 1996, the Fund benefited from actions taken by the Portfolio
Manager to reduce the volatility of the Fund's share price and enhance the
Fund's income. The Fund's performance also benefited from the generally strong
performance of municipal bond prices relative to Treasury bond prices. In 1996,
the general level of interest rates increased and bond prices declined. During
this period, municipal bonds outperformed Treasury bonds. The increase in yields
and decline in prices of municipal bonds were much less substantial than the
yield and price fluctuations of Treasury bonds and other taxable fixed income
instruments.
Municipal bond yields rose in the first half of the year, then drifted
lower in the second half, ending the year only slightly higher. The Portfolio
Manager sold lower coupon discount bonds and zero coupon bonds with longer
durations and higher volatility and replaced them with bonds which had both
shorter durations and better income and return potential. These purchases
included premium coupon callable bonds and bonds with sinking funds. The Fund
also benefited from the pre-refunding and credit upgrade of several holdings of
high coupon bonds, many of which were subsequently sold to capture these credit
gains. The Portfolio Manager selectively increased portfolio holdings of housing
issues and electric and gas utilities, while reducing exposure to unsecured
hospital issues with poorer credit prospects. The Portfolio Manager also added
several attractive unrated bonds in the non-profit, education and adult living
facility sectors.
o Comparing the Fund's Performance to the Market. The chart
below shows the performance of a hypothetical $10,000 investment in
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<PAGE>
Class A shares of the Fund held for the ten year period ended December 31, 1996.
Since Class B and Class C shares are new as of the date of this Prospectus,
there are no comparisons for those classes.
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 considers the effect of taxes.
Moreover, the index performance data does not reflect any assessment of the risk
of investments included. The performance of the Fund's Class A shares is also
compared to the Consumer Price Index, a non-securities index which measures
changes in the inflation rate.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investment in:
Rochester Fund Municipals (Class A), the Lehman Brothers Municipal Bond Index
and the Consumer Price Index.
[graph]
Average Annual Total Return of Class A shares of the Fund at
12/31/96
1 Year 5 years 10 years
- -------------------------------------------------------------------
0.36% 6.81% 7.99%
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.
Class A returns are shown net of the current applicable 4.75%
maximum initial sales charge. During the ten year period ending
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<PAGE>
December 31, 1996, the maximum sales charge on Class A shares of the Fund was
4.0%. The inception date of the Fund (Class A shares) was May 15, 1996.
Past performance is not predicative of future performance.
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 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 adviser. 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
-29-
<PAGE>
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
adviser 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.
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
-30-
<PAGE>
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.
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, such as checkwriting, 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
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<PAGE>
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:
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
-32-
<PAGE>
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 adviser 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 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 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
-33-
<PAGE>
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, 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%
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<PAGE>
- ------------------------------------------------------------------------------------------------------------------------
$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%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
Securities laws.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more. However, the Distributor pays dealers of
record commissions on purchases aggregating $1 million or more in an amount
equal to the sum of 1.0% of those purchases. That commission will be paid only
on the amount of those purchases that were not previously subject to a front-end
sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge (called the
"Class A contingent deferred sales charge") may be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital 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 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.
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<PAGE>
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 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. 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
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<PAGE>
Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers or registered investment advisers that have entered
into an agreement with the Distributor providing specifically for the use of
shares of the Fund in particular investment products made available to their
clients (those clients may be charged a transaction fee by their dealer, broker
or adviser for the purchase or sale of Fund shares);
o (1) investment advisers 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) "rabbi 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 advisers 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 adviser 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
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<PAGE>
owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts; or
o any unit investment trust that has entered into an appropriate
agreement with the Distributor.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of 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;
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
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<PAGE>
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).
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 daily net assets of Class A shares of the
Fund. Although the terms of the Service Plan permit aggregate payments by the
Fund of up to 0.25% of the Funds average daily net assets, the Board of Trustees
has approved aggregate payments of up to only 0.15% of the Fund's average daily
net assets. 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 of 0.15% of the average daily 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.
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<PAGE>
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions; (2) shares held
for over 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:
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)
- -------------------------------------------------------------------
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
- -------------------------------------------------------------------
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
-40-
<PAGE>
Shares" in the Statement of Additional Information.
o Waivers of Class B Sales Charges. The Class B contingent deferred
sales charge will not apply to those shares purchased in certain types of
transactions, nor will it apply to shares redeemed in certain circumstances, as
described below under "Buying Class C Shares - Waivers of Class B and Class C
Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the 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 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 6
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
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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 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
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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 redemptions of shares in
the following cases, if the Transfer Agent is notified that these conditions
apply to the redemption:
o redemptions from accounts following the death or disability of the
last surviving shareholder, including a trustee of a "grantor" trust or
revocable living trust for which the trustee is also the sole beneficiary (the
death or disability must have occurred after the account was established, and
for disability you must provide evidence of a determination of disability by the
Social Security Administration); or
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C shares
sold or issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies
or separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Call the Transfer Agent
for more information.
AccountLink privileges should be requested 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
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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 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 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
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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, by using the Fund's checkwriting privilege or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular basis, as
described above. If you have questions about any of these procedures, and
especially if you are redeeming shares in a special situation, such as due to
the death of the owner, please call the Transfer Agent first, at 1-800-525-7048,
for assistance.
o Certain Requests Require A Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and must
include a signature guarantee in the following situations (there may be other
situations also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o The redemption check is not payable to all shareholders
listed on the account statement
o The redemption check is not sent to the address of record
on your account statement
o Shares are being transferred to a Fund account with a
different owner or name, or
o Shares are redeemed by someone other than the owners (such
as an Executor)
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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 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.
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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.
Checkwriting. To be able to write checks against your Fund account, you may
request that privilege on your account Application or you can contact the
Transfer Agent for signature cards, which must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If you
previously signed a signature card to establish checkwriting in another
Oppenheimer fund, simply call 1-800-525-7048 to request checkwriting for an
account in this Fund with the same registration as the previous checkwriting
account.
o Checks can be written to the order of whomever you wish, but may not
be cashed at the Fund's bank or custodian.
o Checkwriting privileges are not available for accounts holding Class
B shares or Class C shares, or Class A shares that are subject to a contingent
deferred sales charge.
o Checks must be written for at least $100.
o Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you
should not write a check close to the total account value.
o You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within the
prior 10 days.
o Don't use your checks if you changed your Fund account
number.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for
additional information. See "Special Arrangements for Repurchase of Shares from
Dealers and Brokers" in the Statement of Additional Information for more
details.
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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.
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 for this purpose. In some cases, sales
charges may be imposed on exchange transactions. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send it
to the Transfer Agent at the addresses listed in "How to Sell
Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or by calling a service
representative at 1-800-525-7048. That list can change from time to time.
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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
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 advisers 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
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net asset value. In general, securities values are based on market value. There
are special procedures for valuing illiquid and restricted securities and
obligations for which market values cannot be readily obtained. These procedures
are described more completely in the Statement of Additional Information.
o The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is in the
Fund's best interest to do so.
o Telephone transaction privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless and
until the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time to
time, the Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National 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.
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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 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 Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the portfolio. Please refer to "How to Sell Shares" in the Statement of
Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate
of 31% from 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
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"How To Buy Shares," you may be subject to a contingent deferred sales charge
when redeeming certain Class A, Class B and Class C shares.
o To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask
that copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net investment income each regular business day and pays such
dividends to shareholders monthly. It is expected that distributions paid with
respect to Class A shares will generally be higher than for Class B and Class C
shares because expenses allocable to Class B and Class C shares will generally
be higher. There is no fixed dividend rate and there can be no assurance as to
the payment of any dividends. The amount of a class' dividends or distributions
may vary from time to time depending on market conditions, the composition of
the Fund's portfolio and expenses borne by that class.
Capital Gains. Although the Fund does not seek capital gains, it may realize
capital gains on the sale of portfolio securities. If it does, it may make
distributions out of any net short- or long-term capital gains in December. The
Fund may make supplemental distributions of dividends and capital gains
following the end of its fiscal year (which ends December 31st). Long-term
capital gains will be separately identified in the tax information the Fund
sends you after the end of the year. Short-term capital gains are treated as
dividends for tax purposes. There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
Application how you want to receive your distributions. You have
four options:
o Reinvest all distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains distributions in additional shares of the
Fund.
o Reinvest long-term capital gains only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or sent
to your bank account on AccountLink.
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o Receive all distributions in cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them sent to
your bank account on AccountLink.
o Reinvest your distributions in another Oppenheimer Fund account. You
can reinvest all distributions in another Oppenheimer fund account you have
established.
Federal Income Taxes. Long-term capital gains are taxable as long-term capital
gains when distributed to shareholders. Dividends paid from short-term capital
gains and net investment income are taxable as ordinary income. Dividends paid
from net investment income earned by the Fund on municipal obligations will be
excludable from your gross income for Federal income tax purposes. A portion of
the dividends paid by the Fund may be an item of tax preference if you are
subject to the alternative minimum tax. Distributions are subject to Federal
income tax and may be subject to state and/or local taxes. Your distributions
are taxable when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a statement showing
the amount of each taxable distribution you received in the previous year.
o "Buying a Dividend". When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain.
o Taxes on Transactions. Even though the Fund seeks tax-exempt income
for distribution to shareholders, you may have a capital gain or loss when you
sell or exchange your shares. A capital gain or loss is the difference between
the price you paid for the shares and the price you receive when you sell them.
Any capital gain is subject to capital gains tax.
o Returns of Capital. In certain cases distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If that
occurs, it will be identified in notices to shareholders. A non-taxable return
of capital may reduce your tax basis in your Fund shares.
New York State and City Taxes. To the extent that exempt-interest dividends are
derived from interest on municipal obligations, such distributions will be
exempt from New York State and New York City personal income taxes. However, an
investment in the Fund may result in liability for state and/or local taxes for
individual
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shareholders subject to taxation by states other than New York State or cities
other than New York City because the exemption from New York State and New York
City personal income taxes does not prevent such other jurisdictions from taxing
individual shareholders on dividends received from the Fund. In addition,
distributions derived from interest on tax exempt securities other than
municipal obligations will be treated as taxable ordinary income for purposes of
New York State and New York City personal income taxes. For New York State and
New York City personal income tax purposes, distributions of net long-term
capital gains will be taxable at the same rates as ordinary income.
Exempt-interest dividends are included in a corporation's net
investment income for purposes of calculating such corporation's New York State
corporate franchise tax and New York City general corporation tax and will be
subject to such taxes to the extent that a corporate shareholder's net
investment income is allocated to New York State and/or New York City.
All or a portion of interest on indebtedness incurred or continued to
purchase or carry the Fund's shares generally will not be deductible for New
York State and New York City personal income tax purposes.
This information is only a summary of certain Federal income tax and
New York State and New York City personal income tax information about your
investment. 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 TO PROSPECTUS OF
ROCHESTER FUND MUNICIPALS
Graphic material included in the Prospectus of Rochester
Fund Municipals (the "Fund"): "Comparison of Change in Value
of a $10,000 Hypothetical Investment in: Rochester Fund
Municipals, Lehman Brothers Municipal Bond Index and Consumer
Price Index "
Linear graphs will be included in the Prospectus of the Fund depicting
the initial account value and subsequent account value of a hypothetical $10,000
investment in Class A shares of the Fund from fiscal year end December 31, 1986
to fiscal year end December 31, 1996, comparing such values with the same
investments over the same time periods with the Lehman Brothers Municipal Bond
Index and the Consumer Price Index. Set forth below are the relevant data points
that will appear on the linear graphs. Additional information with respect to
the foregoing, including a description of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index, is set forth in the Prospectus under
"Comparing the Fund's Performance to the Market."
<TABLE>
<CAPTION>
Rochester Consumer Lehman Bros.
Fund Price Municipal
Municipals: A Index Bond Index
-------------- ------ -----------
<S> <C> <C> <C>
12/31/86 9,525 10,000 10,000
12/31/87 9,876 10,443 10,150
12/31/88 11,232 10,905 11,182
12/31/89 12,206 11,412 12,388
12/31/90 13,102 12,109 13,291
12/31/91 14,777 12,480 14,905
12/31/92 16,431 12,842 16,219
12/31/93 18,832 13,195 18,210
12/31/94 17,259 13,548 17,268
12/31/95 20,469 13,891 20,286
12/31/96 21,569 14,353 20,381
</TABLE>
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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 16, 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 of less than $250,000 effected by those shareholders of the
Fund who owned Class A shares of the Fund on March 16, 1997, the effective date
of this Prospectus. Purchases of Class A shares made by such shareholders in
amounts of $250,000 or more shall be made in accordance with the sales charge
rates described on page __ of this Prospectus. The sales charge modifications
described below shall remain in effect through January 5, 1998. In addition,
those shareholders of the Fund who owned Class A shares on March 16, 1997, may
elect to make additional purchases of Class A shares over $4 million subject to
an initial sales charge of 0.75%, in which event the 1% Class A contingent
deferred sales charge described in Note 1 below and on page ___ of this
Prospectus would not apply. After January 5, 1998, this election will not be
available and the initial and contingent deferred sales charge rates for all
purchases of Class A shares of the Fund described on pages __ through ___ of
this Prospectus shall apply.
SPECIAL CLASS A SHARES CHARGE RATES AND COMMISSIONS
<TABLE>
<CAPTION>
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%
- ----------------------------------------------------------------------------------------------------------------------
$100,000 or more but less than $250,000 3.35% 3.47% 3.00%
- ----------------------------------------------------------------------------------------------------------------------
Over $4,000,000(1) 0.75% 0.76% 0.60%
</TABLE>
(1) As described on page ___ of this Prospectus, 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 in
this Prospectus may be deducted from the redemption proceeds. The Distributor
pays dealers of record commissions on purchases
A-1
<PAGE>
aggregating $1 million or more in an amount equal to the sum of 1.0% of those
purchases. 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 adviser to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax- Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
o Purchases by Groups and Associations. The following table sets forth
the initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of securities if
that Association purchased shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
B-1
<PAGE>
or Members Price Invested Price
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
For purchases by 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 30 of this Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of members of an Association
or the sales charge rate that applies under the Rights of Accumulation described
above in the Prospectus. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations, also may purchase shares
for their individual or custodial accounts at these reduced sales charge rates,
upon request to the Fund's Distributor.
o Special Class A Contingent Deferred Sales Charge Rates. Class A
shares of the Fund purchased by exchange of shares of other Oppenheimer funds
that were acquired as a result of the merger of Former Quest for Value Funds
into those Oppenheimer funds, and which shares were subject to a Class A
contingent deferred sales charge prior to November 24, 1995 will be subject to a
contingent deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they were purchased,
at a rate equal to 1.0% if the redemption occurs within 12 months of their
initial purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the
subsequent six months. Class A shares of any of the Former Quest for Value Funds
purchased without an initial sales charge on or before November 22, 1995 will
continue to be subject to the applicable 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
B-2
<PAGE>
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995.
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by
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) withdrawals under an automatic
withdrawal plan holding only either Class B or Class C shares if the annual
withdrawal does not exceed 10% of the initial value of the account, and (ii)
liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum value of such
accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of the Fund acquired by exchange from an Oppenheimer fund that was a
Former Quest For Value Fund or into which such fund merged, if those shares were
purchased on or after March 6, 1995, but prior to November 24, 1995: (1)
redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social Security
Administration); (2) withdrawals under an automatic withdrawal plan (but only
for Class B or C shares) where the annual withdrawals do not exceed 10%
B-3
<PAGE>
of the initial value of the account; and (3) liquidation of a shareholder's
account if the aggregate net asset value of shares held in the account is less
than the required minimum account value. A shareholder's account will be
credited with the amount of any contingent deferred sales charge paid on the
redemption of any Class A, Class B or Class C shares of the Fund described in
this section if within 90 days after that redemption, the proceeds are invested
in the same Class of shares in this Fund or another Oppenheimer fund.
B-4
<PAGE>
(five Rochester
bar Fund
logo) Municipals
The Rochester Funds
A Division of OppenheimerFunds, Inc.
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. 20036-1800
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 representations must not be relied upon as having been
authorized by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc. or any affiliate thereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any state to any person to whom it is unlawful to make such an offer in such
state.
PR0365.001.0397 Printed on recycled paper
<PAGE>
ROCHESTER FUND MUNICIPALS
350 Linden Oaks, Rochester, New York 14625
1-800-525-7048
Statement of Additional Information dated March 16, 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 16, 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........................................2
Investment Policies and Strategies..................................2
Other Investment Techniques and Strategies..........................6
Investment Considerations/Risk Factors..............................8
Other Investment Restrictions.......................................19
How the Fund is Managed..................................................21
Organization and History............................................21
Trustees and Officers of the Fund...................................22
The Manager and Its Affiliates......................................26
Brokerage Policies of the Fund...........................................28
Performance of the Fund..................................................29
Distribution and Service Plans...........................................34
About Your Account
How to Buy Shares........................................................36
How to Sell Shares ......................................................43
How to Exchange Shares...................................................47
Dividends, Capital Gains and Taxes.......................................49
Additional Information About the Fund....................................52
Financial Information About the Fund
Independent Auditors' Report.............................................53
Financial Statements.....................................................54
Appendix A: Industry Classifications....................................A-1
Appendix B: Tax-Equivalent Yield Chart..................................B-1
Appendix C: Description of Municipal Securities Ratings.................C-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
facilities for water supply, gas, electricity or sewage or solid waste disposal.
-2-
<PAGE>
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 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
-3-
<PAGE>
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 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
-4-
<PAGE>
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% of the Fund's
assets which are invested in tax-exempt obligations may be invested in unrated
or "illiquid" Municipal Leases.
-5-
<PAGE>
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 place at a later date.
Normally the settlement date occurs within six months of the purchase of
municipal bonds and notes. However, the Fund may, from time to time, purchase
municipal securities whose settlement extends beyond six months and possibly as
long as two years or more
-6-
<PAGE>
beyond trade date. 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 and the number of other potential
purchasers; (3) any dealer undertakings to make a market in the
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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.
Investment Considerations/Risk Factors
Special Investment Considerations - 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 official statements relating to offerings of New York issuers of
Municipal Securities on or prior to February 12, 1997 with respect to offerings
of the State and January 28, 1997 with respect to offerings 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, economic growth
slowed in 1995 and the City's current four-year financial plan assumes that
moderate economic growth will continue through the calendar year 2000.
For each of the 1981 through 1996 fiscal years, the City achieved
balanced operating results as reported in accordance with generally accepted
accounting principles ("GAAP") and the City's 1997 fiscal year results are
projected to be balanced in accordance with GAAP. The City was required to close
substantial budget gaps in recent years in order to maintain balanced operating
results. There can be no assurance that the City will continue to maintain a
balanced budget as required by State law, or that it can maintain a balanced
budget without additional tax or other revenue increases or additional
reductions in City services or programs, which could adversely affect the City's
economic base.
The Mayor is responsible for preparing the City's four-year financial
plan, including the City's current financial plan for the 1997 through 2000
fiscal years (the "1997-2000 Financial Plan", "Financial Plan" or "City Plan").
On November 14, 1996, the City submitted to the New York State
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Financial Control Board (the "Control Board") the Financial Plan for the
1997-2000 fiscal years, which is a modification to a financial plan submitted to
the New York State Financial Control Board (the "Control Board") on June 21,
1996 (the "June Financial Plan") and which relates to the City, the New York
City 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 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, the ability of the New
York City Health and Hospitals Corporation ("HHC") and BOE to take actions to
offset reduced revenues, the ability to complete certain revenue generating
transactions, provision of State and Federal aid and mandate relief and the
impact on City revenues of Federal and State welfare reform and any future
legislation affecting Medicare or other entitlements.
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 1997 through 2000 contemplates the
issuance of $9.0 billion of general obligation bonds and $3.8 billion of bonds
to be issued by the proposed New York City Finance Authority (the "Finance
Authority") primarily to reconstruct and rehabilitate the City's infrastructure
and physical assets and to make other capital investments. The creation of the
Finance Authority, which is subject to the enactment of State legislation, is
being proposed by the City in an attempt to avoid certain State constitutional
debt limitations. The City's projections indicate that City debt may exceed such
limitations sometime by the end of the 1997 fiscal year (July 1, 1996 - June 30,
1997) unless legislation is enacted or other legislative initiatives are
identified and implemented. Without the Finance Authority or other legislative
relief, the City's capital program funded with general obligation debt, with
respect to new projects, would be virtually brought to a halt during the period
of the City Plan. 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 and Finance Authority 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 or bonds and notes of the proposed Finance
Authority, 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.
o 1997-2000 Financial Plan. The June Financial Plan set forth actions
to close a previously projected gap of approximately $2.6 billion in the 1997
fiscal year. The proposed actions in the June Financial Plan for the 1997 fiscal
year included (i) agency actions; (ii) a revised tax reduction program which
would increase projected tax revenues due to the extension of the 12.5% personal
income tax surcharge and other actions; (iii) savings resulting from cost
containment in entitlement programs to reduce City expenditures and additional
proposed State aid; (iv) the assumed receipt of
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revenues relating to rent payments for the City's airports, which are currently
the subject of a dispute with the Port Authority of New York and New Jersey (the
"Port Authority"); (v) the sale of the City's television station; and (vi)
pension cost savings resulting from a proposed increase in the earnings
assumption for pension assets.
