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. 20 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 / X /
Amendment No. 25 / 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 April 1, 1998, 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.
<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 April 1, 1998
Rochester Fund Municipals is a 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 April 1,
1998 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
NOR HAS THE SECURITIES AND
EXCHANGE 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
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during its last fiscal year ended December 31,
1997. 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.")
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.
Class A Class B Class C
Shares Shares Shares
------- -------
Maximum Sales Charge 4.75% None None
on Purchases (as a %
of offering price)
Maximum Deferred Sales None(1) 5% in the first1% if
Charge (as a % of the year, decliningredeemed
lower of the original to 1% in the within 12
offering price or sixth year and months of
redemption proceeds) eliminated
purchase(2)
thereafter(2)
Maximum Sales Charge on None None None
Reinvested Dividends
Redemption
Fee None(3) None(3) None(3)
Exchange Fee None None None
- ------------------------
(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 12 calendar months (18
months for shares purchased prior to May 1, 1997) 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 - Buying Class B Shares" and
"How to Buy Shares - Buying Class C Shares" below for more information on
contingent deferred sales charges. (3) There is a $10 transaction fee for
redemptions paid by Federal Funds wire, but not for redemptions paid by check or
by ACH wire through AccountLink, or for which checkwriting privileges are used.
(See "How to Sell Shares").
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment advisor, OppenheimerFunds, Inc. (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)
Class A Class B Class C
Shares Shares Shares
Management
Fees 0.47% 0.47% 0.47%
12b-1 Plan Fees 0.15%
1.00% 1.00%
Other
Expenses 0.14% 0.12% 0.11%
Total Fund Operating Expenses 0.76% 1.59%
1.58%
The numbers in the chart above are based on the Fund's expenses in its last
fiscal year ended December 31, 1997. These amounts are shown as a percentage of
the average net assets of each class of the Fund's shares for that year. The
"12b-1 Plan Fees" for Class A shares are Service Plan Fees. For Class B and
Class C shares, the "12b-1 Plan Fees" are Service Plan fees and asset-based
sales charges. The service fee for Class A shares is 0.25% (currently set at
0.15%) and for Class B and Class C shares is 0.25% of average annual net assets
of the class and the asset-based sales charge for Class B and Class C shares is
0.75% of average annual net assets. These plans are described in greater detail
in "How to Buy Shares," below
.
The actual expenses for each class of shares in future years may be more
or less than the numbers in the chart, depending on a number of factors,
including changes in the actual value of the Fund's assets represented by each
class of shares.
o Examples. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, and that the
Fund's annual return is 5%, and that its operating expenses for each class are
the ones shown in the Annual Fund Operating Expenses table above. If you were to
redeem your shares at the end of each period shown below, your investment would
incur the following expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
------ ------- ------- --------
Class A Shares $55 $71 $ 88 $137
Class B Shares $66 $80 $107 $146
Class C Shares $26 $50 $ 86 $188
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
------ ------- ------- --------
Class A Shares $55 $71 $88 $137
Class B Shares $16 $50
$87 $146
Class C Shares $16 $50
$86 $188
* In the first example, expenses include the Class A initial sales charge
and the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not include contingent deferred sales charges. The Class
B expenses in years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into Class A shares
after 6 years. Because of the effect of the asset-based sales charge and
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. Please refer to "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, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What Is The Fund's Investment Objective? The Fund's investment objective
is to 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 federal income tax and New
York State and New York City personal income taxes. In addition, the Fund may
also invest its assets in obligations of municipal issuers located in U.S.
territories. See "Dividends, Capital Gains and Taxes." Investments will be made
without regard to maturity. The lack of maturity restrictions, however, may
result in greater fluctuation of bond prices in the Fund's portfolio and greater
fluctuation in the Fund's net asset value because the prices of long-term bonds
are more affected by changes in interest rates than prices of short-term bonds.
As a fundamental policy, at least 80% of the Fund's net assets will be
invested in tax-exempt securities except when the Manager determines that market
conditions could cause serious erosion of portfolio value, in which case assets
may be temporarily invested in short-term taxable obligations as a defensive
measure to preserve net asset value. Such temporary investments will be limited
substantially to obligations issued or guaranteed by the United States
government, its agencies, instrumentalities or 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 advisor (the "Manager") is
OppenheimerFunds, Inc. The Manager (including a subsidiary) advises investment
company portfolios having over $75 billion in assets as of December 31, 1997.
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 . There is no
guarantee of success in achieving the Fund's objective and your shares may be
worth more or less than their original cost when you redeem them. See
"Investment Objective and Policies" for a more complete discussion.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. See "How to Buy Shares" for more details.
o Will I Pay A Sales Charge To Buy Shares? The Fund has three classes of
shares. Each class has the same investment portfolio but different expenses.
Class A shares are offered with a front-end sales charge, starting at 4.75%, and
reduced for larger purchases. Appendix A to this Prospectus sets forth special
sales charge rates that apply to additional purchases of Class A shares of the
Fund by a person who was a shareholder of the Fund on or 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. Please
review "How to Buy Shares" starting on page __ for more details, including a
discussion about factors you and your financial advisor should consider in
determining which class may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer. See "How
to Sell Shares" on page __. The Fund also offers exchange privileges to the
other Oppenheimer funds, described in "How To Exchange Shares" on page __.
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 accountants, whose report on the Fund's
financial statements for the fiscal year ended December 31, 1997, is included
in the Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996(2) 1995 1994
========================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $18.00 $18.18 $16.31 $19.00
- --------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.10 1.10 1.10 1.13
Net realized and unrealized gain (loss) 0.67 (0.18) 1.86 (2.68)
-------- -------- ------ ---------
Total income (loss) from investment
operations 1.77 0.92 2.96 (1.55)
- --------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.10) (1.10) (1.09) (1.13)
Undistributed net investment
income--prior year -- -- -- (0.01)
Distributions from net realized gain -- -- -- --
-------- -------- ------ ---------
Total dividends and distributions
to shareholders (1.10) (1.10) (1.09) (1.14)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.67 $18.00 $18.18 $16.31
======== ======== ====== =========
========================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 10.20% 5.37% 18.58% (8.35)%
========================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $2,848 $2,308 $2,145 $1,791
- --------------------------------------------------------------------------------------------------------
Average net assets (in millions) $2,539 $2,191 $2,005 $1,847
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.96% 6.20% 6.25% 6.43%
Expenses 0.76%(5) 0.82%(5) 0.82%(5) 0.84%
Expenses (excluding interest)(6) 0.75%(5) 0.77%(5) 0.78%(5) 0.73%
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 4.6% 13.3% 14.6% 34.4%
</TABLE>
1. For the period from March 17, 1997 (inception of offering) to December 31,
1997.
2. On January 4, 1996, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
8
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- ------------------------------------------------------------------------ ------------- ----------
PERIOD PERIOD
ENDED ENDED
DEC.31 DEC.31,
1993 1992 1991 1990 1989 1988 1997(1) 1997(1)
======================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$17.65 $17.01 $16.24 $16.29 $16.14 $15.31 $17.89 $17.89
- ------------------------------------------------------------------------------------------------------
1.17 1.20 1.20 1.20 1.20 1.20 0.74 0.74
1.35 0.64 0.81 (0.05) 0.15 0.83 0.76 0.77
------- ------- ------- ------- ------- ------- -------- ---------
2.52 1.84 2.01 1.15 1.35 2.03 1.50 1.51
- ------------------------------------------------------------------------------------------------------
(1.17) (1.20) (1.20) (1.20) (1.20) (1.20) (0.74) (0.74)
-- -- -- -- -- -- -- --
-- -- (0.04) -- -- -- -- --
------- ------- ------- ------- ------- ------- -------- ---------
(1.17) (1.20) (1.24) (1.20) (1.20) (1.20) (0.74) (0.74)
- ------------------------------------------------------------------------------------------------------
$19.00 $17.65 $17.01 $16.24 $16.29 $16.14 $18.65 $18.66
======= ======= ======= ======= ======= ======= ======== =========
======================================================================================================
14.60% 11.19% 12.79% 7.28% 8.67% 13.72% 8.74% 8.80%
======================================================================================================
$1,794 $997 $497 $261 $98 $39 $172 $49
- ------------------------------------------------------------------------------------------------------
$1,449 $717 -- -- -- -- $76 $21
- ------------------------------------------------------------------------------------------------------
6.21% 6.79% 7.12% 7.21% 7.19% 7.40% 4.91%(4) 4.92%(4)
0.75% 0.84% 0.87% 0.88% 1.11% 1.13% 1.59%(4)(5) 1.58%(4)(5)
0.64% 0.70% 0.74% 0.72% 0.91% 1.10% 1.58%(4)(5) 1.57%(5)(5)
- ------------------------------------------------------------------------------------------------------
18.3% 30.0% 48.5% 51.6% 34.8% 61.5% 4.6% 4.6%
</TABLE>
5. The expense ratios reflect the effect of gross expenses paid indirectly by
the Fund.
6. 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.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended December 31, 1997 were $865,561,192 and $122,221,207,
respectively.
Per share information has been determined based on average shares outstanding
for the period.
9
<PAGE>
<TABLE>
<CAPTION>
INFORMATION ON BANK LOANS
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Amounts of debt outstanding
at end of period (in thousands) $15,800 $27,100 $17,930 $15,083 $30,886
- -------------------------------------------------------------------------------------------------------------------
Average amount of debt
outstanding throughout
each period (in thousands) $ 4,378 $14,152 $ 8,217 $28,131 $27,137
- -------------------------------------------------------------------------------------------------------------------
Average number of
shares outstanding throughout
each period (in thousands) 142,783 123,596 114,502 105,753 77,472
- -------------------------------------------------------------------------------------------------------------------
Average amount of debt
per share outstanding throughout
each period $0.03 $0.11 $0.07 $0.27 $0.35
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1992 1991 1990 1989 1988
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Amounts of debt outstanding
at end of period (in thousands) $22,644 $18,292 $ 3,067 $ 1,139 $430
- -------------------------------------------------------------------------------------------------------------------
Average amount of debt
outstanding throughout
each period (in thousands) $17,060 $ 5,317 $ 2,587 $ 990 $ 20
- -------------------------------------------------------------------------------------------------------------------
Average number of
shares outstanding throughout
each period (in thousands) 41,429 22,445 10,327 3,980 1,554
- -------------------------------------------------------------------------------------------------------------------
Average amount of debt
per share outstanding throughout
each period $0.41 $0.24 $0.25 $0.25 $0.01
- -------------------------------------------------------------------------------------------------------------------
</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. 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). In addition, the Fund may
also invest its assets in obligations of municipal issuers located in U.S.
territories. See "Dividends, Capital Gains and Taxes." Investments will be made
without regard to maturity. The lack of maturity restrictions, however, may
result in greater fluctuation of bond prices in the Fund's portfolio and greater
fluctuation in the Fund's net asset value because the prices of long term bonds
are more affected by changes in interest rates than prices of short-term bonds.
As a fundamental policy, at least 80% of the Fund's net assets will be
invested in tax-exempt securities except when the Fund's Manager determines that
market conditions could cause serious erosion of portfolio value, in which case
assets may be temporarily 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. As a general
matter, unrated bonds are backed by mortgage liens or equipment liens on the
underlying property. Investments in these securities present different risks
than investments in higher rated securities, including an increased sensitivity
to adverse economic changes or individual developments and a higher rate of
default. The Manager will attempt to reduce the risks inherent in investments in
lower rated securities through active portfolio management, structuring the
portfolio to include a broad spectrum of municipal securities, credit analysis
and attention to current developments and trends in the economy and financial
markets. Such securities are regarded as speculative securities. See "Investment
Objective and Policies" in the Statement of Additional Information for a
discussion of the risks associated with investments in high yield, high risk
securities.
o Municipal Obligations. Municipal securities include debt obligations
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as bridges, highways, housing,
hospitals, mass transportation, schools, streets and water and sewer works.
Other public purposes for which municipal securities or bonds may be issued
include the refunding of outstanding obligations, obtaining funds for general
operating expenses and the obtaining of funds to loan to other public
institutions and facilities. In addition, certain types of private activity
bonds are issued by or on behalf of public authorities to obtain funds to
provide housing facilities, sports facilities, manufacturing facilities,
convention or trade show facilities, airport, mass transit, port or parking
facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste disposal.
The interest on bonds issued to finance essential state and local
government operations is fully tax-exempt. However, the interest on certain
private activity bonds (including those for housing and student loans) issued
after August 15, 1986, while still tax-exempt for regular tax purposes,
constitutes a preference item for taxpayers in determining their alternative
minimum tax under the Internal Revenue Code of 1986, as amended (the "Code").
See "Dividend, Capital Gains and Taxes." The Code also imposes certain
limitations and restrictions on the use of tax-exempt bond financing for
non-government business activities, such as non-essential private activity
bonds. The Fund intends to purchase private activity bonds only to the extent
that the interest paid by such bonds is exempt from Federal, New York State and
New York City taxes for regular tax purposes.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. There are variations in the security of
municipal bonds, both within a particular classification and between
classifications. General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or specific revenue source. One type of revenue bond in which the
Fund may invest is a "moral obligation" bond. A moral obligation bond is a bond
which is issued by revenue authorities under circumstances where New York State
(the "State") provides a moral pledge of payment in the event that an authority
is unable to make timely debt service. Unlike a general obligation pledge,
however, the moral pledge does not constitute the State's official pledge of its
full faith and credit. Accordingly, the Manager would consider precedents
established in the State with respect to the honoring of such moral pledges in
its credit analyses of moral obligation bonds. Private activity bonds, which are
municipal bonds, are in most cases revenue bonds and do not generally constitute
the pledge of the credit of the issuer of such bonds.
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 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 to determine whether to sell any
holdings to maintain adequate liquidity. Illiquid securities include repurchase
agreements maturing in more than seven days or certain participation interests
other than those with puts exercisable within seven days.
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 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. The Fund cannot buy securities issued or
guaranteed by any one issuer (except the U.S. Government or any of its agencies
or instrumentalities) if, with respect to 75% of its total assets, more than 5%
of the Fund's net assets would be invested in securities of that issuer, or the
Fund would then own more than 10% of that issuer's voting securities. As part of
that policy, the Fund may invest more than 25% of its assets in industrial
development bonds but no more than 5% of the assets will be invested in such
bonds for which the underlying credit is one business or one charitable entity.
As to the balance of 25% of the Fund's gross assets not covered by this policy,
the Fund will not invest more than 10% thereof in the securities of any one
issuer. In no case, however, will the Fund invest more than 5% of its assets in
the securities of any one issuer where such securities are rated B or below.
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. The Fund's investments in inverse floaters, whether
liquid or illiquid, may not exceed 20% of the Fund's total assets.
o When-issued and Delayed Delivery Transactions. The Fund may also
purchase and sell municipal securities on a "when-issued" and "delayed delivery"
basis. These transactions are subject to market fluctuation and the value at
delivery may be more or less than the purchase or sale price. Since the Fund
relies on the buyer or seller, as the case may be, to consummate the
transaction, failure by the other party to complete the transaction may result
in the Fund missing the opportunity of obtaining a price or yield considered to
be advantageous. 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 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 income tax and 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.
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, 1997, 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, 24.16%, 11.52%, 19.44%, 17.47%, 5.11% and 2.00%. 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 20.30% 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 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, 1997 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 24.24%, 14.01%, 22.21%, 21.58%, 15.01% and
2.95%. 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. Any income derived from the Fund's ownership or operation of assets
acquired as a result of such actions would not be tax-exempt.
o Year 2000 Risks. Because many computer software systems in use today
cannot distinguish the year 2000 from the year 1900, the markets for securities
in which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failures of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. Data processing errors by corporate and government issuers of
securities could result in production problems and economic uncertainties, and
those issuers may entail substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Fund's investments and
returns.
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 the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment advisor since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of December 31, 1997,
and with more than 3.5 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.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. 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. Many computer software systems in use
today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. That failure could have a negative impact on
handling securities trades, pricing and accounting services. The Manager, the
Distributor and Transfer Agent have been actively working on necessary changes
to their computer systems to deal with the year 2000 and expect that their
systems will be adapted in time for that event, although there cannot be
assurance of success. Additionally, because the services they provide depend on
the interaction of their computer systems with the computer systems of brokers,
information services and other parties, any failure on the part of the computer
systems of those third parties to deal with the year 2000 may also have a
negative effect on the services provided to the Fund.
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, 1997 was
0.47% 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 fees and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of the Fund's
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 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 by the Investment Advisory Agreement to consider whether brokers
have sold shares of the Fund or any other funds for which the Manager serves as
investment advisor.
o The Distributor. The Fund's shares are sold through dealers, brokers and
financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes the shares of other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at cost" basis. It also acts as the shareholder
servicing agent for the other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return,"
"average annual total return," "standardized yield," "dividend yield," "yield"
and "tax-equivalent yield" to illustrate its performance. The performance of
each class of shares is shown separately, because the performance of each class
of shares will usually be different, as a result of the different kinds of
expenses each class bears. These returns and yields measure the performance of a
hypothetical account in the Fund over various periods, and do not show the
performance of each shareholder's account (which will vary if dividends are
received in cash, or shares are sold or purchased). The Fund's performance may
help you see how well your Fund has done over time and to compare it to other
funds or to a market index.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions of
future returns or performance. This performance data is described below, but
more detailed information about how total returns and yields are calculated is
contained in the Statement of Additional Information, which also contains
information about indices and other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time, depending on
market conditions, the composition of the portfolio , expenses and which class
of shares you purchase.
o Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce 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. Different types of yield may be quoted to show performance. Each
class of shares calculates its standardized yield by dividing the annualized net
investment income per share from the portfolio during a 30-day period by the
maximum offering price on the last day of the period. 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 of each class will differ because
of the different expenses of each class of shares. The yield data represents a
hypothetical investment return on the portfolio, and does not measure an
investment return based on dividends actually paid to shareholders. To show that
return, a dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class paid for a stated period by the maximum
offering price on the last day of the periodand annualizing the result. Yields
for Class A shares normally reflect the deduction of the maximum initial sales
charge, but may also be shown without deducting the sales charge. Yields for
Class B and Class C shares do not reflect the deduction of the contingent
deferred sales
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, 1997, 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, 1997, the municipal bond market was characterized by an
increase in interest rates through April and declining rates during the rest of
the year, resulting in a decline in long-term yields and narrowing of credit
quality yield spreads. The narrowing spreads were due to a stronger economy, a
decrease in the supply of lower investment grade rated issuers and an increased
demand from investors for higher income producing investments. The Fund took
advantage of the narrower yield spreads by purchasing issues which were rated
"AAA" with Federal Government insurance that offered yields equal to those
available on many issues rated only "AA" or "A". The lower yield environment
enabled many issuers to reduce their borrowing cost by selling new issues and
using the proceeds to advance refund older, higher coupon issues. The Fund
benefited from this as many of its "BBB" and "A" rated premium coupon holdings
were pre-refunded, resulting in an upgrade in credit quality to "AAA" and
increase in market value
. The Fund also benefited by the overall improvement of credit quality in New
York State. The State itself was upgraded by S&P from "A-" to "A" in August.
Many state appropriation back issuers were also upgraded from "BBB+" to "A-",
including the Fund's holdings of the Dormitory Authority, Medicare Facilities
Authority, Empire State Development Authority and the Urban Development
Corporation. The Fund's portfolio holdings, allocation and strategies are
subject to change.
o Comparing the Fund's Performance to the Market. The graphs below show
the performance of a hypothetical $10,000 investment in each class of shares of
the Fund held from the inception of the Fund until December 31, 1997. In the
case of Class A shares, performance is measured from the commencement of
operations on May 15, 1986, in the case of Class B shares, from the inception of
the class on March 17, 1997, and in the case of Class C shares from inception of
the class on March 17, 1997. In all cases, all dividends and capital gains
distributions were reinvested in additional shares. The graphs reflect the
deduction of the 4.75% current maximum initial sales charge on Class A shares,
the maximum 5% contingent deferred sales charge on Class B shares, and the 1%
contingent deferred sales charge on Class C shares.
The performance of the Fund 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 is also compared to the Consumer Price
Index, a non-securities index which measures changes in the inflation rate.
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Class A, Class B and Class C Shares of
Rochester Fund Municipals, the
Lehman Brothers Municipal Bond Index
and the Consumer Price Index
[Graph]
Average Annual Total Return of
the Fund at 12/31/97
A Shares(1) 1-Year 5-Year 10-Year
4.96% 6.62% 8.65%
B Shares(2) Life-of-the-Class:
3.74%
C Shares(3) Life-of-the-Class:
7.80%
- ------------------------------
Total returns and the ending account values in the graph show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information for the Lehman Brothers Municipal Bond Index in the
Class B and Class C graph begins on 3/31/97 .
1The inception date of the Fund (Class A shares) was 5/15/86. Class A returns
are shown net of the applicable 4.75% maximum initial sales charge.
2Class B shares of the Fund were first publicly offered on 3/17/97. The average
annual total returns reflect reinvestment of all dividends and capital gains
distributions and are shown net of the applicable 5% contingent deferred sales
charges for the life-of- the-class. The ending account value in the graph is net
of the applicable 5% sales charge. 3Class C shares of the Fund were first
publicly offered on 3/17/97. The one year period is shown net of the applicable
1% contingent deferred sales charge.
Past performance is not predictive of future performance. Graphs are not drawn
to same scale.
ABOUT YOUR ACCOUNT
How To Buy Shares
Classes of Shares. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
o Class A Shares. If you buy Class A shares, you may pay an initial sales
charge on investments up to $1 million. If you purchase Class A shares as part
of an investment of at least $1 million in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), 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 advisor. The Fund's operating costs that apply to a class of
shares and the effect of the different types of sales charges on your investment
will vary your investment results over time. The most important factors to
consider are how much you plan to invest and how long you plan to hold your
investment. If your goals and objectives change over time and you plan to
purchase additional shares, you should re-evaluate those factors to see if you
should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the 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 within six years, as well as the effect of the Class B asset-based
sales charge on the investment return for that class in the short-term. Class C
shares might be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and the
contingent deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C shares (as well as Class
B shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C shares (and
Class B shares). If investing $500,000 or more, Class A 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 Class C
shares from a single investor.
o Investing for the Longer Term. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect of the
expected lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above , and therefore, you should
analyze your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features, such as checkwriting, may not be available to Class B or
Class C shareholders, or other features (such as Automatic Withdrawal Plans)
might not be advisable (because of the effect of the contingent deferred sales
charge) for Class B or Class C shareholders, you should carefully review how you
plan to use your investment account before deciding which class of shares to
buy. Additionally, dividends payable to Class B and Class C shareholders will be
reduced by the additional expenses borne by those classes that are not borne by
Class A shares, 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.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans:
With Asset Builder Plans, Automatic Exchange Plans and military allotment
plans, you can make initial and subsequent investments for as little as $25; and
subsequent purchases of at least $25 can be made by telephone through
AccountLink.
There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other Oppenheimer funds (a list of them
appears in the Statement of Additional Information, or you can ask your dealer
or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o How are Shares Purchased? You can buy shares several ways - through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, or directly through the Distributor, or automatically from your
bank account through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase and redemption orders. When you buy
shares be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you do
not list a dealer on the Application, the Distributor will act as your agent in
buying the shares. However, we recommend that you discuss your investment first
with a financial advisor to be sure it is appropriate for you.
o Payment by Federal Funds Wire. Shares may be purchased by Federal Funds
wire. The minimum investment is $2,500. You must first call the Distributor's
Wire Department at 1-800-525-7041 to notify the Distributor of the wire, and to
receive further instructions.
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 to
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.
Please refer to "AccountLink" below for more details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to four
other Oppenheimer funds) automatically each month from your account at a bank or
other financial institution under an Asset Builder Plan with AccountLink.
Details are 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, or the order is received and transmitted to the Distributor by an entity
authorized by the Fund to accept purchase or redemption orders. The Fund has
authorized the Distributor, certain broker-dealers and agents or intermediaries
designated by the Distributor or those broker-dealers to accept orders. In most
cases, to enable you to receive that day's offering price, the Distributor or an
authorized agent must receive your order by the time of day The New York Stock
Exchange closes, which is normally 4:00 P.M., New York time, but may be earlier
on some days (all references to time in this Prospectus mean "New York time").
The net asset value of each class of shares is determined as of that time on
each day The New York Stock Exchange is open (which is a "regular business
day").
If you buy shares through a dealer, the dealer must receive your order by
the close of The New York Stock Exchange on a regular business day and normally
your order must be transmitted 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 paid to your dealer as a commission. The current
sales charge rates and commissions paid to dealers and brokers are as follows:
Front-End Front-End
Sales Charge Sales Charge Commission
as a % of as a % of as a % of
Offering Amount Offering
Amount of Purchase Price Invested Price
Less than $50,000 4.75% 4.98% 4.00%
$50,000 or more but
less than $100,000 4.50% 4.71% 4.00%
$100,000 or more but
less than $250,000 3.50% 3.63% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.25%
$500,000 or more but
less than $1,000,000 2.00% 2.04% 1.80%
- ---------------------
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 those non-retirement plan purchases in an amount equal to
the sum of 1.0% . That commission will be paid only on the amount of those
purchases that were not previously subject to a front-end sales charge and
dealer commission.
If you redeem any of those shares purchased prior to May 1, 1997, 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. A Class A contingent deferred
sales charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. 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 12 calendar months (18 months
for shares purchased prior to May 1, 1997) of the end of the calendar month of
the purchase of the exchanged shares, the sales charge will apply.
o Special Arrangements With Dealers. The Distributor may advance up to 13
months' commissions to dealers that have established special arrangements with
the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in
one
or more of the following ways:
o Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trusts 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 Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The Oppenheimer funds are listed in "Reduced Sales Charge" 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 Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent which conditions apply.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates; and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker, bank or advisor for the purchase or sale of Fund shares);
o (1) investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and 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 advisors or
financial planners (that have entered into an agreement for this purpose with
the Distributor) who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment advisor (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts; 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 prior 30 days 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 of purchase of shares (prior to May 1, 1997) the dealer
agrees in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (if purchased during the period
May 1, 1997 through December 31, 1997) the dealer agrees in writing to accept
the dealer's portion of the sales commission in installments of 1/12th of the
commission per month (and no further commission will be payable if the shares
are redeemed within 12 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 compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions; (2) shares held
for over 6 years; and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
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 Shares" in the Statement of Additional Information.
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 Class C shares and
servicing accounts. Under the Plans, the Fund pays the Distributor an annual
"asset-based sales charge" of 0.75% per year on Class B shares and on Class C
shares. The Distributor also receives a service fee of 0.25% per year under each
Plan.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class per year.
The Distributor uses the service fees to compensate dealers for providing
personal and account maintenance services for accounts that hold Class B or
Class C shares. Those services are similar to those provided under the Class A
Service Plan, described above. The Distributor pays the 0.25% service fees to
dealers in advance for the first year after Class B or Class C shares have been
sold by the dealer and retains the service fee paid by the Fund in that year.
After the shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B 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 may pay the Class B service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
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 may pay the Class C service fee
and the asset-based sales charge to the dealer quarterly in lieu of paying the
sales commission and service fee advance at the time of purchase.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and Class C shares. At December 31, 1997, the end of
the Class B Plan year, the Distributor had incurred unreimbursed expenses in
connection with sales of Class B shares of $7,678,515 (equal to 4.47% Of the
Fund's net assets represented by Class B shares on that date). At December 31,
1997, the end of the Class C Plan year, the Distributor had incurred
unreimbursed expenses in connection with sales of Class C shares of $775,680
(equal to 1.58%, of the Fund's net assets represented by Class C shares on that
date). If the Fund terminates either of its Plans, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the Plan was terminated.
