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Rochester Fund Municipals
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350 Linden Oaks, Rochester, New York 14624
1-800-525-7048
Statement of Additional Information dated April 30, 1999,
Revised December 10, 1999
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated April 30, 1999. 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 or by downloading
it from the OppenheimerFunds Internet web site at www.oppenheimerfunds.com.
Contents Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks...2
The Fund's Investment Policies.....................................2
Municipal Securities...............................................3
Other Investment Techniques and Strategies.........................16
Investment Restrictions............................................23
How the Fund is Managed.................................................26
Organization and History...........................................26
Trustees and Officers of the Fund..................................28
The Manager........................................................33
Brokerage Policies of the Fund..........................................34
Distribution and Service Plans..........................................35
Performance of the Fund.................................................39
About Your Account
How To Buy Shares.......................................................45
How To Sell Shares......................................................52
How to Exchange Shares..................................................57
Dividends and Taxes.....................................................59
Additional Information About the Fund...................................62
Financial Information About the Fund
Report of Independent Accountants.......................................64
Financial Statements ...................................................65
Appendix A: Municipal Bond Ratings Definitions..........................A-1
Appendix B: Industry Classifications....................................B-1
Appendix C: Special Sales Charge Arrangements and Waivers...............C-1
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A B O U T T H E F U N D
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Additional Information About the Fund's Investment Policies and Risks
The investment objective and the principal investment policies of the Fund
are described in the Prospectus. This Statement of Additional Information
contains supplemental information about those policies and the types of
securities that the Fund's investment Manager, OppenheimerFunds, Inc., can
select for the Fund. Additional explanations are also provided about the
strategies the Fund can use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Manager uses will vary over time. The Fund is
not required to use all of the investment techniques and strategies described
below in seeking its goal. The Fund does not make investments with the objective
of seeking capital growth. However, the values of the securities held by the
Fund may be affected by changes in general interest rates and other factors
prior to their maturity. Because the current value of debt securities varies
inversely with changes in prevailing interest rates, if interest rates increase
after a security is purchased, that security will normally fall in value.
Conversely, should interest rates decrease after a security is purchased,
normally its value will rise.
However, those fluctuations in value will not generally result in realized
gains or losses to the Fund unless the Fund sells the security prior to the
security's maturity. A debt security held to maturity is redeemable by its
issuer at full principal value plus accrued interest. The Fund does not usually
intend to dispose of securities prior to their maturity, but may do so for
liquidity purposes, or because of other factors affecting the issuer that cause
the Manager to sell the particular security. In that case, the Fund could
realize a capital gain or loss on the sale.
There are variations in the credit quality of municipal securities, both
within a particular rating classification and between classifications. These
variations depend on numerous factors. The yields of municipal securities depend
on a number of factors, including general conditions in the municipal securities
market, the size of a particular offering, the maturity of the obligation and
rating (if any) of the issue. These factors are discussed in greater detail
below.
|X| Portfolio Turnover. A change in the securities held by the Fund from
buying and selling investments is known as "portfolio turnover." Short-term
trading increases the rate of portfolio turnover and could increase the Fund's
transaction costs. However, the Fund ordinarily incurs little or no brokerage
expense because most of the Fund's portfolio transactions are principal trades
that do not require payment of brokerage commissions.
The Fund ordinarily does not trade securities to achieve capital gains,
because they would not be tax-exempt income. To a limited degree, the Fund may
engage in short-term trading to attempt to take advantage of short-term market
variations. It may also do so to dispose of a portfolio security prior to its
maturity. That might be done if, on the basis of a revised credit evaluation of
the issuer or other considerations, the Manager believes such disposition is
advisable or the Fund needs
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to generate cash to satisfy requests to redeem Fund shares. In those cases, the
Fund may realize a capital gain or loss on its investments. The Fund's annual
portfolio turnover rate normally is not expected to exceed 50%.
Municipal Securities. The types of municipal securities in which the Fund can
invest are described in the Prospectus under "About the Fund's Investments."
Municipal securities are generally classified as general obligation bonds,
revenue bonds and notes. A discussion of the general characteristics of these
principal types of municipal securities follows below.