The 1997-2000 Financial Plan published on November 14, 1996 reflects
actual receipts and expenditures and changes in forecast revenues and
expenditures since the June Financial Plan. The 1997-2000 Financial Plan
projects revenues and expenditures for the 1997 fiscal year balanced in
accordance with GAAP, and projects budget gaps of $1.2 billion, $2.1 billion and
$3.0 billion for the 1998, 1999 and 2000 fiscal years, respectively, after
successful implementation of the gap closing program for the 1997 fiscal year.
Changes since the June Financial Plan include (i) an increase in projected tax
revenues in fiscal years 1997 through 2000, respectively; (ii) a delay in the
assumed receipt of projected rent payments for the City airports from the 1997
fiscal year to the 1998 and 1999 fiscal years, and a reduction in assumed State
and Federal aid for the 1997 fiscal year; (iii) an increase in projected
overtime and other expenditures in each of the fiscal years 1997 through 2000;
(iv) an increase in expenditures for BOE in the 1997 fiscal year for school text
books; (v) a reduction in projected pension costs, in fiscal years 1997 through
2000, respectively; and (vi) additional agency actions in fiscal years 1997
through 2000, including personnel reductions through attrition and early
retirement.
The Financial Plan assumes (i) approval by the Governor and the State
Legislature of a retroactive extension of the 12.5% personal income tax
surcharge, which expired on December 31, 1996; (ii) collection of the projected
rent payments for the City's airports in the 1998 and 1999 fiscal years,
respectively, which may depend on the successful completion of negotiations with
the Port Authority or the enforcement of the City's rights under the existing
leases thereto through pending legal actions; (iii) the ability of HHC and BOE
to identify actions to offset substantial City and State revenue reductions and
the receipt by BOE of additional State aid; (iv) State approval of the cost
containment initiatives and State aid proposed by the City; and (v) a reduction
in City funding for labor settlements for certain public authorities or
corporations. The Financial Plan does not reflect any increased costs which the
City might incur as a result of welfare legislation recently enacted by Congress
or legislation proposed by the Governor, which would, if enacted, implement such
Federal welfare legislation. In addition, the economic and financial condition
of the City may be affected by various financial, social, economic and political
factors which could have a material effect on the City.
The City's financial plans have been the subject of extensive public
comment and criticism. In December 1996, the City Comptroller, the New York Sate
Comptroller and the Control Board each issued reports 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.
o Ratings. As of January 28, 1997, Moody's rated the City's general
obligation bonds Baa1, Standard & Poor's rated the bonds BBB+ and Fitch rated
the bonds A-. These ratings do not reflect any credit enhancements relating to
any portion of City bonds. Such ratings reflect only the views of Moody's,
Standard & Poor's and Fitch, from which an explanation of the significance of
such
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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 the bonds. On February 28,
1996, Fitch Investors Service, Inc. ("Fitch") placed the City's general
obligation bonds on FitchAlert with negative implications. On November 5, 1996,
Fitch removed the City's general obligation bonds from FitchAlert, although
Fitch stated that the outlook remains negative.
o Outstanding Net Indebtedness. As of December 31, 1996, the City and
the Municipal Assistance Corporation for the City of New York had, respectively,
approximately $25.9 billion and $3.9 billion of outstanding net long-term debt.
As of October 24, 1996, the New York City Municipal Water Finance Authority (
the "Water Authority") had approximately $6.6 billion of long-term debt and $400
million of commercial paper notes outstanding.
Debt service on Water Authority obligations is secured by fees and
charges collected from the users of the City's water and sewer system. State and
federal regulations require the City's water supply to meet certain standards to
avoid filtration. The City's water supply now meets all technical standards and
the City has taken the position that increased regulatory, enforcement and other
efforts to protect its water supply will preserve the high quality of water in
the upstate water supply system and prevent the need for filtration. The U.S.
Environmental Protection Agency has granted the City a waiver of filtration
regulations through December 15, 1996, and has stated it will issue a waiver
through April 2002 if the City and State implement certain protective actions
estimated to cost approximately $400 million. Preliminary estimates of the costs
of such filtration are from $4 to $8 billion. Such an expenditure could cause
significant increases in City water and sewer charges.
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. There can be no assurance
that there will not be reductions in State aid to the City from amounts
currently projected 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.
o Litigation. The City is a defendant in lawsuits pertaining to
material matters, including claims asserted which are incidental to performing
routine governmental and other functions. This litigation includes, but is not
limited to, actions commenced and claims asserted against the City arising out
of alleged torts, alleged breaches of contracts, alleged violations of law and
condemnation proceedings. As of June 30, 1996, claims in excess of $380 billion
were outstanding against the City for which the City estimates its potential
future liability to be approximately $2.8 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.
o Recent Developments. The national economy has resumed a more
robust rate of growth after a "soft landing" in 1995, with over 11 million
jobs added nationally since early 1992. The State
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economy has continued to expand, but growth remains somewhat slower than in the
nation. Although the State has added approximately 240,000 jobs since late 1992,
employment growth in the State has been hindered during recent years by
significant cutbacks in the computer and instrument manufacturing, utility,
defense and banking industries. Government downsizing has also moderated these
job gains. Moderate growth is projected to continue in 1997 for employment,
wages and personal income, followed by a slight slowing in 1998.
The New York State Financial Plan for the State's 1996-1997 fiscal year
(April 1, 1996- March 31, 1997) (the "State Plan") is based on the State's
1996-1997 fiscal year budget and updated, relying on actual results, through the
third quarter of the fiscal year. The State Plan assumes the State's economy
will show modest expansion during the calendar year 1996. Although industries
that export goods and services are expected to continue to do well, growth is
expected to be slowed by government cutbacks at all levels and by tight fiscal
constraints on health and social services. On an average annual basis,
employment growth in the State is expected to be up slightly from the 1995 rate.
Personal income is expected to record moderate gains in 1996. Bonus payments in
the securities industry are expected to increase further from last year's record
level.
o The 1996-97 Fiscal Year. The State's General Fund (the major
operating fund of the State) is projected in the State Plan to be balanced on a
cash basis for the 1996-97 fiscal year. The State Plan projects General Fund
receipts and transfers from other funds at $32.966 billion, an increase of $158
million from the prior fiscal year, and disbursements and transfers to other
funds at $32.895 billion, an increase of $216 million from the total disbursed
in the prior fiscal year. The State Financial Plan includes gap closing actions
to offset a previously projected budget gap of $3.9 billion for the 1996-1997
fiscal year. Such gap closing actions include reductions in the State workforce,
spending reductions in health care and education programs, projected increases
in tax collections, pension and debt service savings and the use of certain
reserve funds. There can be no assurance that additional gap closing measures
will not be required and there is no assurance that any such measures will
enable the State to achieve a balanced budget for its 1996-1997 fiscal year.
The State Plan is based upon forecasts of national and State economic
activity developed through both internal analysis and review of State and
national economic forecasts prepared by commercial forecasting services and
other public and private forecasters. Economic forecasts have frequently failed
to predict accurately the timing and magnitude of changes in the national and
the State economies. Many uncertainties exist in forecasts of both the national
and State economies, including consumer attitudes toward spending, the extent of
corporate and governmental restructuring, federal fiscal and monetary policies,
the level of interest rates, and the condition of the world economy, which could
have an adverse effect on the State. There can be no assurance that the State
economy will not experience results in the current fiscal year that are worse
than predicted, with corresponding material and adverse effects on the State's
projections of receipts and disbursements.
Projections of total State receipts in the State Financial Plan are
based on the State tax structure in effect during the fiscal year and on
assumptions relating to basic economic factors and their historical
relationships to State tax receipts. Projections of total State disbursements
are based on assumptions relating to economic and demographic factors, levels of
disbursements for various
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services provided by local governments (where cost is partially reimbursed by
the State), and the results of various administrative and statutory mechanisms
in controlling disbursements for State operations. Factors that may affect the
level of disbursements in the fiscal year include uncertainties relating to the
economy of the nation and the State, the policies of the federal government, and
changes in the demand for and use of State services.
o Future Fiscal Years. The Governor presented his proposed 1997-1998
Executive Budget (the "Executive Budget") to the Legislature on January 14,
1997. It is expected that the Governor will prepare amendments to the Executive
Budget as permitted under law in a revised Financial Plan to be released in
February 13, 1997. There can be no assurance that the Legislature will enact the
Executive Budget as proposed by the Governor into law, or that the State's
adopted budget projections will not differ materially and adversely from the
projections set forth in the Executive Budget.
The draft 1997-1998 Financial Plan, based on the Executive Budget,
projects balance on a cash basis and reflects a continuing strategy of
substantially reduced State spending, including reductions in social welfare
spending and efficiency and productivity initiatives. Total General Fund
receipts are projected to be $32.88 billion and total General Fund disbursements
and transfers to other funds are projected to be $32.84 billion.
The Executive Budget proposes $2.3 billion in gap closing actions to
balance the 1997-1998 Financial Plan. As a result of the loss of non-recurring
revenues available in 1996-1997 and implementation of previously enacted tax
reduction programs, the Executive Budget proposes to close this gap primarily
through a series of spending reductions and Medicaid cost containment measures,
the use of a portion of the 1996-1997 projected budget surplus, and other
actions.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy, actions
of the federal government and other factors, have created structural gaps for
the State. These gaps resulted from a significant disparity between recurring
revenues and the costs of maintaining or increasing the level of support for
State programs. To address a potential imbalance in any given fiscal year, the
State would be required to take actions to increase receipts and/or reduce
disbursements as it enacts the budget for that year, and under the State
Constitution, the Governor is required to propose a balanced budget each year.
There can be no assurance, however, that the Legislature will enact the
Governor's proposals or that the State's actions will be sufficient to preserve
budgetary balance in a given fiscal year or to align recurring receipts and
disbursements in future fiscal years.
On August 22, 1996, the President signed into law the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996. The new law
abolishes the federal Aid to Families with Dependent Children program (AFDC),
and creates a new Temporary Assistance to Needy Families Program (TANF) funded
with a fixed federal block grant to states. The new law also imposes (with
certain exceptions) a five-year durational limit on TANF recipients, requires
that virtually all recipients be engaged in work or community service activities
within two years of receiving benefits, and limits assistance provided to
certain immigrants and other classes of individuals. States are required to
comply with the new federal welfare reform law no later than July 1, 1997.
States who
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fail to meet these federally mandated job participation rates, or who fail to
conform with certain other federal standards, face potential sanctions in the
form of a reduced federal block grant.
On October 16, 1996, the Governor submitted the State's TANF
implementation plan to the federal government as required under the new federal
welfare law. Submission of this plan to the federal government requires New York
State to begin compliance with certain time limits on welfare benefits and
permits the State to become eligible for federal block grant funding. The
Governor has indicated that he plans to introduce legislation necessary to
conform with federal law for consideration by the Legislature in the 1997
legislative session. Given the size and scope of the changes required under
federal law, it is likely that these proposals will produce extensive public
discussions. There can be no assurances that the State legislature will enact
welfare reform proposals as submitted by the Governor and as required by federal
law.
It is expected that funding levels provided under the federal TANF
block grant will be higher than currently anticipated in the State Plan.
However, the net fiscal impact of any changes to the State's welfare programs
that are necessary to conform with federal law will be dependent upon such
factors as the ability of the State to avoid any federal fiscal penalties, the
level of additional resources required to comply with any new State and/or
federal requirements, and the division of non-federal welfare costs between the
State and its localities.
o Prior Fiscal Years. The State ended its 1995-1996 fiscal year in
balance, with a reported 1995-1996 General Fund cash surplus of $445 million.
Prior to adoption of the State's 1995-1996 fiscal year budget, the State had
projected a potential budget gap of approximately $5 billion, which was closed
primarily through spending reductions, cost containment measures, State agency
actions and local assistance reforms.
In July 1995, the State Comptroller issued its audit of the State's
1994-1995 fiscal year prepared in accordance with generally accepted auditing
standards. The State completed its 1994- 1995 fiscal year with a General Fund
operating deficit of $1.426 billion, as compared with an operating surplus of
$914 million for the previous fiscal year. The 1994-1995 fiscal year deficit was
caused by several factors, including the use of $1.026 billion of the 1993-1994
fiscal year surplus in the 1994-1995 fiscal year and the adoption of changes in
accounting methodologies by the State Comptroller.
o 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. 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 seasonal borrowing.
o Authorities. The fiscal stability of the State is related to the
fiscal stability of its public authorities ("Authorities"). Authorities have
various responsibilities, including these which finance, construct and/or
operate revenue-producing public facilities. Authorities are not subject to the
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constitutional restrictions on the incurrence of debt which apply to the State
itself, and may issue bonds and notes within the amounts, and restrictions set
forth in, their legislative authorization. As of September 30, 1995, the latest
data available, 17 Authorities each had outstanding debt of $100 million or
more, and collectively, had aggregate outstanding debt, including refunding
bonds, of $73.45 billion.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges or tunnels,
highway tolls, rentals for dormitory rooms and housing units and charges for
occupancy at medical care facilities. In addition, State legislation authorizes
several financing techniques for Authorities. Also, there are statutory
arrangements providing for State local assistance payments otherwise payable to
localities to be made under certain circumstances to Authorities. Although the
State has no obligation to provide additional assistance to localities whose
local assistance payments have been paid to Authorities under these
arrangements, if local assistance payments are diverted the affected localities
could seek additional State assistance. Some Authorities also receive moneys
from State appropriations to pay for the operating costs of certain of their
programs.
o Ratings. On January 13, 1992, Standard & Poor's reduced its ratings
on the State's general obligation bonds from A to A- and, in addition, reduced
its ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. Standard & Poor's also continued its negative
rating outlook assessment on State general obligation debt. On April 26, 1993,
Standard & Poor's revised the rating outlook assessment to stable. On February
14, 1994, Standard & Poor's raised its outlook to positive and, on October 3,
1995, confirmed its A-rating. On January 6, 1992, Moody's reduced its ratings on
outstanding limited-liability State lease purchase and contractual obligations
from A to Baa1. On October 2, 1995, Moody's reconfirmed its A rating on the
State's general obligation long-term indebtedness. 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.
o General Obligation Debt. As of March 31, 1996, the State had
approximately $5.05 billion in general obligation bonds, including $294 million
in bond anticipation notes outstanding. Principal and interest due on general
obligation bonds and interest due on bond anticipation notes were $735 million
for the 1995-96 fiscal year and are estimated to be $719 million for the State's
1996-97 fiscal year.
o 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 1996-1997 fiscal year or thereafter.
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The State believes that the State Plan includes sufficient reserves for
the payment of judgments that may be required during the 1996-97 fiscal year.
There can be no assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount the State Plan reserves for the payment
of judgments and, therefore, could affect the ability of the State to maintain a
balanced 1996-1997 State Plan. In its audited financial statements for the
fiscal year ended March 31, 1996, the State reported its estimated liability for
awarded and anticipated unfavorable judgments at $474 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
1996-97 fiscal year or thereafter.
o Other Localities. Certain localities in addition to the City could
have financial problems leading to requests for additional State assistance
during the State's 1996-97 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 1996-97 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 increased State
expenditures for extraordinary local assistance.
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 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. 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
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additional expenses to seek recovery.
Generally, when interest rates rise, the value of fixed rate debt
obligations, including high yield securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a high yield security containing a redemption or call provision
exercises either provision in a declining interest rate market, the Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if the Fund experiences unexpected net redemptions in
a rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to
which the Fund's expenses could be allocated and in a reduced rate of return for
the Fund. While it is impossible to protect entirely against this risk,
diversification of the Fund's portfolio and the careful analysis of prospective
portfolio securities by 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 C 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
-17-
<PAGE>
available for higher quality securities may limit the Fund's ability to sell
such securities at that fair market value in response to changes in the economy
or the financial markets. The ability of the Fund to value or sell high yield
securities also will be adversely affected to the extent that such securities
are thinly traded or illiquid. During such periods, there may be less reliable
objective information available and thus the responsibility of the 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.
-18-
<PAGE>
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 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.
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 adviser, own beneficially
more than 1/2 of 1% of the securities of such issuer and all such officers and
trustees together own beneficially more than 5% of such securities.
-19-
<PAGE>
(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.
-20-
<PAGE>
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).
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
-21-
<PAGE>
liable as a "partner" under certain circumstances, the risk of a Fund
shareholder incurring financial loss on account of shareholder liability is
limited to the relatively remote circumstances in which the Fund would be unable
to meet its obligations described above 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 Limited
Term New York Municipal Fund and Oppenheimer Bond Fund for Growth. With the
exception of Mr. Cannon, all of the trustees are also trustees or directors of
the Oppenheimer Quest For Value Funds (consisting of the following series:
Oppenheimer Quest Growth & Income Value Fund, Oppenheimer Quest Officers Value
Fund, Oppenheimer Quest Opportunity Value Fund and Oppenheimer Quest Small Cap
Fund) Oppenheimer Quest Value Fund, Inc., and Oppenheimer Quest Global Value
Fund, Inc. and Oppenheimer Quest Capital Value Fund, Inc. Messrs. Clinton,
Courtney, Herrmann and Loft are also directors of Oppenheimer Quest Capital
Value Fund, Inc. Ms. Macaskill (in her capacity as President), Messrs. Donohue,
Bowen, Zack, Bishop and Farrar, respectively, hold the same offices with various
other Oppenheimer funds as with the Fund. As of March 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 67
620 Sentry Parkway West Suite 220, Blue Bell, Pennsylvania 19422
Independent Consultant; Chief Investment Officer, 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
39 Blossom Avenue, Osterville, Massachusetts 02655
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
-22-
<PAGE>
which is a money-market fund and Narragansett Insured Tax Free Fund; Director of
Quest Cash Re serves, 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, 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.
RONALD FIELDING, Vice President and Portfolio Manager; Age 48
350 Linden Oaks, Rochester, New York 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
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<PAGE>
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 Rochester Capital Advisors,
Inc., President and a director of Rochester Fund Services, Inc.
ANDREW J. DONOHUE, Secretary; Age 47
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
Oppenheimer Real Asset Management, Inc.; General Counsel of OAC; Executive Vice
President, Chief Legal Officer and a director of MultiSource Services, Inc. (a
broker-dealer); formerly Senior Vice President and Associate General Counsel of
the Manager and the Distributor, partner in Kraft & McManimon (a law firm), an
officer of First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser), and a director
and an officer of First Investors Family of Funds and First Investors Life
Insurance Company.
GEORGE C. BOWEN, Treasurer; Age 60
6803 South Tucson Way, Englewood, Colorado 80112
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.
ROBERT BISHOP, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80112
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 80112
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.
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<PAGE>
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.
- -------------------
*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 remaining Trustees of the Fund received the
total amounts shown below from (i) the Fund during its fiscal year ended
December 31, 1996 and (ii) other investment companies (or series thereof) in the
Fund Complex during the calendar year ended December 31, 1996. 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 $7,193 $0 $13,500 $20,250
Paul Y. Clinton $8,031 $0 $0 $54,450
Thomas W. Courtney $8,031 $0 $0 $54,450
Lacy B. Herrmann $8,031 $0 $0 $54,450
George Loft $7,681 $0 $0 $53,400
- ---------------------
</TABLE>
(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
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<PAGE>
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 funds within the Fund Complex,
which for purposes of the chart above, included the Fund, Limited Term New York
Municipal Fund, Oppenheimer Bond Fund for Growth, Oppenheimer Quest Growth &
Income Value Fund, Oppenheimer Quest Officers Value Fund, Oppenheimer Quest
Opportunity Value Fund, Oppenheimer Quest Small Cap Value Fund, Oppenheimer
Quest Global Value Fund, Inc. and Oppenheimer Quest Value Fund, Inc.
o Major Shareholders. As of March 1, 1997 no person owned of record or
was known by the Fund to own beneficially 5% or more of the Fund as a whole or
of the Fund's outstanding shares except Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive, EFL 3, Jacksonville, Florida 32246-6484 which was the
record owner of 19,090,522.355 (14.63%) of Class A shares of the Fund. No Class
B or Class C shares were issued and outstanding as of such date.
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
$10,305,143 and the management fees paid to Rochester Capital
-26-
<PAGE>
Advisors LP, the Manager's predecessor, were $113,595. For the Fund's fiscal
year ended December 31, 1995, the management fees paid by the Fund to its
previous investment adviser, Rochester Capital Advisors, L.P., 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 adviser to the Fund from
the commencement of its operations as an open-end investment company on May 15,
1986 through April 30, 1994. Rochester Capital Advisors, Inc. is the general
partner of Rochester Capital Advisors, L.P.
The Investment Advisory Agreement contains no expense limitation.