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waiver of the Class B and Class C contingent
deferred sales charge, you must notify the Transfer Agent which conditions
apply.
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 :
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. Please 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 your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with
the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer fund account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below for
details.
Shareholder Transactions by Fax. Beginning May 30, 1997, requests for certain
account transactions may be sent to the Transfer Agent by fax (telecopier).
Please call 1-800-525-7048 for information about which transactions are
included. Transaction requests submitted by fax are subject to the same rules
and restrictions.
OppenheimerFunds Internet Web Site. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. In 1998, the Transfer Agent
anticipates offering certain account transactions through the Internet Web Site.
To find out more information about those transactions and procedures, please
visit the Web Site.
Automatic Withdrawal And Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of Additional Informa tion for more
details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer fund account is $25. These exchanges are subject to the terms of the
Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A 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 an Automatic Withdrawal Plan 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)
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 sent to that account.
o Telephone Redemptions Paid By Check. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
o Telephone Redemptions Through AccountLink or by Wire. There are no
dollar limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive dividends
on the proceeds of the shares you redeemed while they are waiting to be
transferred. Shareholders may also have the Transfer Agent send redemption
proceeds of $2,500 or more by Federal Funds wire to a designated commercial bank
account. The bank must be a member of the Federal Reserve wire system. There is
a $10 fee for each Federal Funds wire. To place a wire redemption request, call
the Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on
the next bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or paid on
the proceeds of shares that have been redeemed and are awaiting transmittal by
wire. To establish wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.
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 refer to "Special
Arrangements for Repurchase of Shares from Dealers and Brokers" in the Statement
of Additional Information for more details.
Selling Shares by Wire. You may request that redemption proceeds of $2,500 or
more be wired to a previously designated account at a commercial bank that is a
member of the Federal Reserve wire system. The wire will normally be transmitted
on the next bank business day after the redemption of shares. To place a wire
redemption request, call the Transfer Agent at 1-800-525-7048.
There is a $10 fee for each wire.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. To
exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days, you
can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
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
obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. However, either fund may delay the purchase of shares of
the fund you are exchanging into up to 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 sale of portfolio securities at a time or price
disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose
these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the fund you own and a purchase of 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.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as of
the close of The New York Stock Exchange, which is normally 4:00 P.M. but may be
earlier on some days, on each day the Exchange is open by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are special
procedures for valuing illiquid and restricted securities and obligations for
which market values cannot be readily obtained. These procedures are described
more completely in the Statement of Additional Information.
o The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
o Telephone transaction privileges for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the Transfer
Agent receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates. 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
business days from the date the shares were purchased. That delay may be avoided
if you purchase shares by federal funds wire, certified check or arrange with
your bank to provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a correct and properly certified
Social Security or Employer Identification Number when you sign your
Application, or if you underreport your income to the Internal Revenue Service .
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
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.
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 the same class of shares of 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. So that the Fund will not have to pay taxes in the amounts it distributes
to shareholders as dividends and capital gains, the Fund intends to manage its
investments so that it will qualify as a "regulated investment company" under
the Internal Revenue Code, although it reserves the right not to qualify in a
particular year.
o "Buying a Dividend". 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 securities and obligations of U.S.
territories, 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 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 New York municipal
securities and obligations of U.S. territories 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.
-2-
<PAGE>
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 the Fund. In the case of the Fund's class A shares, that graph
will cover the ten year period ended December 31, 1997, in the case of the
Fund's Class B shares will cover the period from the inception of the class
(March 17, 1997) through December 31, 1997, and in the case of the Fund's Class
C shares, that graph will cover the period from the inception of the class
(March 17, 1997) through December 31, 1997. The graph will compare such values
with hypothetical $10,000 investments over the time periods indicated below in
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."
Rochester Consumer Lehman Bros.
Fiscal Year Fund Price Municipal
(Period) Ended Municipals: A Index Bond Index
- -------------- -------------- ------ -----------
12/31/87 9,525 10,000 10,000
12/31/88 10,831
10,442 11,016
12/31/89 11,772 10,927 12,205
12/31/90 12,635 11,594 13,094
12/31/91 14,251 11,950 14,684
12/31/92 15,846 12,296 15,979
12/31/93 18,161 12,634 17,941
12/31/94 16,644 12,972 17,012
12/31/95 19,741 13,302 19,986
12/31/96 20,794 13,744 20,871
12/31/97 22,921 13,977 22,787
Rochester Consumer Lehman Bros.
Fiscal Year Fund Price Municipal
(Period) Ended Municipals: B Index Bond Index
- -------------- -------------- ------ -----------
3/17/97 10,000 10,000 10,000
12/31/97 10,374 10,081 10,944
Rochester Consumer Lehman Bros.
Fiscal Year Fund Price Municipal
(Period) Ended Municipals: C Index Bond Index
- -------------- -------------- ------ -----------
3/17/97 10,000 10,000 10,000
12/31/97 10,780 10,081 10,944
<PAGE>
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
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
- ---------------------------------------------------------------
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%
- ----------------
(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 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.
<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) Oppenheimer Quest
for Value Fund, Inc., Oppenheimer Quest Growth & Income Fund,
Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest Small Cap Value Fund
and Oppenheimer Quest Global Value 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) purchased by such shareholder by exchange of shares of other Oppenheimer
funds that were acquired 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.
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
or Members Price Invested Price
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described 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 Waiver of Class A Sales Charges for Certain Shareholders. Class A shares
of the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by
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 Class C shares) where the annual withdrawals do not exceed 10% of
the initial value of the account; and (3) liquidation of a shareholder's account
if the aggregate net asset value of shares held in the account is less than the
required minimum account value. A shareholder's account will be credited with
the amount of any contingent deferred sales charge paid on the redemption of any
Class A, Class B or Class C shares of the Fund described in this section if
within 90 days after that redemption, the proceeds are invested in the same
Class of shares in this Fund
or another Oppenheimer fund.
<PAGE>
(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
OppenheimerFunds Internet Website:
http://www.Oppenheimerfunds.com
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Accountants
Price Waterhouse LLP
950 Seventeenth Street, Suite 2500
Denver, CO 80202-2872
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.
PR0365.001Printed on recycled paper
<PAGE>
ROCHESTER FUND MUNICIPALS
350 Linden Oaks, Rochester, New York 14625
1-800-525-7048
Statement of Additional Information dated April 1,
1998
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 April 1, 1998. It should be
read together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217 or by calling the Transfer Agent at the toll-free number shown
above.
CONTENTS
Page
About the Fund
Investment Objective and Policies.................................
Investment Policies and Strategies...........................
Other Investment Techniques and Strategies...................
Investment Considerations/Risk Factors.......................
Other Investment Restrictions...............................
How the Fund is Managed..........................................
Organization and History....................................
Trustees and Officers of the Fund...........................
The Manager and Its Affiliates..............................
Brokerage Policies of the Fund...................................
Performance of the Fund..........................................
Distribution and Service Plans...................................
About Your Account
How to Buy Shares................................................
How to Sell Shares ..............................................
How to Exchange Shares...........................................
Dividends, Capital Gains and Taxes...............................
Additional Information About the Fund............................
Financial Information About the Fund
Independent Accountants' Report........................
Financial Statements.............................................
Appendix A: Industry Classifications...........................A-1
Appendix B: Tax-Equivalent Yield Chart.........................B-1
Appendix C: Description of Municipal Securities Ratings........C-1
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.
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.
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 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 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) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriated, (3) the lease obligor
has maintained good market acceptability in the past, (4) the investment is of a
size that will be attractive to institutional investors, and (5) 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.
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 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 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 March 3, 1998 with
respect to offerings of the State and March 12, 1998 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 . It improved thereafter commencing in calendar year 1996,
reflecting improved security industry earnings and employment in other sectors.
The City's current financial plan assumes that, after strong growth in the 1998
fiscal year, moderate economic growth will exist through the calendar year 2002,
with moderate job growth and wage increases.
For each of the 1981 through 1997 fiscal years, the City achieved balanced
operating results as reported in accordance with generally accepted accounting
principles ("GAAP") and revenues and expenditures for the City's 1998 and 1999
fiscal years are projected to be balanced in accordance with GAAP. The City has
been required to close substantial budget gaps in recent years in order to
maintain balanced operating results. A pattern of current year surplus operating
results and projected subsequent year budget gaps has been consistent through
the entire period since 1982, during which the City has achieved surplus
operating results, before discretionary transfers for each fiscal year. 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 financial plan,
including the City's current financial plan for the 1998 through 2002 fiscal
years (the "1998-2002 Financial Plan", "Financial Plan" or "City Plan"). On
January 29, 1998, the City published the Financial Plan for the 1998-2002 fiscal
years, which is a modification to a financial plan submitted to the New York
State Financial Control Board (the "Control Board") on June 10, 1997 (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, continuation of projected interest
earning assumptions for pension fund assets and current assumptions with respect
to wages for City employees affecting the City's required pension fund
contributions, 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") , BOE and other such agencies to maintain balanced
budgets, the ability to complete certain revenue generating transactions,
provision of State and Federal aid and the impact on City revenues of Federal
and State welfare reform and any future legislation affecting Medicare or other
entitlements and unanticipated expenditures that may be incurred as a result of
the need to maintain the City's infrastructure.
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 1998 through 2002 contemplates the issuance
of $7.0 billion of general obligation bonds and $7.5 billion of bonds to be
issued by the New York City Transitional Finance Authority (the "Finance
Authority") . The Finance Authority was created as part of the City's effort to
assist in keeping the City's indebtedness within the forecast level of the
constitutional restrictions on the amount of debt the City is authorized to
incur. In a challenge to the New York City Transitional Finance Authority Act
(the "Finance Authority Act"), the state trial court, by summary judgment on
November 25, 1997, held the Finance Authority Act to be constitutional. On March
10, 1998, plaintiffs asked the State appellate court for a preliminary
injunction pending an appeal enjoining the Finance Authority from issuing bonds.
The City and other defendants intend to oppose the request for an injunction. 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 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 1998-2002 Financial Plan. The Financial Plan sets forth actions to close
a previously projected gap for the 1999 fiscal year and to reduce projected gaps
for fiscal years 2000 through 2002. The proposed actions in the Financial Plan
for the 1998 through 2002 fiscal years include additional (i) agency actions;
(ii) Federal aid; and (iii) State aid. The gap-closing actions are partially
offset by proposed new tax reduction programs totaling $237 million, $537
million, $610 million, and $774 million in fiscal years 1999 through 2002,
respectively.
The 1998-2002 Financial Plan reflects actual receipts and expenditures and
changes in forecast revenues and expenditures since the June Financial Plan. The
1998-2002 Financial Plan projects revenues and expenditures for the 1998 and
1999 fiscal years balanced in accordance with GAAP, and projects budget gaps of
$1.8 billion, $2.0 billion and $1.9 billion for the 2000, 2001 and 2002 fiscal
years, respectively . The Financial Plan assumes (i) approval by the Governor
and the State Legislature of the extension of the 14% personal income tax
surcharge, which is scheduled to expire on December 31, 1999, and of the
extension of the 12.5% personal income tax surcharge which is scheduled to
expire on December 31, 1998; (ii) collection of the projected rent payments for
the City's airports in the 1999 through 2002 fiscal years,
which may depend on the successful completion of negotiations with the Port
Authority of New York and New Jersey or the enforcement of the City's rights
under the existing leases thereto through pending legal actions; and (iii) State
approval of the repeal of the Wicks Law relating to contracting requirements for
City constuction projects and the additional State funding assumed in the
Financial Plan, and State and Federal approval of the State and Federal
gap-closing actions proposed by the City in the Financial Plan. 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.
From time to time, the Control Board staff, the staff of the Office of the
State Deputy Comptroller of New York, the City Comptroller, the City's
Independent Budget Office and others issue reports and make public statements
regarding the City's financial condition, commenting on, among other matters,
the City's financial plans, projected revenues and expenditures and actions by
the City to eliminate projected operating deficits. Some of these reports and
statements have warned that the City may have underestimated certain
expenditures and overestimated certain revenues and have suggested that the City
may not have adequately provided for future contingencies. Certain of these
reports have analyzed the City's future economic and social conditions and have
questioned whether the City has the capacity to generate sufficient revenues in
the future to meet the costs of its expenditure increases and to provide
necessary services. It is reasonable to expect that reports and statements will
continue to be issued and to engender public comment.
o Ratings. As of March 12, 1998, Moody's rated the City's general
obligation bonds A3, 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
ratings may be obtained. There is no assurance that such ratings will continue
for any given period of time or that they will not be revised downward or
withdrawn entirely. Any such downward revision or withdrawal could have an
adverse effect on the market prices of the bonds. On July 10, 1995, Standard &
Poor's revised its rating of City bonds downward to BBB+. On February 3, 1998,
Standard & Poor's placed its BBB+ rating of City bonds on CreditWatch with
positive implications. Moody's rating of City bonds was revised in February 1998
to A3 from Baa1.
o Outstanding Net Indebtedness. As of December 31, 1997, the City and the
Municipal Assistance Corporation for the City of New York had, respectively,
approximately $26.6 billion and $3.6 billion of outstanding net long-term debt.
As of October 8, 1997, the New York City Municipal Water Finance Authority ( the
"Water Authority") had approximately $8.1 billion of aggregate principal amount
of outstanding bonds, inclusive of subordinate second resolution bonds, and $200
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. On May 6,
1997, the U.S. Environmental Protection Agency granted the City a filtration
avoidance waiver through April 15, 2002 in response to the City's adoption of
certain watershed regulations, which became effective May 1, 1997. The estimated
incremental cost to the City of implementing this Watershed Memorandum of
Agreement, beyond investments in the watershed which are planned independently,
is approximately $400 million. The city has estimated that if filtration of the
upstate water supply system is ultimately required, the construction
expenditures required could be between $4 billion and $5 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, 1997, the City estimated that its
potential future liability to be approximately $3.5 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 approximately 14 million jobs
added nationally since early 1992. The State economy has continued to expand,
but growth remains somewhat slower than in the nation. Although the State has
added approximately 300,000 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 1998 and 1999 for employment, wages and personal
income, although the growth rates will lessen gradually during the course of the
two years. Personal income growth in 1997 was fueled in part by a continued
large increase in financial sector bonus payments. Increases in bonus payments
at year-end 1998 are projected to be modest, a substantial change from the rate
of increase of the last few years. Overall employment growth is expected to
continue at a modest rate, reflecting the slowing growth in the national
economy, continued spending restraint in government, and restructuring in the
health care, social service, and banking sectors.
o The 1997-98 Fiscal Year. The State's budget for the 1997-1998 fiscal
year (April 1, 1997 through March 31, 1998) was adopted by the Legislature on
August 4, 1997, more than four months after the start of the fiscal year. Prior
to adoption of the budget, the Legislature enacted necessary apropriations for
state-supported debt service. The State Financial Plan for the 1997-1998 fiscal
year (the "State Plan" or "State Financial Plan") was formulated on August 11,
1997, upgraded on January 30, 1998, and based on the State's budget as enacted
by the Legislature, as well as actual results through the third quarter of the
1997-1998 fiscal year.
o The 1997-1998 State Financial Plan projects a balanced General Fund (the
major operating fund of the State) , on a cash basis, with a projected cash
surplus of $1.83 billion. The State has planned to accelerate $1.18 billion in
income tax refund payments into the 1997-1998 fiscal year, or provide reserves
for such payments, in order to make the cash surplus available to help finance
requirements of the 1998-1999 fiscal year. General Fund receipts are projected
to be $35.197 billion while General Fund disbursements are projected at $35.165
billion.
The State projects it has closed
a budget gap of approximately $2.3 billion for the 1997-1998 fiscal year.
Gap-closing actions include cost containment in State Medicaid, the use of the
$1.4 billion 1996-1997 fiscal year budget surplus containment in State Medicaid,
the use of the $1.4 billion 1996-1997 fiscal year budget surplus to finance
current year spending, control on State agency spending and other actions.
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 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.
Certain actions taken in the 1997-1998 adopted budget add further pressure
to future budget balance in New York State. For example, the fiscal effects of
tax reductions adopted in the 1997- 1998 budget are projected to grow more
substantially beyond the 1998-1999 fiscal year, with incremental costs averaging
in excess of $1.3 billion annually over the last three years of the tax
reduction program. These incremental costs reflect the phase-in of State-funded
school property tax and local income tax relief, the phase-out of the
assessments on medical providers, and reductions in estate and gift levies,
utility gross receipts taxes, and the State sales tax on clothing. The full
annual cost of the enacted tax reduction package is estimated at approximately
$4.8 billion when fully effective in State fiscal year 2001-2002. In addition,
the 1997-1998 budget included multi-year commitments for school aid and
pre-kindergarten early learning programs which could add as much as $1.4 billion
in costs when fully annualized in fiscal year 2001-2002. These spending
commitments are subject to annual appropriation.
o Future Fiscal Years. The Governor presented his proposed 1998-1999
Executive Budget (the "Executive Budget") to the Legislature on January 1997 20,
1998. 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 1998-1999 Financial Plan, based on the Executive Budget,
projects balance on a cash basis for the 1998-1999 fiscal year. Total General
Fund receipts are projected to be $36.22 billion and total General Fund
disbursements and transfers to other funds are projected to be $36.18 billion.
The Executive Budget projects budget gaps of aproximately $1.75 billion in
1999-2000 growing to $3.75 billion in 2000-2001. These gaps are projected after
assuming savings actions totaling $600 million in 1999-2000 and $800 million in
2000-2001.
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.
According to the New York State Division of the Budget, uncertainties with
regard to the economy present the largest potential risk to budget balance in
New York State. This risk includes either a financial market or broader economic
"correction". The securities industry is more important to the New York economy
than the national economy, and a significant deterioration in stock market
performance could ultimately produce adverse changes in wage and employment
levels.
o Prior Fiscal Years. The State ended its 1996-1997 fiscal year in
balance, with a reported 1996-1997 General Fund cash surplus of $1.4 billion.
Prior to adoption of the State's 1996-1997 fiscal year budget, the State had
projected a potential budget gap of approximately $3.9 billion.
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.
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 without relying
on short-term 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
constitutional restrictions on the incurring 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, 1996, 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 $75.4 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. As of March 3, 1998, Moody's rated New York State general
obligations bonds A2, and Standard & Poor's rated such bonds A. Standard &
Poor's revised its ratings upwards from A- to A on August 28, 1997 . 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 State Debt. As of March 31, 1997, the State had approximately $5.03
billion outstanding in general obligation debt, including $294 million in bond
anticipation notes outstanding. As of March 31, 1997, the total amount of
outstanding general obligation debt was approximately $5.028 billion, including
$293.6 million in Bond Anticipation Notes. The total amount of moral obligation
debt was approximately $4.07 billion, and $22.50 billion of bonds issued
primarily in connection with lease-purchase and contractual-obligation financing
of State capital programs were outstanding.
For purposes of analyzing the financial condition of the State, debt of
the State and of certain public authorities may be classified as State-supported
debt, which includes general obligations debt of the State and lease-purchase
and contractual obligations of public authorities (and municipalities) where
debt service is paid from State appropriations (including dedicated tax sources,
and other revenues such as patient charges and dormitory facilities rentals). In
addition, a broader classification, referred to as State-related debt, includes
State-supported debt, as well as certain types of contingent obligations,
including moral-obligation financing, certain contingent contractual-obligation
financing arrangements, and State-guaranteed debt, where debt service is
expected to be paid from other sources and State appropriations are contingent
in that they may be made and used only under certain circumstances.
Total outstanding State-related debt increased from $24.45 billion at the
end of the 1987-88 fiscal year to $37.11 billion at the end of the 1996-97
fiscal year, an average annual increase of 4.7%. State-supported debt increased
from $11.61 billion at the end of the 1987-88 fiscal year to $32.77 billion at
the end of the 1996-97 fiscal year, an average annual increase of 12.2%. During
the prior ten year period, annual personal income in the State rose from $329.6
billion to $526.5 billion, an average annual increase of 5.3%. Thus,
State-supported debt grew at a faster rate than personal income while
State-related obligations grew from 3.5% of personal income in the 1987-88
fiscal year to 6.2% for the 1996-97 fiscal year while State-related debt
outstanding declined from 7.4% to 7.1% of personal income for the same period.
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
current fiscal year or thereafter.
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 State Plan in any particular year. In its audited financial
statements for the fiscal year ended March 31, 1997, the State reported its
estimated liability for awarded and anticipated unfavorable judgments at $474
$364 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 current
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 current 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 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 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 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.
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.
(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 and
this Statement of Additional Information, the Fund has adopted the industry
classifications set forth in Appendix A to this Statement of Additional
Information. This is not a fundamental policy. Bonds which are refunded with
escrowed U.S. government securities are considered U.S. government securities
for purposes of the Fund's policy not to concentrate.
Subject to the limitations stated above, the Fund may from time to time
invest more than 25% of its total assets in a particular segment of the
municipal securities market, including but not limited to general obligation
bonds, pollution control bonds, hospital bonds, or any other municipal segment
listed in Appendix A to this Statement of Additional Information.
In these circumstances, economic,
business, political or other changes affecting one bond (such as proposed
legislation affecting the financing of a project or decreased demand for a type
of project) might also affect other bonds in the same municipal market segment,
thereby potentially increasing market risk to the Fund.
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.
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 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 , Oppenheimer Bond Fund for Growth and Oppenheimer
MidCap Fund. 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.,
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 16, 1998 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 , 49
President (since June 1991), Chief Executive Officer
(since
September 1995) and a Director (since December 1994) of the
Manager; President and
director (since June 1991) of
HarbourView Asset
Management Corporation ("HarbourView"), an investment adviser
subsidiary of the Manager; Chairman
and a director of Shareholder Services, Inc. ("SSI")
(since August 1994), and
Shareholder Financial
Services, Inc. ("SFSI") (September 1995), transfer agent
subsidiaries of the Manager; President (since
September 1995) and a director (since October 1990) of
Oppenheimer Acquisition Corp. ("OAC"),
- -----------------
* Trustee who is an "interested person" of the Fund. the Manager's parent
holding company; President (since September 1995) and a director (since November
1989) of Oppenheimer Partnership Holdings, Inc. ("OPHI"), a holding company
subsidiary of the Manager; a director of Oppenheimer Real Asset Management, Inc.
(since July 1996); President and a director (since October 1997) of
OppenheimerFunds International Ltd., an offshore fund manager subsidiary of the
Manager ("OFIL") and Oppenheimer Millennium Funds plc (since October 1997);
President and a director of other Oppenheimer funds; a director of the NASDAQ
Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food company); formerly
an Executive Vice President of the Manager.
JOHN CANNON, Trustee; Age 68
620 Sentry Parkway West Suite 220, Blue Bell, PA 19422
Independent Consultant; Chief Investment Officer, CDC Associates,
a registered investment adviser;
Director, Neuberger & Berman Income Managers Trust, Neuberger &
Berman Income Funds and
Neuberger Berman Trust, 1995-Present; formerly Chairman and
Treasurer, CDC Associates, 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 .
PAUL Y. CLINTON, Trustee; Age 67
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; Trustee of Capital Cash Management Trust, a money-market fund
and Narragansett Tax-Free Fund, a tax-exempt bond fund; Director of OCC Cash
Reserves, Inc. and Trustee of OCC Accumulation Trust, all of which are open-end
investment companies. Formerly: Director, External Affairs, Kravco Corporation,
a national real estate owner and property management corporation; President of
Essex Management Corporation, a management consulting company; a general partner
of Capital Growth Fund, a venture capital partnership; 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; and Vice President of W.R. Grace & Co.
THOMAS W. COURTNEY, Trustee; Age 64
833 Wyndemere Way, Naples, FL 34105 Principal of Courtney Associates, Inc.
(venture capital firm); former General Partner of Trivest Venture Fund (private
venture capital fund); former President of Investment Counseling Federated
Investors, Inc.; Trustee of Cash Assets Trust, a money market fund; Director of
OCC Cash Reserves, Inc., and Trustee of OCC Accumulation Trust, all of which are
open-end investment companies; former President of Boston Company Institutional
Investors; Trustee of Hawaiian Tax-Free Trust and Tax Free Trust of Arizona,
tax-exempt bond funds; Director of several privately owned corporations; former
Director of Financial Analysts Federation.
LACY B. HERRMANN, Trustee; Age 68
380 Madison Avenue, Suite 2300, New York, NY 10017 Chairman and Chief Executive
Officer of Aquila Management Corporation, the sponsoring organization and
Manager, 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, Aquila Cascadia Equity Fund, 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 of OCC Cash Reserves, Inc., and
Trustee of OCC Accumulation Trust , both of which are open-end investment
companies; Trustee Emeritus of Brown University.
GEORGE LOFT, Trustee; Age 83
51 Herrick Road, Sharon, CT 06069
Private Investor; Director of OCC Cash Reserves, Inc., and
Trustee of OCC Accumulation Trust
,
both of which are open-end investment companies.
RONALD H. FIELDING, Vice President and Portfolio Manager; Age
49
350 Linden Oaks, Rochester, NY 14625
Senior Vice President of the Manager, Chairman of Rochester Division of the
Manager; Formerly President and a director of Rochester Tax Managed Fund, Inc,
President and a director, Fielding Management Company, Inc., Chairman and a
director of Rochester Fund Distributors, Inc., President and a director of
Fielding Management Company, Inc., President and a director of Rochester Capital
Advisors, Inc., President and a director of Rochester Fund Services, Inc.
ANDREW J. DONOHUE, Secretary; Age 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc.
(since September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President, General Counsel and a director of Oppenheimer Real Asset Management,
Inc. (since July 1996); General Counsel (since May 1996) and Secretary (since
April 1997) of OAC; A director of OFIL and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
GEORGE C. BOWEN, Treasurer; Age 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor ; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of OPHI
(since November 1989); Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc. (since July 1996); Chief Executive Officer, Treasurer and a
director of MultiSource Services, Inc., a broker-dealer (since December 1995); a
director or trustee and an officer of other Oppenheimer funds.
ROBERT BISHOP, Assistant Treasurer; Age 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager .
SCOTT T. FARRAR, Assistant Treasurer; Age 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager .
ROBERT G. ZACK, Assistant Secretary; Age 49
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of (since May 1985), and SFSI (since
November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.
ADELE A. CAMPBELL, Assistant Treasurer; Age 34
350 Linden Oaks, Rochester, New York 14625
Assistant Vice President of the Manager (1996-Present); Formerly Assistant Vice
President of Rochester Fund Services, Inc. (1994-1996), Assistant Manager of
Fund Accounting, Rochester Fund Services (1992-1994), Audit Manager for Price
Waterhouse
LLP (1991-1992).
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, 1997 and (ii) other investment companies (or series thereof) in the
Fund Complex during the calendar year ended December 31, 1997. The following
table sets forth the aggregate compensation received by the Independent Trustees
from the Fund during the fiscal year ended December 31, 1997.