The Fund is "diversified" with respect to 75% of its total assets. That
means that as to 75% of its total assets, the Fund cannot invest more than 5% of
its net assets in the securities of any one issuer (other than the U.S.
government or its agencies and instrumentalities) and the Fund cannot own more
than 10% of an issuer's voting securities. In applying its diversification
policy with respect to the remaining 25% of its total assets not covered by that
diversification requirement, the Fund will not invest more than 10% of its
assets in the securities of any one issuer.
|X| Municipal Bonds. Long-term municipal securities (which have a maturity
of more than one year when issued) are classified as "municipal bonds." The
principal classifications of long-term municipal bonds are "general obligation"
and "revenue" bonds (including "industrial development" bonds). They may have
fixed, variable or floating rates of interest, as described below, or may be
"zero-coupon" bonds, as described below.
Some bonds may be "callable," allowing the issuer to redeem them before
their maturity date. To protect bondholders, callable bonds may be issued with
provisions that prevent them from being called for a period of time. Typically,
that is 5 to 10 years from the issuance date. When interest rates decline, if
the call protection on a bond has expired, it is more likely that the issuer may
call the bond. If that occurs, the Fund might have to reinvest the proceeds of
the called bond in bonds that pay a lower rate of return. In turn, that could
reduce the Fund's yield.
|_| General Obligation Bonds. The basic security behind general
obligation bonds is the issuer's pledge of its full faith and credit and taxing,
if any, power for the repayment of principal and the payment of interest.
Issuers of general obligation bonds include states, counties, cities, towns, and
regional districts. The proceeds of these obligations are used to fund a wide
range of public projects, including construction or improvement of schools,
highways and roads, and water and sewer systems. The rate of taxes that can be
levied for the payment of debt service on these bonds may be limited or
unlimited. Additionally, there may be limits as to the rate or amount of special
assessments that can be levied to meet these obligations.
|_| Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise tax or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects. Examples include electric, gas, water and sewer systems;
highways, bridges, and tunnels; port and airport facilities; colleges and
universities; and hospitals.
Although the principal security for these types of bonds may vary from
bond to bond, many provide additional security in the form of a debt service
reserve fund that may be used to make principal and interest payments on the
issuer's obligations. Housing finance authorities have a wide range of security,
including partially or fully insured mortgages, rent subsidized and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. Some authorities provide further security in the form of a state's
ability (without obligation) to make up deficiencies in the debt service reserve
fund.
o Industrial Development Bonds. Industrial development bonds are
considered municipal bonds if the interest paid is exempt from federal income
tax. They are issued by or on behalf of public authorities to raise money to
finance various privately operated facilities for business and manufacturing,
housing, sports, and pollution control. These bonds may also be used to finance
public facilities such as airports, mass transit systems, ports, and parking.
The payment of the principal and interest on such bonds is dependent solely on
the ability of the facility's user to meet its financial obligations and the
pledge, if any, of real and personal property financed by the bond as security
for those payments.
The Fund will purchase industrial revenue bonds only if the interest paid
on the bonds is tax exempt under the Internal Revenue Code. The Internal Revenue
Code limits the types of facilities that may be financed with tax-exempt
industrial revenue bonds and private-activity bonds (discussed below) and the
amounts of these bonds that each state can issue.
The Fund will not invest more than 5% of its assets in industrial
development bonds for which the underlying credit is one business or one
charitable entity. Additionally, the Fund will not invest more than 5% of its
assets insecurities for which industrial users having less than three years'
operating history are responsible for the payments of interest and principal on
the securities.
|_| Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules governing tax
exemption for interest on certain types of municipal securities. The Tax Reform
Act generally did not change the tax treatment of bonds issued in order to
finance governmental operations. Thus, interest on general obligation bonds
issued by or on behalf of state or local governments, the proceeds of which are
used to finance the operations of such governments, continues to be tax-exempt.
However, the Tax Reform Act limited the use of tax-exempt bonds for
non-governmental (private) purposes. More stringent restrictions were placed on
the use of proceeds of such bonds. Interest on certain private activity bonds is
taxable under the revised rules. There is an exception for "qualified"
tax-exempt private activity bonds, for example, exempt facility bonds including
certain industrial development bonds, qualified mortgage bonds, qualified
Section 501(c)(3) bonds, and qualified student loan bonds.