However, because of state regulations limiting fund expenses that previously
applied, the Manager had 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 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 adviser for any other person, firm or
corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser. If the Manager
shall no longer act as investment adviser to the Fund, the right of the Fund to
use the name "Oppenheimer" as part of its name may be withdrawn.
o The Distributor. Under its General Distributor's Agreement with the
Fund, 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 and 1995 the aggregate amount of
sales charge on sales of the Fund's Class A shares was $16,039,947 and
$8,868,211, respectively, of which Rochester Fund Distributors, Inc., the Fund's
previous principal underwriter retained $2,015,030 and $1,086,283 in those
respective years. During the Fund's fiscal year ended December 31, 1996, the
aggregate amount of sales charges on the Fund's Class A shares was $9,802,584,
of which the Distributor and an affiliated broker-dealer retained in the
aggregate $1,377,087. 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.
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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. The Transfer Agent is compensated on the basis of a
fixed fee per account. The compensation paid by the Fund for each such services
under a comparable arrangement with Rochester Fund Services, Inc., the Fund's
previous shareholder servicing agent, for fiscal years ended December 31, 1994
and December 31, 1995 were $1,152,456 and $1,267,856, respectively. The
compensation paid to OppenheimerFunds Services for fiscal year ended December
31, 1996 was $1,242,719.
o Accounting and Recordkeeping Services. The Manager also provides
certain accounting and recordkeeping services to the Fund pursuant to an
Accounting and Administration Agreement entered into on January 4, 1996. The
services provided pursuant to the Fund thereunder include the maintenance of
general ledger accounts and records relating to the business of the Fund in the
form required to comply with the Investment Company Act and the calculation of
the daily net asset value of the Fund. The compensation paid by the Fund for
such services to Rochester Fund Services, Inc. its previous shareholder services
agent, for the fiscal years ended December 31, 1994 and 1995 was $556,700 and
$607,025, respectively. The compensation paid to OppenheimerFunds Services for
fiscal year ended December 31, 1996 was $660,089.
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 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
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brokerage are generally made by the Manager's portfolio traders based upon
recommendations from the Manager's portfolio manager. In certain instances,
portfolio manager 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 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 13.34% 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,"
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<PAGE>
"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 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. Additionally, because each
class of shares is subject to different expenses, it is likely that the
standardized yields of the Fund's classes of shares will differ. For the 30-day
period ended December 31, 1996, the standardized yield for the Fund's Class A
shares was 5.37%. No standardized yields are presented for Class B or Class C
shares because no shares of either of those classes were issued during the
fiscal year ended December 31, 1996.
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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. Appendix
B includes tax-equivalent yield tables based on various effective tax brackets
for tax payers. Such tax brackets are determined by a taxpayer's Federal, State
and City taxable income (the net amount subject to Federal and State income
taxes after deductions and exemptions.) The Fund's tax-equivalent yield for its
Class A shares for the 30-day period ended December 31, 1996, for an individual
New York City resident in the 46.08% combined tax bracket was 9.96%. No
tax-equivalent yields are presented for Class B or Class C shares because no
shares of either or those classes were issued during the fiscal year ended
December 31, 1996.
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 for Class A shares includes the maximum
front-end sales charge. For Class B and Class C shares, the maximum offering
price is net asset value per share without considering the effect of the
contingent deferred sales charge.
From time to time similar yield or distribution return calculations may
also be made using the Class A net asset value (instead of its maximum offering
price) at the end of the period.
The dividend yield on Class A shares for the 30-day period ended
December 31, 1996 were 5.84% and 6.13% when calculated at maximum offering price
and at net asset value, respectively. No dividend yields are presented for Class
B or Class C shares because no shares of either of those classes were issued
during the fiscal year ended December 31, 1996.
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). During the 10 year period ended December 31, 1996, on Class A
shares of the Fund was 4.0%. For Class B shares, payment of the contingent
deferred sales charge of 5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year
and none thereafter is applied, as described in the Prospectus. For Class C
shares, the payment of 1.0% contingent deferred sales charge for the first 12
months is applied, as described in the Prospectus. Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that the
investment is redeemed at the end of the period.
The "average annual total returns" on an investment in Class A shares
of the Fund for the one, five and ten year periods ended December 31, 1996 were
0.36%, 6.81% and 7.99%, respectively. The "cumulative total return" on Class A
shares of the Fund for the ten year period ended December 31, 1996 was 115.69%.
No average annual total returns or cumulative total returns are presented for
Class B or class C shares because no shares of either of those classes were
issued during the fiscal year ended December 31, 1996.
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 "average annual total return at net asset value" for Class A shares
for the one, five and ten-year periods ended December 31, 1996 were 5.37%, 7.86%
and 8.52%, respectively. The Fund's "cumulative total return at net asset value"
for Class A shares for the one, five and ten year periods ended December 31,
1996 were 5.37%, 45.96% and 126.44%, respectively.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment
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in Class A, Class B or Class C shares of the Fund, a number of factors should be
considered before using such information as a basis for comparison and before
using such information with other investments.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely- recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods based on
categories relating to investment objectives. The performance of the Fund is
ranked against (i) all other bond funds (excluding money market funds) and (ii)
all other New York municipal bond funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or taxes into
consideration. From time to time the Fund may include in its advertisement and
sales literature performance information about the Fund cited in other
newspapers and periodicals such as The New York Times, which may include
performance quotations from other sources, including Lipper and Morningstar. The
performance of the Fund's Class A, Class B or Class C shares may be compared in
publications to (i) the performance of various securities market indices,
non-securities market indices such as the Consumer Price Index to other
investments for which reliable performance data is available, and (ii) to
averages, performance rankings or other benchmarks by recognized mutual fund
statistical services.
From time to time the Fund may publish the star ranking of its
performance of its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar ranks mutual funds
monthly in broad investment categories (domestic stock, international stock,
taxable bond municipal bond funds) based on risk-adjusted investment return. The
Fund is ranked among municipal bond funds. Investment return measures a fund's
three, five and ten-year average annual total returns depending on the inception
date of the fund or class 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 investment 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%). The
current star rating is the fund's or class's 3-year ranking or its combined 3-
and 5-year ranking (weighted 60%/40%, respectively,) or its combined 3-, 5- and
10- year ranking (weighted 40%, 30% and 30%, respectively) depending on the
inception of the fund or class. Rankings are subject to change.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
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<PAGE>
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 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 Class A,
Class B or Class C 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.
The performance of the Fund's Class A, Class B or Class C 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.
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<PAGE>
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. Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
No Plans may be amended to increase materially the amount of payments to be made
unless such amendment is approved by majority vote of the shareholders of the
class affected by the amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund is required
by a Securities Exchange Commission Rule to obtain approval of Class B as well
as Class A shareholders for a proposed amendment to the Class A Plan that would
materially increase payments 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 for
its review, detailing 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 and Class C Plans shall also
include the Distributor's distribution costs for that quarter, and such costs
for previous fiscal periods that have been carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which they are
based, will be subject to the review and approval of the Independent Trustees in
the exercise of their fiduciary duty. Each Plan further provides that while it
is in effect, the selection and nomination of those Trustees of the Fund who are
not "interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in such
selection and nomination if the final decision 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 fee at the maximum rate
allowed under the Plans and set no minimum amount.
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<PAGE>
For the fiscal year ended December 31, 1996, payments under the Class A
Service Plan, totaled $3,245,654 all of which was paid by the Distributor to
Recipients, including $7,818 paid to an affiliate of the Distributor.
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 Class A Plan for 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 advance service
fee payment for those shares to the Distributor.
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 Conduct Rules 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.
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
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<PAGE>
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 that class, including the asset-based sales
charges to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of 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 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
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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 Municipal Securities, U.S. Government Securities, and
corporate bonds, when last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity, and other special factors
involved (such as the tax-exempt status of the interest paid by Municipal
Securities). The Manager may use pricing services approved by the Board of
Trustees to price any of the types of securities described above. The Manager
will monitor the accuracy of such pricing services, which may include comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts 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).
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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.
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
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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
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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*Through April 30, 1997, upon the exchange of shares of the Fund for Class A
shares of another Oppenheimer fund, those shares acquired upon exchange may not
subsequently be exchanged for
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Class A shares of Limited Term New York Municipal Fund unless the original
exchange involved an exchange 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 price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow" below (as
those terms may be amended from time to time). The investor agrees that shares
equal in value to 5% of the intended purchase amount will be held in escrow by
the Transfer Agent subject to the Terms of Escrow. Also, the investor agrees to
be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
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.
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In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility of the dealer of record and/or
the investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
(1) Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
(2) If the 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
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up to four other Oppenheimer funds. If you make payments from your bank account
to purchase shares of the Fund, your bank account will be automatically debited
normally four to five business days prior to the investment dates selected in
the Account Application. Neither the Distributor, the Transfer Agent, nor the
Fund shall be responsible for any delays in purchasing shares resulting from
delays in ACH transmissions.
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 adviser before
initiating Asset Builder payments. The amount of the Asset Builder investment
may be changed or the automatic investments may be terminated at any time by
writing to the Transfer Agent. A reasonable period (approximately 15 days) is
required after the Transfer Agent's receipt of such instructions to implement
them. The Fund reserves the right to amend, suspend, or discontinue offering
such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below supplements the terms and conditions for redemptions set forth
in the Prospectus.
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
the Bank or the Fund's Custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
By choosing the Checkwriting privilege, whether you do so by signing
the Account Application or by completing a Checkwriting card, the individuals
signing (1) represent that they are either the registered owner(s) of the shares
of the Fund, or are an officer, general partner, trustee or other fiduciary or
agent, as applicable, duly authorized to act on behalf of such registered
owner(s); (2) authorize the Fund, its Transfer Agent and any bank through which
the Fund's drafts ("checks") are payable (the "Bank"), to pay all checks drawn
on the Fund account of such person(s) and to effect a redemption of sufficient
shares in that account to cover payment of such checks; (3) specifically
acknowledge(s) that if you choose to permit a single signature on checks drawn
against joint accounts, or accounts for corporations, partnerships, trusts or
other entities, the signature of any one signatory on a check will be sufficient
to authorize payment of that check and redemption from an account even if that
account is registered in the names of more than one person or even if more than
one authorized signature appears on the Checkwriting card or the Application, as
applicable;
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and (4) understand(s) that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Bank and neither shall incur any
liability for such amendment or termination or for effecting redemptions to pay
checks reasonably believed to be genuine, or for returning or not paying checks
which have not been accepted for any reason.
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.
Payments "In Kind." The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Trustees of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case, the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of securities from the portfolio of
the Fund, in lieu of cash, in conformity with applicable rules of the Securities
Exchange Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder. If shares are redeemed in
kind, the redeeming shareholder might incur brokerage or other costs in selling
the securities for cash. The method of valuing securities used to make
redemptions in kind will be the same as the method the Fund uses to value its
portfolio securities described above under "Determination of Net Asset Value Per
Share" and that valuation will be made as of the time the redemption price is
determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
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.
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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 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. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemptions, the amount of the check or payment will
be reduced accordingly. 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").
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By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below, as
well as in the Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments will
automatically apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed instructions)
to exchange a pre-determined amount of shares of the Fund for shares (of the
same class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
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.
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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.
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). Through April 30, 1997, upon the exchange of shares of
the 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 exchange
of shares of the Fund for Class A shares of either Oppenheimer Money Market
Fund, Inc. or Oppenheimer Cash Reserves. 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
-47-
<PAGE>
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 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
-48-
<PAGE>
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 the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value, or as otherwise
described in "How to Buy Shares." Daily dividends on newly purchased shares will
not be declared or paid until such time as Federal Funds (funds credited to a
member bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Shares
purchased through dealers or brokers normally are paid for by the third business
day following the placement of the purchase order. Shares redeemed through the
regular redemption procedure will be paid dividends through and including the
day on which the redemption request is received by the Transfer Agent in proper
form. Dividends will be declared on shares repurchased by a dealer or broker for
three business days following the trade date (i.e., to and including the day
prior to settlement of the repurchase). If all shares in an account are
redeemed, all dividends accrued on shares of the same class in the account will
be paid together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money Market
Fund, Inc., as promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio, and
expenses borne by the Fund or borne separately by a class, as described in
"Alternative Sales Arrangements -- Class A, Class B and Class C Shares," above.
Dividends are calculated in the same manner, at the same time and on the same
day for shares of each class. However, dividends on Class B shares and Class C
shares are expected to be lower as a result of the asset-based sales charge on
Class B shares and Class C shares, and Class B and Class C dividends will also
differ in amount as a consequence of any difference in net asset value between
Class A shares, Class B shares and Class C shares.
Distributions may be made annually in December out of any net
short-term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from hedging
instruments and closing purchase transactions realized in the twelve months
ending on October 31 of the current year. Any difference between the net asset
values of Class A, Class B and Class C shares will be reflected in such
distributions. Distributions from net short-term capital gains are taxable to
shareholders as ordinary income and when paid by the Fund are considered
"dividends." The Fund may make a supplemental distribution of capital gains and
ordinary income following the end of its fiscal year. Long-term capital gains
distributions, if any,
-49-
<PAGE>
are taxable as long-term capital gains whether received in cash or reinvested
and regardless of how long Fund shares have been held. There is no fixed
dividend rate (although the Fund may have a targeted dividend rate for Class A
shares) and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
Tax Status of the Fund's Dividends and Distributions. The Fund intends to
qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest dividends which
are derived from net investment income earned by the Fund on Municipal
Securities will be excludable from gross income of shareholders for Federal
income tax purposes. Net investment income includes the allocation of amounts of
income from the Municipal Securities in the Fund's portfolio which are free from
Federal income taxes. This allocation will be made by the use of one designated
percentage applied uniformly to all income dividends made during the Fund's tax
year. Such designation will normally be made following the end of each fiscal
year as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of the
Fund's income that was tax-exempt for a given period. All of the Fund's
dividends (excluding capital gains distributions) paid during 1996 were exempt
from Federal income tax and New York state and New York City personal income
taxes. A portion of the exempt-interest dividends paid by the Fund may be an
item of tax preference for shareholders subject to the alternative minimum tax.
The amount of any dividends attributable to tax preference items for purposes of
the alternative minimum tax will be identified when tax information is
distributed by the Fund. 36.75% of the Fund's dividends (excluding
distributions) paid during 1996 were a tax preference item for shareholders
subject to the alternative minimum tax.
A shareholder receiving a dividend from income earned by the Fund from
one or more of: (1) certain taxable temporary investments (such as certificates
of deposit, repurchase agreements, commercial paper and obligations of the U.S.
government, its agencies and instrumentalities); (2) income from securities
loans; (3) income or gains from options or futures; or (4) an excess of net
short-term capital gain over net long-term capital loss from the Fund, treats
the dividend as a receipt of either ordinary income or long-term capital gain in
the computation of gross income, regardless of whether the dividend is
reinvested. The Fund's dividends will not be eligible for the dividends-received
deduction for corporations. Shareholders receiving Social Security benefits
should be aware that exempt-interest dividends are a factor in determining
whether such benefits are subject to Federal income tax. Losses realized by
shareholders on the redemption of Fund shares within six months of purchase
(which period may be shortened by regulation) will be disallowed for Federal
income tax purposes to the extent of exempt-interest dividends received on such
shares.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year and intends to qualify in future
years, but reserves the right not to qualify. The Internal Revenue Code contains
a number of complex tests to determine whether the Fund will qualify, and the
Fund might not meet those tests in a particular year. For example, if the Fund
derives 30% or more of its gross income from the sale of securities held less
than three months, it may fail to qualify. If it does not qualify, the Fund will
be treated for tax purposes as an ordinary corporation, will receive no tax
deduction for payments of dividends and distributions made to shareholders, and
will no longer be able to pay dividends which are exempt from Federal income tax
and New York State and New York City personal income taxes to its shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned and of its capital gains
realized from January 1 through
-50-
<PAGE>
December 31 of that year or else the Fund must pay an excise tax on the amounts
not distributed. The Manager might determine in a particular year that it might
be in the best interest of shareholders for the Fund not to make distributions
at the required levels and to pay the excise tax on the undistributed amounts.
That would reduce the amount of income or capital gains available for
distribution to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund) of
a zero coupon security accrue as income each year a portion of the discount at
which the security was purchased even though the Fund receives no interest
payment in cash on the security during the year. As an investment company, the
Fund must pay out substantially all of its net investment income each year or be
subject to excise taxes, as described above. Accordingly, when the Fund holds
zero coupon securities, it may be required to pay out as an income distribution
each year an amount which is greater than the total amount of cash interest the
Fund actually received during that year. Such distributions will be made from
the cash assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the event the
Fund realizes net capital gains from such transactions, its shareholders may
receive a larger capital gain distribution than they would have had in the
absence of such transactions.
New York State and City Taxes. To the extent that exempt-interest dividends are
derived from interest on Municipal Obligations, such distributions will be
exempt from New York State and City personal income taxes. However, an
investment in the Fund may result in liability for state and/or local taxes for
individual shareholders subject to taxation by states other than New York State
or cities other than New York City because the exemption from New York State and
New York City personal income taxes does not prevent such other jurisdictions
from taxing individual shareholders on dividends received from the Fund. In
addition, distributions derived from interest on tax exempt securities other
than Municipal Obligations will be treated as taxable ordinary income for
purposes of New York State and New York City personal income taxes. For New York
State and New York City personal income tax purposes, distributions of net
long-term capital gains will be taxable at the same rates as ordinary income.
Exempt-interest dividends are included in a corporation's net
investment income for purposes of calculating such corporation's New York State
corporate franchise tax and New York City general corporation tax and will be
subject to such taxes to the extent that a corporate shareholder's net
investment income is allocated to New York State and/or New York City.
All or a portion of interest on indebtedness incurred or continued to
purchase or carry the Fund's shares generally will not be deductible for New
York State and New York City personal income tax purposes.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. Not all of the Oppenheimer funds
offer Class B shares and Class C shares. The names of the funds that offer Class
B and Class C shares can be obtained by calling the Distributor at 1-800-
525-7048. To elect this option, the shareholder must notify the Transfer Agent
in writing and must either have an existing account in the fund selected for
reinvestment or must obtain a prospectus for that fund and an application from
the Distributor to establish an account. The investment will be made at the net
asset value per share in effect at the close of business on the payable date of
the dividend or distribution. Dividends and/or distributions from certain of the
Oppenheimer funds may be invested in shares of this Fund on the same basis.
-51-
<PAGE>
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.