Pension or
Retirement
Aggregate Benefits Estimated Total
Compensation Accrued as Annual
Compensation
from the Part of FundBenefits UponFrom Fund
Name of Person Fund Expenses(1)
Retirement(1)Complex(2)
John Cannon $8,3$10,301 $13,500
$23,100
Paul Y. Clinton $8,170 $0 $0
$68,379
Thomas W. Courtney $8,170 $0 $0
$68,379
Lacy B. Herrmann $7,620 $0 $0
$63,154
George Loft $8,170 $0 $0
$68,379
- ---------------------
(1) The Board of Rochester Fund Municipals has adopted a Retirement Plan for
Independent Trustees of that Fund. Under the terms of the Retirement Plan, as
amended and restated on October 16, 1995, an eligible Trustee (an Independent
Trustee who has served as such for at least three years prior to retirement) may
receive an annual benefit equal to the product of $1500 multiplied by the number
of years of service as an Independent Trustee up to a maximum of nine years. The
maximum annual benefit which may be paid to an eligible Trustee under the
Retirement Plan is $13,500. The Retirement Plan will be effective for all
eligible Trustees who have dates of retirement occurring on or after December
31, 1995. Subject to certain exceptions, retirement is mandatory at age 72 in
order to qualify for the Retirement Plan. Although the Retirement Plan permits
Eligible Trustees to elect early retirement at age 63, retirement benefits are
not payable to Eligible Trustees who elect early retirement until age 65. The
Retirement Plan provides that no Independent Trustee who is elected as a Trustee
of Rochester Fund Municipals after September 30, 1995, will be eligible to
receive benefits thereunder. Mr. Cannon is the only current Independent Trustee
who may be eligible to receive benefits under the Retirement Plan. The estimate
of annual benefits payable to Mr. Cannon under the Retirement Plan is based upon
the assumption that Mr. Cannon, who was first elected as a Trustee of the Fund
in 1992, will serve as an Independent Trustee for nine years. (2) Includes
compensation received during the fiscal year ended December 31, 1997, 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 Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for Independent Trustees that enables Trustees to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under the plan, the compensation deferred by a Trustee is
periodically adjusted as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds selected by the Trustee. The amount paid to the
Trustee under the plan will be determined based upon the performance of the
selected funds. Deferral of Trustees' fees under the plan will not materially
affect the Fund's assets, liabilities and net income per share. The plan will
not obligate the Fund to retain the services of any Trustee or to pay any
particular amount of compensation to any Trustee. Pursuant to an Order issued by
the Securities and Exchange Commission, the Fund may invest in the funds
selected by the Trustee under the plan for the limited purpose of determining
the value of the Trustee's deferred fee account.
o Major Shareholders. As of March 16, 1998 (i) Merrill Lynch Pierce Fenner
& Smith, 4800 Deer Lake Drive EFL3, Jacksonville, Florida , 32246, owned
22,096,166.012 Class A shares (representing 13.81% of the Fund's outstanding
Class A shares; (ii) Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
EFL3, Jacksonville, Florida, 32246, owned 1,628,880.884 Class B shares
(representing 13.09% of the Fund's outstanding Class B shares) and (iii)Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive EFL3, Jacksonville, Florida,
32246, owned 776,302.653 Class C shares (representing 20.07% of the Fund's
outstanding Class C shares). No other person owned of record or was known by the
Trust to own beneficially 5% or more of the shares of the Trust as a whole or
either class of the Fund's outstanding shares as of that 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.
|X| Portfolio Management. The portfolio manager of the
Fund is Ronald H. Fielding, who is principally responsible for the
day-to-day management of the Fund's portfolio. Mr. Fielding's
background is described in the Prospectus under "Portfolio
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. OppenheimerFunds
Distributor, Inc. is a subsidiary of the
Manager and acts as the Fund's Distributor. 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 and
December 31, 1997, the management fees paid by the Fund to the Manager were
$10,305,143 and $12,249,672. For the fiscal year ended December 31, 1996 the
management fees paid to Rochester Capital 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.
Under the Investment Advisory Agreement , the Manager had agreed 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 . During the Fund's last fiscal year, the Fund's expenses did not exceed
the most stringent state regulatory limit and the expense limitation was not
invoked.
The Investment Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
reckless disregard for its obligations and duties under the advisory agreement,
the Manager is not liable for any loss resulting from a good faith error or
omission on its part with respect to any of its duties thereunder. The
Investment Advisory Agreement permits the Manager to act as investment adviser
for any other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
adviser or general distributor. If the Manager shall no longer act as investment
adviser to the Fund, the right of the Fund to use the name "Oppenheimer" as part
of its name may be withdrawn.
o The Distributor. Under its General Distributor's
Agreement with the Fund, which was entered into on January 4,
1996, the Distributor, OppenheimerFunds Distributor, Inc., acts as
the
Fund's principal underwriter in the continuous public offering of
the Fund's Class A, Class B and
Class C shares , but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales, excluding payments under the
Distribution and Service Plans, but including advertising and the cost of
printing and mailing prospectuses (other than those furnished to existing
shareholders) are borne by the Distributor. During the Fund's fiscal years ended
December 31, 1995, the aggregate amount of sales charge on sales of the Fund's
Class A shares was $8,868,211, of which Rochester Fund Distributors, Inc., the
Fund's previous principal underwriter retained $1,086,283 in that year. During
the Fund's fiscal year ended December 31, 1996 and 1997, the aggregate amount of
sales charges on the Fund's Class A shares was $9,802,584 and $15,588,173 of
which the Distributor and an affiliated broker-dealer retained in the aggregate
$1,377,087 and $2,324,962. During the Fund's fiscal year ended December 31,
1997, the contingent deferred sales charge on Class B and Class C shares totaled
$86,086 and $11,324, all of which the Distributor retained. For additional
information about distribution of the Fund's shares and the payments made by the
Fund to the Distributor in connection with such activities, please refer to
"Distribution and Service Plans" below.
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer
Agent, a division of the Manager, serves as the Fund's Transfer Agent pursuant
to a Service Contract dated March 8, 1996. The Transfer Agent is responsible for
maintaining the Fund's shareholder registry and 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
year ended December 31, 1995 was $1,267,856, respectively. The compensation paid
to OppenheimerFunds Services for the fiscal years ended December 31, 1996 and
December 31, 1997 were $1,242,719 and $1,372,343, respectively.
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 year ended December 31, 1995 was $607,025, respectively. The compensation
paid to OppenheimerFunds Services for the fiscal years ended December 31, 1996
and December 31, 1997 were $660,089 and $778,253, respectively.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the Investment Advisory Agreement is to arrange the portfolio
transactions for the Fund. The Investment Advisory Agreement contains provisions
relating to the employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by the Investment
Advisory Agreement to employ such broker-dealers, including "affiliated"
brokers, as that term is defined in the Investment Company Act, as may, in its
best judgment based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such transactions. The
Manager need not seek competitive commission bidding but is expected to 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 other than affiliates 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 brokerage are generally made by the Manager's
portfolio traders based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the Investment Advisory
Agreement and the procedures and rules described above. In either case,
brokerage is allocated under the supervision of the Manager's executive
officers. As most purchases made by the Fund are principal transactions at net
prices, the Fund does not incur substantial brokerage costs. The Fund usually
deals directly with the selling or purchasing principal or market maker without
incurring charges for the services of a broker on its behalf unless it is
determined that a better price or execution may be obtained by utilizing the
services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price. The
Fund seeks to obtain prompt execution of orders at the most favorable net
prices. When the Fund engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any transaction
in the securities to which the option relates. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts managed
by the Manager or its affiliates are combined. The transactions effected
pursuant to such combined orders are averaged as to price and allocated in
accordance with the purchase or sale orders actually placed for each account.
Other funds advised by the Manager have investment objectives and policies
similar to those of the Fund. Such other funds may purchase or sell the same
securities at the same time as the Fund, which could affect the supply and price
of such securities. If two or more of such funds purchase the same security on
the same day from the same dealer, the Manager may average the price of the
transactions and allocate the average among such funds.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems, computer hardware and similar
products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid for in commission dollars.
The Board of Trustees permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions. The Board also permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research where the broker has
represented to Manager that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal transaction.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager, by making available additional views for
consideration and comparisons , and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase. The Manager provides information as to the
commissions paid to brokers furnishing such services together with the Manager's
representation that the amount of such commissions was reasonably related to the
value or benefit of such services.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "dividend yield," "tax-equivalent yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset value" and
"total return at net asset value" of an investment in a class of the Fund shares
may be advertised. An explanation of how yield and total returns are calculated
for each class and the components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each advertised class of shares of the Fund for the 1, 5, and
10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its yield and total
returns are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Returns Yield and total returns for any given past period are not a
prediction or representation by the Fund of future yields or rate of return. The
yield and total returns of each class of shares of the Fund are affected by
portfolio quality, portfolio maturity, the type of investments the Fund holds
and its operating expenses allocated to the particular class.
o Yield
o Standardized Yield. The "standardized yield" (referred to as "yield") is
shown for a class of shares for a stated 30-day period. It 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 for that period. It may therefore differ from the
"dividend yield" for the same class of shares, described below. It is calculated
using the following formula set forth in rules adopted by the Securities and
Exchange Commission , designed to assure uniformity in the way that all funds
calculate their yields:
Standardized ~ Yield ~ = ~ 2~ [~ (~ {a-b} over cd ~ +~ 1~ ) SUP 6~ -~ 1~ ]
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 the yield for
other periods. 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. 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 any 30-day period. For the 30-day
period ended December 31, 1997, the standardized yields for the Fund's classes
of shares were as follows:
Without Deducting Sales Charge With Sales Charge
Deducted
Class A: 5.14% 4.90%
Class B: 4.26% N/A
Class C: 4.28% N/A
o Tax-Equivalent Yield. The "tax-equivalent yield" of a class of shares
adjusts the Fund's current yield, as calculated above, by a stated combined
Federal, state and city tax rate. The tax- equivalent yield is based on a 30-day
period, and is computed by dividing the tax-exempt portion of the Fund's current
yield (as calculated above) by one minus a stated income tax rate and adding the
result to the portion (if any) of the Fund's current yield that is not tax
exempt. The tax equivalent yield may be used to compare the tax effects of
income derived from the Fund with income from taxable investments at the tax
rates stated. Appendix B includes 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, Class B and Class C shares for the 30-day
period ended December 31, 1997, for an individual New York City resident in the
46.08% combined tax bracket was 9.09%, 7.90% and 7.94%.
o Dividend Yield. The Fund may quote a "dividend yield" for each class of
its shares. Dividend yield is based on the dividends paid on shares of a class
during the actual dividend period. To calculate dividend yield, the dividends of
a class declared during a stated 30-day period are added together and the sum is
multiplied by 12 (to annualize the yield) and divided by the maximum offering
price on the last day of the dividend period. The formula is shown below:
Dividend Yield = dividends paid x 12/maximum offering
price (payment date)
The maximum offering price for Class A shares includes the maximum initial
sales charge. The maximum offering price for Class B and Class C shares is the
net asset value per share, without considering the effect of contingent deferred
sales charges. The Class A dividend yield may also be quoted without deducting
the maximum initial sales charge.
The dividend yields for the 30-day period ended December 31, 1997 were as
follows:
Without Deducting
Sales Charge With Sales Charge Deducted
Class A: 5.92% 5.64%
Class B: 4.98% N/A
Class C: 4.99% N/A
o Total Return Information
o Average Annual Total Returns. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") ,
according to the following formula: LEFT ( {~ERV~} OVER P~ right) SUP
{1/n}~-1~=~Average~Annual~Total~ Return
The "average annual total return" on an investment in Class A shares of
the Fund for the one, five and ten year periods ended December 31, 1997 was
4.96%, 6.62% and 8.65%, respectively. The "average annual total return" on an
investment in Class B shares of the Fund since inception on March 17, 1997 was
3.74%. The "average annual total return" on an investment in Class C shares of
the Fund since inception on March 17, 1997 was 7.80%.
o Cumulative Total Returns. The cumulative "total return" calculation
measures the change in the 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: ALIGNC {ERV~-~ P~} over
P~ =~Total~ Return
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). 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 "total return" on an investment in Class A shares of the Fund (using
the method described above) for the period from May 15, 1986 (inception of the
Fund) through December 31, 1997, was 149.68%. The cumulative total return on
Class B shares for the period from March 17, 1997 (inception of the class)
through December 31, 1997 was 3.74%. The cumulative total return on the Class C
shares for the period from March 17, 1997 (inception of the class) through
December 31, 1997 was 7.80%.
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, 1997 were 10.20%,
7.66% and 9.18%, 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, 1997 were 10.20%, 44.65% and 140.65%, respectively.
The total return at net asset value for the Fund's Class B shares since
inception on March 17, 1997 was 8.74%. The total return at net asset value for
the Fund's Class C shares since inception on March 17, 1997 was 8.80%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment in Class A, Class B or Class C shares of
the Fund, a number of factors should be considered before using such information
as a basis for comparison before using such information with other investments.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of the performance of its Class A, Class B or Class C shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent mutual
fund monitoring service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives.
The performance of the Fund is ranked
against (i) all other bond funds, other than money market funds and (ii) all
other New York municipal bond funds. The Lipper performance rankings are based
on total returns that include the reinvestment of capital gains 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 prepared by recognized mutual fund statistical services.
From time to time the Fund may publish the star ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an independent
mutual fund monitoring service. Morningstar ranks mutual funds in broad
investment categories: domestic stock funds, international stock funds, taxable
bond funds and municipal bond funds based on risk-adjusted total investment
return. The Fund is ranked among the municipal bond funds. Investment return
measures a fund's or class's three, five and ten-year average annual total
returns (depending on the inception of the fund or class) in excess of the
90-day U.S. Treasury bill returns after the Fund's considering sales charges and
expenses. Risk measures a fund's or class's performance below the 90-day U.S.
Treasury bill 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
ranking 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 monthly.
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.
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 return to the returns on fixed income investments available from
banks and thrift institutions, such as certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed or
variable time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed by the FDIC or
any other agency and will fluctuate daily, while bank depository obligations may
be insured by the FDIC and may provide fixed rates of return, and Treasury bills
are guaranteed as to principal and interest by the U.S. government. In order to
compare the Fund's dividends to the rate of return on taxable investments,
Federal income taxes on such investments should be considered.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or Transfer Agent) or on the investor services provided by them to
shareholders of the Oppenheimer funds, other than the performance rankings of
the Oppenheimer funds themselves. Those ratings or rankings of
shareholder/investor services by a third party may compare the Oppenheimer funds
services to those of other mutual fund families selected by the rating or
ranking services and may be based upon the opinions of the rating or ranking
service itself, based on its research or judgment, or based upon surveys of
investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and Distribution
and Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of
the Investment Company Act, pursuant to which the Fund will make payments to the
Distributor for its services in connection with the distribution and/or
servicing of the shares of that class, as described in the Prospectus. Each Plan
has been approved by a vote of (i) the Board of Trustees of the Fund, including
a majority of the Independent Trustees, cast in person at a meeting called for
the purpose of voting on that Plan, and (ii) the holders of a "majority" (as
defined in the Investment Company Act) of the shares of each class. For the
Distribution and Service Plans for Class B and Class C shares, that vote was
cast by the Manager, as the sole initial holder of Class B and Class C shares of
the Fund.
In addition, under the Plans the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform, at no cost to the Fund. The Distributor
and the Manager may, in their sole discretion, increase or decrease the amount
of payments they make to Recipients from their own resources.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. 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 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 and
Exchange Commission Rule to obtain the approval of Class B as well as Class A
shareholders for a proposed amendment to the Class A Plan that would materially
increase payments under the Plan. Such vote must be by a "majority" of the Class
A and Class B shares (as defined in the Investment Company Act), voting
separately by class. All material amendments must be approved by the Board and
the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the 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 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 who are not "interested persons" of the Fund is committed to the
discretion of the Independent Trustees. This does not prevent the involvement of
others in such selection and nomination if the final decision as to any such
selection or nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any quarter
if the aggregate net asset value of all Fund shares held by the Recipient for
itself and its customers, did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Trustees.
Initially, the Board of Trustees has set the fee at the maximum rate allowed
under the Plans and set no minimum amount.
For the fiscal year ended December 31, 1997, payments under the Class A
Service Plan, totaled $3,708,931, all of which was paid by the Distributor to
Recipients, including $17,494 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 fiscal
years. Payments received by the Distributor under the Class A Plan will not be
used to pay any interest expense, carrying charge, or other financial costs, or
allocation of overhead by the Distributor.
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 shares sold.
An exchange of shares does not entitle the Recipient to an advance service fee
payment. In the event Class B and Class C shares are redeemed during the first
year such shares are outstanding, the Recipient will be obligated to repay to
the Distributor a pro rata portion of the advance of the service fee payment for
those shares to the Distributor. Payments made under the Class B Plan during the
fiscal year ended December 31, 1997 totaled $603,667, of which $603,626 was
retained by the Distributor. Payments under the Class C Plan during the fiscal
year ended December 31, 1997 totaled $165,599, of which $164,399 was retained by
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. The
Distributor retains the asset-based sales charge on Class B shares outstanding
for less than 6 years. As to Class C shares, the Distributor retains the
asset-based sales charge during the first year shares are outstanding and pays
the asset-based sales charges as an ongoing commission to the dealer on Class C
shares outstanding for more than a year or more. Such payments are made to the
Distributor under the Plans in recognition that the Distributor (i) pays sales
commissions to authorized brokers and dealers at the time of sale and pays
service fees as described in the Prospectus, (ii) may finance such commissions
and/or the advance of the service fee payment to Recipients under those Plans,
or may provide such financing from its own resources, or from an affiliate,
(iii) employs personnel to support distribution of shares, and (iv) may bear the
costs of sales literature, advertising and prospectuses (other than those
furnished to current shareholders), and state "blue sky" registration fees and
certain other distribution expenses.
ABOUT YOUR ACCOUNT
How to Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor to
choose the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant circumstances. Investors should understand
that the purpose and function of the deferred sales charge and asset-based sales
charge with respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the other. The
Distributor normally will not accept any order for $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of the
Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and expenses. The net income attributable to Class A, Class B and
Class C shares and the dividends payable on such shares will be reduced by
incremental expenses borne solely by 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
unaffiliated Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (a) Distribution
and/or Service Plan fees, (b) transfer and shareholder servicing agent fees and
expenses, (c) registration fees and (d) shareholder meeting expenses, to the
extent that such expenses pertain to a specific class rather than to the Fund as
a whole.
Determination of Net Asset Value Per Share. The net asset values per share of
Class A, Class B and Class C shares of the Fund are determined as of the close
of business of The New York Stock Exchange (the "Exchange") on each day that the
Exchange is open, by dividing the value of the Fund's net assets attributable to
that class by the number of shares of that class outstanding. The Exchange
normally closes at 4:00 P.M., New York time, but may close earlier on some days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual announcement schedule (which is
subject to change) states that it will close on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in debt securities and
in foreign securities on certain days on which the Exchange is closed (including
weekends and holidays) or after 4:00 p.m. on a regular business day. Because the
Fund's net asset value will not be calculated on those days, the Fund's net
asset value per share may be significantly affected on such days when
shareholders may not purchase or redeem shares.
The Board of Trustees has established procedures for the valuation of the
Fund's securities, generally as follows: (i) long-term debt securities having a
remaining maturity in excess of 60 days are valued based on the mean between the
"bid" and "asked" prices determined by a portfolio pricing service approved by
the Fund's Board of Trustees or obtained by the Manager from two active market
makers in the security on the basis of reasonable inquiry; (ii) a non-money
market fund will value (a) debt instruments that had a maturity of more than 397
days when issued, (b) debt instruments that had a maturity of 397 days or less
when issued and have a remaining maturity in excess of 60 days, and (c)
non-money market type debt instruments that had a maturity of 397 days or less
when issued and have a remaining maturity of sixty days or less , at the mean
between "bid" and "asked" prices determined by a pricing service approved by the
Fund's Board of Trustees or, if unavailable, obtained by the Manager from two
active market makers in the security on the basis of reasonable inquiry; (iii)
money market-type debt securities held by a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining maturity of 60
days or less and debt instruments held by a money market fund that have a
remaining maturity of 397 days or less, shall be valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (iv) securities
(including restricted securities) not having readily-available market quotations
are valued at fair value determined under the Board's procedures. If the Manager
is unable to locate two market makers willing to give quotes (see (i) and (ii)
above), the security may be priced at the mean between the "bid" and "asked"
prices provided by a single active market maker (which in certain cases may be
the "bid" price if no "asked" price is available) provided that the Manager is
satisfied that the firm rendering the quotes is reliable and that the quotes
reflect the current market value.
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, or as determined
by a pricing service approved by the Board of Trustees or by the Manager. If
there were no sales that day, value shall be the last sale price on the
preceding trading day if it is within the spread of the closing "bid" and
"asked" prices on the principal exchange or on NASDAQ on the valuation date, or,
if not, 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 "asked" prices
obtained by the Manager from two active market makers (which in certain cases
may be the "bid" price if no "asked" price is available).
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 the shares. Dividends will begin to accrue on shares purchased
by the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If the 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 after such Federal Funds are received.
The proceeds of ACH transfers are normally received by the Fund three days after
the transfers are initiated. The Distributor and the Fund are not responsible
for any delays in purchasing shares resulting from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, parents, grandparents, parents-in- law, brothers and sisters,
sons-and daughters-in-law, a sibling's spouse, a spouse's siblings, aunts,
uncles, nieces and nephews. Relations by virtue of a remarriage (step-children,
step-parents, etc.) are included.
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 Global Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund Oppenheimer High Yield Fund Oppenheimer Insured
Municipal Fund Oppenheimer Intermediate Municipal Fund Oppenheimer International
Bond Fund Oppenheimer International Growth Fund Oppenheimer International Small
Company 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 MidCap 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 Capital Value Fund, Inc. 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 Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Rochester Fund Municipals
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
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares or Class A and Class B shares of the Fund (and other Oppenheimer
funds) during a 13-month period (the "Letter of Intent period"), which may, at
the investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases of shares which, when added to investor's holdings of shares
of those funds, will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or distributions of capital gains
and purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to count the
Class A and Class B shares purchased under the Letter to obtain the reduced
sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge) that
applies to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow" below (as
those terms may be amended from time to time). The investor agrees that shares
equal in value to 5% of the intended purchase amount will be held in escrow by
the Transfer Agent subject to the Terms of Escrow. Also, the investor agrees to
be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
(1) Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
(2) If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
(3) If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
(4) By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
(5) The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of the 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 sold with a front-end sales
charge of one of the other Oppenheimer funds that were acquired subject to a
contingent deferred sales charge or (ii) Class B shares of one of the other
Oppenheimer funds that were acquired subject to a contingent deferred sales
charge.
(6) Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds. 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 transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below
supplements the terms and conditions for redemptions set forth in
the Prospectus.
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
the Bank or the Fund's Custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
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; 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.
Selling Shares by Wire. The wire of redemption proceeds may be delayed if the
Fund's custodian bank is not open for business on a day when the Fund would
normally authorize the wire to be made, which is usually the Fund's next regular
business day following the redemption. In those circumstances, the wire will not
be transmitted until the next bank business day on which the Fund is open for
business. No dividends will be paid on the proceeds of redeemed shares awaiting
transfer by wire.
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 and 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 Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchase subject to an initial sales charge or Class A contingent deferred sales
charge which was paid, or (ii) Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed . This privilege does not apply
to Class C shares. The reinvestment may be made without sales charge only in
Class A shares of the Fund or any of the other Oppenheimer funds into which
shares of the Fund are exchangeable, as described in "How to Exchange Shares"
below, at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Distributor for that
privilege at the time of reinvestment. Any capital gain that was realized when
the shares were redeemed is taxable, and reinvestment will not alter any capital
gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending on the
timing and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer funds within 90
days of payment of the sales charge, the shareholder's basis in the shares of
the Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
an order placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes (normally, that is 4:00 P.M., but may be earlier
on some days) and the order was transmitted to and received by the Distributor
prior to its close of business that day (normally 5:00 P.M.). Ordinarily, for
accounts redeemed by a broker-dealer under this procedure, payment will be made
within three business days after the shares have been redeemed upon the
Distributor's receipt 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 any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving,
directly or indirectly, a public sale).
The transferred shares will remain subject to the contingent deferred sales
charge, calculated as if the transferee shareholder had acquired the transferred
shares in the same manner and at the same time as the transferring shareholder.
If less than all shares held in an account are transferred, and some but not all
shares in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B or the Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
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 redemption, 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 contingent deferred sales charge is
waived as described in the Prospectus under "Waivers of Class B and Class C
Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below, as
well as those stated 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 thereafter shares acquired with reinvested dividends and
capital gains distributions will be redeemed next, followed by shares acquired
with a sales charge, to the extent necessary to make withdrawal payments.
Depending upon the amount withdrawn, the investor's principal may be depleted.
Payments made under such plans should not be considered as a yield or income on
your investment. It may not be desirable to purchase additional shares of Class
A shares while maintaining automatic withdrawals because of the sales charges
that apply to purchases when made. Accordingly, a shareholder normally may not
maintain an Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect.
The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated form.
Upon written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A Shares" for
this purpose. All of the Oppenheimer funds offer Class A, 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 through
OppenheimerFunds sponsored 401(k) plans). A current list showing which funds
offer which class can be obtained by calling the Distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months prior
to that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any other of the Oppenheimer funds 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 12 months of the end of the calendar month of the initial purchase of the
exchanged Class A shares (18 months if the shares were initially purchased prior
to May 1, 1997), 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 and Automatic Withdrawal Plans, will be switched to the new account unless
the Transfer Agent is instructed otherwise. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date").
Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases may be delayed
by either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The Fund
reserves the right, in its discretion, to refuse any exchange request that may
disadvantage it (for example, if the receipt of multiple exchange requests from
a dealer might require the disposition of portfolio securities at a time or at a
price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of 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, 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 1997 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. 37.64% of the Fund's dividends (excluding
distributions) paid during 1997 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 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 New York Municipal securities and obligations of U.S.
territories, 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 New York Municipal
securities and obligations of U.S. territories 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.