In addition, limitations as to the amount of private activity bonds which
each state may issue were revised downward by the Tax Reform Act, which will
reduce the supply of such bonds. The value of the Fund's portfolio could be
affected if there is a reduction in the availability of such bonds.
Interest on certain private activity bonds issued after August 7, 1986,
which continues to be tax-exempt, will be treated as a tax preference item
subject to the alternative minimum tax (discussed below) to which certain
taxpayers are subject.
The Fund may hold municipal securities the interest
on which (and thus a proportionate share of the exempt-interest dividends paid
by the Fund) will be subject to the Federal alternative minimum tax on
individuals and corporations.
The Federal alternative minimum tax is designed to ensure that all persons
who receive income pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference items
that are used to calculate alternative minimum taxable income. The Tax Reform
Act made tax-exempt interest from certain private activity bonds a tax
preference item for purposes of the alternative minimum tax on individuals and
corporations. Any exempt-interest dividend paid by a regulated investment
company will be treated as interest on a specific private activity bond to the
extent of the proportionate relationship the interest the investment company
receives on such bonds bears to all its exempt interest dividends.
In addition, corporate taxpayers subject to the alternative minimum tax
may, under some circumstances, have to include exempt-interest dividends in
calculating their alternative minimum taxable income. That could occur in
situations where the "adjusted current earnings" of the corporation exceeds its
alternative minimum taxable income.
To determine whether a municipal security is treated as a taxable private
activity bond, it is subject to a test for: (a) a trade or business use and
security interest, or (b) a private loan restriction. Under the trade or
business use and security interest test, an obligation is a private activity
bond if: (i) more than 10% of the bond proceeds are used for private business
purposes and (ii) 10% or more of the payment of principal or interest on the
issue is directly or indirectly derived from such private use or is secured by
the privately used property or the payments related to the use of the property.
For certain types of uses, a 5% threshold is substituted for this 10% threshold.
The term "private business use" means any direct or indirect use in a
trade or business carried on by an individual or entity other than a state or
municipal governmental unit. Under the private loan restriction, the amount of
bond proceeds that may be used to make private loans is limited to the lesser of
5% or $5.0 million of the proceeds. Thus, certain issues of municipal securities
could lose their tax-exempt status retroactively if the issuer fails to meet
certain requirements as to the expenditure of the proceeds of that issue or the
use of the bond-financed facility. The Fund makes no independent investigation
of the users of such bonds or their use of proceeds of the bonds. If the Fund
should hold a bond that loses its tax-exempt status retroactively, there might
be an adjustment to the tax-exempt income previously distributed to
shareholders.
Additionally, a private activity bond that would otherwise be a qualified
tax-exempt private activity bond will not, under Internal Revenue Code Section
147(a), be a qualified bond for any period during which it is held by a person
who is a "substantial user" of the facilities or by a "related person" of such a
substantial user. This "substantial user" provision applies primarily to exempt
facility bonds, including industrial development bonds. The Fund may invest in
industrial development bonds and other private activity bonds. Therefore, the
Fund may not be an appropriate investment for entities which are "substantial
users" (or persons related to "substantial users") of such exempt facilities.
Those entities and persons should consult their tax advisers before purchasing
shares of the Fund.
A "substantial user" of such facilities is defined generally as a
"non-exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be a
"related person" under the Internal Revenue Code unless such individual or the
individual's immediate family (spouse, brothers, sisters and immediate
descendants) own directly or indirectly in the aggregate more than 50% in value
of the equity of a corporation or partnership which is a "substantial user" of a
facility financed from the proceeds of exempt facility bonds.
The Fund intends to purchase only those private activity bonds on which
the interest paid is exempt from federal income tax and New York State and New
York City personal income taxes.
|X| Municipal Notes. Municipal securities having a maturity (when the
security is issued) of less than one year are generally known as municipal
notes. Municipal notes generally are used to provide for short-term working
capital needs. Some of the types of municipal notes the Fund can invest in are
described below.
[_| Tax Anticipation Notes. These are issued to finance working capital
needs of municipalities. Generally, they are issued in anticipation of various
seasonal tax revenue, such as income, sales, use or other business taxes, and
are payable from these specific future taxes.
|_| Revenue Anticipation Notes. These are notes issued in expectation of
receipt of other types of revenue, such as Federal revenues available under
Federal revenue-sharing programs.
|_| Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. The
long-term bonds that are issued typically also provide the money for the
repayment of the notes.
|_| Construction Loan Notes. These are sold to provide project
construction financing until permanent financing can be secured. After
successful completion and acceptance of the project, it may receive permanent
financing through public agencies, such as the Federal Housing Administration.