-52-
<PAGE>
Report of Independent Accountants
To the Shareholders and Trustees of Rochester Fund Municipals
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Rochester Fund Municipals (the
Fund) at December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
financial statements) are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1996 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Rochester, New York
January 24, 1997
- --------------------------------------------------------------------------------
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hospital/Healthcare Albany IDA (Albany Medical Center) 8.250 % 08/01/2004 $ 2,825 $ 3,015,603
13.8% Beacon IDA (Craig House) 9.000 07/01/2011 225 230,063
$318,408,582 Bethany Retirement Home 7.450 02/01/2024 1,000 1,122,490
Cayuga County COP (Auburn Hospital) 6.000 01/01/2021 8,400 8,490,132
Clifton Springs Hospital & Clinic 8.000 01/01/2020 3,870 3,988,616
Erie IDA (Mercy Hospital) 6.250 06/01/2010 1,355 1,365,122
Groton Community Health 7.450 07/15/2021 2,080 2,356,598
Lyons Community Health 6.800 09/01/2024 3,470 3,636,005
Monroe IDA (Genesee Hospital) 7.000 11/01/2018 14,525 14,612,876
Newark/Wayne Community Hospital 5.875 01/15/2033 4,750 4,789,188
NYC Health & Hospital LEVRRS 7.040 (f) 02/15/2011 26,500 26,135,625
NYS Dorm (Brookhaven Hospital) 8.700 07/01/2006 220 222,886
NYS Dorm (Cornwall Hospital) 8.750 07/01/2007 775 774,876
NYS Dorm (Department of Health) 6.625 07/01/2024 250 268,390
NYS Dorm (Department of Health) 7.250 07/01/2011 3,750 4,105,088
NYS Dorm (Department of Health) 7.350 08/01/2029 95 99,892
NYS Dorm (Episcopal Health Services) 7.550 08/01/2029 95 102,195
NYS Dorm (German Masonic Home) 5.950 08/01/2026 1,130 1,135,096
NYS Dorm (German Masonic Home) 6.000 08/01/2036 2,500 2,509,175
NYS Dorm (Grace Manor Health Care) 6.150 07/01/2018 1,000 1,025,280
NYS Dorm (Hebrew Hospital) 5.900 08/01/2036 15,535 15,553,487
NYS Dorm (Insured Mtg. Nursing) 6.125 02/01/2036 2,250 2,315,700
NYS Dorm (KMH Homes) 6.950 08/01/2031 25 26,080
NYS Dorm (L.I. Medical Center) 7.750 08/15/2027 25 26,468
NYS Dorm (Manhattan E,E&T) 11.500 07/01/2009 1,125 1,153,125
NYS Dorm (Menorah Campus) 7.300 08/01/2016 20 21,678
NYS Dorm (Montefiore Hospital) 8.625 07/01/2010 95 97,090
NYS Dorm (Presbyterian Hospital) 6.500 08/01/2034 2,200 2,325,950
NYS Dorm (RGH) RITES (e) 6.222 (f) (c) 08/01/2033 12,750 11,985,000
NYS Dorm (St. Vincent Hospital) 7.400 08/01/2030 5 5,450
NYS HFA (H&N) 6.875 11/01/2010 9 9,225
NYS HFA (H&N) 6.875 11/01/2011 5 5,103
NYS HFA (H&N) 7.000 11/01/2017 455 468,650
NYS HFA (H&N) 8.000 11/01/2000 (p) 2,420 2,772,860
NYS HFA (H&N) 8.000 11/01/2008 500 560,240
NYS Medcare 7.300 02/15/2021 5 5,506
NYS Medcare (BLH) 7.100 02/15/2027 5,300 5,414,480
NYS Medcare (BLH) 7.100 02/15/2027 2,295 2,348,221
NYS Medcare (Brookdale Hospital) 6.850 02/15/2017 4,600 4,849,090
NYS Medcare (Downtown Hospital) 6.800 02/15/2020 2,240 2,335,446
NYS Medcare (H&N) 6.200 02/15/2023 95 96,841
NYS Medcare (H&N) 6.375 08/15/2033 1,000 1,061,660
NYS Medcare (H&N) 6.500 02/15/2034 2,250 2,374,020
NYS Medcare (H&N) 6.600 02/15/2031 250 266,873
NYS Medcare (H&N) 6.650 08/15/2032 12,820 13,526,895
NYS Medcare (H&N) 7.250 02/15/2024 50 52,634
NYS Medcare (H&N) 7.250 02/15/2012 6,570 6,813,813
NYS Medcare (H&N) 7.400 11/01/2016 5,205 5,322,269
NYS Medcare (H&N) 7.625 02/15/2023 1,650 1,736,427
NYS Medcare (H&N) 7.700 02/15/2018 50 52,756
NYS Medcare (H&N) 9.000 02/15/2026 2,120 2,132,317
NYS Medcare (H&N) 9.375 11/01/2016 4,390 4,583,599
NYS Medcare (H&N) 10.000 11/01/2006 3,500 3,701,250
NYS Medcare (Insured Mtg. Nursing) 6.450 08/15/2034 4,000 4,205,920
NYS Medcare (Insured Mtg. Nursing) 6.500 11/01/2015 75 77,702
NYS Medcare (Insured Mtg. Nursing) 6.900 08/15/2034 15 16,188
NYS Medcare (Insured Mtg. Nursing) 9.500 01/15/2024 2,320 2,389,600
NYS Medcare (Kingston Hospital) 8.875 11/15/2017 7,700 7,808,339
NYS Medcare (Mental Health) 0.000 08/15/2018 145 29,120
NYS Medcare (Mental Health) 6.500 02/15/2019 190 196,490
NYS Medcare (Mental Health) 7.500 02/15/2021 810 899,505
NYS Medcare (Mental Health) 7.625 08/15/2017 805 901,689
NYS Medcare (Mental Health) 7.750 08/15/2011 95 106,562
NYS Medcare (Mental Health) 7.875 08/15/2015 705 756,444
NYS Medcare (Nyack) 8.300 11/01/98 (p) 2,835 3,096,245
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS Medcare (N. General) 7.150 02/15/2001 $ 10 $ 10,510
NYS Medcare (N. General) 7.350 08/15/2009 4,600 4,850,930
NYS Medcare (N. General) 7.400 02/15/2019 1,965 2,061,128
NYS Medcare (N. General) 10.250 01/01/2024 1,465 1,514,810
NYS Medcare (St. Charles) 6.375 08/15/2034 1,350 1,410,264
NYS Medcare (St. Charles) 6.375 02/15/2035 1,650 1,723,656
NYS Medcare (St. Luke) IVRC (e) 6.663 (f) 02/15/2029 22,000 20,845,000
NYS Medcare (St. Luke) RITES (e) 6.164 (f) 02/15/2029 12,500 11,843,750
NYS Medcare (St. Luke) RITES (e) 6.222 (f) 02/15/2029 8,400 7,959,000
NYS Medcare (St. Luke) RITES (e) 6.222 (f) 02/15/2029 10,000 9,475,000
NYS Medcare (St. Luke) RITES (e) 6.222 (f) 02/15/2029 5,750 5,448,125
NYS Medcare (Vassar Brothers) 8.250 11/01/2013 4,590 4,777,685
NYS Medcare (Wyckoff Heights Medical Center 7.350 08/15/2011 50 53,98
NYS Medcare (Wyckoff Heights Medical Center 7.400 08/15/2021 5,255 5,677,87
Oneida Healthcare Corp. 7.100 08/01/2011 10 10,733
Oneida Healthcare Corp. 7.200 08/01/2031 130 142,279
Onondaga IDA (CGH) 6.625 01/01/2018 3,650 3,748,988
Onondaga IDA (Crouse Irving Hospital) 7.800 01/01/2003 220 239,842
Puerto Rico ITEME (Ryder Hospital) 6.400 05/01/2009 1,045 1,096,121
Puerto Rico ITEME (Ryder Hospital) 6.700 05/01/2024 5,250 5,397,735
Puerto Rico TEMEC (Mennonite Hospital) 6.500 07/01/2026 3,000 3,098,640
Rensselaer Municipal Leasing Corp. 6.900 06/01/2024 15,000 15,679,650
Syracuse IDA (St. Joseph's Hospital) 7.500 06/01/2018 3,770 4,016,671
Tompkins Healthcare 5.875 02/01/2033 1,000 1,003,950
Tompkins Healthcare 10.800 02/01/2028 25 32,843
Tompkins Healthcare 10.800 02/01/2007 140 191,631
UFA Devel. Corp. (Loretto Utica) 5.950 07/01/2035 4,870 4,888,214
Valley Health Devel. 7.850 08/01/2035 20 22,305
Valley Health Devel. 11.300 02/01/2023 175 212,525
Westchester IDA (Beth Abraham Hospital) 8.375 12/01/2025 1,870 1,932,458
Yonkers IDA (St. Joseph's Hospital) 7.500 12/30/2003 1,125 1,162,541
Yonkers IDA (St. Joseph's Hospital) 8.500 12/30/2013 3,270 3,410,545
- ------------------------------------------------------------------------------------------------------------------------------------
Housing, Albany Hsg. Auth. 0.000 10/01/2002 (p) 560 144,539
Multi-Family Albany IDA (MARA Mansion Rehab.) 6.500 02/01/2023 1,715 1,742,560
13.1% Batavia Hsg. Auth. (Washington Towers) 6.500 01/01/2023 515 527,860
$302,128,643 Battery Park City Auth. 10.000 06/01/2023 700 738,500
Bayshore HDC 7.500 02/01/2023 1,470 1,570,974
Bleeker Terrace HDC 8.100 07/01/2001 35 35,700
Bleeker Terrace HDC 8.350 07/01/2004 45 45,900
Bleeker Terrace HDC 8.750 07/01/2007 900 904,158
Elmira HDC 7.500 08/01/2007 25 26,250
Guam Economic Devel. 9.375 11/01/2018 3,010 3,117,909
Guam Economic Devel. 9.500 11/01/2018 2,505 2,594,779
Hamilton Elderly Hsg. 11.250 01/01/2015 695 729,792
Macleay Hsg. (Larchmont Woods) 8.500 01/01/2031 3,950 4,271,293
Mechanicsville HDC 6.900 08/01/2022 2,500 2,638,800
Monroe HDC 7.000 08/01/2021 295 304,605
New Hartford HDC 7.375 01/01/2024 20 21,612
North Tonawanda HDC 6.800 12/15/2007 585 629,957
North Tonawanda HDC 7.375 12/15/2021 3,295 3,719,462
NYC HDC (Albert Einstein) 6.500 12/15/2017 331 332,202
NYC HDC (Amsterdam) 6.500 08/15/2018 927 927,107
NYC HDC (Atlantic Plaza) 7.034 02/15/2019 1,546 1,571,442
NYC HDC (Barclay Avenue) 6.450 04/01/2017 1,045 1,059,045
NYC HDC (Barclay Avenue) 6.600 04/01/2033 4,055 4,138,371
NYC HDC (Boulevard) 6.500 08/15/2017 2,884 2,897,237
NYC HDC (Bridgeview) 6.500 12/15/2017 496 498,305
NYC HDC (Cadman Plaza) 6.500 11/15/2018 1,331 1,336,789
NYC HDC (Cadman Plaza) 7.000 12/15/2018 520 531,564
NYC HDC (Candia) 6.500 06/15/2018 196 196,631
NYC HDC (Clinton) 6.500 07/15/2017 3,756 3,772,805
NYC HDC (Contello III) 7.000 12/15/2018 320 326,441
NYC HDC (Cooper Gram) 6.500 08/15/2017 1,558 1,565,011
NYC HDC (Court Plaza) 6.500 08/15/2017 1,189 1,194,236
NYC HDC (Crown Gardens) 7.250 01/15/2019 1,752 1,820,909
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYC HDC (Esplanade Gardens) 7.000 % 01/15/2019 $ 3,616 $ 3,693,227
NYC HDC (Essex) 6.500 07/15/2018 86 86,402
NYC HDC (Forest Park) 6.500 12/15/2017 533 534,979
NYC HDC (Gouverneur Gardens) 7.034 02/15/2019 1,723 1,758,718
NYC HDC (Heywood) 6.500 10/15/2017 380 382,092
NYC HDC (Hudsonview) 6.500 09/15/2017 4,288 4,306,612
NYC HDC (Janel) 6.500 09/15/2017 1,213 1,217,858
NYC HDC (Kings Arms) 6.500 11/15/2018 240 241,279
NYC HDC (Kingsbridge) 6.500 08/15/2017 423 425,194
NYC HDC (Leader) 6.500 03/15/2018 1,292 1,298,115
NYC HDC (Lincoln Amsterdam) 7.250 11/15/2018 1,791 1,861,361
NYC HDC (Middagh) 6.500 01/15/2018 217 218,047
NYC HDC (Montefiore) 6.500 10/15/2017 2,836 2,848,529
NYC HDC (Multi-Family) 6.600 04/01/2030 38,880 40,324,781
NYC HDC (Multi-Family) 7.300 06/01/2010 30 32,562
NYC HDC (Multi-Family) 7.350 06/01/2019 1,145 1,217,627
NYC HDC (Multi-Family) 8.250 01/01/2011 1,360 1,394,000
NYC HDC (New Amsterdam) 6.500 08/15/2018 907 911,026
NYC HDC (Residential Charter) 7.375 04/01/2017 3,440 3,570,204
NYC HDC (Riverbend) 6.500 11/15/2018 1,131 1,136,591
NYC HDC (Riverside Park) 7.250 11/15/2018 6,894 7,165,990
NYC HDC (RNA House) 7.000 12/15/2018 495 505,218
NYC HDC (Robert Fulton) 6.500 12/15/2017 715 717,974
NYC HDC (Rosalie Manning) 7.034 11/15/2018 259 262,964
NYC HDC (Scott Tower) 7.000 12/15/2018 687 702,129
NYC HDC (Seaview) 6.500 01/15/2018 942 946,253
NYC HDC (Sky View) 6.500 11/15/2018 1,756 1,763,562
NYC HDC (South Bronx) 8.100 09/01/2023 3,240 3,486,110
NYC HDC (Stevenson) 6.500 05/15/2018 1,786 1,793,904
NYC HDC (Stryckers Bay) 7.034 11/15/2018 513 522,073
NYC HDC (St. Martin) 6.500 11/15/2018 389 391,010
NYC HDC (Tivoli) 6.500 01/15/2018 1,793 1,801,183
NYC HDC (Towers) 6.500 08/15/2017 386 387,706
NYC HDC (Townhouse) 6.500 01/15/2018 244 244,652
NYC HDC (Tri-Faith House) 7.000 01/15/2019 374 382,491
NYC HDC (University) 6.500 08/15/2017 1,593 1,600,205
NYC HDC (Washington Square) 7.000 01/15/2019 477 487,426
NYC HDC (West Side) 6.500 11/15/2018 431 432,605
NYC HDC (West Village) 6.500 11/15/2013 4,845 4,913,800
NYC HDC (Westview) 6.500 10/15/2017 278 279,338
NYC HDC (Woodstock Terrace) 7.034 02/15/2019 636 647,111
NYS HFA 6.125 11/01/2020 1,385 1,428,849
NYS HFA (Children's Rescue) 7.625 05/01/2018 3,555 3,803,957
NYS HFA (Dominican Village) 6.600 08/15/2027 2,000 2,084,620
NYS HFA (Fulton Manor) 6.100 11/15/2025 2,955 3,004,703
NYS HFA (HELP/Bronx) 7.850 11/01/99 1,080 1,142,726
NYS HFA (HELP/Bronx) 7.850 05/01/99 1,040 1,090,398
NYS HFA (HELP/Bronx) 8.050 11/01/2005 13,080 14,024,114
NYS HFA (HELP/Suffolk) 8.100 11/01/2005 1,210 1,278,377
NYS HFA (Meadow Manor) 7.750 11/01/2019 5 5,105
NYS HFA (Multi-Family) 0.000 11/01/2017 12,695 3,855,472
NYS HFA (Multi-Family) 0.000 11/01/2015 14,590 4,827,247
NYS HFA (Multi-Family) 0.000 11/01/2014 15,730 5,567,162
NYS HFA (Multi-Family) 6.100 11/15/2036 1,285 1,293,520
NYS HFA (Multi-Family) 6.300 08/15/2026 5,000 5,124,050
NYS HFA (Multi-Family) 6.350 08/15/2023 100 103,260
NYS HFA (Multi-Family) 6.400 11/15/2027 1,175 1,208,370
NYS HFA (Multi-Family) 6.500 08/15/2024 2,750 2,844,765
NYS HFA (Multi-Family) 6.700 08/15/2025 11,980 12,441,709
NYS HFA (Multi-Family) 6.750 11/15/2036 5,755 6,002,925
NYS HFA (Multi-Family) 6.950 08/15/2024 2,905 3,055,276
NYS HFA (Multi-Family) 6.950 08/15/2012 75 78,987
NYS HFA (Multi-Family) 7.050 08/15/2024 5,350 5,658,963
NYS HFA (Multi-Family) 7.450 11/01/2028 5,330 5,612,437
NYS HFA (NonProfit) 6.400 11/01/2010 5 4,900
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS HFA (NonProfit) 6.400 % 11/01/2013 $ 25 $ 24,750
NYS HFA (NonProfit) 6.600 11/01/2008 20 20,300
NYS HFA (NonProfit) 6.600 11/01/2013 20 19,960
NYS HFA (NonProfit) 6.600 11/01/2010 25 25,300
NYS HFA (Phillips Village) 7.750 08/15/2017 5,000 5,552,500
NYS HFA (Service Contract) 6.000 03/15/2026 2,400 2,400,744
NYS HFA (Service Contract) 6.125 03/15/2020 25 24,707
NYS HFA (Service Contract) 6.500 03/15/2025 9,265 9,825,162
NYS HFA (Service Contract) 7.700 03/15/2006 150 163,758
NYS HFA (Shorehill Hsg.) 7.500 05/01/2008 1,285 1,313,000
Pilgrim Village HDC 6.800 02/01/2021 1,115 1,149,755
Portchester CDC (Southport) 7.300 08/01/2011 60 64,194
Portchester CDC (Southport) 7.375 08/01/2022 25 26,645
Puerto Rico HB&F 7.500 10/01/2015 210 222,997
Puerto Rico HFA 7.300 10/01/2006 10 10,515
Puerto Rico HFC 7.500 04/01/2022 8,180 8,648,959
Rensselaer Hsg. Auth. (Renwyck) 7.650 01/01/2011 25 28,751
Riverhead HDC 8.250 08/01/2010 45 47,250
Rochester Hsg. Auth. (Crossroads) 7.700 01/01/2017 20,890 22,518,376
Schenectady IDA (ASSC) 6.400 05/01/2014 500 513,725
Schenectady IDA (ASSC) 6.450 05/01/2024 2,655 2,737,252
Scotia Hsg. Auth. (Holyrood House) 7.000 06/01/2009 175 189,350
Sunnybrook EHC 11.250 12/01/2014 3,045 3,225,782
Syracuse IDA (James Square) 0.000 08/01/2025 47,725 9,205,675
Syracuse Senior Citizens Hsg. 8.000 12/01/2010 375 392,906
Tonawanda HDC 10.000 05/01/2012 315 322,380
Tonawanda HDC 10.000 05/01/2011 410 419,606
Tonawanda HDC 10.000 05/01/2010 375 383,786
Tonawanda HDC 10.000 05/01/2009 340 347,966
Tonawanda HDC 10.000 05/01/2003 25 26,125
Tonawanda Senior Citizens Hsg. 7.875 02/01/2011 535 556,512
Tupper Lake HDC 8.125 10/01/2010 75 78,750
Union Elderly Hsg. 10.000 04/01/2013 2,140 2,225,600
Utica Senior Citizen Hsg. 0.000 07/01/2002 25 18,211
Utica Senior Citizen Hsg. 0.000 07/01/2026 2,460 290,870
V. I. HFA 8.100 12/01/2018 25 26,415
Watervliet Elderly Hsg. 8.000 11/15/2003 100 103,270
Watervliet Elderly Hsg. 8.000 11/15/2004 95 98,107
Watervliet Elderly Hsg. 8.000 11/15/2005 95 98,107
Watervliet Elderly Hsg. 8.000 11/15/2007 100 103,270
Watervliet Elderly Hsg. 8.000 11/15/2008 100 103,270
Watervliet Elderly Hsg. 8.000 11/15/2009 100 103,270
Watervliet Elderly Hsg. 8.000 11/15/2006 100 103,270
- ------------------------------------------------------------------------------------------------------------------------------------
General Obligation Lowville GO 7.200 09/15/2005 100 109,853
12.9% Lowville GO 7.200 09/15/2014 100 114,103
$296,640,296 Lowville GO 7.200 09/15/2007 75 83,633
Lowville GO 7.200 09/15/2013 100 113,864
Lowville GO 7.200 09/15/2012 100 113,801
Newburgh GO 7.100 09/15/2008 185 181,098
Newburgh GO 7.100 09/15/2007 185 181,317
Newburgh GO 7.150 09/15/2010 150 146,529
Newburgh GO 7.150 09/15/2009 180 176,740
Newburgh GO 7.200 09/15/2012 155 150,865
Newburgh GO 7.200 09/15/2011 155 151,278
Newburgh GO 7.250 09/15/2014 155 150,769
Newburgh GO 7.250 09/15/2013 160 156,051
NYC GO 0.000 08/01/2014 500 330,850
NYC GO 0.000 05/15/2014 1,690 1,153,949
NYC GO 0.000 08/15/2016 70 54,825
NYC GO 0.000 05/15/2011 270 116,413
NYC GO 0.000 05/15/2012 200 80,604
NYC GO 0.000 11/15/2011 4,990 2,080,381
NYC GO 5.750 02/01/2020 250 238,185
NYC GO 6.000 02/01/2011 6,000 6,023,700
NYC GO 6.000 02/15/2024 1,550 1,514,381
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYC GO 6.000 % 10/15/2026 $ 8,000 $ 7,798,800
NYC GO 6.125 02/01/2025 18,500 18,351,815
NYC GO 6.500 08/01/2014 500 516,380
NYC GO 6.500 08/01/2015 2,000 2,065,520
NYC GO 6.600 02/15/2010 2,000 2,075,280
NYC GO 6.625 08/01/2025 2,000 2,070,600
NYC GO 6.625 02/15/2025 15,580 16,112,369
NYC GO 7.000 02/01/2022 4,600 4,936,490
NYC GO 7.000 02/01/2020 650 697,548
NYC GO 7.000 10/01/2012 625 674,425
NYC GO 7.000 02/01/2015 15 15,168
NYC GO 7.000 02/01/2010 20 20,551
NYC GO 7.100 02/01/2011 1,765 1,901,011
NYC GO 7.100 02/01/2010 4,000 4,308,240
NYC GO 7.100 02/01/2009 1,000 1,077,060