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 Accountants. Price Waterhouse LLP, 950 Seventeenth Street, Suite
2500, Denver, CO 80202 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.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of 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, 1997, 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 periods indicated, 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, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where securities purchased had not been received, provide a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
Denver, Colorado
January 28, 1998
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITAL/HEALTHCARE (MARKET VALUE $478,466,919) - 15.5%
Albany IDA (Albany Medical Center) 8.250% 08/01/04 $ 2,560 $ 2,761,370
Beacon IDA (Craig House) 9.000 07/01/11 215 218,216
Bethany Retirement Home 7.450 02/01/24 1,000 1,160,800
Castle Rest Residential Health Care Fac. 5.750 08/01/37 6,250 6,419,938
Cayuga County COP (Auburn Hospital) 6.000 01/01/21 8,600 9,178,866
City of Port Jervis (Mercy Hospital) 5.500 11/01/16 1,200 1,209,360
Clifton Springs Hospital & Clinic 8.000 01/01/20 3,495 3,867,672
Erie IDA (Mercy Hospital) 6.250 06/01/10 1,355 1,417,818
Groton Community Health Care Center 7.450 07/15/21 2,065 2,412,705
Lyons Community Health Initiatives Corp. 6.800 09/01/24 5,350 5,854,933
Monroe IDA (Genesee Hospital) 7.000 11/01/18 14,565 15,416,179
Newark/Wayne Community Hospital 5.875 01/15/33 4,950 5,168,444
Newark/Wayne Community Hospital 7.600 09/01/15 2,365 2,559,308
NYC Health & Hospital LEVRRS 6.542f) 02/15/11 26,500 28,653,125
NYS Dorm (Bethel Springvale Home) 6.000 02/01/35 10 10,573
NYS Dorm (Center for Nursing) 5.550 08/01/37 8,435 8,495,395
NYS Dorm (Chapel Oaks, Inc.) 5.450 07/01/26 1,000 1,008,120
NYS Dorm (Cornwall Hospital) 8.750 07/01/07 675 676,553
NYS Dorm (Department of Health) 5.500 07/01/21 525 529,904
NYS Dorm (Department of Health) 6.625 07/01/24 250 280,945
NYS Dorm (Department of Health) 7.250 07/01/11 3,750 4,189,800
NYS Dorm (Department of Health) 7.350 08/01/29(p) 95 103,096
NYS Dorm (Episcopal Health Services) 7.550 08/01/29 95 101,895
NYS Dorm (German Masonic Home) 6.000 08/01/36 2,500 2,646,475
NYS Dorm (Grace Manor Health Care Fac.) 6.150 07/01/18 1,000 1,096,370
NYS Dorm (Gurwin Geriatric Home) 5.700 02/01/37 2,230 2,326,737
NYS Dorm (Hebrew Hospital) 5.900 08/01/36 10,285 10,821,980
NYS Dorm (Insured Mtg. Nursing) 6.125 02/01/36 4,200 4,512,942
NYS Dorm (KMH Homes) 6.950 08/01/31 25 27,128
NYS Dorm (Lakeside Home) 6.000 02/01/37 4,380 4,649,370
NYS Dorm (L.I. Medical Center) 7.750 08/15/27 25 25,593
NYS Dorm (Menorah Campus) 6.100 02/01/37 7,400 7,935,982
NYS Dorm (Menorah Campus) 7.300 08/01/16 20 22,490
NYS Dorm (Methodist Hospital) 6.050 02/01/34 7,230 7,880,700
NYS Dorm (Montefiore Hospital) 8.625 07/01/10 90 90,298
NYS Dorm (Niagara Nursing Home) 5.600 08/01/37 2,400 2,486,856
NYS Dorm (Park Ridge Fac.) 7.850 02/01/29 290 305,764
NYS Dorm (Presbyterian Hospital) 6.500 08/01/34 2,200 2,391,554
NYS Dorm (RGH) RITES (b) 7.110(c)(f) 08/01/33 12,750 13,307,813
NYS Dorm (Sarah Neumann Home) 5.450 08/01/27 600 613,950
NYS Dorm (Sarah Neumann Home) 5.500 08/01/37 1,000 1,024,940
NYS Dorm (St. Barnabas Hospital) 5.450 08/01/35 3,000 3,052,980
NYS Dorm (St. Vincent Hospital) 7.400 08/01/30 5 5,558
NYS HFA (H&N) 6.875 11/01/10 9 9,199
NYS HFA (H&N) 6.875 11/01/11 5 5,106
NYS HFA (H&N) 7.000 11/01/17 510 516,222
NYS HFA (H&N) 8.000 11/01/08 500 554,000
NYS Medcare (BLH) 7.100 02/15/27 6,235 6,425,168
NYS Medcare (BLH) 7.100 02/15/27 17,125 17,509,970
NYS Medcare (Brookdale Hospital) 6.850 02/15/17 4,600 5,084,334
NYS Medcare (Central Suffolk Hospital) 6.125 11/01/16 1,000 999,340
NYS Medcare (Downtown Hospital) 6.700 02/15/12 500 550,435
NYS Medcare (Downtown Hospital) 6.800 02/15/20 7,355 8,052,622
NYS Medcare (H&N) 5.750 08/15/19 45 46,292
NYS Medcare (H&N) 5.800 08/15/22 14,515 15,167,304
NYS Medcare (H&N) 5.850 02/15/33 4,690 4,870,565
NYS Medcare (H&N) 6.200 02/15/23 95 101,342
NYS Medcare (H&N) 6.375 08/15/33 1,000 1,068,950
NYS Medcare (H&N) 6.375 08/15/29 60 64,190
NYS Medcare (H&N) 6.500 02/15/34 2,215 2,408,702
NYS Medcare (H&N) 6.600 02/15/31 250 273,528
NYS Medcare (H&N) 6.650 08/15/32 12,820 13,914,187
NYS Medcare (H&N) 6.875 02/15/32 3,000 3,281,220
NYS Medcare (H&N) 7.250 02/15/24(p) 50 52,836
NYS Medcare (H&N) 7.250 02/15/24 50 52,616
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS Medcare (H&N) 7.250 % 02/15/12 $7,355 $7,519,531
NYS Medcare (H&N) 7.400 11/01/16 5,465 5,587,908
NYS Medcare (H&N) 7.600 02/15/29 10 10,560
NYS Medcare (H&N) 7.625 02/15/23 2,240 2,293,603
NYS Medcare (H&N) 7.700 02/15/18(p) 25 25,617
NYS Medcare (H&N) 7.700 02/15/18 3,255 3,333,185
NYS Medcare (H&N) 8.000 02/15/28 240 250,219
NYS Medcare (H&N) 8.000 02/15/27 14,340 14,669,533
NYS Medcare (H&N) 9.000 02/15/26 1,610 1,614,798
NYS Medcare (H&N) 9.375 11/01/16 4,120 4,301,404
NYS Medcare (H&N) 10.000 11/01/06 3,140 3,332,482
NYS Medcare (Insured Mtg. Nursing) 5.900 08/15/33 22,230 23,738,750
NYS Medcare (Insured Mtg. Nursing) 6.375 08/15/24 2,000 2,175,020
NYS Medcare (Insured Mtg. Nursing) 6.450 08/15/34 4,000 4,357,280
NYS Medcare (Insured Mtg. Nursing) 6.500 11/01/15 70 76,952
NYS Medcare (Insured Mtg. Nursing) 6.600 02/15/11 700 788,361
NYS Medcare (Insured Mtg. Nursing) 6.900 08/15/34 15 17,143
NYS Medcare (Insured Mtg. Nursing) 7.875 02/15/07 3,000 3,068,640
NYS Medcare (Insured Mtg. Nursing) 10.250 01/01/24 1,445 1,462,947
NYS Medcare (Kingston Hospital) 8.875 11/15/17 7,800 7,831,200
NYS Medcare (Mental Health) 0.000 08/15/18 320 66,829
NYS Medcare (Mental Health) 5.500 08/15/24 250 252,755
NYS Medcare (Mental Health) 6.500 02/15/19 190 205,956
NYS Medcare (Mental Health) 7.300 02/15/21(p) 5 5,620
NYS Medcare (Mental Health) 7.500 02/15/21(p) 505 564,418
NYS Medcare (Mental Health) 7.500 02/15/21 305 336,662
NYS Medcare (Mental Health) 7.625 08/15/17 250 280,798
NYS Medcare (Mental Health) 7.625 08/15/17(p) 545 617,343
NYS Medcare (Mental Health) 7.750 08/15/11 35 39,224
NYS Medcare (Mental Health) 7.750 08/15/11(p) 60 67,495
NYS Medcare (Mental Health) 7.875 08/15/15 220 229,200
NYS Medcare (Mental Health) 7.875 08/15/20 5,100 5,661,357
NYS Medcare (Mental Health) 8.875 08/15/07 1,725 1,765,865
NYS Medcare (N. General Hospital) 7.150 02/15/01 10 10,669
NYS Medcare (N. General Hospital) 7.350 08/15/09 4,745 5,022,250
NYS Medcare (N. General Hospital) 7.400 02/15/19 2,110 2,234,912
NYS Medcare (St. Charles Hospital) 6.375 08/15/34 1,350 1,474,079
NYS Medcare (St. Charles Hospital) 6.375 02/15/35 1,650 1,801,652
NYS Medcare (St. Luke's Hospital) IVRC (b) 6.884 (f) 02/15/29 22,000 23,072,500
NYS Medcare (St. Luke's Hospital) RITES (b) 7.060 (f) 02/15/29 8,400 8,767,500
NYS Medcare (St. Luke's Hospital) RITES (b) 7.060 (f) 02/15/29 5,750 6,001,563
NYS Medcare (St. Luke's Hospital) RITES (b) 7.060 (f) 02/15/29 10,000 10,437,500
NYS Medcare (St. Luke's Hospital) RITES (b) 7.060 (f) 02/15/29 12,500 13,046,875
NYS Medcare (WHMC) 7.350 08/15/11 50 55,296
NYS Medcare (WHMC) 7.400 08/15/21 5,255 5,865,106
Oneida Healthcare Corp. 7.100 08/01/11 10 10,895
Oneida Healthcare Corp. 7.200 08/01/31 130 141,941
Onondaga IDA (CGH) 6.625 01/01/18 7,820 8,361,848
Onondaga IDA (Crouse Irving Hospital) 7.800 01/01/03 220 232,696
Oswego IDA (Seneca Hill Manor) 5.650 08/01/37 3,260 3,329,340
Puerto Rico ITEME (Ryder Hospital) 6.700 05/01/24 5,250 5,680,500
Puerto Rico TEMEC (Mennonite Hospital) 5.625 07/01/27 985 1,000,474
Puerto Rico TEMEC (Mennonite Hospital) 5.625 07/01/17 500 510,130
Puerto Rico TEMEC (Mennonite Hospital) 6.500 07/01/26 3,000 3,224,490
Rensselaer Municipal Leasing Corp. 6.900 06/01/24 15,000 16,470,300
Syracuse IDA (St. Joseph's Hospital) 7.500 06/01/18(p) 3,770 4,234,464
Tompkins Healthcare 10.800 02/01/07 135 165,042
Tompkins Healthcare 10.800 02/01/28 25 33,337
UFA Devel. Corp. (Loretto-Utica Corp.) 5.950 07/01/35 4,870 5,106,098
Valley Health Devel. Corp. 7.850 08/01/35 20 22,336
Valley Health Devel. Corp. 11.300 02/01/07 450 548,366
Valley Health Devel. Corp. 11.300 02/01/23 175 213,103
Westchester IDA (Beth Abraham Hospital) 8.375 12/01/25 1,870 2,134,287
Yonkers IDA (St. Joseph's Hospital) 7.500 12/30/03 1,000 1,064,260
Yonkers IDA (St. Joseph's Hospital) 8.500 12/30/13 3,270 3,715,832
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- --------------------------------------------------------------------------------------------------------------------------
General Obligation (market value $378,624,836) - 12.3%
<S> <C> <C> <C> <C> <C>
Cohoes GO 6.200% 03/15/13 $ 25 $ 25,668
Cohoes GO 6.200 03/15/12 35 35,935
Cohoes GO 6.250 03/15/15 25 25,666
Cohoes GO 6.250 03/15/16 25 25,625
Cohoes GO 6.250 03/15/14 25 25,666
Lowville GO 7.200 09/15/13 100 121,385
Lowville GO 7.200 09/15/12 100 121,170
Lowville GO 7.200 09/15/05 100 117,088
Lowville GO 7.200 09/15/14 100 121,996
Lowville GO 7.200 09/15/07 75 89,828
Newburgh GO 7.100 09/15/08 185 193,843
Newburgh GO 7.100 09/15/07 185 194,348
Newburgh GO 7.150 09/15/09 180 188,563
Newburgh GO 7.150 09/15/10 150 156,627
Newburgh GO 7.200 09/15/11 155 161,395
Newburgh GO 7.200 09/15/12 155 160,980
Newburgh GO 7.250 09/15/14 155 160,636
Newburgh GO 7.250 09/15/13 160 166,245
NYC GO 0.000 05/15/12 200 94,368
NYC GO 0.000(c) 08/15/16(p) 70 58,753
NYC GO 0.000 11/15/11 4,990 2,433,224
NYC GO 0.000(c) 08/01/25 100 60,114
NYC GO 0.000 10/01/12 40 18,505
NYC GO 0.000(c) 05/15/14 1,690 1,325,163
NYC GO 0.000(c) 08/01/14 500 381,040
NYC GO 0.000 05/15/11 270 135,111
NYC GO 5.125 08/01/13 1,250 1,229,538
NYC GO 5.125 02/01/11 1,285 1,275,877
NYC GO 5.250 08/01/20 7,000 6,890,520
NYC GO 5.250 08/01/12 2,060 2,061,730
NYC GO 5.800(c)(f) 08/01/14 13,640 13,848,556
NYC GO 5.875 08/01/24 2,000 2,085,560
NYC GO 5.875 08/01/24 4,865 5,203,166
NYC GO 6.000 08/01/15 100 100,090
NYC GO 6.000 10/15/16 50 52,902
NYC GO 6.000 05/15/20 270 281,224
NYC GO 6.000 02/01/11 6,000 6,417,780
NYC GO 6.000 02/15/24 90 94,736
NYC GO 6.000 10/01/26 (p) 8,170 8,637,733
NYC GO 6.000 08/01/19 10 10,009
NYC GO 6.000 02/01/25 650 680,349
NYC GO 6.125 08/01/25 (p) 8,735 9,309,938
NYC GO 6.125 02/01/25 (p) 18,600 19,666,524
NYC GO 6.250 04/15/27 12,200 13,106,094
NYC GO 6.500 08/01/15 2,000 2,223,800
NYC GO 6.500 08/01/14 500 555,950
NYC GO 6.600 02/15/10 2,000 2,231,700
NYC GO 6.625 08/01/25 2,000 2,246,300
NYC GO 6.625 02/15/25 15,580 17,408,157
NYC GO 7.000 02/01/10 5 5,060
NYC GO 7.000 02/01/20 250 274,618
NYC GO 7.000 02/01/18 25 27,462
NYC GO 7.000 02/01/22 4,595 5,067,320
NYC GO 7.000 02/01/17 (p) 55 51,900
NYC GO 7.000 02/01/20 10 10,985
NYC GO 7.000 02/01/20 (p) 400 447,120
NYC GO 7.000 02/01/22 (p) 5 5,589
NYC GO 7.000 10/01/12 625 694,150
NYC GO 7.100 02/01/09 85 93,683
NYC GO 7.100 02/01/10 (p) 3,060 3,431,821
NYC GO 7.100 02/01/10 940 1,036,021
NYC GO 7.100 02/01/11 (p) 1,555 1,743,948
NYC GO 7.100 02/01/09 (p) 860 964,499
NYC GO 7.100 02/01/11 (p) 210 231,452
NYC GO 7.200 02/01/14 (p) 3,520 3,960,810
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NYC GO 7.200 % 02/01/15(p) $ 2,465 $ 2,773,692
NYC GO 7.200 02/01/15 335 370,453
NYC GO 7.200 02/01/14(p) 480 530,798
NYC GO 7.250 08/15/24(p) 4,005 4,431,773
NYC GO 7.250 08/15/24 9,815 10,710,619
NYC GO 7.400 02/01/02 330 366,277
NYC GO 7.500 08/01/20 645 732,481
NYC GO 7.500 02/01/03 2,000 2,233,740
NYC GO 7.500 08/01/19(p) 160 181,701
NYC GO 7.500 08/01/21(p) 915 1,052,781
NYC GO 7.500 08/01/19(p) 1,705 1,961,739
NYC GO 7.500 08/15/20 6,180 7,347,093
NYC GO 7.500 08/01/20 p) 6,855 7,887,226
NYC GO 7.500 08/01/21 85 96,075
NYC GO 7.500 02/01/18 120 134,834
NYC GO 7.500 02/01/18(p) 1,380 1,572,124
NYC GO 7.500 02/01/16 240 269,287
NYC GO 7.500 02/01/16(p) 2,760 3,144,247
NYC GO 7.625 02/01/13(p) 3,535 4,043,616
NYC GO 7.625 02/01/14(p) 250 285,970
NYC GO 7.625 02/01/14(p) 20 22,406
NYC GO 7.625 02/01/13 310 349,630
NYC GO 7.750 08/15/17(p) 20 22,724
NYC GO 7.750 02/01/13 6,000 6,797,100
NYC GO 7.750 08/15/12(p) 90 102,260
NYC GO 7.750 02/01/10 1,500 1,702,290
NYC GO 7.750 08/15/13 60 67,341
NYC GO 7.750 08/15/13(p) 940 1,068,047
NYC GO 7.750 08/15/17 110 123,498
NYC GO 7.750 08/15/12 60 67,341
NYC GO 8.000 08/01/18 45 50,844
NYC GO 8.000 08/15/21(p) 245 280,417
NYC GO 8.000 08/15/21(p) 5 5,655
NYC GO 8.000 08/15/20 10 11,310
NYC GO 8.250 11/15/20 20 22,943
NYC GO 8.250 08/01/13 30 34,142
NYC GO 8.250 08/01/14 35 39,832
NYC GO 8.250 11/15/15 80 91,771
NYC GO 8.250 11/15/18(p) 2,760 3,206,292
NYC GO 8.250 11/15/18(p) 240 275,314
NYC GO 8.250 08/01/14(p) 1,590 1,826,926
NYC GO 8.250 08/01/12 5 5,721
NYC GO 8.250 11/15/15(p) 920 1,068,764
NYC GO CARS 7.670(f) 09/01/11 8,387 9,571,664
NYC GO CARS 7.670(f) 08/12/10 16,387 18,701,664
NYC GO RIBS 7.028(f) 07/29/10 4,200 4,483,500
NYC GO RIBS 7.028(f) 08/01/09 6,200 6,626,250
NYC GO RIBS 7.126(f) 08/22/13 5,400 5,724,000
NYC GO RIBS 7.126(f) 08/01/15 3,050 3,221,563
NYC GO RIBS 8.006(f) 08/01/13 13,150 14,695,125
NYC GO RITES 8.000(f) 10/01/11 15,000 16,674,300
Puerto Rico GO 5.875 07/01/18 30 31,755
Puerto Rico GO 5.375 07/01/25 5,000 5,050,000
Puerto Rico GO 8.000 07/01/07 715 742,349
Puerto Rico GO RITES (b) 7.821(f) 07/01/22 1,600 1,810,000
Puerto Rico GO YCN 7.782(f) 07/01/20 40,250 44,627,188
Puerto Rico GO YCN (b) 6.880(f) 07/01/15 1,000 1,123,750
Suffolk GO 6.375 11/01/16 725 762,765
Suffolk GO 6.750 08/01/10 15 15,323
Utica GO 5.900 12/01/02 100 99,111
Utica GO 6.000 01/15/06 580 565,894
Utica GO 6.250 01/15/07 560 555,078
V. I. GO (Hugo Insurance Claims Program) 7.750 10/01/06 358 398,626
V. I. Public Finance Authority 7.125 10/01/04 1,135 1,276,807
V. I. Public Finance Authority 7.250 10/01/18 28,750 32,283,663
V. I. Public Finance Authority 7.375 10/01/10 1,735 1,951,754
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Multi-Family Housing (market value $353,756,495) - 11.5%
Albany Hsg. Authority 0.000% 10/01/12(p) $ 496 $ 126,737
Albany IDA (MARA Mansion Rehab.) 6.500 02/01/23 1,715 1,774,699
Batavia Hsg. Authority (Washington Towers) 6.500 01/01/23 515 539,159
Battery Park City Authority 5.800 11/01/22 1,050 1,087,979
Battery Park City Authority 10.000 06/01/23 700 730,660
Bayshore HDC 7.500 02/01/23 1,460 1,574,756
Bleeker Terrace HDC 8.100 07/01/01 35 35,177
Bleeker Terrace HDC 8.350 07/01/04 45 45,133
Bleeker Terrace HDC 8.750 07/01/07 900 908,289
East Rochester Hsg. Authority (St. John's Meadows) 5.675 08/01/22 3,250 3,394,430
East Rochester Hsg. Authority (St. John's Meadows) 5.700 08/01/27 4,250 4,482,178
East Rochester Hsg. Authority (St. John's Meadows) 5.950 08/01/27 4,095 4,233,370
Elmira HDC 7.500 08/01/07 25 25,896
Guam Economic Devel. Authority 9.375 11/01/18 2,995 3,075,625
Guam Economic Devel. Authority 9.500 11/01/18 2,540 2,609,393
Hamilton Elderly Hsg. Corp. 11.250 01/01/15 680 711,389
Lockport HDC 6.000 10/01/18 1,200 1,224,216
Macleay Hsg. (Larchmont Woods) 8.500 01/01/31 4,640 5,009,808
Mechanicsville HDC 6.900 08/01/22 2,500 2,636,050
Monroe HDC 7.000 08/01/21 290 302,966
New Hartford HDC 7.375 01/01/24 20 21,346
New Hartford Sunset Wood Project 5.950 08/01/27 1,520 1,584,554
North Tonawanda HDC 6.800 12/15/07 585 642,687
North Tonawanda HDC 7.375 12/15/21 3,295 3,848,066
NYC HDC (Albert Einstein) 6.500 12/15/17 324 338,654
NYC HDC (Amsterdam) 6.500 08/15/18 911 911,189
NYC HDC (Atlantic Plaza) 7.034 02/15/19 1,516 1,593,983
NYC HDC (Barclay Avenue) 6.450 04/01/17 1,045 1,098,462
NYC HDC (Barclay Avenue) 6.600 04/01/33 4,055 4,260,953
NYC HDC (Boulevard) 6.500 08/15/17 2,828 2,956,484
NYC HDC (Bridgeview) 6.500 12/15/17 486 507,983
NYC HDC (Cadman Plaza) 6.500 11/15/18 1,305 1,366,028
NYC HDC (Cadman Plaza) 7.000 12/15/18 511 536,859
NYC HDC (Candia) 6.500 06/15/18 192 200,713
NYC HDC (Clinton) 6.500 07/15/17 3,681 3,847,664
NYC HDC (Contello III) 7.000 12/15/18 313 329,642
NYC HDC (Cooper Gram) 6.500 08/15/17 1,524 1,593,378
NYC HDC (Court Plaza) 6.500 08/15/17 1,163 1,216,178
NYC HDC (Crown Gardens) 7.250 01/15/19 1,723 1,814,554
NYC HDC (Esplanade Gardens) 7.000 01/15/19 3,547 3,730,453
NYC HDC (Essex) 6.500 07/15/18 84 88,408
NYC HDC (Forest Park) 6.500 12/15/17 521 545,229
NYC HDC (Gouverneur Gardens) 7.034 02/15/19 1,691 1,778,015
NYC HDC (Heywood) 6.500 10/15/17 373 389,979
NYC HDC (Hudsonview) 6.500 09/15/17 4,205 4,395,802
NYC HDC (Janel) 6.500 09/15/17 1,189 1,242,669
NYC HDC (Kings Arms) 6.500 11/15/18 236 246,564
NYC HDC (Kingsbridge) 6.500 08/15/17 415 433,891
NYC HDC (Leader) 6.500 03/15/18 1,269 1,326,942
NYC HDC (Lincoln Amsterdam) 7.250 11/15/18 1,762 1,854,964
NYC HDC (Middagh) 6.500 01/15/18 213 222,265
NYC HDC (Montefiore) 6.500 10/15/17 2,775 2,901,185
NYC HDC (Multi-Family) 5.850 05/01/26 4,390 4,529,383
NYC HDC (Multi-Family) 5.850 05/01/25 50 51,496
NYC HDC (Multi-Family) 5.850 05/01/26 1,650 1,698,362
NYC HDC (Multi-Family) 6.600 04/01/30 38,880 41,442,970
NYC HDC (Multi-Family) 7.300 06/01/10 30 32,129
NYC HDC (Multi-Family) 7.350 06/01/19 1,145 1,223,204
NYC HDC (New Amsterdam) 6.500 08/15/18 891 932,345
NYC HDC (Residential Charter) 7.375 04/01/17 3,525 3,596,417
NYC HDC (Riverbend) 6.500 11/15/18 1,110 1,161,451
NYC HDC (Riverside Park) 7.250 11/15/18 6,781 7,123,224
NYC HDC (RNA House) 7.000 12/15/18 485 510,250
NYC HDC (Robert Fulton) 6.500 12/15/17 700 731,919
NYC HDC (Rosalie Manning) 7.034 11/15/18 254 266,614
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYC HDC (Scott Tower) 7.000% 12/15/18 $ 674 $ 709,013
NYC HDC (Seaview) 6.500 01/15/18 924 966,796
NYC HDC (Sky View) 6.500 11/15/18 1,722 1,802,137
NYC HDC (South Bronx) 8.100 09/01/23 3,210 3,429,917
NYC HDC (Stevenson) 6.500 05/15/18 1,754 1,834,613
NYC HDC (Stryckers Bay) 7.034 11/15/18 504 530,792
NYC HDC (St. Martin) 6.500 11/15/18 382 399,563
NYC HDC (Tivoli) 6.500 01/15/18 1,759 1,840,758
NYC HDC (Towers) 6.500 08/15/17 378 395,781
NYC HDC (Townhouse) 6.500 01/15/18 239 249,966
NYC HDC (Tri-Faith House) 7.000 01/15/19 367 386,279
NYC HDC (University) 6.500 08/15/17 1,562 1,633,333
NYC HDC (Washington Square) 7.000 01/15/19 468 491,557
NYC HDC (West Side) 6.500 11/15/18 422 442,068
NYC HDC (West Village) 6.500 11/15/13 4,767 5,006,112
NYC HDC (Westview) 6.500 10/15/17 272 284,718
NYC HDC (Woodstock Terrace) 7.034 02/15/19 624 656,393
NYC HDC, Series B 5.875 11/01/18 5,235 5,443,301
NYS HFA (Children's Rescue) 7.625 05/01/18 3,555 3,805,201
NYS HFA (Dominican Village) 6.600 08/15/27 2,200 2,354,550
NYS HFA (Fulton Manor) 6.100 11/15/25 4,205 4,451,455
NYS HFA (HELP/Bronx) 7.850 11/01/99 1,080 1,127,034
NYS HFA (HELP/Bronx) 7.850 05/01/99 1,040 1,073,353
NYS HFA (HELP/Bronx) 8.050 11/01/05 13,080 13,861,661
NYS HFA (HELP/Suffolk) 8.100 11/01/05 1,210 1,261,486
NYS HFA (Meadow Manor) 7.750 11/01/19 5 5,070
NYS HFA (Multi-Family) 0.000 11/01/14 15,730 6,334,314
NYS HFA (Multi-Family) 0.000 11/01/17 12,695 4,117,369
NYS HFA (Multi-Family) 0.000 11/01/15 14,590 5,522,169
NYS HFA (Multi-Family) 5.950 08/15/24 25 25,565
NYS HFA (Multi-Family) 6.050 08/15/32 2,000 2,097,260
NYS HFA (Multi-Family) 6.100 11/15/36 1,285 1,351,666
NYS HFA (Multi-Family) 6.125 08/15/38 4,700 4,917,704
NYS HFA (Multi-Family) 6.200 08/15/12 50 52,596
NYS HFA (Multi-Family) 6.300 08/15/26 5,000 5,291,550
NYS HFA (Multi-Family) 6.350 08/15/23 4,170 4,442,843
NYS HFA (Multi-Family) 6.400 11/15/27 1,175 1,249,695
NYS HFA (Multi-Family) 6.500 03/15/25 9,265 10,675,133
NYS HFA (Multi-Family) 6.500 08/15/24 2,905 3,052,690
NYS HFA (Multi-Family) 6.700 08/15/25 11,980 12,665,136
NYS HFA (Multi-Family) 6.750 11/15/36 5,725 6,179,451
NYS HFA (Multi-Family) 6.950 08/15/24 2,870 3,047,165
NYS HFA (Multi-Family) 6.950 08/15/12 75 81,186
NYS HFA (Multi-Family) 7.050 08/15/24 5,350 5,744,509
NYS HFA (Multi-Family) 7.450 11/01/28 1,586 1,669,265
NYS HFA (Multi-Family) 7.550 11/01/29 2,460 2,592,496
NYS HFA (Multi-Family) 7.700 03/15/06(p) 145 162,732
NYS HFA (Multi-Family) 7.700 03/15/06(p) 5 5,575
NYS HFA (Multi-Family) 7.850 02/15/30 50 55,576
NYS HFA (NonProfit) 6.400 11/01/10 15 15,325
NYS HFA (NonProfit) 6.400 11/01/13 25 25,540
NYS HFA (NonProfit) 6.600 11/01/10 25 25,534
NYS HFA (NonProfit) 6.600 11/01/08 20 20,428
NYS HFA (NonProfit) 6.600 11/01/13 20 20,623
NYS HFA (Phillips Village) 7.750 08/15/17 5,000 5,587,900
NYS HFA (Service Contract) 5.500 03/15/25 5,525 5,558,703
NYS HFA (Service Contract) 5.500 09/15/22 5,600 5,654,096
NYS HFA (Service Contract) 6.125 03/15/20 25 26,434
NYS HFA (Shorehill Hsg.) 7.500 05/01/08 1,210 1,224,641
NYS HFA, Series A 6.125 11/01/20 1,385 1,472,629
Pilgrim Village HDC 6.800 02/01/21 1,105 1,147,078
Portchester CDC (Southport) 7.300 08/01/11 60 62,779
Portchester CDC (Southport) 7.375 08/01/22 25 26,139
Puerto Rico HFC 7.300 10/01/06 10 10,587
Puerto Rico HFC 7.500 10/01/15 210 222,890
Puerto Rico HFC 7.500 04/01/22 6,180 6,568,784
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rensselaer Hsg. Authority (Renwyck) 7.650 % 01/01/11 $ 25 $ 27,318
Riverhead HDC 8.250 08/01/10 45 46,649
Rochester Hsg. Authority (Crossroads) 7.700 01/01/17 20,890 22,843,424
Schenectady IDA (ASSC) 6.400 05/01/14 500 536,900
Schenectady IDA (ASSC) 6.450 05/01/24 2,655 2,858,028
Scotia Hsg. Authority (Holyrood House) 7.000 06/01/09 175 187,061
Sunnybrook EHC 11.250 12/01/14 2,990 3,172,988
Syracuse IDA (James Square) 0.000 08/01/25 45,155 10,958,215
Tonawanda Senior Citizens Hsg. 7.875 02/01/11 525 543,632
Tupper Lake HDC 8.125 10/01/10 75 75,623
Union Elderly Hsg. 10.000 04/01/13 2,140 2,219,608
Utica Senior Citizen Hsg. 0.000 07/01/02 25 16,405
Utica Senior Citizen Hsg. 0.000 07/01/26 3,410 441,288
V. I. HFA 8.100 12/01/18 25 26,450
Watervliet Elderly Hsg. Corp. 8.000 11/15/07 100 101,859
Watervliet Elderly Hsg. Corp. 8.000 11/15/03 100 101,859
Watervliet Elderly Hsg. Corp. 8.000 11/15/08 100 101,859
Watervliet Elderly Hsg. Corp. 8.000 11/15/05 95 96,766
Watervliet Elderly Hsg. Corp. 8.000 11/15/06 100 101,859
Watervliet Elderly Hsg. Corp. 8.000 11/15/09 100 101,859
Watervliet Elderly Hsg. Corp. 8.000 11/15/04 95 96,766