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.
|X| Municipal Lease Obligations. The Fund's investments in municipal lease
obligations may be through certificates of participation that are offered to
investors by public entities. Municipal leases may take the form of a lease or
an installment purchase contract issued by a state or local government authority
to obtain funds to acquire a wide variety of equipment and facilities.
Some municipal lease securities may be deemed to be "illiquid" securities.
If they are illiquid, their purchase by the Fund will be subject to the
percentage limitations on the Fund's investments in illiquid securities
described in the Prospectus and below in "Illiquid and Restricted Securities."
The Fund may not invest more than 5% of its assets in unrated or illiquid
municipal lease obligations. That limitation does not apply to a municipal lease
obligation that the Manager has determined to be liquid under guidelines set by
the Board of Trustees and that has received an investment grade rating from a
nationally recognized rating organization .
Those Board guidelines require the Manager to evaluate, among other things:
o the frequency of trades and price quotations for the obligation; o the number
of dealers willing to purchase or sell the securities and the number of
potential buyers; o the willingness of dealers to undertake to make a market in
the obligation; o the nature of the marketplace trades for the securities; o the
likelihood that the marketability of the obligation will continue while the Fund
owns it; and o the likelihood that the municipality will continue to appropriate
funding for the leased property.
Municipal leases have special risk considerations. Although lease
obligations do not constitute general obligations of the municipality for which
the municipality's taxing power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to budget for, appropriate and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for that purpose on a yearly basis. While the obligation
might be secured by the lease, it might be difficult to dispose of that property
in case of a default.
To reduce the risk of "non-appropriation," the Fund will not invest more than
10% of its total assets in Municipal Leases that contain "non-appropriation"
clauses. Also, the Fund will invest in leases with non-appropriation clauses
only if certain conditions are met: o the nature of the leased equipment or
property is such that its ownership or use is essential to a governmental
function of a municipality,
o appropriate covenants are obtained from the municipal obligor prohibiting
the substitution or purchase of similar equipment if lease payments are not
appropriated,
o the lease obligor has maintained good market acceptability in the past,
o the investment is of a size that will be attractive to institutional
investors, and
o the underlying leased equipment has elements of
portability and/or use that enhance its marketability if foreclosure is
ever required on the underlying equipment.
Municipal Leases may be subject to an "abatement" risk. The leases
underlying certain municipal lease obligations may state that lease payments are
subject to partial or full abatement. That abatement might occur, for example,
if material damage or destruction of the leased property interferes with the
lessee's use of the property. In some cases that risk might be reduced by
insurance covering the leased property, or by the use of credit enhancements
such as letters of credit to back lease payments, or perhaps by the lessee's
maintenance of reserve funds for lease payments.
Projects financed with certificates of participation generally are not
subject to state constitutional debt limitations or other statutory requirements
that may apply to other municipal securities. Payments by the public entity on
the obligation underlying the certificates are derived from available revenue
sources. That revenue might be diverted to the funding of other municipal
service projects. Payments of interest and/or principal with respect to the
certificates are not guaranteed and do not constitute an obligation of a state
or any of its political subdivisions.
In addition, municipal lease securities do not have as highly liquid a
market as conventional municipal bonds. Municipal leases, like other municipal
debt obligations, are subject to the risk of non-payment of interest or
repayment of principal by the issuer. The ability of issuers of municipal leases
to make timely lease payments may be adversely affected in general economic
downturns and as relative governmental cost burdens are reallocated among
federal, state and local governmental units. A default in payment of income
would result in a reduction of income to the Fund. It could also result in a
reduction in the value of the municipal lease and that, as well as a default in
repayment of principal, could result in a decrease in the net asset value of the
Fund. While the Fund holds these securities, the Manager will evaluate their
credit quality and the likelihood of a continuing market for them.