NYC GO 7.200 02/01/2015 2,800 3,044,832
NYC GO 7.200 02/01/2014 4,000 4,349,760
NYC GO 7.250 08/15/2001 (p) 355 396,169
NYC GO 7.250 08/15/2024 13,465 14,496,419
NYC GO 7.400 02/01/2002 330 362,168
NYC GO 7.500 08/01/2021 1,000 1,115,500
NYC GO 7.500 08/15/2020 6,180 6,995,884
NYC GO 7.500 02/01/2002 (p) 1,110 1,272,648
NYC GO 7.500 02/01/2016 1,890 2,093,440
NYC GO 7.500 08/01/2019 1,865 2,080,408
NYC GO 7.500 08/01/2001 (p) 7,500 8,366,250
NYC GO 7.500 02/01/2018 1,500 1,660,755
NYC GO 7.500 02/01/2003 2,000 2,214,820
NYC GO 7.625 02/01/2014 270 300,551
NYC GO 7.625 02/01/2013 3,845 4,280,062
NYC GO 7.750 08/15/2001 (p) 1,885 2,171,652
NYC GO 7.750 08/15/2013 750 837,315
NYC GO 7.750 08/15/2012 750 837,315
NYC GO 7.750 08/15/2001 (p) 250 287,223
NYC GO 7.750 08/15/2001 (p) 250 287,223
NYC GO 7.750 02/01/2010 1,500 1,680,825
NYC GO 7.750 02/01/2013 6,000 6,726,120
NYC GO 7.750 08/15/2017 165 184,209
NYC GO 8.000 08/15/2021 5 5,602
NYC GO 8.000 08/15/2021 245 284,457
NYC GO 8.000 08/01/2018 45 50,386
NYC GO 8.000 08/15/2020 10 11,204
NYC GO 8.250 08/01/2001 (p) 1,590 1,855,260
NYC GO 8.250 11/15/2001 (p) 2,760 3,253,378
NYC GO 8.250 08/01/2012 5 5,649
NYC GO 8.250 11/15/2018 240 274,320
NYC GO 8.250 11/15/2020 20 22,721
NYC GO 8.250 08/01/2014 35 39,541
NYC GO 8.250 11/15/2015 80 90,884
NYC GO 8.250 11/15/2001 (p) 920 1,084,459
NYC GO 8.250 08/01/2013 30 33,892
NYC GO 8.500 08/01/2013 30 30,750
NYC GO CARS 8.280 (f) 09/01/2011 8,387 8,974,090
NYC GO CARS 8.280 (f) 08/12/2010 16,387 17,636,509
NYC GO RIBS 6.977 (f) 08/01/2009 6,200 5,835,750
NYC GO RIBS 7.075 (f) 08/22/2013 5,400 4,961,250
NYC GO RIBS 7.075 (f) 08/01/2015 3,050 2,760,250
NYC GO RIBS 7.079 (f) 08/01/2010 4,200 3,927,000
NYC GO RIBS 8.107 (f) 08/01/2013 13,150 12,821,250
NYC GO RITES 7.569 (f) 10/01/2011 15,000 15,907,650
Puerto Rico GO RITES (e) 7.690 (f) 07/01/2022 1,600 1,686,000
Puerto Rico GO YCN 8.132 (f) 07/01/2020 29,000 29,870,000
Puerto Rico GO YCN (e) 4.747 (f) 07/01/2015 1,000 1,038,750
Suffolk GO 6.375 11/01/2016 725 739,225
Suffolk GO (Sewer) 6.750 08/01/2010 15 15,300
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Utica BANS 8.250 % 05/22/97 $ 7,000 $ 7,011,130
V. I. Public Finance Auth. 7.125 10/01/2004 1,135 1,221,805
V. I. Public Finance Auth. 7.250 10/01/2018 28,750 30,787,225
V. I. Public Finance Auth. 7.375 10/01/2010 1,735 1,895,505
V. I. (GO/HUGO) 7.750 10/01/2006 388 423,110
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Utilities American Samoa Power Auth. 6.800 09/01/2000 400 419,040
9.2% American Samoa Power Auth. 6.850 09/01/2001 400 422,256
$212,477,669 American Samoa Power Auth. 6.900 09/01/2002 400 424,632
American Samoa Power Auth. 6.950 09/01/2003 500 532,105
American Samoa Power Auth. 7.000 09/01/2004 500 534,110
American Samoa Power Auth. 7.100 09/01/2001 800 852,648
American Samoa Power Auth. 7.200 09/01/2002 800 860,776
Guam Power Auth. 6.750 10/01/2024 4,780 5,035,730
NYS ERDA (Con Ed) 6.375 12/01/2027 11,000 11,373,450
NYS ERDA (Con Ed) 7.125 03/15/2022 985 1,007,468
NYS ERDA (Con Ed) 7.125 03/15/2022 3,250 3,334,175
NYS ERDA (Con Ed) 7.250 11/01/2024 15,485 16,264,205
NYS ERDA (Con Ed) 7.375 07/01/2024 27,500 28,822,200
NYS ERDA (Con Ed) 7.500 07/01/2025 325 348,169
NYS ERDA (Con Ed) 7.500 11/15/2021 1,795 1,834,723
NYS ERDA (Con Ed) 7.750 01/01/2024 6,000 6,264,480
NYS ERDA (LILCO) 7.150 02/01/2022 10,920 11,716,505
NYS ERDA (LILCO) 7.150 09/01/2019 14,810 15,853,661
NYS ERDA (LILCO) 7.150 02/01/2022 15,250 16,362,335
NYS ERDA (LILCO) 7.150 12/01/2020 11,075 11,882,811
NYS ERDA (LILCO) 7.150 06/01/2020 15,200 16,308,688
NYS ERDA (LILCO) 7.150 09/01/2019 16,515 17,719,604
NYS ERDA (NIMO) 8.875 11/01/2025 18,140 18,638,850
NYS ERDA (RG&E) 8.375 12/01/2028 120 128,179
Puerto Rico Electric 6.000 07/01/2014 60 58,800
Puerto Rico Electric LEVRRS 8.338 (f) 07/01/2023 17,800 18,578,750
V. I. Water & Power Auth. 7.400 07/01/2011 6,465 6,899,319
- ------------------------------------------------------------------------------------------------------------------------------------
Resource Recovery Dutchess Res Rec (Solid Waste) 6.800 01/01/2010 1,700 1,760,537
9.0% Dutchess Res Rec (Solid Waste) 7.000 01/01/2010 1,805 1,874,511
$208,097,231 Hempstead IDA (Amer. Ref-Fuel Co.) 7.400 12/01/2010 4,110 4,212,750
Islip Res Rec 6.250 07/01/2006 1,725 1,905,021
Islip Res Rec 6.500 07/01/2009 2,000 2,212,140
NYS Environ. (Huntington) 7.500 10/01/2012 58,860 62,283,298
Onondaga Res Rec 6.875 05/01/2006 27,850 29,124,416
Onondaga Res Rec 7.000 05/01/2015 74,035 77,518,347
Ulster County Res Rec 6.000 03/01/2014 1,250 1,219,563
Warren/Washington IDA (Res Rec) 8.000 12/15/2012 8,730 8,545,273
Warren/Washington IDA (Res Rec) 8.200 12/15/2010 8,535 8,506,408
Warren/Washington IDA (Res Rec) 8.200 12/15/2010 8,965 8,934,967
- ------------------------------------------------------------------------------------------------------------------------------------
Housing, NYS (SONYMA) Mortgage, 1st Series 0.000 10/01/2014 30 5,772
Single Family NYS (SONYMA) Mortgage, 1st Series 0.000 10/01/98 95 81,405
7.6% NYS (SONYMA) Mortgage, 2nd Series 0.000 10/01/2014 13,275 2,509,506
$175,182,518 NYS (SONYMA) Mortgage, 6th Series 9.375 04/01/2010 2,585 2,695,871
NYS (SONYMA) Mortgage, 7th Series GAINS 0.000 (c) 10/01/2014 1,255 1,158,880
NYS (SONYMA) Mortgage, 8th Series A 6.875 04/01/2017 260 265,569
NYS (SONYMA) Mortgage, 8th Series C 8.300 10/01/2006 35 36,058
NYS (SONYMA) Mortgage, 8th Series C 8.400 10/01/2017 170 173,698
NYS (SONYMA) Mortgage, 8th Series D 8.200 10/01/2006 100 103,231
NYS (SONYMA) Mortgage, 8th Series E 8.100 10/01/2017 80 82,655
NYS (SONYMA) Mortgage, 8th Series F 8.000 10/01/2017 15 15,377
NYS (SONYMA) Mortgage, 9th Series A 7.300 04/01/2017 240 245,760
NYS (SONYMA) Mortgage, 9th Series B 8.300 10/01/2017 25 25,675
NYS (SONYMA) Mortgage, 9th Series E 8.375 04/01/2018 20 20,692
NYS (SONYMA) Mortgage, Series 12 0.000 (c) 04/01/2017 790 762,927
NYS (SONYMA) Mortgage, Series 2 0.000 10/01/2014 265 50,562
NYS (SONYMA) Mortgage, Series 27 6.450 04/01/2004 25 26,654
NYS (SONYMA) Mortgage, Series 28 6.650 04/01/2022 10,000 10,390,100
NYS (SONYMA) Mortgage, Series 28 7.050 10/01/2023 8,615 9,123,888
NYS (SONYMA) Mortgage, Series 30-A 4.375 10/01/2023 15 13,125
NYS (SONYMA) Mortgage, Series 30-B 6.650 10/01/2025 16,005 16,719,783
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS (SONYMA) Mortgage, Series 36-A 6.625 % 04/01/2025 $ 11,500 $ 12,053,495
NYS (SONYMA) Mortgage, Series 38 RITES (e) 6.899 (f) 04/01/2025 13,940 14,131,675
NYS (SONYMA) Mortgage, Series 40-A 6.700 04/01/2025 6,560 6,905,581
NYS (SONYMA) Mortgage, Series 40-B 6.600 04/01/2025 5,745 6,027,252
NYS (SONYMA) Mortgage, Series 42 6.650 04/01/2026 13,600 14,321,480
NYS (SONYMA) Mortgage, Series 44 7.500 04/01/2026 11,990 12,984,690
NYS (SONYMA) Mortgage, Series 46 6.600 10/01/2019 35 36,752
NYS (SONYMA) Mortgage, Series 46 6.650 10/01/2025 24,715 26,082,975
NYS (SONYMA) Mortgage, Series 50 6.625 04/01/2025 7,535 7,950,781
NYS (SONYMA) Mortgage, Series 58 6.400 04/01/2027 6,200 6,394,618
NYS (SONYMA) Mortgage, Series BB-2 7.950 10/01/2015 150 155,646
NYS (SONYMA) Mortgage, Series EE-1 8.000 10/01/2010 45 46,900
NYS (SONYMA) Mortgage, Series EE-2 7.450 10/01/2010 95 100,241
NYS (SONYMA) Mortgage, Series EE-2 7.500 04/01/2016 40 42,314
NYS (SONYMA) Mortgage, Series EE-3 7.700 10/01/2010 270 286,543
NYS (SONYMA) Mortgage, Series EE-3 7.750 04/01/2016 15 16,010
NYS (SONYMA) Mortgage, Series EE-4 7.750 10/01/2010 95 102,184
NYS (SONYMA) Mortgage, Series HH-2 7.600 10/01/2021 40 40,900
NYS (SONYMA) Mortgage, Series HH-2 7.700 10/01/2009 410 427,097
NYS (SONYMA) Mortgage, Series HH-2 7.850 04/01/2022 40 42,652
NYS (SONYMA) Mortgage, Series HH-3 7.600 10/01/2021 15 15,511
NYS (SONYMA) Mortgage, Series HH-3 7.875 10/01/2009 285 302,981
NYS (SONYMA) Mortgage, Series HH-3 7.950 04/01/2022 490 519,542
NYS (SONYMA) Mortgage, Series HH-4 8.050 04/01/2022 65 67,425
NYS (SONYMA) Mortgage, Series II 0.000 04/01/2005 100 55,539
NYS (SONYMA) Mortgage, Series II 0.000 10/01/2009 180 70,110
NYS (SONYMA) Mortgage, Series II 0.000 10/01/2007 100 45,522
NYS (SONYMA) Mortgage, Series II 0.000 10/01/2008 120 50,530
NYS (SONYMA) Mortgage, Series II 0.000 04/01/2008 170 74,428
NYS (SONYMA) Mortgage, Series II 0.000 04/01/2006 90 46,258
NYS (SONYMA) Mortgage, Series II 0.000 04/01/2020 1,285 210,714
NYS (SONYMA) Mortgage, Series JJ 7.500 10/01/2017 425 448,107
NYS (SONYMA) Mortgage, Series KK 7.650 04/01/2019 130 138,067
NYS (SONYMA) Mortgage, Series KK 7.800 10/01/2020 255 268,143
NYS (SONYMA) Mortgage, Series MM-1 7.500 04/01/2013 80 84,629
NYS (SONYMA) Mortgage, Series MM-1 7.750 10/01/2005 25 26,640
NYS (SONYMA) Mortgage, Series MM-2 7.700 04/01/2005 100 109,261
NYS (SONYMA) Mortgage, Series NN 7.550 10/01/2017 60 63,865
NYS (SONYMA) Mortgage, Series RR 7.700 10/01/2010 105 112,766
NYS (SONYMA) Mortgage, Series RR 7.750 10/01/2017 80 85,910
NYS (SONYMA) Mortgage, Series SS 7.500 10/01/2019 250 258,068
NYS (SONYMA) Mortgage, Series TT 6.950 10/01/2002 5 5,411
NYS (SONYMA) Mortgage, Series UU 7.150 10/01/2022 100 104,270
NYS (SONYMA) Mortgage, Series UU 7.750 10/01/2023 1,365 1,442,341
NYS (SONYMA) Mortgage, Series VV 0.000 10/01/2023 115,222 16,378,807
NYS (SONYMA) Mortgage, Series VV 7.375 10/01/2011 195 208,525
Puerto Rico HFA 0.000 08/01/2026 8,690 1,164,808
Puerto Rico HFA 7.650 10/15/2022 60 64,142
V. I. HFA 6.450 03/01/2016 100 103,224
- ------------------------------------------------------------------------------------------------------------------------------------
Marine/Aviation Albany IDA (Port of Albany) 7.250 02/01/2024 1,395 1,484,601
Facilities Guam Airport 6.600 10/01/2010 3,675 3,801,494
5.8% Guam Airport 6.700 10/01/2023 60,730 62,977,617
$135,086,117 Monroe County Airport 7.250 01/01/2019 20 20,934
NYC IDA (Amer. Airlines) 6.900 08/01/2024 16,685 18,018,799
NYC IDA (Amer. Airlines) 7.750 07/01/2019 1,795 1,894,910
NYC IDA (Amer. Airlines) 8.000 07/01/2020 7,110 7,538,946
NYC IDA (Japan Airlines) 6.000 11/01/2015 3,500 3,575,530
Port Auth. NY/NJ (US Air) 9.000 12/01/2010 495 557,662
Port Auth. NY/NJ (US Air) 9.000 12/01/2006 7,025 7,914,295
Port Auth. NY/NJ (US Air) 9.125 12/01/2015 22,310 25,260,051
Port Auth. NY/NJ, 68th Series 7.250 02/15/2025 30 31,955
Port Auth. NY/NJ, 68th Series 7.250 02/15/2025 80 87,286
Port Auth. NY/NJ, 70th Series 7.250 08/01/2025 15 16,356
Port Auth. NY/NJ, 70th Series 7.250 08/01/2025 20 21,570
Port Auth. NY/NJ, 76th Series 6.500 11/01/2026 60 61,261
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Port Auth. NY/NJ, Series 51 0.000 % (c) 12/01/2014 $ 25 $ 24,488
Puerto Rico Port Auth. 7.300 07/01/2007 30 30,600
V. I. Port Auth. (CEK Airport) 8.100 10/01/2005 1,670 1,767,762
- ------------------------------------------------------------------------------------------------------------------------------------
Lease Rental Albany IDA (Upper Hudson Library) 8.750 05/01/2007 230 238,296
4.0% Albany IDA (Upper Hudson Library) 8.750 05/01/2022 955 1,031,419
$92,024,662 Albany Parking Auth. 0.000 11/01/2017 1,770 510,291
Babylon IDA (WWH Ambulance) 7.375 09/15/2008 1,330 1,428,859
Carnegie Redevelopment Corp. 7.000 09/01/2021 500 523,755
Clifton Park COP (Clifton Commons) 8.500 08/01/2008 10 10,422
Monroe COP 8.050 01/01/2011 480 520,190
NYS COP (BOCES) (e) 7.875 10/01/2000 1,120 1,180,995
NYS COP (Hanson Redevelopment) 8.250 11/01/2001 250 268,720
NYS Dorm (Suffolk-Judicial) 9.500 04/15/2014 31,750 37,050,663
NYS LGSC (SCSB) 7.375 12/15/2016 810 820,903
NYS UDC 0.000 01/01/2011 98,090 43,047,777
NYS UDC 0.000 01/01/2003 15 10,819
NYS UDC 0.000 01/01/2011 80 36,992
NYS UDC 0.000 01/01/2008 900 487,611
NYS UDC 7.500 01/01/2003 (p) 2,000 2,262,300
Schroon Lake Fire District (e) 7.250 03/01/2009 580 599,175
Vigilant EHL (Thomatson) 7.500 11/01/2012 950 1,005,328
Yonkers Parking Auth. 7.750 12/01/2004 950 990,147
- ------------------------------------------------------------------------------------------------------------------------------------
Manufacturing, Brookhaven IDA (Farber) 6.188 (v) 12/01/2002 870 870,000
Durable Goods Brookhaven IDA (Farber) 6.188 (v) 12/01/2004 490 490,000
3.3% Broome IDA (Simulator) 8.250 01/01/2002 775 810,921
$76,895,126 Cattaraugus IDA (Cherry Creek) 9.800 09/01/2010 1,980 2,210,987
Chautauqua IDA (Dunkirk Glass) 11.500 12/01/2010 7,900 8,501,427
City of Port Jervis (Future Home Tech.) 10.000 11/01/2008 720 752,940
Cortland IDA (Paul Bunyon Products) 8.000 07/01/2000 120 125,996
Erie IDA (Great Lakes Orthodontic) 12.099 05/01/2000 115 123,414
Monroe IDA (Brazill Merk) 7.900 12/15/2014 3,080 3,301,113
Monroe IDA (Melles Griot) 9.500 12/01/2009 1,560 1,627,907
Monroe IDA (RTM Turbine) 7.750 12/01/2006 3,490 3,508,148
Monroe IDA (RTM Turbine) 8.000 12/01/2011 3,060 3,117,436
Monroe IDA (RTM Turbine) 8.500 12/01/2016 770 805,174
Nassau IDA (RJS Scientific) 8.050 12/01/2005 330 355,697
Nassau IDA (RJS Scientific) 9.050 12/01/2025 2,700 2,979,315
Nassau IDA (Structural Industries) 7.750 02/01/2012 500 537,260
NYC IDA (Display Creations) 9.250 06/01/97 (b) 2,000 2,014,600
NYC IDA (HiTech Res Rec) 8.750 08/01/2000 320 335,107
NYC IDA (HiTech Res Rec) 9.250 08/01/2008 695 728,701
NYC IDA (House of Spices) 9.000 10/15/2001 490 534,281
NYC IDA (House of Spices) 9.250 10/15/2011 2,140 2,358,301
NYC IDA (Koenig Iron Works) 8.375 12/01/2025 1,675 1,785,031
NYC IDA (Nekboh) 9.625 05/01/2011 5,955 6,314,563
NYC IDA (Novelty Cord & Tassel) 8.663 (v) 12/01/2006 645 655,863
NYC IDA (Penguin Air Conditioning) 12.222 12/01/99 165 172,597
NYC IDA (Pop Display) 6.750 12/15/2004 1,150 1,163,961
NYC IDA (Pop Display) 7.900 12/15/2014 2,645 2,765,982
NYC IDA (Priority Mailers) 9.000 03/01/2010 1,795 1,956,460
NYC IDA (Sequins International) 8.500 04/30/2000 405 433,172
NYC IDA (Sequins International) 8.950 01/30/2016 4,555 5,081,467
NYC IDA (Ultimate Display) 8.750 10/15/2000 305 326,036
NYC IDA (Ultimate Display) 9.000 10/15/2011 1,910 2,077,431
Onondaga IDA (Coltec) 7.250 06/01/2008 535 540,350
Onondaga IDA (Coltec) 9.875 10/01/2010 750 778,125
Onondaga IDA (Gear Motion) 8.400 12/15/2001 610 627,818
Onondaga IDA (Gear Motion) 8.900 12/15/2011 1,700 1,827,908
Peekskill IDA (Wenco) 8.875 12/01/2008 1,035 1,067,561
Rensselaer IDA (MMP) 8.500 12/15/2002 30 31,056
Suffolk IDA (Fil-Coil) 9.000 12/01/2015 445 460,495
Suffolk IDA (Fil-Coil) 9.250 12/01/2025 1,060 1,104,456
Suffolk IDA (Marbar Assoc.) 8.300 03/01/2009 190 196,213
Suffolk IDA (Marbar Assoc.) 8.300 03/01/2008 190 197,600
Suffolk IDA (Microwave Power) 7.750 06/30/2002 345 357,851
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Suffolk IDA (Microwave Power) 8.500 % 06/30/2022 $ 4,320 $ 4,593,024
Suffolk IDA (Wireless Boulevard Realty) 7.875 12/01/2012 1,410 1,423,437
Suffolk IDA (Wireless Boulevard Realty) 8.625 12/01/2026 4,005 4,129,596
Syracuse IDA (Piscitell Stone) 8.400 12/01/2011 685 738,348
- ------------------------------------------------------------------------------------------------------------------------------------
Water Utilities Erie County Water Revenue, 4th Series 0.000 12/01/2017 13,590 3,041,714
3.1% NYC Municipal Water Finance Auth. IRS 6.715 (f) 06/15/2013 12,500 11,828,125
$70,334,005 NYC Municipal Water Finance Auth. IVRC (e) 7.492 (f) 06/15/2017 30,000 30,712,500
NYS Environ. (Consolidated Water) 7.150 11/01/2014 1,840 1,956,454
NYS Environ. (L.I. Water) 10.000 10/01/2017 500 526,800
NYS Environ. (NYS Water Services) 8.375 01/15/2020 7,500 8,235,300
Suffolk IDA (Ocean Park Water ) 7.500 11/01/2022 715 770,241
V.I. Water & Power Auth. 7.600 01/01/2012 6,850 7,394,096
V.I. Water & Power Auth. 8.500 01/01/2010 5,500 5,868,775
- ------------------------------------------------------------------------------------------------------------------------------------