- --------------------------------------------------------------------------------------------------------------------------
Resource Recovery (market value $328,922,593) - 10.7%
Dutchess Res Rec (Solid Waste) 6.800 01/01/10 1,700 1,822,162
Dutchess Res Rec (Solid Waste) 7.000 01/01/10 1,805 1,954,436
Islip Res Rec 6.500 07/01/09 2,000 2,279,520
NYS Environ. (Huntington Res Rec) 7.500 10/01/12 58,860 62,754,178
NYS Environ. (Occidental Petroleum) 5.700 09/01/28 6,015 6,102,819
NYS Environ. (Occidental Petroleum) 6.100 11/01/30 9,000 9,427,410
Onondaga Res Rec 6.875 05/01/06 27,850 29,810,919
Onondaga Res Rec 7.000 05/01/15 67,435 72,885,097
Suffolk IDA (Huntington Res Rec) 5.550(w) 10/01/04 8,545 8,848,689
Suffolk IDA (Huntington Res Rec) 5.650(w) 10/01/05 9,180 9,587,225
Suffolk IDA (Huntington Res Rec) 5.750(w) 10/01/06 9,875 10,366,084
Suffolk IDA (Huntington Res Rec) 5.800(w) 10/01/07 10,615 11,161,673
Suffolk IDA (Huntington Res Rec) 5.850(w) 10/01/08 11,410 12,056,262
Suffolk IDA (Huntington Res Rec) 5.950(w) 10/01/09 12,265 13,007,033
Suffolk IDA (Huntington Res Rec) 6.000(w) 10/01/10 13,190 14,046,559
Suffolk IDA (Huntington Res Rec) 6.150(w) 10/01/11 14,170 15,269,025
Suffolk IDA (Huntington Res Rec) 6.250(w) 10/01/12 17,155 18,635,477
Ulster County Res Rec 6.000 03/01/14 2,250 2,339,303
Warren/Washington IDA (Res Rec) 8.000 12/15/12 8,730 8,802,372
Warren/Washington IDA (Res Rec) 8.200 12/15/10 8,965 9,101,447
Warren/Washington IDA (Res Rec) 8.200 12/15/10 8,535 8,664,903
- --------------------------------------------------------------------------------------------------------------------------
Electric Utilities (market value $288,748,259) - 9.4%
American Samoa Power Authority 6.800 09/01/00 400 422,432
American Samoa Power Authority 6.850 09/01/01 400 429,460
American Samoa Power Authority 6.900 09/01/02 400 436,284
American Samoa Power Authority 6.950 09/01/03 500 552,480
American Samoa Power Authority 7.000 09/01/04 500 558,455
American Samoa Power Authority 7.100 09/01/01 800 865,472
American Samoa Power Authority 7.200 09/01/02 800 882,232
Guam Power Authority 6.300 10/01/22 10 10,520
Guam Power Authority 6.625 10/01/14 450 493,241
Guam Power Authority 6.750 10/01/24 4,780 5,244,234
NYC IDA (Brooklyn Navy Yard) 5.650 10/01/28 11,490 11,642,243
NYC IDA (Brooklyn Navy Yard) 5.750 10/01/36 30,350 30,802,215
NYS ERDA (Con Ed) 6.375 12/01/27 290 312,075
NYS ERDA (Con Ed) 6.375 12/01/27 11,000 11,616,000
NYS ERDA (Con Ed) 6.750 01/15/27 4,290 4,591,115
NYS ERDA (Con Ed) 6.750 01/15/27 6,115 6,535,223
NYS ERDA (Con Ed) 7.125 03/15/22 1,405 1,436,430
NYS ERDA (Con Ed) 7.125 03/15/22 3,250 3,322,833
NYS ERDA (Con Ed) 7.250 11/01/24 16,365 16,925,338
NYS ERDA (Con Ed) 7.375 07/01/24 25 25,645
NYS ERDA (Con Ed) 7.375 07/01/24 27,850 28,561,289
NYS ERDA (Con Ed) 7.500 01/01/26 7,190 7,662,527
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYS ERDA (Con Ed) 7.500 % 07/01/25 $ 2,740 $ 2,889,303
NYS ERDA (Con Ed) 7.500 01/01/26 4,000 4,266,840
NYS ERDA (LILCO) 6.900 08/01/22 55 59,995
NYS ERDA (LILCO) 6.900 08/01/22 275 299,973
NYS ERDA (LILCO) 7.150 06/01/20 15,750 17,217,428
NYS ERDA (LILCO) 7.150 09/01/19 16,580 18,104,034
NYS ERDA (LILCO) 7.150 12/01/20 12,305 13,451,457
NYS ERDA (LILCO) 7.150 09/01/19 14,940 16,331,960
NYS ERDA (LILCO) 7.150 02/01/22 15,295 16,720,035
NYS ERDA (LILCO) 7.150 02/01/22 11,630 12,713,567
NYS ERDA (NIMO) 8.875 11/01/25 18,500 18,931,050
NYS ERDA (NYSEG) 5.700 12/01/28 400 413,348
NYS ERDA (NYSEG) 5.950 12/01/27 30 32,005
NYS ERDA (RG&E) 5.950(w) 09/01/33 12,500 13,133,750
NYS ERDA (RG&E) 8.375 12/01/28 120 126,682
NYS Power Authority 6.000 01/01/18 670 670,951
NYS Power Authority 6.750 01/01/18 10 10,888
Puerto Rico Electric LEVRRS 7.978(f) 07/01/23 17,800 20,047,250
- --------------------------------------------------------------------------------------------------------------------------
Single-Family Housing (market value $232,389,935) - 7.6%
NYS (SONYMA) Mortgage, 1st Series 0.000 10/01/1998 95 89,388
NYS (SONYMA) Mortgage, 1st Series 0.000 10/01/14 30 6,335
NYS (SONYMA) Mortgage, 2nd Series 0.000 10/01/14 10,880 2,255,315
NYS (SONYMA) Mortgage, 6th Series 9.375 04/01/10 830 860,859
NYS (SONYMA) Mortgage, 7th Series GAINS 0.000(c) 10/01/14 1,255 1,259,229
NYS (SONYMA) Mortgage, 8th Series A 6.875 04/01/17 315 318,802
NYS (SONYMA) Mortgage, 8th Series D 8.200 10/01/06 100 102,062
NYS (SONYMA) Mortgage, 8th Series E 8.100 10/01/17 80 81,965
NYS (SONYMA) Mortgage, 8th Series F 8.000 10/01/17 15 15,180
NYS (SONYMA) Mortgage, 9th Series A 7.300 04/01/17 310 313,658
NYS (SONYMA) Mortgage, 9th Series E 8.375 04/01/18 5 5,110
NYS (SONYMA) Mortgage, Series 12 CAB 8.250 04/01/17 790 809,869
NYS (SONYMA) Mortgage, Series 2 0.000 10/01/14 220 45,846
NYS (SONYMA) Mortgage, Series 27 6.450 04/01/04 25 26,702
NYS (SONYMA) Mortgage, Series 28 6.450 10/01/20 7,705 7,983,998
NYS (SONYMA) Mortgage, Series 28 6.650 04/01/22 10,000 10,607,800
NYS (SONYMA) Mortgage, Series 28 7.050 10/01/23 8,810 9,460,178
NYS (SONYMA) Mortgage, Series 30 5.800 10/01/25 500 511,620
NYS (SONYMA) Mortgage, Series 30-A 4.375 10/01/23 15 14,751
NYS (SONYMA) Mortgage, Series 30-B 6.650 10/01/25 16,005 17,100,702
NYS (SONYMA) Mortgage, Series 36-A 6.625 04/01/25 11,500 12,386,995
NYS (SONYMA) Mortgage, Series 38 RITES (b) 7.861(f) 04/01/25 13,940 15,142,325
NYS (SONYMA) Mortgage, Series 40-A 6.700 04/01/25 7,560 8,172,587
NYS (SONYMA) Mortgage, Series 40-B 6.400 10/01/12 35 37,610
NYS (SONYMA) Mortgage, Series 40-B 6.600 04/01/25 5,795 6,240,520
NYS (SONYMA) Mortgage, Series 42 6.650 04/01/26 100 108,606
NYS (SONYMA) Mortgage, Series 42 6.650 04/01/26 13,605 14,696,257
NYS (SONYMA) Mortgage, Series 44 7.500 04/01/26 11,990 13,123,535
NYS (SONYMA) Mortgage, Series 46 6.500 04/01/13 100 108,498
NYS (SONYMA) Mortgage, Series 46 6.600 10/01/19 65 70,501
NYS (SONYMA) Mortgage, Series 46 6.650 10/01/25 24,565 26,639,514
NYS (SONYMA) Mortgage, Series 48 6.100 04/01/25 140 146,782
NYS (SONYMA) Mortgage, Series 50 6.625 04/01/25 7,470 8,113,914
NYS (SONYMA) Mortgage, Series 52 6.100 04/01/26 895 946,489
NYS (SONYMA) Mortgage, Series 54 6.200 10/01/26 25 26,455
NYS (SONYMA) Mortgage, Series 58 6.400 04/01/27 6,200 6,673,804
NYS (SONYMA) Mortgage, Series 60 6.000 10/01/22 120 126,016
NYS (SONYMA) Mortgage, Series 60 6.050 04/01/26 200 210,000
NYS (SONYMA) Mortgage, Series 63 6.125 04/01/27 9,750 10,305,458
NYS (SONYMA) Mortgage, Series 65 5.850 10/01/28 10,205 10,594,627
NYS (SONYMA) Mortgage, Series 67 5.700 10/01/17 3,000 3,082,140
NYS (SONYMA) Mortgage, Series 67 5.800 10/01/28 11,665 12,064,060
NYS (SONYMA) Mortgage, Series BB-2 7.950 10/01/15 1,845 1,914,188
NYS (SONYMA) Mortgage, Series EE-1 8.000 10/01/10 40 40,547
NYS (SONYMA) Mortgage, Series EE-2 7.450 10/01/10 95 99,852
NYS (SONYMA) Mortgage, Series EE-2 7.500 04/01/16 40 42,075
NYS (SONYMA) Mortgage, Series EE-3 7.700 10/01/10 265 281,491
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NYS (SONYMA) Mortgage, Series EE-3 7.750 % 04/01/16 $ 15 $ 15,950
NYS (SONYMA) Mortgage, Series EE-4 7.750 10/01/10 95 101,008
NYS (SONYMA) Mortgage, Series HH-2 7.700 10/01/09 395 411,827
NYS (SONYMA) Mortgage, Series HH-2 7.850 04/01/22 40 41,866
NYS (SONYMA) Mortgage, Series HH-3 7.875 10/01/09 270 285,649
NYS (SONYMA) Mortgage, Series HH-3 7.950 04/01/22 515 543,758
NYS (SONYMA) Mortgage, Series HH-4 8.050 04/01/22 65 69,070
NYS (SONYMA) Mortgage, Series II 0.000 10/01/07 100 48,844
NYS (SONYMA) Mortgage, Series II 0.000 04/01/08 170 79,813
NYS (SONYMA) Mortgage, Series II 0.000 10/01/09 180 74,462
NYS (SONYMA) Mortgage, Series II 0.000 10/01/08 120 54,185
NYS (SONYMA) Mortgage, Series II 0.000 04/01/05 100 59,599
NYS (SONYMA) Mortgage, Series II 0.000 04/01/06 90 49,611
NYS (SONYMA) Mortgage, Series JJ 7.500 10/01/17 455 480,949
NYS (SONYMA) Mortgage, Series KK 7.650 04/01/19 95 99,429
NYS (SONYMA) Mortgage, Series KK 7.800 10/01/20 285 299,717
NYS (SONYMA) Mortgage, Series MM-1 7.500 04/01/13 290 304,486
NYS (SONYMA) Mortgage, Series MM-1 7.750 10/01/05 25 26,186
NYS (SONYMA) Mortgage, Series MM-1 7.950 10/01/21 30 32,480
NYS (SONYMA) Mortgage, Series MM-2 7.700 04/01/13 3,105 3,164,274
NYS (SONYMA) Mortgage, Series MM-2 7.700 04/01/05 100 104,460
NYS (SONYMA) Mortgage, Series NN 7.550 10/01/17 60 63,494
NYS (SONYMA) Mortgage, Series OO 7.900 10/01/11 5 5,199
NYS (SONYMA) Mortgage, Series QQ 7.700 10/01/12 25 26,317
NYS (SONYMA) Mortgage, Series RR 7.700 10/01/10 105 111,784
NYS (SONYMA) Mortgage, Series RR 7.750 10/01/17 80 85,059
NYS (SONYMA) Mortgage, Series SS 7.500 10/01/19 85 87,617
NYS (SONYMA) Mortgage, Series TT 6.950 10/01/02 5 5,292
NYS (SONYMA) Mortgage, Series UU 7.150 10/01/22 105 110,142
NYS (SONYMA) Mortgage, Series UU 7.750 10/01/23 2,760 2,937,440
NYS (SONYMA) Mortgage, Series VV 0.000 10/01/23 115,222 17,519,505
NYS (SONYMA) Mortgage, Series VV 7.375 10/01/11 195 209,709
Puerto Rico HFA 0.000 08/01/26 8,690 1,249,274
Puerto Rico HFA 6.250 04/01/29 100 105,742
Puerto Rico HFA 7.650 10/15/22 80 85,371
V. I. HFA 6.450 03/01/16 165 176,152
- ---------------------------------------------------------------------------------------------------------------------------
Marine/Aviation Facilities (market value $165,347,465) - 5.4%
Albany IDA (Port of Albany) 7.250 02/01/24 1,395 1,526,186
Guam Airport 6.600 10/01/10 5,375 5,891,914
Guam Airport 6.700 10/01/23 60,730 66,391,251
Monroe County Airport 7.250 01/01/19 20 21,423
NYC IDA (American Airlines) 6.900 08/01/24 16,685 18,780,135
NYC IDA (American Airlines) 7.750 07/01/19 1,795 1,884,768
NYC IDA (American Airlines) 8.000 07/01/20 7,110 7,482,777
NYC IDA (Japan Airlines) 6.000 11/01/15 3,395 3,656,517
NYC IDA (Terminal One Group Assoc.) 6.000 01/01/19 15,050 15,799,641
NYC IDA (Terminal One Group Assoc.) 6.125 01/01/24 6,715 7,103,799
Port Authority NY/NJ (KIAC) 6.750 10/01/19 150 166,395
Port Authority NY/NJ (US Air) 9.000 12/01/10 520 587,881
Port Authority NY/NJ (US Air) 9.000 12/01/06 7,255 8,202,068
Port Authority NY/NJ (US Air) 9.125 12/01/15 22,335 25,307,342
Port Authority NY/NJ, 51st Series 7.000 12/01/14 40 41,107
Port Authority NY/NJ, 68th Series 7.250 02/15/25 105 111,818
Port Authority NY/NJ, 68th Series 7.250 02/15/25 225 239,657
Port Authority NY/NJ, 69th Series 7.125 06/01/25 55 59,168
Port Authority NY/NJ, 70th Series 7.250 08/01/25 75 80,756
Port Authority NY/NJ, 70th Series 7.250 08/01/25 15 16,144
Port Authority NY/NJ, 71st Series 6.500 01/15/26 40 42,644
Port Authority NY/NJ, 73rd Series 6.750 04/15/26 35 37,704
Port Authority NY/NJ, 73rd Series 6.750 04/15/26 5 5,374
Port Authority NY/NJ, 74th Series 6.750 08/01/26 15 16,305
Port Authority NY/NJ, 76th Series 6.500 11/01/26 60 64,661
Puerto Rico Port Authority 7.300 07/01/07 25 25,040
V. I. Port Authority (CEK Airport) 8.100 10/01/05 1,670 1,738,620
Westchester IDA (Westchester Airport) 5.950 08/01/24 65 66,370
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
NonProfit Organization (market value $116,526,987) - 3.8%
<S> <C> <C> <C> <C> <C>
Albany IDA (Albany Rehab.) 8.375 % 06/01/23 $ 1,025 $ 1,129,694
Blauvelt Volunteer Fire Company 6.250 10/15/17 1,065 1,079,686
Columbia IDA (Berkshire Farms) 6.900 12/15/04 685 739,047
Columbia IDA (Berkshire Farms) 7.500 12/15/14 1,855 2,062,556
Geneva IDA (FLCP) 8.250 11/01/04 700 761,229
Monroe IDA (Al Sigl Center) 6.600 12/15/17 4,260 4,531,490
Monroe IDA (Al Sigl Center) 7.250 12/15/15 1,590 1,735,596
Monroe IDA (DePaul CF) 6.450 02/01/14 880 973,755
Monroe IDA (DePaul CF) 6.500 02/01/24 1,285 1,410,095
Monroe IDA (DePaul Properties) 8.300 09/01/02 405 438,963
Monroe IDA (DePaul Properties) 8.800 09/01/21 4,605 5,010,240
Montgomery IDA (New Dimensions in Living) 8.900 05/01/16 1,055 1,153,875
NYC IDA (Blood Center) 7.200 05/01/12(p) 500 576,670
NYC IDA (Blood Center) 7.250 05/01/22(p) 3,000 3,468,240
NYC IDA (CCM) 7.875 12/01/16 1,770 1,973,851
NYC IDA (CCM) 8.000 12/01/11 1,980 2,184,059
NYC IDA (EPG) 7.500 07/30/03 10,255 11,328,801
NYC IDA (Fund for NYC Project) 7.625 07/01/10 1,000 1,068,850
NYC IDA (Graphic Artists) 8.250 12/30/23 1,265 1,367,022
NYC IDA (JBFS) 6.750 12/15/12 6,040 6,479,712
NYC IDA (Lighthouse) 6.500 07/01/22 1,000 1,076,010
NYC IDA (NY Hostel Co.) 6.750 01/01/04 1,040 1,076,338
NYC IDA (NY Hostel Co.) 7.600 01/01/17 4,400 4,627,436
NYC IDA (OHEL) 8.250 03/15/23 3,435 3,774,378
NYC IDA (PRFFP) 7.000 10/01/16 815 889,075
NYC IDA (Psycho Therapy) 9.625 04/01/10 730 789,196
NYC IDA (St. Christoper Ottilie) 7.500 07/01/21 4,140 4,528,166
NYS Dorm (Teresian House) 5.250 07/01/17 3,500 3,470,495
Rochester Museum & Science Center 6.125 12/01/15 6,790 6,898,708
Suffolk IDA (Community Program Ctr. of L.I.) 7.250 11/01/07 425 429,488
Suffolk IDA (Community Program Ctr. of L.I.) 8.250 11/01/22 1,825 1,847,575
UCP Chemung County 6.600 08/01/22 1,000 1,115,940
United Nations Dev. Corp., Series B 5.600 07/01/26 21,590 21,657,577
United Nations Dev. Corp., Series C 5.600 07/01/26 12,450 12,492,579
Westchester IDA (JBFS) 6.750 12/15/12 2,220 2,380,595
- ---------------------------------------------------------------------------------------------------------------------------
Lease Rental (market value $112,125,629) - 3.7%
Albany IDA (Upper Hudson Library) 8.750 05/01/22 940 1,015,181
Albany IDA (Upper Hudson Library) 8.750 05/01/07 230 241,636
Albany Parking Authority 0.000 11/01/17 1,770 635,731
Amherst IDA (Amherst Rink) 5.650 10/01/22 2,000 2,034,180
Babylon IDA (WWH Ambulance) 7.375 09/15/08 1,330 1,473,002
Capital District Youth Center 6.000 02/01/17 600 636,384
Carnegie Redevelopment Corp. 7.000 09/01/21 500 548,065
Clifton Park COP (Clifton Commons) 8.500 08/01/08 5 6,644
Monroe COP 8.050 01/01/11 460 493,014
North Babylon Volunteer Fire Company 5.750 08/01/22 715 748,255
NYS COP (BOCES) (b) 7.875 10/01/00 875 911,628
NYS COP (Hanson Redevelopment) 8.250 11/01/01 250 265,468
NYS Dorm (Suffolk-Judicial) 9.500 04/15/14 31,750 37,071,935
NYS LGSC (SCSB) 7.375 12/15/16 810 882,017
NYS UDC 0.000 01/01/08(p) 900 552,465
NYS UDC 0.000 01/01/11 80 38,602
NYS UDC 0.000 01/01/11 98,200 47,383,464
NYS UDC 0.000 01/01/03 15 12,155
NYS UDC 5.500 01/01/25 1,000 1,027,860
NYS UDC 7.500 01/01/18(p) 2,000 2,231,260
Puerto Rico Public Bldgs. Authority Indexed Flt. 5.760 (c)(f) 07/01/16 7,000 7,208,180
Puerto Rico/Family Department Municipal Lease (b) 12.725 08/12/03 3,549 4,173,975
Schroon Lake Fire District (b) 7.250 03/01/09 552 583,944
Vigilant EHL (Thomatson) 7.500 11/01/12 950 1,028,518
Yonkers Parking Authority 7.750 12/01/04 860 922,066
- --------------------------------------------------------------------------------------------------------------------------------
Adult Living Facilities (market value $96,850,021) - 3.2%
Batavia Hsg. Authority (Trocaire Place) 8.750 04/01/25 3,850 4,411,600
Middleton IDA (Southwinds) 8.375 03/01/18 3,740 4,128,025
Monroe IDA (Jewish Home) 6.875 04/01/27 4,945 5,159,316
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Monroe IDA (Jewish Home) 6.875 % 04/01/17 $ 1,000 $ 1,051,310
Orange IDA (Glen Arden) 8.250 01/01/02 18,025 18,417,945
Orange IDA (Glen Arden) 8.875 01/01/25 23,985 27,645,351
Syracuse Hsg. Authority (Seneca Heights) 7.500 12/01/07 1,990 2,029,143
Syracuse Hsg. Authority (Seneca Heights) 8.500 12/01/17 4,720 4,820,536
Syracuse Hsg. Authority, Series A 5.800 08/01/37 9,590 9,987,313
Syracuse Hsg. Authority, Series B 7.500 08/01/10 625 637,381
Tompkins IDA (Ithacare Center) 6.200 02/01/37 3,750 4,075,875
Tompkins IDA (Kendall at Ithaca) 7.875 06/01/15 2,790 3,026,006
Tompkins IDA (Kendall at Ithaca) 7.875 06/01/24 5,465 5,927,284
Union Hsg. Authority (Methodist Homes) 7.625 11/01/16 2,470 2,731,771
Union Hsg. Authority (Methodist Homes) 8.050 04/01/1999 105 108,767
Union Hsg. Authority (Methodist Homes) 8.150 04/01/00 110 116,393
Union Hsg. Authority (Methodist Homes) 8.250 04/01/01 120 130,020
Union Hsg. Authority (Methodist Homes) 8.350 04/01/02 150 166,223
Union Hsg. Authority (Methodist Homes) 8.500 04/01/12 2,010 2,279,762
- --------------------------------------------------------------------------------------------------------------------------
Water Utilities (market value $92,695,963) - 3.0%
Erie County Water Revenue, 4th Series 0.000 12/01/17 16,565 3,984,876
NYC Municipal Water Finance Authority IRS 6.419 (f) 06/15/13 12,500 12,921,875
NYC Municipal Water Finance Authority IVRC (b) 7.560 (f) 06/15/17 30,000 34,050,000
NYC Municipal Water Finance Authority LEVRRS 6.915 (f) 06/15/19 10,000 10,725,000
NYS Environ. (Consolidated Water) 7.150 11/01/14 1,840 2,023,798
NYS Environ. (NYS Water Services) 8.375 01/15/20 7,500 8,181,675
Suffolk IDA (Ocean Park Water) 7.500 11/01/22 715 786,193
V. I. Water & Power Authority 7.400 07/01/11 6,215 6,816,239
V. I. Water & Power Authority 7.600 01/01/12 6,850 7,702,003
V. I. Water & Power Authority 8.500 01/01/10 5,200 5,504,304
- --------------------------------------------------------------------------------------------------------------------------
Manufacturing, Non-Durable Goods (market value $87,123,683) - 2.8%
Babylon IDA (JFB & Sons Lithographers) 7.625 12/01/06 1,100 1,146,167
Babylon IDA (JFB & Sons Lithographers) 8.625 12/01/16 2,570 2,696,984
Cattaraugus IDA (Cherry Creek) 9.800 09/01/10 1,910 2,122,010
Herkimer IDA (Burrows Paper) 7.250 01/01/01 1,465 1,496,117
Herkimer IDA (Burrows Paper) 8.000 01/01/09 2,440 2,548,116
Middleton IDA (Fleurchem) 8.000 12/01/16 905 1,001,075
Monroe IDA (Cohber) 7.550 12/01/01 10 10,275
Monroe IDA (Cohber) 7.650 12/01/02 10 10,348
Monroe IDA (Cohber) 7.700 12/01/03 10 10,357
Monroe IDA (Cohber) 7.850 12/01/09 170 177,164
Nassau IDA (RJS Scientific) 8.050 12/01/05 305 334,860
Nassau IDA (RJS Scientific) 9.050 12/01/25 2,700 3,088,044
Nassau IDA (Sharp International) 7.375 12/01/07 3,070 3,222,579
Nassau IDA (Sharp International) 7.375 12/01/07 1,950 2,047,929
Nassau IDA (Sharp International) 7.875 12/01/12 2,610 2,758,222
Nassau IDA (Sharp International) 7.875 12/01/12 1,650 1,744,248
Newburgh IDA (ARMA Textile Printers) 7.125 11/01/07 2,310 2,374,495
Newburgh IDA (ARMA Textile Printers) 8.000 11/01/17 4,880 5,047,433
NYC IDA (Allied Metal) 6.375 12/01/14 870 874,724
NYC IDA (Allied Metal) 7.125 12/01/27 1,740 1,749,013
NYC IDA (Amplaco Group) 7.250 11/01/08 1,255 1,288,182
NYC IDA (Amplaco Group) 8.125 11/01/18 2,645 2,744,822
NYC IDA (Amster Novelty) 8.000 12/01/10 530 534,913
NYC IDA (Amster Novelty) 8.375 12/01/15 790 797,142
NYC IDA (Atlantic Veal & Lamb) 8.375 12/01/16 1,160 1,220,100
NYC IDA (Display Creations) 9.250 06/01/08 1,900 1,930,761
NYC IDA (Gutmann Plastics) 7.750 12/01/07 905 942,087
NYC IDA (House of Spices) 9.000 10/15/01 410 448,925
NYC IDA (House of Spices) 9.250 10/15/11 2,140 2,372,768
NYC IDA (Novelty Cord & Tassel) 8.663 (v) 12/01/06 580 579,583
NYC IDA (Paradise Products) 7.125 11/01/07 1,125 1,139,063
NYC IDA (Paradise Products) 8.250 11/01/22 4,475 4,537,740
NYC IDA (Pop Display) 6.750 12/15/04 1,035 1,081,741
NYC IDA (Pop Display) 7.900 12/15/14 2,645 2,900,613
NYC IDA (Promotional Slideguide) 7.500 12/01/10 710 750,988
NYC IDA (Promotional Slideguide) 7.875 12/01/15 1,065 1,148,571
NYC IDA (Sequins International) 8.500 04/30/00 315 335,053
NYC IDA (Sequins International) 8.950 01/30/16 4,555 5,098,184
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NYC IDA (Streamline Plastics) 7.750 % 12/01/15 $ 585 $ 626,763
NYC IDA (Streamline Plastics) 8.125 12/01/25 1,275 1,386,346
NYC IDA (Ultimate Display) 8.750 10/15/00 240 255,811
NYC IDA (Ultimate Display) 9.000 10/15/11 1,910 2,105,221
NYC IDA (Van Blarcom Closures) 7.125 11/01/07 1,380 1,409,435
NYC IDA (Van Blarcom Closures) 8.000 11/01/17 2,965 3,040,667
NYC IDA (Visy Paper) 7.950 01/01/28 8,000 9,241,120
Putnam IDA (Brewster Plastics) 8.500 12/01/16 1,990 2,137,121
Ulster IDA (Brooklyn Bottling) 7.800 06/30/02 525 552,557
Ulster IDA (Brooklyn Bottling) 8.600 06/30/22 1,915 2,057,246
- ---------------------------------------------------------------------------------------------------------------------------
Highways/Railways (market value $86,852,116) - 2.8%
MTA IVRC (b) 6.313 (f) 07/01/11 10,000 10,975,000
MTA Service Contract, Series R 5.500 (w) 07/01/13 815 820,738
MTA Service Contract, Series R 5.500 (w) 07/01/17 4,360 4,351,280
MTA Service Contract, Series R 5.500 (w) 07/01/12 1,270 1,284,719
MTA Service Contract, Series R 5.500 (w) 07/01/17 3,320 3,313,360
MTA Service Contract, Series R 5.500 (w) 07/01/12 1,000 1,011,590
MTA Service Contract, Series R 5.500 (w) 07/01/14 2,500 2,506,275
MTA YCR (b) 6.155 (f) 07/01/13 9,400 9,881,750
MTA YCR (b) 6.155 (f) 07/01/22 3,000 3,071,250
MTA, Series C1 5.500 07/01/22 9,690 9,755,698
MTA, Series C1 5.625 07/01/27 13,480 13,760,519
NYS Thruway 0.000 01/01/04 2,000 1,513,480
NYS Thruway 0.000 01/01/05 260 186,797
NYS Thruway 0.000 01/01/03 1,000 794,660
NYS Thruway Inflos 4.695 (f) 01/01/24 25,000 23,625,000
- ---------------------------------------------------------------------------------------------------------------------------
Higher Education (market value $76,164,648) - 2.5%
Allegany IDA (Alfred University) 7.500 09/01/11 10,070 11,098,751
Brookhaven IDA (Dowling College) 6.750 03/01/23 6,965 7,496,638
Cattaraugus IDA (St. Bonaventure University) 8.300 12/01/10 8,465 9,328,345
Dutchess IDA (Bard College) 7.000 11/01/17 3,500 3,915,415
Erie IDA (Medaille College) 8.000 12/30/22 3,230 3,567,018
Monroe IDA (Roberts Wesleyan College) 6.700 09/01/11 2,625 2,734,883
New Rochelle IDA (CNR) 6.750 07/01/22 3,000 3,237,090
NYC IDA (CNR) 5.800 09/01/26 1,500 1,548,690
NYC IDA (MMC) 7.000 07/01/23 3,500 3,765,370
NYS Dorm (City University) 5.375 07/01/24 5,650 5,622,315
NYS Dorm (Court Facility) 5.375 05/15/16 25 25,066
NYS Dorm (NY Medical College) 6.875 07/01/21 25 27,578
NYS Dorm (State University) 0.000 05/15/07 50 32,410
NYS Dorm (State University) 6.000 05/15/17 (p) 5 5,220
NYS Dorm (State University) 6.000 05/15/17 20 20,459
NYS Dorm (State University) 6.000 05/01/22 50 53,207
NYS Dorm (State University) 7.000 05/15/16 225 242,561
NYS Dorm (St. Thomas Aquinas College) 6.250 07/01/14 75 81,717
Puerto Rico ITEME (Polytech University) 5.700 08/01/13 5 5,095
Rockland IDA (DC) 8.000 03/01/13 2,090 2,306,616
Suffolk IDA (Dowling College) 6.625 06/01/24 2,000 2,108,540
Suffolk IDA (Dowling College) 6.700 12/01/20 2,870 3,076,583
Suffolk IDA (Dowling College) 8.250 12/01/20 (p) 950 1,074,175
University of V. I. 7.250 10/01/04 1,205 1,301,304
University of V. I. 7.700 10/01/19 3,570 4,076,547
University of V. I. 7.750 10/01/24 5,175 5,907,935
Yates IDA (Keuka College) 8.750 08/01/15 1,915 2,273,814
Yates IDA (Keuka College) 9.000 08/01/11 1,095 1,231,306
- ---------------------------------------------------------------------------------------------------------------------------
Education (market value $64,142,703) - 2.1%
Brookhaven IDA (Interdisciplinary School) 8.500 12/01/04 535 585,493
Brookhaven IDA (Interdisciplinary School) 9.500 12/01/19 3,220 3,631,161
Columbia IDA (ARC) 7.750 06/01/05 660 724,779
Columbia IDA (ARC) 8.650 06/01/18 2,650 2,979,528
Islip IDA (Leeway School) 9.000 08/01/21 960 1,063,142
Nassau IDA (ACLDD) 8.125 10/01/22 2,725 2,996,764
NYC IDA (BHMS) 8.400 09/01/02 200 202,552
NYC IDA (BHMS) 8.500 01/01/27 3,075 3,219,771
NYC IDA (BHMS) 8.900 09/01/11 660 712,041
NYC IDA (BHMS) 9.200 09/01/21 1,690 1,860,166
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NYC IDA (Eden II School) 7.750% 06/01/04 $ 405 $ 433,261
NYC IDA (Eden II School) 8.750 06/01/19 2,505 2,741,547
NYC IDA (Friends Seminary School) 7.000 12/01/17 3,705 3,923,817
NYC IDA (Hebrew Academy) 10.000 03/01/21 2,290 2,525,595
NYC IDA (Herbert G. Birch Childhood Project) 7.375 02/01/09 780 817,924
NYC IDA (Herbert G. Birch Childhood Project) 8.375 02/01/22 2,195 2,304,487
NYC IDA (St. Bernard's School) 7.000 12/01/21 5,115 5,505,888
NYC IDA (Summit School) 7.250 12/01/04 170 176,445
NYC IDA (Summit School) 8.250 12/01/24 1,485 1,590,554
NYC IDA (United Nations School) 6.350 12/01/15 1,000 1,057,980
Orange IDA (Mental Retardation Project) 7.800 07/01/11 495 594,475
Saratoga IDA (ARC) 8.400 03/01/13 1,395 1,538,001
Suffolk IDA (Devel. Disabilities) 7.375 03/01/03 915 957,246
Suffolk IDA (Devel. Disabilities) 8.750 03/01/23 9,675 10,976,868
Wayne IDA (ARC) 7.250 03/01/03 450 471,353
Wayne IDA (ARC) 8.375 03/01/18 2,925 3,228,469
Westchester IDA (Clearview School) 9.375 01/01/21 1,408 1,557,467
Westchester IDA (JDAM) 6.750 04/01/16 1,560 1,674,254
Yonkers IDA (Westchester School) 7.375 12/30/03 395 417,819
Yonkers IDA (Westchester School) 8.750 12/30/23 3,330 3,673,856
- ---------------------------------------------------------------------------------------------------------------------------
Corporate Backed (market value $54,138,998) - 1.8%
Albany IDA (Albany Golf) 7.500 05/01/12 400 440,916
Auburn IDA (Wegmans) 7.250 12/01/1998 65 65,648
Brookhaven IDA (Farber) 6.375 (v) 12/01/02 870 870,000
Brookhaven IDA (Farber) 6.375 (v) 12/01/04 490 490,000
Broome IDA (Industrial Park) 7.550 12/01/00 190 192,445
Broome IDA (Industrial Park) 7.600 12/01/01 195 197,564
Dutchess IDA (Merchants Press) 7.950 (d) 06/30/02 1,800 1,290,024
Dutchess IDA (Merchants Press) 9.000 (d) 06/30/22 4,590 3,277,811
Erie IDA (Affordable Hospitality) 9.250 12/01/15 3,520 3,662,067
Erie IDA (Air Cargo) 8.250 10/01/07 1,370 1,432,910
Erie IDA (Air Cargo) 8.500 10/01/15 2,380 2,532,011
Fulton IDA (Crossroads Incubator) 8.500 12/15/1998 (a) 160 162,896
Hudson IDA (Have, Inc.) 8.125 12/01/17 990 1,044,915
Hudson IDA (Northside) 9.000 12/01/09 435 470,061
Islip IDA (WJL Realty) 7.800 03/01/03 50 52,342
Islip IDA (WJL Realty) 7.850 03/01/04 100 103,406
Islip IDA (WJL Realty) 7.900 03/01/05 100 103,525
Islip IDA (WJL Realty) 7.950 03/01/10 500 532,770
Monroe IDA (Canal Ponds) 7.000 06/15/13 900 987,336
Monroe IDA (Cottrone Devel.) 9.500 12/01/10 2,280 2,504,409
Monroe IDA (De Carolis) 7.500 01/30/05 365 365,487
Monroe IDA (Morrell/Morrell) 7.000 12/01/07 2,053 2,151,010
Monroe IDA (Piano Works) 7.625 11/01/16 4,330 4,770,015
Monroe IDA (West End Business) 6.750 12/01/04 125 132,625
Monroe IDA (West End Business) 6.750 12/01/04 70 72,250
Monroe IDA (West End Business) 6.750 12/01/04 520 546,452
Monroe IDA (West End Business) 8.000 12/01/14 170 177,118
Monroe IDA (West End Business) 8.000 12/01/14 515 564,275
Monroe IDA (West End Business) 8.000 12/01/14 1,375 1,506,560
Monroe IDA (West End Business) 8.000 12/01/14 345 378,010
Niagara IDA (Maryland Maple) 10.250 11/15/09 1,000 1,048,200
Niagara IDA (Sevenson Hotel) 6.600 05/01/07 1,900 1,965,132
NYC IDA (ALA Realty) 7.500 12/01/10 1,035 1,111,393
NYC IDA (ALA Realty) 8.375 12/01/15 1,355 1,526,719
NYC IDA (Gabrielli Truck Sales) 8.125 12/01/17 3,280 3,460,269
NYC IDA (Loehmann's) 9.500 12/31/04 845 860,987
NYC IDA (Petrocelli Electric) 7.250 11/01/07 1,785 1,816,077
NYC IDA (Petrocelli Electric) 8.000 11/01/17 3,780 3,858,397
NYC IDA (Priority Mailers) 9.000 03/01/10 1,730 1,891,617
Suffolk IDA (Rimland Facilities) 6.375 (v) 12/01/09 1,670 1,636,600
Syracuse IDA (Rockwest Center II) 7.625 12/01/10 980 1,030,441
Syracuse IDA (Rockwest Center II) 8.625 12/01/15 1,470 1,625,497
Syracuse IDA (Rockwest Center I) 8.000 06/01/13 1,150 1,230,811
- ---------------------------------------------------------------------------------------------------------------------------
Manufacturing, Durable Goods (market value $46,794,312) - 1.5%
Broome IDA (Simulator) 8.250 01/01/02 645 659,616
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
ROCHESTER FUND MUNICIPALS
STATEMENT OF INVESTMENTS - DECEMBER 31, 1997
Face Amount
Description Coupon Maturity (000) Omitted Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
City of Port Jervis (Future Home Tech.) 10.000% 11/01/08 $ 685 $ 714,030
Cortland IDA (Paul Bunyon Products) 8.000 07/01/00 95 97,497
Erie IDA (Great Lakes Orthodontic) 12.099 05/01/00 80 88,034
Monroe IDA (Brazill Merk) 7.900 12/15/14 3,080 3,299,327
Monroe IDA (Melles Griot) 9.500 12/01/09 1,495 1,549,388
Monroe IDA (RTM Turbine) 7.750 12/01/06 3,490 2,798,806
Monroe IDA (RTM Turbine) 8.000 12/01/11 3,060 2,455,497
Monroe IDA (RTM Turbine) 8.500 12/01/16 770 618,033
Nassau IDA (Structural Industries) 7.750 02/01/12 500 564,990
NYC IDA (Koenig Iron Works) 8.375 12/01/25 1,675 1,824,326
NYC IDA (Penguin Air Conditioning) 12.222 12/01/1999 108 113,132
Oneida IDA (MCC) 8.000 11/01/08 1,265 1,287,593
Oneida IDA (MCC) 8.750 11/01/18 2,825 2,875,200
Onondaga IDA (Coltec) 7.250 06/01/08 585 593,483
Onondaga IDA (Coltec) 9.875 10/01/10 750 781,200
Onondaga IDA (Gear Motion) 8.400 12/15/01 490 500,917
Onondaga IDA (Gear Motion) 8.900 12/15/11 1,640 1,760,458
Orange IDA (Kingston Manufacturing) 8.000 11/01/17 7,600 8,022,180
Rensselaer IDA (MMP) 8.500 12/15/02 30 30,383
Suffolk IDA (Fil-Coil) 9.000 12/01/15 445 460,157
Suffolk IDA (Fil-Coil) 9.250 12/01/25 1,060 1,095,680
Suffolk IDA (Marbar Assoc.) 8.300 03/01/08 190 190,836
Suffolk IDA (Marbar Assoc.) 8.300 03/01/09 190 190,836
Suffolk IDA (Microwave Power) 7.750 06/30/02 300 316,635
Suffolk IDA (Microwave Power) 8.500 06/30/22 4,320 4,606,805
Suffolk IDA (Wireless Boulevard Realty) 7.875 12/01/12 1,365 1,444,661
Suffolk IDA (Wireless Boulevard Realty) 8.625 12/01/26 4,005 4,319,152
Syracuse IDA (Anoplate Corp.) 7.250 11/01/07 550 563,602
Syracuse IDA (Anoplate Corp.) 8.000 11/01/22 2,195 2,257,184
Syracuse IDA (Piscitell Stone) 8.400 12/01/11 660 714,674
- --------------------------------------------------------------------------------------------------------------------------
Telephone Utilities (market value $34,252,500) - 1.1%
Puerto Rico Telephone Authority RIBS 6.915 (f) 01/16/15 16,550 17,377,500
Puerto Rico Telephone Authority RIBS (b) 7.411 (f) 01/01/20 15,000 16,875,000
- --------------------------------------------------------------------------------------------------------------------------
Gas Utilities (market value $29,318,125) - 1.0%
NYS ERDA (Brooklyn Union Gas) RIBS 7.031 (f) 07/08/26 7,000 7,218,750
NYS ERDA (Brooklyn Union Gas) RIBS 8.553 (f) 04/01/20 7,000 8,645,000
NYS ERDA (Brooklyn Union Gas) RIBS 9.311 (f) 07/01/26 10,300 13,454,375
- --------------------------------------------------------------------------------------------------------------------------
Other (market value $29,564,330) - 1.0%
Franklin SWMA 6.250 06/01/15 4,245 4,402,022
Montgomery IDA (Amsterdam) 7.250 01/15/19 5,860 6,271,049
Municipal Assistance Corp. for Troy, NY 0.000 07/15/21 803 245,351
Municipal Assistance Corp. for Troy, NY 0.000 01/15/22 1,219 363,147
NYC IDA (HiTech Res Rec) 8.750 08/01/00 240 251,225
NYC IDA (HiTech Res Rec) 9.250 08/01/08 695 746,715
NYC IDA (Nekboh) 9.625 05/01/11 5,760 6,168,269
Peekskill IDA (Karta) 9.000 07/01/10 1,629 1,677,828
Puerto Rico Infrastructure 7.500 07/01/09 5,390 5,603,013
Puerto Rico Infrastructure 7.750 07/01/08 2,935 3,054,601
Puerto Rico Infrastructure 7.900 07/01/07 750 781,110
- --------------------------------------------------------------------------------------------------------------------------
Total municipal bond investments, at value (cost $2,936,875,477) - 102.7% $3,152,806,517
- --------------------------------------------------------------------------------------------------------------------------
Liabilities in excess of other assets - (2.7%) (84,179,154)
--------------
Net assets - 100.0% $3,068,627,363
==============
</TABLE>
(a) Date of mandatory put; final maturity 12/15/2008.
(b) Illiquid security--See Note 6 of Notes to Financial Statements.
(c) Security will convert to a fixed coupon at a date prior to maturity.
(d) Non-income accruing security--Issuer is in default of interest
payment.
(f) Interest rate is subject to change periodically and inversely to th
prevailing market rate. The interest rate shown is the rate in effect at
12/31/97.
(p) This issue has been prerefunded to an earlier date. (v) Variable rate
security that fluctuates as a percentage of prime rate. (w) When-issued
security--See Note 3 of Notes to Financial Statements.
See accompanying Notes to Financial Statements.
22
<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:
ACLDD Adults and Children with Learning
and Developmental Disabilities
ARC Association of Retarded Citizens
ASSC Annie Schaffer Senior Center
BHMS Brooklyn Heights Montessori School
BLH Bronx Lebanon Hospital
BOCES Board of Cooperative Educational Services
CAB Capital Appreciation Bond
CARS Complimentary Auction Rate Security
CCM Comprehensive Care Management
CDC Community Development Corporation
CEK Cyril E. King
CF Community Facilities
CGH Community General Hospital
CNR College of New Rochelle
ConEd Consolidated Edison Co.
COP Certificate of Participation
DC Dominican College
EHC Elderly Housing Corporation
EHL Engine Hook and Ladder
EPG Elmhurst Parking Garage
ERDA Energy Research and
Development Authority
FLCP Finger Lakes Cerebral Palsy
GAINS Growth and Income Securities
GO General Obligation
HDC Housing Development Corporation
HELP Homeless Economic Loan Program
HFA Housing Finance Agency
HFC Housing Finance Corporation
H&N Hospital and Nursing
IDA Industrial Development Authority
IRS Inverse Rate Security
ITEME Industrial Tourist Educational Medical
and Environmental
IVRC Inverse Variable Rate Certificate JBFS Jewish Board of Family Services JDAM
Julia Dyckman Angus Memorial LEVRRS Leveraged Reverse Rate Security LGSC Local
Government Services Corporation L.I. Long Island LILCO Long Island Lighting
Corporation MCC Mobile Climate Control MMC Marymount Manhattan College MMP
Millbrook Millwork Project MTA Metropolitan Transit Authority NIMO Niagara
Mohawk Power Corporation NYSEG New York State Electric and Gas PRFFP Puerto
Rican Family Foundation Project Res Rec Resource Recovery Facility RGH Rochester
General Hospital RG&E Rochester Gas and Electric RIBS Residual Interest Bonds
RITES Residual Interest Tax Exempt Security SCSB Schuyler Community Services
Board SONYMA State of New York Mortgage Agency SWMA Solid Waste Management
Authority
TEMEC Tourist, Educational, Medical and Environmental Control
UCP United Cerebral Palsy
UDC Urban Development Corporation
UFA Utica Free Academy
WHMC Wyckoff Heights Medical Center
WWH Wyandach/Wheatley Heights
YCN Yield Curve Note
YCR Yield Curve Receipt
V. I. United States Virgin Islands
- --------------------------------------------------------------------------------
ASSET COMPOSITION TABLE - DECEMBER 31, 1997 (UNAUDITED)
Percentage
Rating of
Investments
- -----------------------
AAA 27.2%
AA 13.0%
A 21.6%
BBB 21.2%
BB 3.7%
B 2.5%
CCC 0.0%
CC 0.0%
C 0.0%
Not Rated 10.8%
---------
Total 100.0%
=========
Bonds rated by any nationally recognized statistical rating organization are
included in the equivalent Standard & Poor's rating category. As a general
matter, unrated bonds may be backed by mortgage liens or equipment liens on the
underlying property, and also may be guaranteed. 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, or when, in the opinion of the Manager, the bond itself
possesses credit characteristics which allow for rating. The unrated bonds in
the portfolio are predominantly smaller issuers which have not applied for a
bond rating. Only those unrated bonds which subsequent to purchase have not been
designated investment grade by the Manager and the Fund's Board of Trustees are
included in the "Not Rated" category. For further information see "Credit
Quality" in the Prospectus.
23
<PAGE>
<TABLE>
ROCHESTER FUND MUNICIPALS
<CAPTION>
- -------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<S> <C>
ASSETS
Investments, at value (cost $2,936,875,477)--see accompanying statement .... $3,152,806,517
Receivables:
Interest ................................................................. 50,196,791
Investments sold ......................................................... 22,134,940
Shares of beneficial interest sold ....................................... 12,155,129
Other ...................................................................... 3,074,767
--------------
Total assets ............................................................... 3,240,368,144
--------------
LIABILITIES
Bank overdraft ............................................................. 3,135,394
Payables and other liabilities:
Investments purchased .................................................... 147,792,303
Note payable to bank (interest rate 7.125% at 12/31/97)--Note 5 .......... 15,800,000
Shares of beneficial interest redeemed ................................... 2,607,175
Dividends ................................................................ 1,029,154
Trustees' fees--Note 1 ................................................... 518,065
Other .................................................................... 858,690
--------------
Total liabilities .......................................................... 171,740,781
--------------
NET ASSETS .................................................................... $3,068,627,363
==============
- -------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital ............................................................ $2,916,288,742
Undistributed net investment income ........................................ 1,380,220
Accumulated net realized loss on investment transactions ................... (64,972,639)
Net unrealized appreciation on investments--Note 3 ......................... 215,931,040
--------------
Net assets ................................................................. $3,068,627,363
==============
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
CLASS A SHARES:
Net asset value and redemption price per share (based on net assets of
$2,847,665,548 and 152,512,105 shares of beneficial interest
outstanding) ............................................................ $18.67
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) ................................................ $19.60
--------------
- -------------------------------------------------------------------------------------------------
CLASS B SHARES:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$171,743,931 and 9,206,795 shares of beneficial
interest outstanding) .................................................. $18.65
--------------
- -------------------------------------------------------------------------------------------------
CLASS C SHARES:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$49,217,884 and 2,637,930 shares of beneficial
interest outstanding) .................................................. $18.66
--------------
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
24
<PAGE>
ROCHESTER FUND MUNICIPALS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
INVESTMENT INCOME:
Interest .............................................. $175,541,046
------------
EXPENSES:
Management fees--Note 4 ................................ 12,249,672
Distribution and service plan
fees--Note 4:
Class A ............................................... 3,708,931
Class B ............................................... 603,667
Class C ............................................... 165,599
Transfer and shareholder servicing
agent fees--Note 4:
Class A ............................................... 1,328,853
Class B ............................................... 35,982
Class C ............................................... 7,508
Accounting service fees--Note 4 ....................... 778,253
Shareholder reports ................................... 364,227
Registration and filing fees .......................... 335,205
Custodian fees and expenses ........................... 280,995
Trustees' fees and expenses--Note 1 ................... 103,122
Legal and auditing fees ............................... 84,056
Other ................................................. 172,318
Interest .............................................. 280,504
------------
Total expenses ....................................... 20,498,892
Less expenses paid indirectly ........................ (164,765)
------------
Total net expenses ................................... 20,334,127
------------
NET INVESTMENT INCOME................................... 155,206,919
------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on investments ..................... (5,735,552)
Net change in unrealized appreciation
or depreciation on investments ..................... 107,729,438
------------
Net realized and unrealized gain ..................... 101,993,886
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $257,200,805
============
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 1997 1996
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income ......................... $155,206,919 $ 135,835,359
Net realized loss ............................. (5,735,552) (3,568,327)
Net change in unrealized appreciation
or depreciation ............................. 107,729,438 (15,226,664)
------------- -------------
Net increase in net assets
resulting from operations ................... 257,200,805 117,040,368
---------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income:
Class A ..................................... (152,050,014) (136,511,912)
Class B ..................................... (2,948,096) --
Class C ..................................... (808,459) --
--------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS:
Net increase in net assets resulting
from beneficial interest
transactions--Note 2:
Class A ..................................... 443,076,063 182,057,766
Class B ..................................... 168,083,894 --
Class C ..................................... 48,222,991 --
--------------------------------------------------------------------------------------------
NET ASSETS:
Total increase .................................. 760,777,184 162,586,222
Beginning of period ............................. 2,307,850,179 2,145,263,957
--------------- --------------
End of period (including undistributed
net investment income of $1,380,220
and $1,979,870, respectively) ................. $3,068,627,363 $2,307,850,179
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
25
<PAGE>
ROCHESTER FUND MUNICIPALS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------------------------
1997 1996(g) 1995 1994 1993
------- ----------- ------ ------ ------
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $18.00 $18.18 $16.31 $19.00 $17.65
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income .......................... 1.10 1.10 1.10 1.13 1.17
Net realized and unrealized gain (loss) ........ 0.67 (0.18) 1.86 (2.68) 1.35
------ ------ ------ ------ ------
Total income (loss) from investment operations ... 1.77 0.92 2.96 (1.55) 2.52
------ ------ ------ ------ ------
Dividends and distributions to shareholders:
Dividends from net investment income ........... (1.10) (1.10) (1.09) (1.13) (1.17)
Undistributed net investment income--
prior year ................................... -- -- -- (0.01) --
------ ------ ------ ------ ------
Total dividends and distributions to
shareholders ................................... (1.10) (1.10) (1.09) (1.14) (1.17)
------ ------ ------ ------ ------
Net asset value, end of period ................... $18.67 $18.00 $18.18 $16.31 $19.00
====== ====== ====== ====== ======
TOTAL RETURN, AT NET ASSET VALUE(B) .............. 10.20% 5.37% 18.58% (8.35%) 14.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) ........ $2,848 $2,308 $2,145 $1,791 $1,794
Average net assets (in millions) ............... $2,539 $2,191 $2,005 $1,847 $1,449
Ratios to average net assets:
Net investment income ........................ 5.96% 6.20% 6.25% 6.43% 6.21%
Expenses(d) .................................. 0.76% 0.82% 0.82% 0.84% 0.75%
Expenses (excluding interest)(d)(e) .......... 0.75% 0.77% 0.78% 0.73% 0.64%
Portfolio turnover rate(f) ..................... 4.58% 13.34% 14.59% 34.39% 18.27%
- ------------------------------------------------------------------------------------------------------------------------------ -----
</TABLE>
(a) For the period from March 16, 1997 (inception of offering) to December 31,
1997.