Higher Education Allegany IDA (Alfred University) 7.500 09/01/2011 10,070 10,909,939
3.0% Brookhaven IDA (Dowling College) 6.750 03/01/2023 6,965 7,267,978
$70,081,514 Cattaraugus IDA (St. Bonaventure) 8.300 12/01/2010 8,825 9,722,061
Dutchess IDA (Bard College) 7.000 11/01/2017 3,500 3,785,285
Erie IDA (Medaille College) 8.000 12/30/2022 3,230 3,501,772
Monroe IDA (Roberts Wesleyan) 6.700 09/01/2011 2,625 2,672,749
New Rochelle IDA (CNR) 6.750 07/01/2022 3,000 3,113,250
NYC IDA (MMC) 7.000 07/01/2023 3,600 3,745,908
NYS Dorm (City University) 6.000 07/01/2026 3,350 3,351,374
NYS Dorm (State University) 0.000 05/15/2007 50 27,533
NYS Dorm (State University) 7.000 05/15/2016 225 243,358
Puerto Rico ITEME (Polytech University) 5.700 08/01/2013 5 4,745
Rockland IDA (DC) 8.000 03/01/2013 2,090 2,260,022
Suffolk IDA (Dowling College) 6.625 06/01/2024 2,000 2,081,500
Suffolk IDA (Dowling College) 6.700 12/01/2020 1,870 1,926,362
Suffolk IDA (Dowling College) 8.250 12/01/2000 (p) 965 1,107,820
University of V. I. 7.250 10/01/2004 1,205 1,287,892
University of V. I. 7.700 10/01/2019 3,570 3,926,822
University of V. I. 7.750 10/01/2024 5,175 5,691,155
Yates IDA (Keuka College) 8.750 08/01/2015 1,960 2,236,360
Yates IDA (Keuka College) 9.000 08/01/2011 1,095 1,217,629
- ------------------------------------------------------------------------------------------------------------------------------------
Adult Living Batavia Hsg. Auth. (Trocaire Place) 8.750 04/01/2025 3,850 4,072,030
Facilities Middleton IDA (Southwinds) 8.375 03/01/2018 3,740 3,803,243
2.9% Orange IDA (Glen Arden) 8.250 01/01/2002 18,025 18,578,187
$67,130,572 Orange IDA (Glen Arden) 8.875 01/01/2025 23,985 25,884,852
Tompkins IDA (Kendall at Ithaca) 7.625 06/01/2009 925 935,721
Tompkins IDA (Kendall at Ithaca) 7.875 06/01/2024 5,465 5,573,262
Tompkins IDA (Kendall at Ithaca) 7.875 06/01/2015 2,790 2,858,690
Union Hsg. Auth. (Methodist Homes) 7.625 11/01/2016 2,470 2,662,586
Union Hsg. Auth. (Methodist Homes) 8.050 04/01/99 105 110,921
Union Hsg. Auth. (Methodist Homes) 8.150 04/01/2000 110 116,889
Union Hsg. Auth. (Methodist Homes) 8.250 04/01/2001 120 127,660
Union Hsg. Auth. (Methodist Homes) 8.350 04/01/2002 150 159,753
Union Hsg. Auth. (Methodist Homes) 8.500 04/01/2012 2,010 2,246,778
- ------------------------------------------------------------------------------------------------------------------------------------
NonProfit Albany IDA (Albany Rehab.) 8.375 06/01/2023 1,035 1,084,307
Organization Columbia IDA (Berkshire Farms) 6.900 12/15/2004 760 796,769
2.7% Columbia IDA (Berkshire Farms) 7.500 12/15/2014 1,855 1,993,272
$61,600,756 Geneva IDA (FLCP) 8.250 11/01/2004 770 828,482
Monroe IDA (Al Sigl Center) 7.250 12/15/2015 1,590 1,628,748
Monroe IDA (DePaul CF) 6.450 02/01/2014 880 940,738
Monroe IDA (DePaul CF) 6.500 02/01/2024 1,285 1,365,929
Monroe IDA (DePaul Properties) 8.300 09/01/2002 470 502,604
Monroe IDA (DePaul Properties) 8.800 09/01/2021 4,605 4,870,662
NYC IDA (Blood Center) 7.200 05/01/2004 (p) 500 571,905
NYC IDA (Blood Center) 7.250 05/01/2004 (p) 3,000 3,480,750
NYC IDA (CCM) 7.875 12/01/2016 1,770 1,815,064
NYC IDA (CCM) 8.000 12/01/2011 2,055 2,098,402
NYC IDA (EPG) 7.500 07/30/2003 10,355 11,240,870
NYC IDA (Fund for NYC Project) 7.625 07/01/2010 1,000 1,066,360
NYC IDA (Graphic Artists) 8.250 12/30/2023 1,280 1,336,717
NYC IDA (JBFS) 6.750 12/15/2012 6,040 6,265,050
NYC IDA (Lighthouse) 6.500 07/01/2022 1,000 1,057,950
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYC IDA (NY Hostel Co.) 6.750 % 01/01/2004 $ 1,175 $ 1,181,427
NYC IDA (NY Hostel Co.) 7.600 01/01/2017 4,400 4,450,292
NYC IDA (OHEL) 8.250 03/15/2023 3,435 3,527,779
NYC IDA (PRFFP) 7.000 10/01/2016 815 872,694
NYC IDA (Psycho Therapy) 9.625 04/01/2010 755 820,526
NYC IDA (St. Christoper Ottilie) 7.500 07/01/2021 4,140 4,451,990
UCP Chemung County 6.600 08/01/2022 1,000 1,050,150
Westchester IDA (JBFS) 6.750 12/15/2012 2,220 2,301,319
- ---------------------------------------------------------------------------------------------------------------------------------
Education Brookhaven IDA (Interdisciplinary School) 8.500 12/01/2004 590 629,353
2.4% Brookhaven IDA (Interdisciplinary School) 9.500 12/01/2019 3,220 3,539,585
$56,401,753 Columbia IDA (ARC) 7.750 06/01/2005 715 762,405
Columbia IDA (ARC) 8.650 06/01/2018 2,660 2,814,918
Islip IDA (Leeway School) 9.000 08/01/2021 970 1,031,343
Montgomery IDA (New Dimension) 8.900 05/01/2016 1,095 1,183,848
Nassau IDA (ACLDD) 8.125 10/01/2022 2,725 2,806,832
NYC IDA (BHMS) 8.400 09/01/2002 230 234,924
NYC IDA (BHMS) 8.500 01/01/2027 3,075 3,082,565
NYC IDA (BHMS) 8.900 09/01/2011 660 698,999
NYC IDA (BHMS) 9.200 09/01/2021 1,690 1,827,532
NYC IDA (Eden II) 7.750 06/01/2004 450 468,990
NYC IDA (Eden II) 8.750 06/01/2019 2,505 2,669,453
NYC IDA (Hebrew Academy) 10.000 03/01/2021 2,315 2,551,500
NYC IDA (St. Bernard's School) 7.000 12/01/2021 5,115 5,243,642
NYC IDA (Summit School) 7.250 12/01/2004 190 195,696
NYC IDA (Summit School) 8.250 12/01/2024 1,485 1,528,303
NYC IDA (UN School) 6.350 12/01/2015 1,000 997,860
Orange IDA (Mental) 7.800 07/01/2011 495 561,360
Saratoga IDA (ARC) 8.400 03/01/2013 1,395 1,447,592
Suffolk IDA (Devel. Disabilities) 7.375 03/01/2003 1,035 1,059,995
Suffolk IDA (Devel. Disabilities) 8.750 03/01/2023 9,675 10,320,806
Wayne IDA (ARC) 7.250 03/01/2003 515 529,178
Wayne IDA (ARC) 8.375 03/01/2018 2,925 3,011,873
Westchester IDA (Clearview School) 9.375 01/01/2021 1,469 1,602,005
Westchester IDA (JDAM) 6.750 04/01/2016 1,560 1,596,192
Yonkers IDA (Westchester) 7.375 12/30/2003 395 407,241
Yonkers IDA (Westchester) 8.750 12/30/2023 3,375 3,597,763
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Backed Albany IDA (Albany Golf) 7.500 05/01/2012 400 420,908
1.9% Albany IDA (Kenwood Assoc.) 9.250 (d) 09/01/2010 2,735 2,193,990
$44,042,633 Auburn IDA (Wegmans) 7.250 12/01/98 125 126,534
Broome IDA (Industrial Park) 7.550 12/01/2000 190 195,700
Broome IDA (Industrial Park) 7.600 12/01/2001 195 200,850
Dutchess IDA (Merchants Press) 7.950 (d) 06/30/2002 1,800 1,706,346
Dutchess IDA (Merchants Press) 9.000 (d) 06/30/2022 4,590 4,255,068
Erie IDA (Affordable Hospitality) 9.250 12/01/2015 3,610 3,685,377
Erie IDA (Air Cargo) 8.250 10/01/2007 1,455 1,505,037
Erie IDA (Air Cargo) 8.500 10/01/2015 2,380 2,493,740
Fulton IDA (Crossroads Incubator) 8.500 12/15/98 (a) 160 162,400
Hudson IDA (Northside) 9.000 12/01/2009 455 494,212
Islip IDA (WJL Realty) 7.800 03/01/2003 50 53,166
Islip IDA (WJL Realty) 7.850 03/01/2004 100 106,474
Islip IDA (WJL Realty) 7.900 03/01/2005 100 106,616
Islip IDA (WJL Realty) 7.950 03/01/2010 500 532,450
Monroe IDA (Canal Ponds) 7.000 06/15/2013 900 964,782
Monroe IDA (Cottrone Devel.) 9.500 12/01/2010 2,358 2,552,746
Monroe IDA (De Carolis) 7.500 01/30/2005 402 402,199
Monroe IDA (Morrell/Morrell) 7.000 12/01/2007 2,172 2,203,559
Monroe IDA (Piano Works) 7.625 11/01/2016 4,330 4,368,450
Monroe IDA (West End Business) 6.750 12/01/2004 575 585,471
Monroe IDA (West End Business) 6.750 12/01/2004 140 142,549
Monroe IDA (West End Business) 6.750 12/01/2004 75 76,366
Monroe IDA (West End Business) 8.000 12/01/2014 515 547,172
Monroe IDA (West End Business) 8.000 12/01/2014 1,375 1,460,896
Monroe IDA (West End Business) 8.000 12/01/2014 170 180,618
Monroe IDA (West End Business) 8.000 12/01/2014 345 366,552
Niagara IDA (Maryland Maple) 10.250 11/15/2009 1,090 1,162,943
</TABLE>
<PAGE>
Rochester Fund Municipals
Statement of Investments
December 31, 1996
<TABLE>
<CAPTION>
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Niagara IDA (Sevenson Hotel) 6.600 % 05/01/2007 $ 1,900 $ 1,934,561
NYC IDA (ALA Realty) 7.500 12/01/2010 1,035 1,065,450
NYC IDA (ALA Realty) 8.375 12/01/2015 1,450 1,569,553
NYC IDA (Loehmann's) 9.500 12/31/2004 845 863,320
Suffolk IDA (Rimland Facilities) 6.188 (v) 12/01/2009 1,670 1,619,900
Syracuse IDA (Rockwest Center II) 7.625 12/01/2010 980 994,906
Syracuse IDA (Rockwest Center II) 8.625 12/01/2015 1,470 1,536,503
Syracuse IDA (Rockwest Center I) 8.000 06/01/2013 1,150 1,205,269
- ------------------------------------------------------------------------------------------------------------------------------------
Telephone Utilities Puerto Rico Telephone Auth. RIBS 7.067 (f) 01/01/2015 16,550 16,156,938
1.4%, $32,075,688 Puerto Rico Telephone Auth. RIBS (e) 7.936 (f) 01/01/2020 15,000 15,918,750
- ---------------------------------------------------------------------------------------------------------------------------------
Manufacturing, Babylon IDA (JFB & Sons Lithographers) 7.625 12/01/2006 1,180 1,182,655
Non-Durable Babylon IDA (JFB & Sons Lithographers) 8.625 12/01/2016 2,570 2,576,451
Goods Herkimer IDA (Burrows Paper) 7.250 01/01/2001 2,295 2,237,900
1.1% Herkimer IDA (Burrows Paper) 8.000 01/01/2009 2,440 2,402,985
$24,716,112 Middleton IDA (Fleurchem) 8.000 12/01/2016 905 938,349
Monroe IDA (Cohber) 7.550 12/01/2001 10 10,507
Monroe IDA (Cohber) 7.650 12/01/2002 10 10,525
Monroe IDA (Cohber) 7.700 12/01/2003 10 10,533
Monroe IDA (Cohber) 7.850 12/01/2009 170 179,365
NYC IDA (Amster Novelty) 8.000 12/01/2010 530 539,476
NYC IDA (Amster Novelty) 8.375 12/01/2015 790 820,755
NYC IDA (Atlantic Veal & Lamb) 8.375 12/01/2016 1,160 1,164,965
NYC IDA (Promotional Slideguide) 7.500 12/01/2010 710 705,839
NYC IDA (Promotional Slideguide) 7.875 12/01/2015 1,065 1,077,908
NYC IDA (Streamline Plastics) 7.750 12/01/2015 585 599,648
NYC IDA (Streamline Plastics) 8.125 12/01/2025 1,275 1,329,047
NYC IDA (Visy Paper) 7.950 01/01/2028 4,000 4,266,360
Putnam IDA (Brewster Plastics) 8.500 12/01/2016 1,990 2,042,496
Ulster IDA (Brooklyn Bottling) 7.800 06/30/2002 595 615,171
Ulster IDA (Brooklyn Bottling) 8.600 06/30/2022 1,915 2,005,177
- ------------------------------------------------------------------------------------------------------------------------------------
Highways, MTA YCR (e) 3.882 (f) 07/01/2013 9,400 9,353,000
Commuter Facilities MTA YCR (e) 3.882 (f) 07/01/2022 3,000 2,823,750
1.1% MTA (Transit) IVRC (e) 6.360 (f) 07/01/2011 10,000 9,987,500
$24,407,149 NYS Thruway 0.000 01/01/2003 1,000 720,450
NYS Thruway 0.000 01/01/2004 2,000 1,356,860
NYS Thruway 0.000 01/01/2005 260 165,589
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Utilities NYS ERDA (Brooklyn Union Gas) 7.000 12/01/2020 70 71,407
1.0% NYS ERDA (Brooklyn Union Gas) RIBS 7.538 (f) 07/08/2026 3,000 2,752,500
$23,089,907 NYS ERDA (Brooklyn Union Gas) RIBS 8.721 (f) 04/01/2020 7,000 7,700,000
NYS ERDA (Brooklyn Union Gas) RIBS 9.868 (f) 07/01/2026 10,300 12,566,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Franklin SWMA 6.250 06/01/2003 (p) 1,060 1,169,954
0.5% Franklin SWMA 6.250 06/01/2015 2,195 2,183,937
$11,850,704 Montgomery IDA (Amsterdam) 7.250 01/15/2019 5,860 6,060,822
Municipal Assistance Corp. for Troy, NY 0.000 01/15/2022 1,021 248,679
Municipal Assistance Corp. for Troy, NY 0.000 07/15/2021 673 168,927
Peekskill IDA (Karta) 9.000 07/01/2010 1,834 1,901,211
St. Lawrence County (SWDA) 8.250 01/01/99 (p) 10 10,882
St. Lawrence County (SWDA) 8.875 01/01/98 (p) 100 $ 106,292
- ------------------------------------------------------------------------------------------------------------------------------------
Total municipal bond investments, at value (cost $2,194,470,034) - 99.8% $ 2,302,671,637
- ------------------------------------------------------------------------------------------------------------------------------------
Other assets and liabilities (net) - 0.2% 5,178,542
---------------
Net assets - 100.0% $ 2,307,850,179
===============
</TABLE>
(a) Date of mandatory put; final maturity 12/15/2008.
(b) Date of mandatory put; final maturity 06/01/2008.
(c) Security will convert to a fixed coupon at a future date prior to maturity.
(d) Non-income accruing security.
(e) Illiquid security.
(f) Interest rate is subject to change periodically and inversely to the
prevailing market rate. The interest rate shown is the rate in effect at
December 31, 1996.
(p) Date of pre-refunded call.
(v) Variable rate security that fluctuates as a percentage of prime rate.
See accompanying Notes to Financial Statements.
<PAGE>
Portfolio Abbreviations
To simplify the listings of Rochester Fund Municipals' holdings in the Statement
of Investments, we have abbreviated the descriptions of many of the securities
per the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ACLDD Adults and Children with Learning IRS Inverse Rate Security
and Developmental Disabilities ITEME Industrial Tourist Educational Medical
ARC Association of Retarded Citizens and Environmental
ASSC Annie Schaffer Senior Center IVRC Inverse Variable Rate Certificate
BANS Bond Anticipation Notes JBFS Jewish Board of Family Services
BHMS Brooklyn Heights Montessori School JDAM Julia Dyckman Angus Memorial
BLH Bronx Lebanon Hospital LEVRRS Leveraged Reverse Rate Security
BOCES Board of Cooperative Educational Services LGSC Local Government Services Corporation
CARS Complimentary Auction Rate Security L.I. Long Island
CCM Comprehensive Care Management LILCO Long Island Lighting Corporation
CDC Community Development Corporation MMC Marymount Manhattan College
CEK Cyril E. King MMP Millbrook Millwork Project
CF Community Facilities MTA Metropolitan Transit Authority
CGH Community General Hospital NIMO Niagara Mohawk Power Corporation
CNR College of New Rochelle PRFFP Puerto Rico Family Foundation Project
Con Ed Consolidated Edison Co. Res Rec Resource Recovery Facility
COP Certificate of Participation RGH Rochester General Hospital
DC Dominican College RG&E Rochester Gas & Electric
EHC Elderly Housing Corporation RIBS Residual Interest Bonds
EHL Engine Hook and Ladder RITES Residual Interest Tax Exempt Security
EPG Elmhurst Parking Garage SCSB Schuyler Community Services Board
ERDA Energy Research and SONYMA State of New York Mortgage Agency
Development Authority SWDA Solid Waste Disposal Authority
E,E&T Ear, Eye and Throat SWMA Solid Waste Management Authority
FLCP Finger Lakes Cerebral Palsy TEMEC Tourist, Educational, Medical and
GAINS Growth and Income Securities Environmental Control
GO General Obligation UCP United Cerebral Palsy
HB&F Housing Bank and Finance UDC Urban Development Corporation
HDC Housing Development Corporation UFA Utica Free Academy
HELP Homeless Economic Loan Program UN United Nations
HFA Housing Finance Agency WWH Wyandach/Wheatley Heights
HFC Housing Finance Corporation YCN Yield Curve Note
H&N Hospital and Nursing YCR Yield Curve Receipt
IDA Industrial Development Authority V. I. United States Virgin Islands
======================================================================================================
</TABLE>
Asset Composition Table - December 31, 1996
(Unaudited) (As a percentage of total investments)
Percentage
Rating of Investments
- ------------------------
AAA 18.5%
AA 15.0%
A 23.3%
BBB 23.5%
BB 6.0%
B 2.4%
CCC 0.0%
CC 0.0%
C 0.0%
Not Rated 11.3%
--------------
Total 100.0%
==============
All unrated bonds are backed by mortgage liens and guarantees by the issuer.
Bonds which are backed by a letter of credit or by other financial institutions
or agencies may be assigned an investment grade rating by the Manager, which
reflects the quality of the guarantor, institution or agency. Unrated bonds may
also be assigned a rating when the issuer has rated bonds outstanding with
comparable credit characteristics which allow for rating. The unrated bonds in
the portfolio are predominantly smaller issuers which have not applied for a
bond rating. Only those unrated bonds which subsequent to purchase have not been
designated investment grade are included in the "Not Rated" category. For
further information see "Credit Quality" in the Prospectus.