(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
the total returns. Total returns are not annualized for periods of less
than one full year.
(c) Annualized.
(d) 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.
26
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------- ------------
Period Ended Period Ended
December 31, December 31,
1997(a) 1997(a)
------------- ------------
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period ................................ $17.89 $17.89
------ ------
Income from investment operations:
Net investment income ............................................. 0.74 0.74
Net realized and unrealized gain .................................. 0.76 0.77
------ ------
Total income from investment operations ............................. 1.50 1.51
------ ------
Dividends and distributions to shareholders:
Dividends from net investment income .............................. (0.74) (0.74)
Undistributed net investment income--prior year ................... -- --
------ ------
Total dividends and distributions to shareholders ................... (0.74) (0.74)
------ ------
Net asset value, end of period ...................................... $18.65 $18.66
====== ======
TOTAL RETURN, AT NET ASSET VALUE(B) ................................. 8.74% 8.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) ........................... $172 $49
Average net assets (in millions) .................................. $76 $21
Ratios to average net assets:
Net investment income ........................................... 4.91%(c) 4.92%(c)
Expenses(d) ..................................................... 1.59%(c) 1.58%(c)
Expenses (excluding interest)(d)(e) ............................. 1.58%(c) 1.57%(c)
Portfolio turnover rate(f) ........................................ 4.58% 4.58%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(e) 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.
(f) 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, 1997 were
$865,561,192 and $122,221,207, respectively.
(g) On January 4, 1996, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
Per share information has been determined based on average
shares outstanding for the period.
See accompanying Notes to Financial Statements.
27
<PAGE>
ROCHESTER FUND MUNICIPALS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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, 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 its
investment policies and prudent investment management while seeking preservation
of shareholders' capital. The Fund's investment adviser is OppenheimerFunds,
Inc. (the Manager).
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge. Class B and Class C shares may be subject to a
contingent deferred sales charge. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to a particular
class and exclusive voting rights with respect to matters affecting a single
class. Class B shares will automatically convert to Class A shares six years
after the date of purchase. The following is a summary of significant accounting
policies consistently followed by the Fund.
INVESTMENT VALUATION 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. 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 date extends beyond six months and possibly as long as two
years or more beyond trade 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 or greater than 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.
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At December 31, 1997, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $64,546,000, which expires between 2000 and 2005.
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 Rochester
Capital Advisors, L.P. (the Fund's former investment advisor) to the Manager,
all but one of the existing independent trustees retired effective January 4,
1996. 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. The retirement plan expense,
which is included in trustees' fees and expenses, amounted to $61,806 for the
year ended December 31, 1997. Payments of $54,000 were made to retired trustees
during the year ended December 31, 1997. At December 31, 1997, the Fund had
recognized an accumulated liability of $507,306.
28
<PAGE>
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from its 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 fiscal year in which the income or realized gain (loss) was
recorded by the Fund.
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 Fund has authorized an unlimited number of shares of beneficial interest,
par value $.01 per share. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 (1) DECEMBER 31, 1996
---------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
CLASS A:
Sold ................................. 35,581,801 $648,373,849 20,027,352 $355,593,044
Dividends and distributions
reinvested ......................... 4,372,465 79,564,502 4,049,796 71,854,295
Redeemed ............................. (15,687,966) (284,862,288) (13,850,487) (245,389,573)
----------- ------------ ----------- ------------
Net increase ......................... 24,266,300 $443,076,063 10,226,661 $182,057,766
=========== ============ =========== ============
CLASS B:
Sold ................................. 9,239,870 $168,687,731 -- $ --
Dividends and distributions
reinvested ........................... 101,107 1,860,790 -- --
Redeemed ............................. (134,182) (2,464,627) -- --
----------- ------------ ----------- ------------
Net increase ......................... 9,206,795 $168,083,894 -- $ --
=========== ============ =========== ============
CLASS C:
Sold ................................. 2,680,454 $ 49,004,451 -- $ --
Dividends and distributions
reinvested ......................... 28,231 520,244 -- --
Redeemed ............................. (70,755) (1,301,704) -- --
----------- ------------ ----------- ------------
Net increase ......................... 2,637,930 $ 48,222,991 -- $ --
=========== ============ =========== ============
</TABLE>
(1) For the year ended December 31, 1997 for Class A shares and for the period
from March 16, 1997 (inception of offering) to December 31, 1997 for Class
B and Class C shares.
NOTE 3. PORTFOLIO INFORMATION:
The Fund held $455,612,688 in inverse floating rate municipal bonds at December
31, 1997, which represents 14.85% of the Fund's net assets.
29
<PAGE>
During 1997, 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, 1997, net unrealized appreciation on investments of $215,931,040
was composed of gross appreciation of $219,895,364, and gross depreciation of
$3,964,324.
Unrealized appreciation (depreciation) at December 31, 1997 based on cost of
investments for federal income tax purposes of $2,937,016,583 was:
Gross unrealized appreciation .............................. $219,756,060
Gross unrealized depreciation .............................. (3,966,126)
------------
Net unrealized appreciation ................................ $215,789,934
============
At December 31, 1997, investments in securities included issues that were
purchased on a when-issued or delayed delivery basis. The Fund has recorded
these commitments and is valuing the when-issued securities at current market
value on each trading day. In addition, the Fund has segregated sufficient
liquid debt securities with its custodian to cover these commitments. The Fund
intends to invest no more than 10% of its net assets in when-issued or delayed
delivery securities. The aggregate cost of securities purchased on a when-issued
or delayed delivery basis at December 31, 1997 was $131,936,453, which
represents 4.30% of the Fund's net assets. Information concerning these
securities is as follows:
<TABLE>
<CAPTION>
VALUATION PER UNIT
FACE AMOUNT ACQUISITION DELIVERY COST PER AS OF
SECURITY (IN THOUSANDS) DATE DATE UNIT DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MTA Service Contract,
Series R:
5.50% due 7/1/12 1,000 10/31/97 4/2/98 98.535% 101.159%
5.50% due 7/1/12 1,270 10/31/97 4/2/98 98.535 101.159
5.50% due 7/1/13 815 10/31/97 4/2/98 98.170 100.704
5.50% due 7/1/14 2,500 10/31/97 4/2/98 97.579 100.251
5.50% due 7/1/17 3,320 10/31/97 4/2/98 96.763 99.800
5.50% due 7/1/17 4,360 10/31/97 4/2/98 96.763 99.800
- ----------------------------------------------------------------------------------------------------------------------
NYS ERDA (RG&E):
5.95% due 9/1/33 7,000 9/3/97 9/2/98 100.000 105.070
5.95% due 9/1/33 5,500 9/29/97 9/2/98 102.250 105.070
- ----------------------------------------------------------------------------------------------------------------------
Suffolk IDA
(Huntington Res Rec):
5.55% due 10/1/04 8,545 1/28/97 7/29/99 100.000 103.554
5.65% due 10/1/05 9,180 1/28/97 7/29/99 100.000 104.436
5.75% due 10/1/06 9,875 1/28/97 7/29/99 100.000 104.973
5.80% due 10/1/07 10,615 1/28/97 7/29/99 100.000 105.150
5.85% due 10/1/08 11,410 1/28/97 7/29/99 100.000 105.664
5.95% due 10/1/09 12,265 1/28/97 7/29/99 100.000 106.050
6.00% due 10/1/10 13,190 1/28/97 7/29/99 100.000 106.494
6.15% due 10/1/11 14,170 1/28/97 7/29/99 100.000 107.756
6.25% due 10/1/12 17,155 1/28/97 7/29/99 100.000 108.630
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
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 of 0.54% on the first $100 million of
average annual net assets, 0.52% of the next $150 million, 0.47% of the next
$1,750 million, 0.46% of the next $3 billion, and 0.45% on net assets in excess
of $5 billion. During 1997, the Fund paid $12,249,672 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 1997, the Fund paid $778,253 to the Manager for accounting
and pricing services.
OppenhimerFunds Services (OFS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and
30
<PAGE>
for other registered investment companies. The Fund pays OFS an annual
maintenance fee for each Fund shareholder account and reimburses OFS for its
out-of-pocket expenses. During 1997, the Fund paid a total of $1,372,343 to OFS
for transfer and shareholder servicing agent fees.
For the year ended December 31, 1997, commissions (sales charges paid by
investors) on sales of Class A shares totaled $15,588,173, of which $2,324,962
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to brokers/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $6,618,261 and $478,210, respectively, of which $16,585
and $4,335, respectively, were paid to an affiliated broker/dealer. During the
year ended December 31,1997, OFDI received contingent deferred sales charges of
$86,086 and $11,324, respectively, upon redemption of Class B and Class C
shares, as reimbursement for sales commissions advanced by OFDI at the time of
sale of such shares.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI for a
portion of its costs incurred in connection with the personal service and
maintenance of shareholder accounts that hold Class A shares. Reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of the average annual
net assets of Class A shares of the Fund. Currently, the Board of Trustees has
limited the rate to 0.15% per year on Class A shares. OFDI uses the service fee
to reimburse brokers, dealers, banks and other financial institutions quarterly
for providing personal service and maintaining accounts of their customers that
hold Class A shares. During the year ended December 31, 1997, OFDI paid $17,494
to an affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B and Class C shares for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing personal
services for accounts that hold Class B and Class C shares. Each fee is computed
on the average annual net assets of Class B and Class C shares, determined as of
the close of each regular business day. During the year ended December 31, 1997,
OFDI retained $603,626 and $164,399, respectively, as compensation for Class B
and Class C sales commissions and service fee advances, as well as financing
costs. If either Plan is terminated by the Fund, the Board of Trustees may allow
the Fund to continue payments of the asset-based sales charge to OFDI for
distributing shares before the Plan was terminated. At December 31, 1997, OFDI
had incurred unreimbursed expenses of $7,678,515 for Class B and $775,680 for
Class C.
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 funds
managed by the Manager in an unsecured line of credit with a bank, which permits
borrowings up to $50 million, collectively. Interest is charged to each fund,
based on its borrowings, at a rate equal to the Federal Funds Rate plus 0.625%.
In addition, a commitment fee of 0.07% is allocated among the three
participating funds at the end of each quarter, based on the average daily
unused portion of the committed line. The commitment fee is allocated among the
three funds based upon their respective average net assets for the period. The
commitment fee allocated to the Fund for the year ended December 31, 1997 was
$785.
The Fund had borrowings outstanding of $15,800,000 at December 31, 1997. For the
year ended December 31, 1997, the average monthly loan balance was $4,377,935 at
an average interest rate of 6.325%. The maximum amount of borrowings outstanding
at any month-end was $21,500,000.
NOTE 6. ILLIQUID AND RESTRICTED SECURITIES:
At December 31, 1997, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily-available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 15% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. Certain
restricted securities, eligible for resale to qualified institutional investors,
are not subject to that limit. The aggregate value of illiquid securities
subject to this limitation at December 31, 1997 was $173,232,373, which
represents 5.65% of the Fund's net assets.
APPENDIX A
INDUSTRY CLASSIFICATIONS
Electric Resource Recovery
Gas
Water Higher Education
Sewer Education
Telephone
Lease Rental
Adult Living Facilities
Hospital Non Profit Organization
General Obligation Highways
Special Assessment Marine/Aviation
Facilities
Sales Tax
Multi Family Housing
Manufacturing, Non Durables Single Family Housing
Manufacturing, Durables
Pollution Control
A-1
<PAGE>
APPENDIX B
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, 1998. 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
Federal Effective Rochester Fund Municipals Yield of:
Taxable Tax
Income Bracket Is Approximately Equivalent To a
Taxable Yield of:
JOINT RETURN
Over Not overFederal NYS Combine1.0% 1.5% 2.00% 2.50% 3.00% 3.50% $ 22,000 $
26,00015.00% 5.25% 19.46% 1.24% 1.86%2.48% 3.10% 3.72% 4.35% $ 26,000 $
40,00015.00% 5.90% 20.01% 1.25% 1.88%2.50% 3.13% 3.75% 4.38% $ 40,000 $
42,35015.00% 6.85% 20.82% 1.26% 1.89%2.53% 3.16% 3.79% 4.42% $ 42,350
$102,30028.00% 6.85% 32.93% 1.49% 2.24%2.98% 3.73% 4.47% 5.22% $102,300
$155,95031.00% 6.85% 35.73% 1.56% 2.33%3.11% 3.89% 4.67% 5.45% $155,950
$278,45036.00% 6.85% 40.38% 1.68% 2.52%3.35% 4.19% 5.03% 5.87% $278,450 and
abov39.60% 6.85% 43.74% 1.78% 2.67%3.55% 4.44% 5.33% 6.22%
4.00% 4.50% 5.00%5.50% 6.00% 6.50% 7.00%
4.97% 5.59% 6.21%6.83% 7.45% 8.07%8.69%
5.00% 5.63% 6.25%6.88% 7.50% 8.13%8.75%
5.05% 5.68% 6.31%6.95% 7.58% 8.21%8.84%
5.96% 6.71% 7.46%8.20% 8.95% 9.69%10.44%
6.22% 7.00% 7.78%8.56% 9.34%10.11%10.89%
6.71% 7.55% 8.39%9.23% 10.06%10.90%11.74%
7.11% 8.00% 8.89%9.78% 10.66%11.55%12.44%
SINGLE RETURN
Over Not overFederal NYS Combine1.00% 1.5% 2.00% 2.50% 3.00% 3.50%
- ---- --------------- --- -------
$20,000 $ 25,35015.00% 6.85% 20.82% 1.26% 1.89%2.53% 3.16% 3.79% 4.42%
$ 25,350 $ 61,40028.00% 6.85% 32.93% 1.49% 2.24%2.98% 3.73% 4.47% 5.22%
$ 61,400 $128,10031.00% 6.85% 35.73% 1.56% 2.33%3.11% 3.89% 4.67% 5.45%
$128,100 $278,45036.00% 6.85% 40.38% 1.68% 2.52%3.35% 4.19% 5.03% 5.87%
$278,450 and abov39.60% 6.85% 43.74% 1.78% 2.67%3.55% 4.44% 5.33% 6.22%
4.00% 4.50% 5.00%5.50% 6.00% 6.50% 7.00%
5.05% 5.68% 6.31 6.95% 7.58% 8.21%8.84%
5.96% 6.71% 7.46 8.20% 8.95% 9.69%10.44%
6.22% 7.00% 7.78 8.56% 9.34%10.11%10.89%
6.71% 7.55% 8.39 9.23%10.06%10.90%11.74%
7.11% 8.00% 8.89 9.78%10.66%11.55%12.44%
New York City Residents
Federal Effective Rochester Fund Municipals Yield of:
Taxable Tax
Income Bracket Is Approximately Equivalent To a
Taxable Yield of:
JOINT RETURN
Over Not overFederal NYS NYC Combined 1.1.50% 2.00% 2.50% 3.00%
- ---- --------------- --- --- --------
3.50%
$ 27,000 $ 40,00015.00% 5.90% 4.39% 23.75% 1.311.97% 2.62% 3.28% 3.93%
4.59%
$ 40,000 $ 42,35015.00% 6.85% 4.39% 24.55% 1.331.99% 2.65% 3.31% 3.98%
4.64%
$ 42,350 $ 45,00028.00% 6.85% 4.39% 36.09% 1.562.35% 3.13% 3.91% 4.69%
5.48%
$ 45,000 $ 90,00028.00% 6.85% 4.40% 36.10% 1.562.35% 3.13% 3.91% 4.69%
5.48%
$ 90,000 $102,30028.00% 6.85% 4.46% 36.14% 1.572.35% 3.13% 3.92% 4.70%
5.48%
$102,300 $108,00031.00% 6.85% 4.46% 38.80% 1.632.45% 3.27% 4.09% 4.90%
5.72%
$108,000 $155,95031.00% 6.85% 4.46% 38.80% 1.632.45% 3.27% 4.09.%4.90%
5.72%
$155,950 $278,45036.00% 6.85% 4.46% 43.24% 1.762.64% 3.52% 4.40% 5.29%
6.17%
$278,450 and abov39.60% 6.85% 4.46% 46.43% 1.872.80% 3.73% 4.67% 5.60%
6.53%
4.00% 4.50% 5.00%5.50% 6.00% 6.50% 7.00%
5.25% 5.90% 6.56%7.21% 7.87% 8.52%9.18%
5.30% 5.96% 6.63%7.29% 7.95% 8.62%9.28%
6.26% 7.04% 7.82%8.61% 9.39% 10.1710.95%
6.26% 7.04% 7.82%8.61% 9.39% 10.1710.95%
6.26% 7.05% 7.83%8.61% 9.40% 10.1810.96%
6.54% 7.35% 8.17%8.99% 9.80% 10.6211.44%
6.54% 7.35% 8.17%8.99% 9.80% 10.6211.44%
7.05% 7.93% 8.81%9.69% 10.57% 11.4512.33%
7.47% 8.40% 9.33%10.27%11.20% 1213.07%
SINGLE RETURN
Over Not overFederal NYS NYC Combined 1.1.50% 2.00% 2.50% 3.00%
- ---- --------------- --- --- --------
3.50%
$ 20,000 $ 25,00015.0% 6.85% 4.39% 24.55% 1.331.99% 2.65% 3.31% 3.98%
4.64%
$ 25,000 $ 25,35015.0% 6.85% 4.40% 24.56% 1.331.99% 2.65% 3.31% 3.98%
4.64%
$ 25,350 $ 50,00028.0% 6.85% 4.40% 36.10% 1.562.35% 3.13% 3.91% 4.69%
5.48%
$ 50,000 $ 61,40028.0% 6.85% 4.46% 36.14% 1.572.35% 3.13% 3.92% 4.70%
5.48%
$ 61,400 $128,10031.0% 6.85% 4.46% 38.80% 1.632.45% 3.27% 4.09% 4.90%
5.72%
$128,100 $278,45036.0% 6.85% 4.46% 43.24% 1.762.64% 3.52% 4.40% 5.29%
6.17%
$278,450 and abov39.6% 6.85% 4.46% 46.43% 1.872.80% 3.73% 4.67% 5.60%
6.53%
4.00% 4.50% 5.00%5.50% 6.00% 6.50% 7.00%
5.30% 5.96% 6.63 7.29% 7.95% 8.62%9.28%
5.30% 5.97% 6.63 7.29% 7.95% 8.62%9.28%
6.26% 7.04% 7.82 8.61% 9.39%10.17%10.95%
6.26% 7.05% 7.83 8.61% 9.40%10.18%10.96%
6.54% 7.35% 8.17 8.99% 9.80%10.62%11.44%
7.05% 7.93% 8.81 9.69%10.57%11.45%12.33%
7.47% 8.40% 9.3310.27%11.20%12.13%13.07%
B-1
<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:
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to
possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have a demand or
double feature as part of their provisions. The first rating addresses the
likelihood of repayment of principal and interest as due, and the second rating
addresses only the demand feature. With short-term demand debt, S&P's note
rating symbols are used with the commercial paper symbols (for example, "SP-
1+/A-1+").
Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the
following short-term ratings to debt obligations that are payable
on demand or have original maturities of generally up to three
years,
including commercial paper, certificates of deposit, medium-term
notes, and municipal and investment
notes:
F-1+: Exceptionally strong credit quality; the strongest degree of assurance for
timely payment.
F-1: Very strong credit quality; assurance of timely payment is only slightly
less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned "F-1+" or "F-1"
ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities, when issued, of
under one year), asset-backed commercial paper, and certificates of deposit (the
ratings cover all obligations of the institution with maturities, when issued,
of under one year, including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
Duff 1-:High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small.
Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term
ratings, including commercial paper (with maturities up to 12
months), are as follows:
A1: Obligations supported by the highest capacity for timely
repayment.
A1: Obligations supported by a very strong capacity for timely repayment.
A2: Obligations supported by a strong capacity for timely repayment, although
such capacity may be susceptible to adverse changes in business, economic, or
financial conditions.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings
apply to commercial paper, certificates of deposit, unsecured
notes, and other securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding timely
repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated
"TBW-1".
Long Term Debt Ratings. These ratings are relevant for securities purchased by
the Trust with a remaining maturity of 397 days or less, or for rating issuers
of short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
positions of such issues.
Aa: Judged to be of high quality by all standards. Together
with the "Aaa" group they comprise
what are generally known as high-grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuations of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in "Aaa" securities.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the security ranks in the higher
end of its generic rating category; the modifier "2" indicates a mid-range
ranking; and the modifier "3" indicates that the issue ranks in the lower end of
its generic rating category.
Standard & Poor's: Bonds (including municipal bonds) are rated as
follows:
AAA: The highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and
differ from "AAA" rated issues only in small degree.
Fitch:
AAA: Considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA: Considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Plus (+) and minus (-) signs are used
in the "AA" category to indicate the relative position of a credit within that
category.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated "F-1+".
Duff & Phelps:
AAA: The highest credit quality. The risk factors are
negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA: High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions. Plus (+) and
minus (-) signs are used in the "AA" category to indicate the relative position
of a credit within that category.
IBCA: Long-term obligations (with maturities of more than 12
months) are rated as follows:
AAA: The lowest expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial such that adverse changes in business,
economic, or financial conditions are unlikely to increase investment risk
significantly.
AA: A very low expectation for investment risk. Capacity for
timely repayment of principal and interest is substantial.
Adverse changes in business, economic, or financial conditions may
increase
investment risk albeit not very significantly.
A plus (+) or minus (-) sign may be appended to a long term rating to denote
relative status within a rating category.
TBW: TBW issues the following ratings for companies. These ratings assess the
likelihood of receiving payment of principal and interest on a timely basis and
incorporate TBW's opinion as to the vulnerability of the company to adverse
developments, which may impact the market's perception of the company, thereby
affecting the marketability of its securities.
A: Possesses an exceptionally strong balance sheet and earnings record,
translating into an excellent reputation and unquestioned access to its natural
money markets. If weakness or vulnerability exists in any aspect of the
company's business, it is entirely mitigated by the strengths of the
organization.
A/B: The company is financially very solid with a favorable track record and no
readily apparent weakness. Its overall risk profile, while low, is not quite as
favorable as for companies in the highest rating category.
A-1
<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
950 Seventeenth Street, Suite 2500 Denver, CO 80202-2872
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
A-2
<PAGE>
<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 -incorporated by reference.
(2) Bylaws - filed with Registrant's Post Effective
Amendment No. 13 filed May 1, 1993 -incorporated by
reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: filed 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 - incorporated 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
- incorporated 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.
(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 - incorporated 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 with Registrant's
Post-Effective Amendment No. 19 filed March 16, 1997, and
incorporated herein by reference.
(ii) Form of Investment Letter regarding Class C shares from
OppenheimerFunds, Inc. - filed with Registrant's Post-Effective Amendment No. 19
filed March 16, 1997, and incorporated herein by reference.
filed herewith
(14) Not applicable.
(15) (i) Amended and Restated Service Plan and Agreement with
Oppenheimer Funds Distributor, Inc. dated January 4, 1996 for
Class A Shares - filed with Registrant's Post Effective
Amendment No. 16 filed January 11, 1996 -incorporated herein by
reference.
(ii) Distribution and Service Plan and Agreement for Class B
Shares under Rule 12b-1 of the Investment Company Act of 1940:
filed herewith.
(iii) Distribution and Service Plan and Agreement for Class C
Shares under Rule 12b-1 of the Investment Company Act of 1940:
filed herewith.
(16) Performance Computation Schedule - filed herewith.
(17) (i) Financial Data Schedule for Class A shares filed herewith.
(ii) Financial Data Schedule for Class B shares filed herewith.
(iii) Financial Data Schedule for Class C shares filed herewith.
(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 -incorporated by reference.
-- Powers of Attorney - filed with Registrant's Post
Effective Amendment. 16 filed
January 11,1996 - incorporated by reference
Item 25. Persons Controlled by or under Common Control with
Registrant
- --------
- -------------------------------------------------------------------
- ----------
The Board of Trustees of the Registrant is identical to
the Boards of 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
- -------- --------------------------------------
Number of Record Holders
Title of Class as of March
16, 1998
---------------
- --------------------------------
Class A shares of beneficial interes 55,561 Class B shares of beneficial interes
5,051 Class C shares of beneficial interes 1,208
Item 27. Indemnification
- -------- -------------------
Registrant's Amended and Restated Agreement and Declaration of Trust (the
"Declaration of Trust"), which is referenced herein, (see Exhibit 1), contains
certain provisions relating to the indemnification of Registrant's officers and
trustees. Section 6.4 of Registrant's Declaration of Trust provides that
Registrant shall indemnify (from the assets of the Fund or Funds in question)
each of its trustees and officers (including persons who served at Registrant's
request as directors, officers or trustees of another organization in which
Registrant has any interest as a shareholder, creditor or otherwise hereinafter
referred to as a "Covered Person") against all liabilities, including but not
limited to, amounts paid for satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable accountants' and counsel
fees, incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or with which
such person may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a trustee or officer, director or
trustee, except with respect to any matter as to which it has been determined in
one of the manners described below, that such Covered Person (i) did not act in
good faith in the reasonable belief that such Covered Person's action was in or
not opposed to the best interest of Registrant or (ii) had acted with willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct described in (i) and (ii) being referred to hereafter as
"Disabling Conduct".
Section 6.4 provides that a determination that the Covered Conduct may be
made by (i) a final decision on the merits by a court or other body before whom
the proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of evidence
of Disabling Conduct, or (iii) a reasonable determination, based upon a review
of the facts, that the indemnity was not liable by reason of Disabling Conduct
by (a) a vote of a majority of a quorum of trustees who are neither "interested
persons" of Registrant as defined in Section 2(a)(19) of the 1940 Act nor
parties to the proceeding, or (b) an independent legal counsel in a written
opinion.
In addition, Section 6.4 provides that expenses, including accountants'
and counsel fees so incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines or penalties), may
be paid from time to time in advance of the final disposition of any such
action, suit or proceeding, provided that the Covered Person shall have
undertaken to repay the amounts so paid to the Sub-trust in question if it is
ultimately determined that indemnification of such expenses is not authorized
under Article 6 and (i) the Covered Person shall have provided security for such
undertaking, (ii) Registrant shall be insured against losses arising by reason
of any lawful advances, or (iii) a majority of a quorum of disinterested
trustees who are not a party to the proceeding, by an independent legal counsel
in a written opinion, based upon a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
Section 6.1 of Registrant's Agreement and Declaration of Trust provides,
among other things, that nothing in the Agreement and Declaration of Trust shall
protect any trustee or officer against any liability to Registrant or the
shareholders to which such trustee or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of trustee or such officer.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such 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.
Name and Current Position with Other Business and Connections
OppenheimerFunds, Inc.(During the Past Two Years
Mark J.P. Anson,
Vice President Vice President of Oppenheimer
Real Asset Management, Inc.
("ORAMI"); formerly Vice
President of Equity Derivatives at
Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a Chartered Financial
Analyst; Senior Vice President of
HarbourView Asset Management
Corporation
("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.
Beichert, Kathleen
VicNone.sident
Rajeev Bhaman,
Vice President Formerly Vice President (January
1992 - February, 1996) of Asian
Equities for Barclays de Zoete
Wedd, Inc.
Robert J. Bishop,
Vice President
Vice President of Mutual Fund
Accounting (since May 1996); an officer of
other Oppenheimer funds; formerly an Assistant
Vice President of OFI/Mutual Fund Accounting
(April 1994- May 1996), and a Fund Controller
for
OFI.
George C. Bowen,
Senior Vice President & Treasurer
Vice President
(since June 1983) and Treasurer
(since March 1985) of
OppenheimerFunds Distributor,
Inc. (the
"Distributor"); Vice President
(since October 1989) and
Treasurer (since April 1986) of
HarbourView; Senior Vice
President (since February 1992),
Treasurer (since July 1991)and
a director (since December 1991)
of Centennial; President,
Treasurer and a director of
Centennial Capital Corporation
(since June 1989); Vice
President and Treasurer (since
August
1978) and Secretary (since April
1981) of Shareholder Services,
Inc. ("SSI"); Vice President,
Treasurer and Secretary
of Shareholder Financial
Services, Inc. ("SFSI") (since
November 1989); Treasurer of
Oppenheimer Acquisition Corp.
("OAC") (since June 1990);
Treasurer of Oppenheimer
Partnership Holdings, Inc. (since
November 1989); Vice
President and Treasurer of
ORAMI (since July 1996); Chief Executive
Officer, Treasurer and a director of
MultiSource Services, Inc.
, a broker-dealer
(since December 1995); an
officer of other Oppenheimer
funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President
& Assistant
Treasurer: Rochester DFormerly Assistant Vice President
of Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; Vice President of
Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 present) of
Awhtolia College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President &
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
Executive Vice President (since September
1993), and a director (since January 1992) of
the Distributor; Executive Vice
President,
General Counsel
and a director of HarbourView,
SSI,
SFSI and Oppenheimer Partnership
Holdings, Inc. since
(September 1995) and
MultiSource Services, Inc.
Distributor.(a broker-dealer) (since December
1995); President and a director of Centennial
(since September 1995); President and a
director of ORAMI (since July 1996); General
Counsel (since May 1996) and Secretary (since
April 1997) of OAC; Vice President of
OppenheimerFunds International, Ltd. ("OFIL")
and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer
funds.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of
Oppenheimer
Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds; formerly an
Assistant Vice President of OFI/Mutual Fund
Accounting (April 1994-May 1996), and a Fund
Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
the Distributor
; Secretary of HarbourView
,
MultiSource and
Centennial
; 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 ;
Presently he holds the following
other
positions: Director (since 1995)
of ICI Mutual Insurance
Company; Governor (since 1994) of
St. John's College; Director
(since 1994 - present) of
International Museum of
Photography
at George Eastman House; Director
(since 1986) of GeVa
Theatre. Formerly he held the
following positions: 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.; Director (1993 - 1997)
of VehiCare Corp.; Director (1993
- 1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of
certainformer
Rochester funds (May, 1993 -
January, 1996);
Secretary of Rochester Capital
Advisors, Inc.
and General Counsel (June, 1993 -
January 1996) of Rochester
Capital
Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director
(1990-1996) for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds
. Formerly Vice President
and General Counsel of Oppenheimer
Acquisition Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly Vice President for
Schroder Capital Management
International.
Jill Glazerman,
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial
Officer Currently a Member and Fellow of
the Institute of Chartered
Accountants; formerly an
accountant for Arthur Young
(London,
U.K.).
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).
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.
Elaine T. Hamann,
Vice President Formerly Vice President
(September, 1989 - January, 1997)
of Bankers Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President
(1994-1997) of Retirement Plans
Services for OppenheimerFunds
Services.
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice 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, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly a Senior Vice President
and Portfolio Manager for
Warburg, Pincus Counsellors, Inc.
(1993-1997), Co-manager of
Warburg, Pincus Emerging Markets
Fund (12/94 - 10/97), Co-
manager Warburg, Pincus
Institutional Emerging Markets
Fund
- Emerging Markets Portfolio
(8/96 - 10/97), Warburg Pincus
Japan OTC Fund, Associate
Portfolio Manager of Warburg
Pincus International Equity Fund,
Warburg Pincus Institutional
Fund - Intermediate Equity
Portfolio, and Warburg Pincus EAFE
Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President
None.
Ronald Jamison,
Vice President Formerly Vice President and
Associate General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds ; formerly, a
Managing Director of Global
Equities at Paine
Webber's Mitchell Hutchins
division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director
(1994 - 1996) of Van Eck Global.
Avram Kornberg,
Vice President
None.
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,
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 for certain
Oppenheimer funds; a Chartered
Financial Analyst; a Vice
President of
HarbourView; prior to March 1996
, the senior bond portfolio manager for
Panorama Series Fund, Inc., other mutual funds
and pension accounts managed by G.R. Phelps;
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.
Steve Macchia,
Assistant Vice PresidenNone.
Bridget Macaskill,
President, Chief Executive Officer
and Director
Chief Executive Officer
(since September 1995); President and director
(since June 1991) of HarbourView; Chairman and
a director of SSI (since August 1994), and SFSI
(September 1995); President (since September
1995) and a director (since October 1990) of
OAC; President (since September 1995) and a
director (since November 1989) of Oppenheimer
Partnership Holdings, Inc. , a holding company
subsidiary of OFI; a director of ORAMI (since
July 1996) ; President and a director (since
October 1997) of OFIL, an offshore fund manager
subsidiary of OFI and Oppenheimer Millennium
Funds plc (since October 1997); President and a
director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of
Hillsdown Holdings plc (a U.K. food company);
formerly an Executive Vice President of OFI.
Wesley Mayer,
Vice President Formerly Vice President
(January, 1995 - June, 1996) of Manufacturers Life Insurance
Company.
Loretta McCarthy,
Executive Vice President None.
Tanya Mrva,
Assistant Vice President
None.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds ; formerly a
Portfolio Manager (August, 1989 -
August,
1995) 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.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division 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.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Russell Read,
Vice President of Oppenheimer
Real Asset Management, Inc.
(since March, 1995); formerly
director of Quantitative Research
for the Manager. Prior to that
he was a lecturer at Stanford
University, an investment manager
for The Prudential, and
Associate Economist for the First
National Bank of Chicago.
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; formerly, a
Securities Analyst for the
Manager.
Adam Rochlin,
Vice President None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager of
certain Oppenheimer funds ; Formerly, Vice
President (June, 1983 - January, 1996) of RFS,
President and Director of
; Vice President and Director of FMC ; Vice
President and director of RCAI ; General
Partner of RCA; Vice President and Director of
Rochester Tax Managed Fund Inc.
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
None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of
Citicorp Investment Services.
Richard Soper,
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.
Richard A. Stein,
Vice President: Rochester DivisioAssistant Vice President (since
1995) of Rochester Capitol
Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Stoma,
Senior Vice President,
Director
Retirement Plans Formerly Vice President of U.S.
Group Pension Strategy and
Marketing for Manulife Financial.
Michael C. Strathearn,
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
, 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
An
officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Managing Director of
Buckingham Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant TreasurerAssistant 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.
Jerry 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
, 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.; Point of
Contact: Finance Supporters of
Children; Member of the Oncology
Advisory Board of the
Childrens Hospital; Member of the
Board of Directors of the
Colorado Museum of Contemporary
Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant
Secretary of
Funds SSI (since May 1985), and
SFSI (since November 1989);
Assistant Secretary of
Oppenheimer
Millennium Funds plc (since
October 1997); an officer of
other
Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; Vice President of
Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as 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 Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company 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
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
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
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset 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.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, the 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 80012.
The address of MultiSource Services, Inc. is 1700 Lincoln
Street, Denver, Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester,
New York 14625- 2807.
Item 29. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the 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:
Name & Principal Positions & Offices Positions &
Offices
Business Address with Underwriter with
Registrant
George C.
Bowen(1) Vice President and Vice President and
Treasurer of the
Oppenheimer 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(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
Rhonda Dixon-Gunner(1) Assistant Vice
President None
Andrew John Donohue(2) Executive Vice Secretary of the
President
& Director 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
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. FieldVice President
None
Reed F. Finley Vice President None
1215 W. 10th
Street
Apt. 510
Cleveland, OH 44113
Birmingham, MI 48009
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
C. Webb Heidinger(2) Vice President None
Byron Ingram(2) Assistant Vice PresidentNone
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Michael KeoVice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice PresidenNone
560 Beacon Hill Drive
Orange Village, OH 44022
Ilene Kutno(2) Assistant Vice PresidentNone
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice PresidentNone
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
60 Myrtle Beach Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Vice PresidenNone
2555 N. Clark, #209
Chicago, IL 60614
Elaine PuleoVice President None
Minnie Ra Vice President None
895 Thirty-First Ave
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI 48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3Vice President
None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon
Blvd. #123
Falls Church, VA 22042
Philip St. John TrVice President None
201 Summerfield
Northbrook, IL 60062
Sarah TurpiVice President None
2735 Dover Road
Atlanta, GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen VanVice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
Item 30. Location of Accounts and Records
- -------- -----------------------------------------
All accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act and the General Rules and
Regulations promulgated thereunder, are in possession of OppenheimerFunds, Inc.
at its offices at 6803 South Tucson Way, Englewood, Colorado, except that
records with regard to items covered by Registrant's Custodian Agreement, are
maintained by, or under agreement with, its Custodian, Citibank, N.A., 399 Park
Avenue, New York, New York 10043.
Item 31. Management Services
- -------- --------------------------
Not applicable.
Item 32. Undertakings
- -------- ----------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
C-1
<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
31st day of March, 1998.
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:
Signatures Title Date
- ------------ ------ ------
/s/ Bridget A. Macaskill Chairman of the Board, March 31, 1998
- ----------------------------* President (Principal
Bridget A. Macaskill Executive Officer) and
Trustee
/s/ George C. Bowen
- ------------------------* Treasurer (Principal March 31, 1998
George C. Bowen Financial and Accounting
Officer)
/s/ John Cannon
- -------------------------* Trustee March 31, 1998
John Cannon
/s/ Paul Y. Clinton
- -------------------------* Trustee March 31, 1998
Paul Y. Clinton
/s/ Thomas W. Courtney
- -----------------------------*Trustee March 31, 1998
Thomas W. Courtney
/s/ Lacy B. Herrman
- ------------------------ * Trustee March 31, 1998
Lacy B. Herrmann
/s/ George Loft
- ------------------ * Trustee March 31, 1998
George Loft
*By: /s/ Robert G. Zack
--------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
FORM N-1A
ROCHESTER FUND MUNICIPALS
EXHIBIT INDEX
Item No. Description
- ---------- --------------
24(b)(11) Independent Auditor's Consent
24(b)(15)(ii)Distribution and Service Plan and
Agreement for Class B Shares
24(b)(15)(iiiDistribution and Service Plan and
Agreement for Class C Shares
24(b)(16) Performance Data Computation Schedule
24(b)(17)(i) Financial Data Schedule for Class A shares
24(b)(17)(ii) Financial Data Schedule for Class B shares
24(b)(17)(ii) Financial Data Schedule for Class C shares
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 20 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 28, 1998, relating to the financial statements 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 "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
- --------------------------------------
PRICE WATERHOUSE LLP
Denver, Colorado
March 30, 1998
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Rochester Fund Municipals
THIS AMENDED AND RESTATED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the
"Plan") is dated as of the ____ day of ___________, 1998, by and between
ROCHESTER FUND MUNICIPALS (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC.
(the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution, to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms
shall have the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
-1-
<PAGE>
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments for Distribution Assistance and Administrative
Support Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares (1) sold in purchase transactions,
(2) issued in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (3) issued pursuant to
a plan of reorganization to which the Fund is a party. If the Board believes
that the Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding for no more than
six years (the "Maximum Holding Period"). Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1)
-2-
<PAGE>
distribution assistance fees for rendering distribution assistance in connection
with the sale of Shares and/or (2) service fees for rendering administrative
support services with respect to Accounts. However, no such payments shall be
made to any Recipient for any such quarter in which its Qualified Holdings do
not equal or exceed, at the end of such quarter, the minimum amount ("Minimum
Qualified Holdings"), if any, that may be set from time to time by a majority of
the Independent Trustees. All fee payments made by the Distributor hereunder are
subject to reduction or chargeback so that the aggregate service fee payments
and Advance Service Fee Payments do not exceed the limits on payments to
Recipients that are, or may be, imposed by the NASD Conduct Rules. The
Distributor may make Plan payments to any "affiliated person" (as defined in the
1940 Act) of the Distributor if such affiliated person qualifies as a Recipient
or retain such payments if the Distributor qualifies as a Recipient.
(i) Service Fee. In consideration of the administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (i) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge)
Payments. In its sole discretion and irrespective of whichever alternative
method of making service fee payments to Recipients is selected by the
Distributor, in addition the Distributor may make distribution assistance fee
payments to a Recipient quarterly, within forty-five (45) days after the end of
each calendar quarter, at a rate not to exceed 0.1875% (0.75% on an annual
basis) of the average during the calendar quarter of the aggregate
-3-
<PAGE>
net asset value of Shares computed as of the close of each business day
constituting Qualified Holdings owned beneficially or of record by the Recipient
or its Customers
for no more than six years and for any
minimum period that the Distributor may establish. Distribution assistance fee
payments shall be made only to Recipients that are registered with the SEC as a
broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease the rate of fees to be paid to the Distributor or to
any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease the Maximum Holding Period, any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period, that are established, and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current prospectus shall
constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset- Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Trustees still is not satisfied after the receipt of
such report, either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient's rights as a
third-party beneficiary hereunder shall terminate. Additionally, in their
discretion, a majority of the Fund's Independent Trustees at any time may remove
any broker, dealer, bank or other person or entity as a Recipient, where upon
such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan
-4-
<PAGE>
does not obligate or in any way make the Fund liable to make any
payment whatsoever to any person
or entity other than directly to the Distributor. The Distributor
has no obligation to pay any Service
Fees or Distribution Assistance Fees to any Recipient if the Distributor has not
received payment of Service Fees or Distribution Fees from the Fund.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing the amount
of all payments made under this Plan and the purpose for which the payments were
made. The reports shall be provided quarterly, and shall state whether all
provisions of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Amended and
Restated Plan has been approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called on __________, 1998 for the purpose
of voting on this Plan, and replaces the Fund's prior Distribution and Service
Plan for Class B shares. Unless terminated as hereinafter provided, it shall
continue in effect until renewed by the Board in accordance with the Rule and
thereafter from year to year or as the Board may otherwise determine, but only
so long as such continuance is specifically approved at least annually by a vote
of the Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class B Shareholders at a
meeting called for that purpose, and all material amendments must be approved by
a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding
-5-
<PAGE>
Class B voting shares. In the event of such termination, the Board and its
Independent Trustees shall determine whether the Distributor shall be entitled
to payment from the Fund of all or a portion of the Service Fee and/or the
Asset-Based Sales Charge in respect of Shares sold prior to the effective date
of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
ROCHESTER FUND MUNICIPALS
By: _____________________________
Andrew J. Donohue, Secretary
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
Katherine P. Feld, Vice President
& Secretary
ofmi\365.b98
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Rochester Fund Municipals
THIS AMENDED AND RESTATED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the
"Plan") is dated as of the ____ day of ___________, 1998, by and between
ROCHESTER FUND MUNICIPALS (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC.
(the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms
shall have the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
-1-
<PAGE>
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments for Distribution Assistance and Administrative
Support Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge"). Such Asset-Based Sales
Charge payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
-2-
<PAGE>
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the Distributor
shall make the following payments to Recipients:
(i) Service Fee. In consideration of the administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (A) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (B) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
-3-
<PAGE>
(ii) Distribution Assistance Fee (Asset-Based Sales Charge) Payments.
Irrespective of whichever alternative method of making service fee payments to
Recipients is selected by the Distributor, in addition the Distributor shall
make distribution assistance fee payments to each Recipient quarterly, within
forty-five (45) days after the end of each calendar quarter, at a rate not to
exceed 0.1875% (0.75% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares computed as of the close of
each business day constituting Qualified Holdings owned beneficially or of
record by the Recipient or its Customers for a period of more than one (1) year.
Alternatively, at its sole option, the Distributor may make distribution
assistance fee payments to a Recipient quarterly, at the rate described above,
on Shares constituting Qualified Holdings owned beneficially or of record by the
Recipient or its Customers without regard to the one-year holding period
described above. Distribution assistance fee payments shall be made only to
Recipients that are registered with the SEC as a broker-dealer or are exempt
from registration.
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and paying expenses of personnel
of the Recipient who support the distribution of Shares by the Recipient, and
providing such other information and services in connection with the
distribution of Shares as the Distributor or the Fund may reasonably request.
(c) A majority of the Independent Trustees may at any time or from time to
time (i) increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or (ii)
direct the Distributor to increase or decrease any Minimum Holding Period, any
maximum period set by a majority of the Independent Trustees during which fees
will be paid on Shares constituting Qualified Holdings owned beneficially or of
record by a Recipient or by its Customers (the "Maximum Holding Period"), or
Minimum Qualified Holdings. The Distributor shall notify all Recipients of any
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period
that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset- Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a
-4-
<PAGE>
written report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Trustees still is not satisfied after the receipt of
such report, either may take appropriate steps to terminate the Recipient's
status as a Recipient under the Plan, whereupon such Recipient's rights as a
third-party beneficiary hereunder shall terminate. Additionally, in their
discretion a majority of the Fund's Independent Trustees at any time may remove
any broker, dealer, bank or other person or entity as a Recipient, whereupon
such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment whatsoever to
any person or entity other than directly to the Distributor. The Distributor has
no obligation to pay any Service Fees or Distribution Assistance Fees to any
Recipient if the Distributor has not received payment of Service Fees or
Distribution Assistance Fees from the Fund.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing the amount
of all payments made under this Plan and the purpose for which the payments were
made. The reports shall be provided quarterly, and shall state whether all
provisions of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Amended and
Restated Plan has been approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called on __________, 1998 for the purpose
of voting on this Plan, and replaces the Fund's prior Distribution and Service
Plan for Class C shares. Unless terminated as hereinafter provided, it shall
continue in effect until renewed by the Board in accordance with the Rule and
thereafter from year to year or as the Board may otherwise determine, but only
so long as such continuance is specifically approved at least annually by a vote
of the Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance.
-5-
<PAGE>
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders at a
meeting called for that purpose, and all material amendments must be approved by
a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
ROCHESTER FUND MUNICIPALS
By: _____________________________
Andrew J. Donohue, Secretary
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
Katherine P. Feld, Vice President
& Secretary
ofmi\365.c98
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:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term
Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
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
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
<PAGE>
Rochester Fund Municipals
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term
Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
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
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
<PAGE>
Rochester Fund Municipals
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term
Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
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
01/28/97 0.0920000 0.0000000 17.870
02/25/97 0.0920000 0.0000000 18.090
03/25/97 0.0920000 0.0000000 17.860
04/22/97 0.0920000 0.0000000 17.700
05/27/97 0.0920000 0.0000000 17.920
06/24/97 0.0920000 0.0000000 18.160
07/22/97 0.0920000 0.0000000 18.410
08/26/97 0.0920000 0.0000000 18.280
09/23/97 0.0920000 0.0000000 18.400
10/28/97 0.0920000 0.0000000 18.420
11/25/97 0.0920000 0.0000000 18.480
12/29/97 0.0920000 0.0000000 18.660
Class B Shares
03/25/97 0.0253926 0.0000000 17.850
04/22/97 0.0790000 0.0000000 17.690
05/27/97 0.0790000 0.0000000 17.900
06/24/97 0.0790000 0.0000000 18.140
07/22/97 0.0790000 0.0000000 18.400
08/26/97 0.0790000 0.0000000 18.260
09/23/97 0.0790000 0.0000000 18.380
10/28/97 0.0790000 0.0000000 18.400
11/25/97 0.0796407 0.0000000 18.460
12/29/97 0.0773115 0.0000000 18.640
Class C Shares
03/25/97 0.0253926 0.0000000 17.860
04/22/97 0.0790000 0.0000000 17.700
05/27/97 0.0790000 0.0000000 17.910
06/24/97 0.0790000 0.0000000 18.150
07/22/97 0.0790000 0.0000000 18.400
08/26/97 0.0790000 0.0000000 18.270
09/23/97 0.0790000 0.0000000 18.380
10/28/97 0.0790000 0.0000000 18.400
11/25/97 0.0798521 0.0000000 18.470
12/29/97 0.0776122 0.0000000 18.650
<PAGE>
Rochester Fund Municipals
Page 4
1. Average Annual Total Returns for the Periods Ended 12/31/97:
The formula for calculating average annual total return is as follows:
1/number of years = n {(ERV/P)^n} - 1 = average annual total
return
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 Examples at NAV:
sales charge of 4.75%:
One Year One Year
{($1,049.63/$1,000)^ 1} - 1 = 4.96{($1,101.98/$1,000)^ 1} - 1 = 10.20%
Five Year Five Year
{($1,377.73/$1,000)^.2} - 1 = 6.62{($1,446.51/$1,000)^.2} - 1 = 7.66%
Ten Year Ten Year
{($2,292.12/$1,000)^.1000}-1 = 8.65{($2,406.47/$1,000)^.1000}- 1 = 9.18%
<PAGE>
Rochester Fund Municipals
Page 5
2. Cumulative Total Returns for the Periods Ended 12/31/97:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 4.75%:
One Year One Year
$1,049.63 - $1,000/$1,000 = 4.9$1,101.98 - $1,000/$1,000 = 10.20%
Five Year Five Year
$1,377.73 - $1,000/$1,000 = 37.7$1,446.51 - $1,000/$1,000 = 44.65%
Ten Year Ten Year
$2,292.12 - $1,000/$1,000 = 129.2$2,406.47 - $1,000/$1,000 = 140.65%
Class B Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the inception year:
Inception Inception
$1,037.42 - $1,000/$1,000 = 3.7$1,087.43 - $1,000/$1,000 = 8.74%
Class C Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the inception year:
Inception Inception
$1,078.03 - $1,000/$1,000 = 7.80$1,088.03 - $1,000/$1,000 = 8.80%
<PAGE>
Rochester Fund Municipals
Page 6
3. Standardized Yield for the 30-Day Period Ended 12/31/97:
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%:
$13,658,237.93 - $1,714,693.00 6
2{(------------------------------ + 1) - 1} = 4.90%
150,889,709 x $19.60
Class B Shares
Example, assuming a maximum sales charge of 4.75%:
$ 764,501.21 - $ 208,952.25 6
2{(------------------------------ + 1) - 1} = 4.26%
8,456,966 x $18.65
Class C Shares
Example, assuming a maximum sales charge of 1.00%:
$ 219,265.45 - $ 59,292.97 6
2{(------------------------------ + 1) - 1} = 4.28%
2,424,966 x $18.66
<PAGE>
Rochester Fund Municipals
Page 6
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/97:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { a x b) / c or d
The symbols above represent the following factors:
a = The last declared dividend during the period.
b = Number of months in the year.
c = The Fund's maximum offering price (including sales charge)
per share on the pay date.
c = The Fund's net asset value (excluding sales charge) per share on the
pay date.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering ($.0920000 x 12) / $19.59 = 5.64%
Dividend Yield
at Net Asset Value ($.0920000 x 12) / $18.66 = 5.92%
Class B Shares
Dividend Yield
at Net Asset Value ($.0773115 x 12) / $18.64 = 4.98%
Class C Shares
Dividend Yield
at Net Asset Value ($.0776122 x 12) / $18.65 = 4.99%
<PAGE>
Rochester Fund Municipals
Page 7
5. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/97:
The Fund's tax-equivalent yields are calculated using the following formula:
(a / (1-c)) + b = Tax-Equivalent Yield
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio. b =
30-day SEC yield of taxable security positions in the portfolio. c = Stated
federal income rate for an individual in the 39.6% federal
tax bracket filing singly).
Examples:
Class A Shares (0.0490 / (1 - .4608)) + 0 = 9.09%
Class B Shares (0.0426 / (1 - .4608)) + 0 = 7.90%
Class C Shares (0.0428 / (1 - .4608)) + 0 = 7.94%
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 6.85% 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+.0388))} = 46.08%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000093621
<NAME> ROCHESTER FUND MUNICIPALS
<SERIES>
<NUMBER> 1
<NAME> CLASS A
<MULTIPLIER> 1
<CURRENCY> UDS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 2,936,875,477
<INVESTMENTS-AT-VALUE> 3,152,806,517
<RECEIVABLES> 84,486,860
<ASSETS-OTHER> 3,074,767
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,240,368,144
<PAYABLE-FOR-SECURITIES> 147,792,303
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,948,478
<TOTAL-LIABILITIES> 171,740,781
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,916,288,742
<SHARES-COMMON-STOCK> 152,512,105
<SHARES-COMMON-PRIOR> 128,245,804
<ACCUMULATED-NII-CURRENT> 1,380,220
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (64,972,639)
<ACCUM-APPREC-OR-DEPREC> 215,931,040
<NET-ASSETS> 3,068,627,363
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 175,541,046
<OTHER-INCOME> 0
<EXPENSES-NET> 20,334,127
<NET-INVESTMENT-INCOME> 155,206,919
<REALIZED-GAINS-CURRENT> (5,735,552)
<APPREC-INCREASE-CURRENT> 107,729,438
<NET-CHANGE-FROM-OPS> 257,200,805
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (152,050,014)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35,581,801
<NUMBER-OF-SHARES-REDEEMED> (15,687,966)
<SHARES-REINVESTED> 4,372,465
<NET-CHANGE-IN-ASSETS> 760,777,184
<ACCUMULATED-NII-PRIOR> 1,979,870
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