<PAGE>
Rochester Fund Municipals
================================================================================
Statement of Assets and Liabilities - December 31, 1996
Assets
Investments, at value
(Cost $2,194,470,034) $ 2,302,671,637
Receivables:
Interest 38,260,232
Shares of beneficial interest sold 2,809,607
Investments sold 1,045,994
Other 2,811,075
---------------
Total assets 2,347,598,545
---------------
Liabilities
Payables and other liabilities:
Bank overdraft 252,728
Demand note payable to bank
(interest rate 7.60% at 12/31/96) 27,100,000
Investments purchased 8,952,318
Dividends 786,842
Shares of beneficial interest redeemed 2,043,236
Trustees' fees 509,500
Other 103,742
---------------
Total liabilities 39,748,366
---------------
Net Assets $ 2,307,850,179
===============
Composition of Net Assets
Paid-in capital $ 2,256,905,794
Undistributed net investment income 1,979,870
Accumulated net realized loss on
investment transactions (59,237,088)
Net unrealized appreciation on investments 108,201,603
---------------
Net assets $ 2,307,850,179
===============
Net Asset Value Per Share
Net asset value and redemption price per share
(based on net assets of $2,307,850,179 and
128,245,804 shares of beneficial interest
outstanding) $ 18.00
===============
Maximum offering price per share (net asset
value plus sales charge of 4.00% of offering
price) $ 18.75
===============
================================================================================
Statement of Operations
For the Year Ended December 31, 1996
Investment Income:
Interest $ 153,669,200
-------------
Expenses:
Management fees 10,418,738
Distribution and service plan fees 3,245,654
Transfer and shareholder servicing agent fees 1,242,719
Accounting service fees 660,089
Shareholder reports 412,478
Trustees' fees and expenses 327,250
Custodian fees and expenses 269,909
Legal and auditing fees 92,094
Registration and filing fees 89,860
Other 208,281
Interest 890,390
-------------
Total expenses 17,857,462
Less expenses paid indirectly (23,621)
-------------
Total net expenses 17,833,841
-------------
Net Investment Income 135,835,359
-------------
Realized and Unrealized Loss:
Net realized loss on investments (3,568,327)
Net change in unrealized appreciation
or depreciation on investments (15,226,664)
-------------
Net realized and unrealized loss (18,794,991)
-------------
Net Increase in Net Assets
Resulting From Operations $ 117,040,368
=============
Statements of Changes in Net Assets
Year Ended December 31, 1996 1995
---- ----
Increase in Net Assets -
Operations:
Net investment income $ 135,835,359 $ 125,186,936
Net realized loss (3,568,327) (10,724,838)
Net change in unrealized appreciation
or depreciation (15,226,664) 222,374,949
--------------- ---------------
Net increase in net assets
resulting from operations 117,040,368 336,837,047
--------------- ---------------
Dividends to Shareholders From:
Net investment income (136,511,912) (124,417,144)
--------------- ---------------
Beneficial Interest Transactions:
Sold 355,593,044 292,964,245
Dividends and distributions reinvested 71,854,295 67,511,771
Redeemed (245,389,573) (218,931,015)
--------------- ---------------
Net increase in net assets resulting from
beneficial interest transactions 182,057,766 141,545,001
--------------- ---------------
Net Assets:
Total increase 162,586,222 353,964,904
Beginning of period 2,145,263,957 1,791,299,053
--------------- ---------------
End of period (including undistributed
net investment income of $1,979,870
and $2,633,000, respectively) $ 2,307,850,179 $ 2,145,263,957
=============== ===============
See accompanying Notes to Financial Statements.
<PAGE>
Rochester Fund Municipals
Financial Highlights
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
------------ ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $18.18 $16.31 $19.00 $17.65 $17.01
--------- --------- --------- --------- -------
Income (loss) from investment operations:
Net investment income 1.10 1.10 1.13 1.17 1.20
Net realized and unrealized gain (loss) (0.18) 1.86 (2.68) 1.35 0.64
--------- --------- --------- --------- -------
Total income from investment operations 0.92 2.96 (1.55) 2.52 1.84
--------- --------- --------- --------- -------
Dividends and distributions to shareholders:
Dividends from net investment income (1.10) (1.09) (1.13) (1.17) (1.20)
Undistributed net investment income -
prior year -- -- (0.01) -- --
Distributions from net realized gain -- -- -- -- --
--------- --------- --------- --------- -------
Total dividends and distributions to shareholders (1.10) (1.09) (1.14) (1.17) (1.20)
--------- --------- --------- --------- -------
Net asset value, end of period $18.00 $18.18 $16.31 $19.00 $17.65
========= ========= ========= ========= =======
Total Return, at Net Asset Value (a) 5.37% 18.58% (8.35%) 14.60% 11.19%
Ratios/Supplemental Data:
Net assets, end of period (in millions) $2,308 $2,145 $1,791 $1,794 $997
Average net assets (in millions) $2,191 $2,005 $1,847 $1,449 $717
Ratios to average net assets:
Net investment income 6.20% 6.25% 6.43% 6.21% 6.79%
Expenses (b) 0.82% 0.82% 0.84% 0.75% 0.84%
Expenses (excluding interest) (b) (c) 0.77% 0.78% 0.73% 0.64% 0.70%
Portfolio turnover rate (d) 13.34% 14.59% 34.39% 18.27% 29.99%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total returns
are not annualized for periods of less than one full year.
(b) Beginning in fiscal 1995, the expense ratios reflect the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not
been adjusted.
(c) 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.
(d) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1996 were
$449,938,295 and $290,605,385, respectively.
Per share information has been determined based on average shares
outstanding for the period.
See accompanying Notes to Financial Statements.
<PAGE>
Rochester Fund Municipals
Notes to Financial Statements
December 31, 1996
Note 1. Significant Accounting Policies:
Rochester Fund Municipals (the Fund), which is organized as a business trust
under the laws of the Commonwealth of Massachusetts, conducted operations as a
closed-end investment company from December, 1982 until May 15, 1986, at which
time it commenced operations as an open-end investment company. The Fund's
investment objective is to provide as high a level of interest income exempt
from federal, New York State and New York City personal income taxes as is
consistent with prudent investing while seeking preservation of shareholders'
capital.
On January 4, 1996, Rochester Capital Advisors, L.P. (RCA, L.P.), the Fund's
investment adviser, Rochester Fund Distributors, Inc., (RFD), the Fund's
principal underwriter, and Rochester Fund Services, Inc. (RFS), the Fund's
shareholder servicing, accounting and pricing agent, consummated a transaction
with OppenheimerFunds, Inc. (the Manager), which resulted in the sale to the
Manager of certain assets of RCA, L.P., RFD and RFS, including the transfer of
the investment advisory agreement and other contracts with the Fund and the use
of the name "The Rochester Funds."
The following is a summary of significant accounting policies consistently
followed by the Fund.
Investment Valuation and Transactions. Portfolio securities are valued at the
close of the New York Stock Exchange on each trading day. Long-term debt
securities are valued at the mean between the bid and asked price using
information available from a portfolio pricing service approved by the Board of
Trustees, dealer-supplied valuations, provided the Manager is satisfied that the
firm rendering the quotes is reliable and that the quotes reflect current value,
or analysis of various relationships between comparable securities. Securities
for which market quotations are not readily available are valued at fair value
under consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Investment transactions are accounted for on
the date the investments are purchased or sold (trade date). Cost is determined
and realized gains and losses are based upon the specific identification method
for both financial statement and federal income tax purposes. Interest income is
recorded on the accrual basis. In computing net investment income, the Fund
amortizes premiums and accretes original issue discount. For municipal bonds
purchased after April 30, 1993 and subsequently sold at a gain, market discount
is accreted at the time of sale (to the extent of the lesser of the accrued
market discount or the disposition gain) and is treated as taxable income,
rather than capital gain.
Securities Purchased on a When-Issued Basis. Delivery and payment for securities
that have been purchased by the Fund on a forward commitment or when-issued
basis can take place a month or more after the transaction date. During this
period, such securities do not earn interest, are subject to market fluctuation
and may increase or decrease in value prior to their delivery. The Fund
maintains, in a segregated account with its custodian, assets with a market
value equal to the amount of its purchase commitments. The purchase of
securities on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. As of December 31, 1996,
the Fund had no outstanding when-issued or forward commitments.
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At December 31, 1996, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $59,099,600 which expires between 2000 and 2004.
Trustees' Fees and Expenses. In January, 1995, the Board of Trustees of the Fund
adopted a retirement plan for its independent trustees. Upon retirement,
eligible trustees receive annual payments based upon their years of service. The
plan is not funded. In connection with the sale of certain assets of RCA, L.P.
and other affiliates to the Manager, all but one of the independent trustees
retired effective January 4, 1996. The retirement plan expense, which is
included in trustees' fees and expenses, amounted to $278,000 for the year ended
December 31, 1996. Payments of $40,500 were made to retired trustees during the
year ending December 31, 1996. At December 31, 1996, the Fund had recognized an
accumulated liability of $499,500. The retirement plan, as amended and restated
on October 16, 1995, provides that no independent trustee of the Fund who is
elected after September 30, 1995 may be eligible to receive benefits thereunder.
<PAGE>
Distributions to Shareholders. Income dividends are declared and recorded each
day the New York Stock Exchange is open for business based on the projected net
investment income for a period, usually one month, calculated as if earned pro
rata throughout the period on a daily basis. Such dividends are paid monthly.
Distributions from net realized gains on investments, if any, are recorded on
the ex-dividend date and paid annually.
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gain (loss) was recorded by the
Fund.
During the year ended December 31, 1996, the Fund adjusted the classification of
net investment income and net realized gain (loss) to reflect the differences
between financial statement amounts and distributions determined in accordance
with income tax regulations. During the year ended December 31, 1996, amounts
have been reclassified to reflect a decrease in paid-in capital of $82,628, a
decrease in an accumulated net realized loss of $59,204, and an increase in
undistributed net investment income of $23,424.
Concentration in New York Issuers. There are certain risks arising from
geographic concentration in any state. Certain revenue or tax related events in
a state may impair the ability of certain issuers of municipal securities to pay
principal and interest on their obligations.
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
Other. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
Note 2. Shares of Beneficial Interest:
The Agreement and Declaration of Trust permits the Fund to issue an unlimited
number of shares of beneficial interest, par value $.01 per share. Transactions
in shares of beneficial interest were as follows:
Year Ended December 31, 1996 1995
---- ----
Sold 20,027,352 16,778,524
Dividends and distributions reinvested 4,049,796 3,857,323
Redeemed (13,850,487) (12,475,987)
------------ ------------
Net increase in shares outstanding 10,226,661 8,159,860
Shares outstanding, beginning of period 118,019,143 109,859,283
------------ ------------
Shares outstanding, end of period 128,245,804 118,019,143
============ ============
Note 3. Portfolio Information:
The Fund held $351,619,487 in inverse floating rate municipal bonds at December
31, 1996, comprising approximately 15.24% of net assets.
During 1996, 10.54% of interest income was derived from investments in U.S.
territories which are exempt from federal, all states, and New York City income
taxes.
At December 31, 1996, net unrealized appreciation on investments of $108,201,603
was composed of gross appreciation of $116,613,463, and gross depreciation of
$8,411,860.
<PAGE>
Unrealized appreciation (depreciation) at December 31, 1996 based on cost of
investments for federal income tax purposes of $2,194,607,522 was:
Gross unrealized appreciation $116,501,348
Gross unrealized depreciation (8,437,234)
----------------
Net unrealized appreciation $108,064,114
================
Note 4. Management Fees and Other Transactions With Affiliates:
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee based on an annual
rate of 0.54% of average daily net assets up to $100 million, 0.52% of average
daily net assets in excess of $100 million to $250 million, 0.47% of average
daily net assets in excess of $250 million to $2 billion, 0.46% of average daily
net assets in excess of $2 billion to $5 billion, and 0.45% of average daily net
assets in excess of $5 billion. During 1996, the Fund paid $113,595 to RCA, L.P.
(the former manager) and $10,305,143 to the Manager for management and
investment advisory services.
Accounting fees paid to the Manager were in accordance with the accounting
services agreement with the Fund which provides for an annual fee of $12,000 for
the first $30 million of net assets and $9,000 for each additional $30 million
of net assets. During 1996, the Fund paid $7,180 to RFS (the former accounting
and pricing agent) and $652,909 to the Manager for accounting and pricing
services.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund. The transfer and shareholder servicing
agent fee paid by the Fund is based on an annual maintenance fee of $24.12 for
each shareholder account. During 1996, the Fund paid $13,137 to RFS (the former
shareholder servicing agent) and $1,229,582 to OFS.
For the year ended December 31, 1996, commissions (sales charges paid by
investors) totaled $9,802,584, of which $1,377,087 was retained by
OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the Manager, as
general distributor, and by affiliated broker/dealers.
The Fund has adopted a Service Plan to reimburse OFDI for a portion of its costs
incurred in connection with the personal service and maintenance of shareholder
accounts. Reimbursement is made monthly at an annual rate that may not exceed
0.25% per annum of average daily net assets of the Fund. Currently, the Board of
Trustees has limited the rate to 0.15% per annum of average daily net assets.
OFDI uses the service fee to reimburse brokers, dealers, banks and other
financial institutions quarterly for providing personal service and maintenance
of accounts of their customers that hold shares of the Fund. During the year
ended December 31, 1996, OFDI paid $7,818 to an affiliated broker/dealer as
reimbursement for personal service and maintenance expenses.
Note 5. Bank Borrowings:
The Fund may borrow up to 5% of its total assets from a bank to purchase
portfolio securities, or for temporary and emergency purposes. The Fund has
entered into an agreement which enables it to participate with two other
Rochester Division funds managed by the Manager in an unsecured line of credit
with a bank, which permits borrowings up to $70 million, collectively. Interest
is charged to each fund, based on its borrowings, at a rate equal to the New
York Interbank Offer Rate (NIBOR) plus 0.75%. Borrowings are payable on demand.
The Fund had borrowings of $27,100,000 outstanding at December 31, 1996. For the
year ended December 31, 1996, the average monthly loan balance was $14,152,424
at an average interest rate of 6.172%. The maximum amount of borrowings
outstanding at any month-end was $49,370,000.
<PAGE>
APPENDIX A
INDUSTRY CLASSIFICATIONS
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
A-1
<PAGE>
APPENDIX B
TAX EQUIVALENT YIELD TABLES
The equivalent yield tables below compare tax-free income with taxable income
under Federal, New York State and New York City income tax rates effective
January 1, 1997. Combined taxable income refers to the net amount subject to
Federal, New York State and New York City income tax after deductions and
exemptions. The tables assume that an investor's highest tax bracket applies to
the change in taxable income resulting from a switch between taxable and
non-taxable investments, that the investor is not subject to the Alternative
Minimum Tax and that New York State and local income tax payments are fully
deductible for Federal income tax purposes. They do not reflect the phaseout of
itemized deductions and personal exemptions at higher income levels, resulting
in higher effective tax rates and tax equivalent yields.
New York State Residents
Combined Taxable Income
<TABLE>
<CAPTION>
Rochester Fund Municipals Yield
Single Return Joint Return of:
Combined 3.5% 4.0% 4.5%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 22,000 $ 26,000 19.46% 4.35% 4.97% 5.59%
$ 26,000 $ 40,000 20.01% 4.38% 5.00% 5.63%
$ 20,000 $ 24,650 $ 40,000 $ 41,200 20.82% 4.42% 5.05% 5.68%
$ 24,650 $ 59,750 $ 41,200 $ 99,600 32.93% 5.22% 5.96% 6.71%
$ 59,750 $124,650 $ 99,600 $151,750 35.73% 5.45% 6.22% 7.00%
$124,650 $271,050 $151,750 $271,050 40.38% 5.87% 6.71% 7.55%
$271,050 $271,050 43.74% 6.22% 7.11% 8.00%
</TABLE>
New York State Residents
Combined Taxable Income
<TABLE>
<CAPTION>
Rochester Fund Municipals Yield
Single Return Joint Return of:
Combined 5.0% 5.5% 6.0%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 22,000 $ 26,000 19.46% 6.21% 6.83% 7.45%
$ 26,000 $ 40,000 20.01% 6.25% 6.88% 7.50%
$ 20,000 $ 24,650 $ 40,000 $ 41,200 20.82% 6.31% 6.95% 7.58%
$ 24,650 $ 59,750 $ 41,200 $ 99,600 32.93% 7.46% 8.20% 8.95%
$ 59,750 $124,650 $ 99,600 $151,750 35.73% 7.78% 8.56% 9.34%
$124,650 $271,050 $151,750 $271,050 40.38% 8.39% 9.23% 10.06%
$271,050 $271,050 43.74% 8.89% 9.78% 10.66%
</TABLE>
B-1
<PAGE>
New York City Residents
Combined Taxable Income
<TABLE>
<CAPTION>
Rochester Fund Municipals Yield
Single Return Joint Return of:
Combined 3.5% 4.0% 4.5%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 26,000 $ 40,000 23.21% 4.56% 5.21% 5.86%
$ 20,000 $ 24,650 $ 40,000 $ 41,200 24.02% 4.61% 5.26% 5.92%
$ 24,650 $ 25,000 $ 41,200 $ 45,000 35.64% 5.44% 6.21% 6.99%
$ 25,000 $ 50,000 $ 45,000 $ 90,000 35.68% 5.44% 6.22% 7.00%
$ 50,000 $ 59,750 $ 90,000 $ 99,600 35.73% 5.45% 6.22% 7.00%
$ 69,750 $124,650 $ 99,600 $151,750 38.40% 5.68% 6.49% 7.31%
$124,650 $271,050 $151,750 $271,050 42.87% 6.13% 7.00% 7.88%
$271,050 $271,050 46.08% 6.49% 7.42% 8.35%
</TABLE>
New York City Residents
Combined Taxable Income
<TABLE>
<CAPTION>
Rochester Fund Municipals Yield
Single Return Joint Return of:
Combined 5.0% 5.5% 6.0%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 26,000 $ 40,000 23.21% 6.51% 7.16% 7.81%
$ 20,000 $ 24,650 $ 40,000 $ 41,200 24.02% 6.58% 7.24% 7.90%
$ 24,650 $ 25,000 $ 41,200 $ 45,000 35.64% 7.77% 8.55% 9.32%
$ 25,000 $ 50,000 $ 45,000 $ 90,000 35.68% 7.77% 8.55% 9.33%
$ 50,000 $ 59,750 $ 90,000 $ 99,600 35.73% 7.78% 8.56% 9.33%
$ 69,750 $124,650 $ 99,600 $151,750 38.40% 8.12% 8.93% 9.74%
$124,650 $271,050 $151,750 $271,050 42.87% 8.75% 9.63% 10.50%
$271,050 $271,050 46.08% 9.27% 10.20% 11.13%
</TABLE>
B-2
<PAGE>
APPENDIX C
DESCRIPTION OF MUNICIPAL 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:
C-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.
C-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.
C-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.
C-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 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, NY 14604-2705
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
<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): Filed
herewith
(2) Report of Independent Accountants(See Part B):
Filed herewith
(3) Statement of Investments(See Part B): Filed
herewith
(4) Statement of Assets and Liabilities (See Part
B): Filed herewith
(5) Statement of Operations (See Part B): Filed
herewith
(6) Statement of Changes in Net Assets (See Part
B): Filed herewith
(7) Notes to Financial Statements (See Part B):
Filed herewith
(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
C-1
<PAGE>
(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 with Registrant's Post Effective
Amendment No. 18 filed January 15, 1997 -
incorporated by reference
(ii) Specimen Class B Share Certificate: filed
with Registrant's Post Effective Amendment No.
18 filed January 15, 1997 -incorporated by
reference
(iii) Specimen Class C Share Certificate:
filed with Registrant's Post Effective
Amendment No. 18 filed January 15, 1997 -
incorporated by reference
(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) 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
C-2
<PAGE>
(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
with Registrant's Post Effective Amendment No. 18
filed January 15, 1997 -incorporated by reference
(9) Service Contract dated March 8, 1996 between
the Registrant and OppenheimerFunds Services -
filed with Registrant's Post Effective Amendment
No. 18 filed January 15, 1997 -incorporated by
reference
(10) Consent of Counsel - incorporated by reference
to the Registrant's Rule 24f-2 Notice filed on
February 27, 1997 - incorporated by reference
(11) Independent Auditor's Consent - filed herewith
(12) Not applicable
(13) (i) Form of Investment Letter regarding Class
B shares from OppenheimerFunds, Inc. - filed
herewith
(ii) Form of Investment Letter regarding Class
C shares from OppenheimerFunds, Inc. -
filed herewith
(14) Not applicable
(15) (i) Amended and Restated Service Plan and
Agreement with Oppenheimer Funds
Distributor, Inc. dated January 4, 1996
C-3
<PAGE>
for Class A Shares - filed with
Registrant's Post Effective Amendment No.
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
with Registrant's Post Effective Amendment No.
18 filed January 15, 1997 -incorporated by
reference
(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 with Registrant's Post Effective
Amendment No. 18 filed January 15, 1997 -
incorporated by reference
(16) Performance Computation Schedule - filed
herewith
(17) (i) Financial Data Schedule for Class A
shares - filed herewith
(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
- ----------
C-4
<PAGE>
The Board of Trustees of the Registrant is identical to the
Boards of of Trustees of Bond Fund Series - Oppenheimer Bond Fund
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 March 1, 1997
Class A shares of beneficial interest 51,163
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
C-5
<PAGE>
in (i) and (ii) being referred to hereafter as "Disabling Conduct".
Section 6.4 provides that a determination that the Covered 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
C-6
<PAGE>
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a 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
C-7
<PAGE>
Financial
Analyst;
Senior Vice
President of
HarbourView;
prior to
March, 1996 he
was the senior
equity
portfolio
manager for
the Panorama
Series Fund,
Inc. (the
"Company") and
other mutual
funds and
pension funds
managed by
G.R. Phelps &
Co. Inc.
("G.R.
Phelps"), the
Company's
former
investment
adviser, which
was a
subsidiary of
Connecticut
Mutual Life
Insurance
Company; was
also
responsible
for managing
the common
stock
department and
common stock
investments of
Connecticut
Mutual Life
Insurance Co.
Lawrence Apolito,
Vice President None.
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.
Rajeev Bhaman,
Assistant Vice President Formerly Vice President of Asian
Equities for Barclays de Zoete Wedd,
Inc.
C-8
<PAGE>
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,
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.
C-9
<PAGE>
Michael A. Carbuto,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds; Vice
President of
Centennial.
Ruxandra Chivu,
Assistant Vice President None.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed Income
for State Street Research & Management
Co.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant 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
C-10
<PAGE>
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.
Leslie A. Falconio,
Assistant Vice President None.
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.
C-11
<PAGE>
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.
Jennifer Foxson,
Assistant Vice President None.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President and
Counsel of OAC; formerly he held the
following positions: Vice President and
a director of HarbourView and
Centennial, a director of SFSI and SSI,
an officer of other Oppenheimer Funds.
Linda Gardner,
Assistant Vice President None.
Jill Glazerman,
Assistant Vice President None.
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.
Robert Grill,
Vice President
Formerly
Marketing Vice
President for
Bankers Trust
Company
(1993-1996);
Steering
Committee
Member,
Subcommittee
Chairman for
American
Savings
Education
Council
(1995-1996).
C-12
<PAGE>
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.
Glenna Hale,
Director of Investor Marketing Formerly Vice President (1994-1997) of
Retirement Plans Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Assistant Vice President None.
Barbara Hennigar,
Executive Vice President and
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI;
President and Chief Executive Officer
of SSI.
Dorothy Hirshman,
Assistant Vice President None.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
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
C-13
<PAGE>
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.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Securities Analyst for Columbus Circle
Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Assistant Vice President
Director of
Board (since
2/96), Chinese
Finance
Society;
formerly
Chairman
(11/94-2/96)),
Chinese
Finance
Society; and
Director
(6/94-6/95),
Greater China
Business
Networks.
Stephen F. Libera,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds; a
Chartered
Financial
Analyst; a
Vice President
of
HarbourView;
prior to
March, 1996 he
was the senior
bond portfolio
manager
C-14
<PAGE>
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.
David Mabry,
Assistant 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.
Michelle McCann,
Assistant Vice President Formerly Vice President, Quest for
Value Distributors, Oppenheimer Capital
Corporation.
Lisa Migan,
Assistant Vice President, None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager of
C-15
<PAGE>
certain Oppenheimer funds. Formerly a
Portfolio Manager with Phoenix
Securities Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly Marketing Manager (July, 1995
- November, 1996) for Chase Investment
Services Corp.
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.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
John Pirie,
Assistant Vice President Formerly a Vice President with Cohane
Rafferty Securities, Inc.
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-16
<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.
James Ruff,
Executive Vice President None.
C-17
<PAGE>
Valerie Sanders,
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,
Assistant Vice President None.
Nancy Sperte,
Executive Vice President
None.
Donald W. Spiro,
Chairman Emeritus and
Director Vice
Chairman and
Trustee of the
New York-based
Oppenheimer
Funds;
formerly
Chairman of
the Manager
and the
Distributor.
Arthur Steinmetz,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
Ralph Stellmacher,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
John Stoma,
Senior Vice President,
Director Retirement Plans Formerly Vice President of U.S. Group
Pension Strategy and Marketing for
Manulife Financial.
C-18
<PAGE>
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March, 1996 he
was an equity portfolio manager for
Panorama Series Fund, Inc. and other
mutual funds and pension accounts
managed by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or
Managing Partner of the Denver-based
Oppenheimer Funds; President and a
Director
of Centennial; formerly President and
Director of OAMC, and Chairman of the
Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Discovery Fund, Oppenheimer
Global Emerging Growth Fund and
Oppenheimer Enterprise Fund. Formerly
Managing Director of Buckingham Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor
and SFSI.
Ashwin Vasan,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Dorothy Warmack,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
C-19
<PAGE>
Jerry A. Webman,
Senior Vice President
Director of
New York-based
tax-exempt
fixed income
Oppenheimer
Funds;
Formerly
Managing
Director and
Chief Fixed
Income
Strategist at
Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Vice President of
HarbourView; prior to March, 1996 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.
C-20
<PAGE>
Arthur J. Zimmer,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds; Vice
President of
Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds,
the Denver-based Oppenheimer Funds, and the Quest/Rochester Funds,
set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer 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 Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
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
C-21
<PAGE>
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Quest/Rochester Funds
- ---------------------------------
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
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., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of MultiSource Services, Inc. is 1700 Lincoln
Street, Denver, Colorado 80203.
The address of Oppenheimer Bond Fund For Growth, Rochester
Fund Municipals and Limited Term New York Municipal Fund is 350
Linden Oaks, Rochester, New York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
C-22
<PAGE>
Registrant's shares. It is also the Distributor of each of the other registered
open-end investment companies for which OppenheimerFunds, Inc. is the investment
adviser, as described in Part A and B of this Registration Statement and listed
in Item 28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
<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
C-23
<PAGE>
Bill Coughlin Vice President None
3425 1/2 Irving Avenue So.
Minneapolis, MN 55408
Mary Crooks+ Senior Vice President None
E. Drew Devereaux ++ Assistant Vice President None
Andrew John Donohue* Executive Vice Secretary of the
President, General New York-based
Counsel and Director Oppenheimer funds
/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
C-24
<PAGE>
139 Avant Lane
Cincinatti, OH 45249
Patricia Gadecki Vice President None
3906 Americana Drive
Tampa, FL 3334
Luiggino Galletto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
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
C-25
<PAGE>
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
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
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
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
C-26
<PAGE>
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.,
Director -
Key Accounts
Minnie Ra Vice President - None
0895 Thirty-First Ave. Financial Institution Div.
Apt. 4
San Francisco, CA 94121
Michael Raso Vice President None
30 Hommocks Road
Apt. 30
Larchmont, NY 10538
John C. Reinhardt ++ Vice President None
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
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
C-27
<PAGE>
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker ++ Vice President None
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
</TABLE>
* Two World Trade Center, New York, NY 10048-0203
+ 6803 South Tuscon Way, Englewood, CO 80112
++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester
Division")
(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
C-28
<PAGE>
10043.
Item 31. Management Services
- -------- -------------------
Not applicable.
Item 32. Undertakings
- -------- --------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
C-29
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for the effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York on the 14th day
of March, 1997.
ROCHESTER FUND MUNICIPALS
/s/ Bridget A. Macaskill
------------------------------*
By: 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. Macaskill Chairman of the Board, March 14, 1997
- -------------------------* President (Principal
Bridget A. Macaskill Executive Officer) and
Trustee
/s/ George C. Bowen
- ------------------------* Treasurer (Principal March 14, 1997
George C. Bowen Financial and Accounting
Officer)
/s/ John Cannon
- -------------------------* Trustee March 14, 1997
John Cannon
/s/ Paul Y. Clinton
- -------------------------* Trustee March 14, 1997
Paul Y. Clinton
/s/ Thomas W. Courtney
- --------------------------* Trustee March 14, 1997
Thomas W. Courtney
<PAGE>
/s/ Lacy B. Herrman
- --------------------------* Trustee March 14, 1997
Lacy B. Herrmann
/s/ George Loft
- -------------------------* Trustee March 14, 1997
George Loft
*By: /s/ Robert G. Zack
----------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
<PAGE>
FORM N-1A
ROCHESTER FUND MUNICIPALS
EXHIBIT INDEX
Item No. Description
- -------- -----------
24(b)(11) Independent Auditor's Consent
24(b)(13)(i) Form of Investment Letter regarding Class B
shares from OppenheimerFunds, Inc.
24(b)(13)(ii) Form of Investment Letter regarding Class C
shares from OppenheimerFunds, Inc.
24(b)(16) Performance Data Computation Schedule
24(b)(17) Financial Data Schedule for Class A shares
Exhibit 24(b)(11)
EXHIBIT 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. 19 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 24, 1997, relating to the financial statement and 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
March 13, 1997
Item 24(b)(13)(i)
March , 1997
The Board of Trustees
Rochester Fund Municipals
350 Linden Oaks
Rochester, NY 14625
To the Board of Trustees:
OppenheimerFunds, Inc. ("OFI") herewith purchases________ Class B of
Rochester Fund Municipals at a net asset value per share of $______, for an
aggregate purchase price of $1000.
In connection with such purchase, OFI represents that such purchase is
made for investment purposes by OFI without any present intention of redeeming
or selling such shares.
Very truly yours,
OppenheimerFunds, Inc.
Robert G. Zack
Senior Vice President
Item 24(b)(13)(ii)
March , 1997
The Board of Trustees
Rochester Fund Municipals
350 Linden Oaks
Rochester, NY 14625
To the Board of Trustees:
OppenheimerFunds, Inc. ("OFI") herewith purchases________ Class C of
Rochester Fund Municipals at a net asset value per share of $______, for an
aggregate purchase price of $1000.
In connection with such purchase, OFI represents that such purchase is
made for investment purposes by OFI without any present intention of redeeming
or selling such shares.
Very truly yours,
OppenheimerFunds, Inc.
Robert G. Zack
Senior Vice President
Rochester Fund Municipals
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares
02/02/87 0.1000000 0.1080000 15.950
02/27/87 0.1000000 0.0000000 15.930
03/27/87 0.1000000 0.0000000 16.010
04/29/87 0.1000000 0.0000000 15.350
05/28/87 0.1000000 0.0000000 15.170
06/26/87 0.1000000 0.0000000 15.280
07/28/87 0.1000000 0.0000000 15.340
08/27/87 0.1000000 0.0000000 15.430
09/28/87 0.1000000 0.0000000 15.310
10/28/87 0.1000000 0.0000000 14.950
11/27/87 0.1000000 0.0000000 15.370
12/29/87 0.1000000 0.0000000 15.420
01/28/88 0.1000000 0.0000000 15.520
02/26/88 0.1000000 0.0000000 15.730
03/29/88 0.1000000 0.0000000 15.620
04/28/88 0.1000000 0.0000000 15.670
05/27/88 0.1000000 0.0000000 15.670
06/29/88 0.1000000 0.0000000 15.750
07/29/88 0.1000000 0.0000000 15.830
08/30/88 0.1000000 0.0000000 15.820
09/29/88 0.1000000 0.0000000 15.970
10/27/88 0.1000000 0.0000000 15.980
11/28/88 0.1000000 0.0000000 15.970
12/28/88 0.1000000 0.0000000 15.990
01/27/89 0.1000000 0.0000000 16.060
02/27/89 0.1000000 0.0000000 16.060
03/28/89 0.1000000 0.0000000 16.030
04/27/89 0.1000000 0.0000000 16.090
05/26/89 0.1000000 0.0000000 16.170
06/28/89 0.1000000 0.0000000 16.210
07/28/89 0.1000000 0.0000000 16.290
08/28/89 0.1000000 0.0000000 16.190
09/28/89 0.1000000 0.0000000 16.130
10/30/89 0.1000000 0.0000000 16.190
11/28/89 0.1000000 0.0000000 16.250
12/27/89 0.1000000 0.0000000 16.320
01/29/90 0.1000000 0.0000000 16.110
02/26/90 0.1000000 0.0000000 16.250
03/28/90 0.1000000 0.0000000 16.180
04/26/90 0.1000000 0.0000000 15.970
05/29/90 0.1000000 0.0000000 16.250
06/27/90 0.1000000 0.0000000 16.270
07/27/90 0.1000000 0.0000000 16.420
08/28/90 0.1000000 0.0000000 16.190
09/26/90 0.1000000 0.0000000 16.150
10/29/90 0.1000000 0.0000000 16.160
</TABLE>
<PAGE>
Rochester Fund Municipals
Page 2
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares (Continued)
11/28/90 0.1000000 0.0000000 16.270
12/27/90 0.1000000 0.0000000 16.260
01/29/91 0.1000000 0.0000000 16.250
02/26/91 0.1000000 0.0000000 16.310
03/27/91 0.1000000 0.0000000 16.350
04/26/91 0.1000000 0.0000000 16.520
05/29/91 0.1000000 0.0000000 16.520
06/26/91 0.1000000 0.0000000 16.510
07/29/91 0.1000000 0.0000000 16.680
08/28/91 0.1000000 0.0000000 16.790
09/26/91 0.1000000 0.0000000 16.880
10/29/91 0.1000000 0.0000000 16.930
11/26/91 0.1000000 0.0000000 16.910
12/27/91 0.1000000 0.0351000 16.950
01/29/92 0.1000000 0.0000000 16.870
02/26/92 0.1000000 0.0000000 16.800
03/27/92 0.1000000 0.0000000 16.890
04/28/92 0.1000000 0.0000000 17.000
05/27/92 0.1000000 0.0000000 17.110
06/26/92 0.1000000 0.0000000 17.350
07/29/92 0.1000000 0.0000000 17.910
08/27/92 0.1000000 0.0000000 17.550
09/28/92 0.1000000 0.0000000 17.550
10/28/92 0.1000000 0.0000000 17.270
11/25/92 0.1000000 0.0000000 17.610
12/29/92 0.1000000 0.0000000 17.640
01/28/93 0.1000000 0.0000000 17.720
02/24/93 0.1000000 0.0000000 18.300
03/29/93 0.1000000 0.0000000 18.210
04/28/93 0.1000000 0.0000000 18.310
05/27/93 0.0950000 0.0000000 18.380
06/28/93 0.0950000 0.0000000 18.670
07/28/93 0.0950000 0.0000000 18.570
08/27/93 0.0950000 0.0000000 18.980
09/28/93 0.1000000 0.0000000 19.180
10/27/93 0.0950000 0.0000000 19.110
11/26/93 0.0950000 0.0000000 18.780
12/23/93 0.0970000 0.0000000 19.020
01/24/94 0.0950000 0.0000000 18.980
02/22/94 0.0950000 0.0000000 18.710
03/24/94 0.0950000 0.0000000 18.090
04/22/94 0.0950000 0.0000000 17.520
05/24/94 0.0950000 0.0000000 17.430
06/23/94 0.0950000 0.0000000 17.560
07/22/94 0.0950000 0.0000000 17.460
08/24/94 0.0950000 0.0000000 17.470
09/23/94 0.0950000 0.0000000 17.140
10/24/94 0.0950000 0.0000000 16.770
11/22/94 0.0950000 0.0000000 15.590
12/23/94 0.0950000 0.0000000 16.260
</TABLE>
<PAGE>
Rochester Fund Municipals
Page 3
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares (Continued)
01/24/95 0.0950000 0.0000000 16.470
02/21/95 0.0900000 0.0000000 17.060
03/28/95 0.0900000 0.0000000 17.290
04/25/95 0.0900000 0.0000000 17.440
05/23/95 0.0900000 0.0000000 17.610
06/27/95 0.0900000 0.0000000 17.710
07/25/95 0.0900000 0.0000000 17.510
08/22/95 0.0900000 0.0000000 17.400
09/26/95 0.0910000 0.0000000 17.690
10/24/95 0.0910000 0.0000000 17.870
11/21/95 0.0910000 0.0000000 17.950
12/27/95 0.0910000 0.0000000 18.110
01/23/96 0.0910000 0.0000000 18.090
02/20/96 0.0910000 0.0000000 18.010
03/26/96 0.0910000 0.0000000 17.700
04/23/96 0.0920000 0.0000000 17.550
05/28/96 0.0920000 0.0000000 17.630
06/25/96 0.0920000 0.0000000 17.390
07/23/96 0.0920000 0.0000000 17.520
08/27/96 0.0920000 0.0000000 17.660
09/24/96 0.0920000 0.0000000 17.660
10/22/96 0.0920000 0.0000000 17.750
11/26/96 0.0920000 0.0000000 18.010
12/27/96 0.0920000 0.0000000 17.980
</TABLE>
<PAGE>
Rochester Fund Municipals
Page 4
1. Average Annual Total Returns for the Periods Ended 12/31/96:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,003.63 1 $1,390.25 .2
(---------) - 1 = 0.36% (---------) - 1 = 6.81%
$1,000 $1,000
Ten Year
$2,156.89 .1
(---------) - 1 = 7.99%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,053.72 1 $1,459.67 .2
(---------) - 1 = 5.37% (---------) - 1 = 7.86%
$1,000 $1,000
Ten Year
$2,264.42 .1
(----------) - 1 = 8.52%
$1,000
<PAGE>
Rochester Fund Municipals
Page 5
2. Cumulative Total Returns for the Periods Ended 12/31/96:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,003.63 - $1,000 $1,390.25 - $1,000
------------------ = 0.36% ------------------ = 39.03%
$1,000 $1,000
Ten Year
$2,156.89 - $1,000
------------------ = 115.69%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,053.72 - $1,000 $1,459.67 - $1,000
------------------ = 5.37% ------------------ = 45.97%
$1,000 $1,000
Ten Year
$2,264.42 - $1,000
------------------ = 126.44%
$1,000
<PAGE>
Rochester Fund Municipals
Page 6
3. Standardized Yield for the 30-Day Period Ended 12/31/96:
The Fund's standardized yields are calculated using the following formula
set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during the
30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge) per
share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred sales
charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$12,444,021.75 - $1,754,099.35 6
2{(------------------------------ + 1) - 1} = 5.37%
127,694,346 x $18.90
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/96:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share on the
last day of the period.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering ($.0841939/30 x 365) / $18.90 = 5.42%
Dividend Yield
at Net Asset Value ($.0841939/30 x 365) / $18.00 = 5.69%
<PAGE>
Rochester Fund Municipals
Page 7
5. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/96:
The Fund's tax-equivalent yields are calculated using the following formula:
a
----- + b = Tax-Equivalent Yield
1 - c
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Combined stated tax rate (e.g., federal, state and New York City
income tax rates for an individual in the 39.6% federal tax bracket
filing singly).
Examples:
Class A Shares
.0537
----------- + 0 = 9.96%
1 - .4608
Combined Stated Tax Rate Formula:
1 - {(1-d)(1-(e+f))} = Combined Stated Tax Rate
The symbols above represent the following factors:
d = Stated federal tax rate (e.g., federal income tax rate for an
individual in the 39.6% federal tax bracket filing singly).
e = Stated New York State tax rate (e.g., for an individual in the 39.6%
federal and 6.850% state tax bracket filing singly).
f = Stated New York City tax rate (e.g., for an individual in the 39.6%
federal and 3.88% city tax bracket filing singly).
Example: 1 - {(1 - .3960)(1 - (.06850+.03880))} = 46.08%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000093621
<NAME> ROCHESTER FUND MUNICIPALS
<MULTIPLIER> 1
<CURRENCY> UDS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 2,194,470,034
<INVESTMENTS-AT-VALUE> 2,302,671,637
<RECEIVABLES> 42,115,833
<ASSETS-OTHER> 2,811,075
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,347,598,545
<PAYABLE-FOR-SECURITIES> 8,952,318
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,796,048
<TOTAL-LIABILITIES> 39,748,366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,256,905,794
<SHARES-COMMON-STOCK> 128,245,804
<SHARES-COMMON-PRIOR> 118,019,143
<ACCUMULATED-NII-CURRENT> 1,979,870
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (59,237,088)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 108,201,603
<NET-ASSETS> 2,307,850,179
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 153,669,200
<OTHER-INCOME> 0
<EXPENSES-NET> 17,833,841
<NET-INVESTMENT-INCOME> 135,835,359
<REALIZED-GAINS-CURRENT> (3,568,327)
<APPREC-INCREASE-CURRENT> (15,226,664)
<NET-CHANGE-FROM-OPS> 117,040,368
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (136,511,912)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,027,352
<NUMBER-OF-SHARES-REDEEMED> (13,856,487)
<SHARES-REINVESTED> 4,049,796
<NET-CHANGE-IN-ASSETS> 162,586,222
<ACCUMULATED-NII-PRIOR> 2,633,000
<ACCUMULATED-GAINS-PRIOR> (55,727,965)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,418,738
<INTEREST-EXPENSE> 890,390
<GROSS-EXPENSE> 17,857,462
<AVERAGE-NET-ASSETS> 2,190,534,087
<PER-SHARE-NAV-BEGIN> 18.18
<PER-SHARE-NII> 1.10
<PER-SHARE-GAIN-APPREC> (0.18)
<PER-SHARE-DIVIDEND> (1.10)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.00
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 14,152,424
<AVG-DEBT-PER-SHARE> .11
</TABLE>