Subject to the foregoing percentage limitations on investments in Illiquid
Securities, the Fund may invest in a tax-exempt lease only if the following
requirements are met: o the Fund must receive the opinion of issuer's legal
counsel that the
tax-exempt obligation will generate interest income that is exempt from
federal and New York State income taxes; that legal counsel must be
experienced in municipal lease transactions;
o the Fund must receive an opinion that, as of the effective date of the lease
or at the date of the Fund's purchase of the obligation (if that occurs on a
date other than the effective date of the lease), the lease is the valid and
binding obligation of the governmental issuer;
o the Fund must receive an opinion of issuer's legal counsel that the
obligation has been issued in compliance with all applicable federal and
state securities laws;
o the Manager must perform its own credit analysis in instances where a credit
rating has not been provided for the lease obligation by a national rating
agency;
o if a particular exempt obligation is unrated and, in the opinion of the
Manager, not of investment- grade quality, then at the time the Fund makes
the investment the Manager must include the investment within the Fund's
illiquid investments; it will also be subject to the Fund's overall
limitation on investments in unrated tax-exempt leases.
Municipal lease obligations are generally not rated by rating
organizations. In those cases the Manager must perform its own credit analysis
of the obligation. In those cases, the Manager generally will rely on current
information furnished by the issuer or obtained from other sources considered by
the Manager to be reliable.
|X| Ratings of Municipal Securities. Ratings by ratings organizations such
as Moody's Investors Service, Standard & Poor's Ratings Services and Fitch/IBCA,
Inc. represent the respective rating agency's opinions of the credit quality of
the municipal securities they undertake to rate. However, their ratings are
general opinions and are not guarantees of quality. Credit ratings typically
evaluate the safety of municipal and interest payments, not market risk.
Municipal securities that have the same maturity, coupon and rating may have
different yields, while other municipal securities that have the same maturity
and coupon but different ratings may have the same yield.
After the Fund buys a municipal security, it may cease to be rated or its
rating may be reduced below the minimum required to enable the Fund to buy it.
Neither event requires the Fund to sell a security, but the Manager will
consider those events in determining whether the Fund should continue to hold
that security. If ratings given by Moody's, Standard & Poor's, or another rating
organization change as a result of changes in those rating organizations or
their rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the Fund's investment policies.
The Fund may buy municipal securities that are "pre-refunded." The
issuer's obligation to repay the principal value of the security is generally
collateralized with U.S. government securities placed in an escrow account. This
causes the pre-refunded security to have essentially the same risks of default
as a "AAA"-rated security.
The rating definitions of Moody's, Standard & Poor's, Duff & Phelps and
Fitch/IBCA for municipal securities are contained in Appendix A to this
Statement of Additional Information. The Fund can purchase securities that are
unrated by nationally recognized rating organizations. The Manager will make its
own assessment of the credit quality of unrated issues the Fund buys. The
Manager will use criteria similar to those used by the rating agencies, and
assign a rating category to a security that is comparable to what the Manager
believes a rating agency would assign to that security. However, the Manager's
rating does not constitute a guarantee of the quality of a particular issue.
|_| Special Risks of Lower-Grade Securities. Lower grade securities,
commonly called "junk bonds," may offer higher yields than securities rated in
investment grade rating categories. In addition to having a greater risk of
default than higher-grade, securities, there may be less of a market for these
securities. As a result they may be more difficult to value and harder to sell
at an acceptable price. These additional risks mean that the Fund might not
receive the anticipated level of income from these securities, and the Fund's
net asset value could be affected by declines in the value of lower-grade
securities. However, because the added risk of lower quality securities might
not be consistent with the portion of the Fund's objective to seek preservation
of capital, the Fund limits its investments in lower quality securities to not
more than 25% of its tax-exempt investments.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are considered investment grade, they may be subject to special
risks and have some speculative characteristics. The Fund will not invest more
than 5% of its assets in the securities of any one issuer if the securities are
rated "B" or below by a national rating organization or are given a comparable
rating by the Manager.
Special Investment Considerations - New York Municipal Securities. As explained
in the Prospectus, the Fund's investments are highly sensitive to the fiscal
stability of New York State (referred to in the section as the "State") and its
subdivisions, agencies, instrumentalities or authorities, including New York
City, which issue the municipal securities in which the Fund invests. The
following information on risk factors in concentrating in New York municipal
securities is only a summary, based on publicly-available official statements
relating to offerings by
<PAGE>
issuers of New York municipal securities on or prior to December 15, 1998 with
respect to offerings of New York State, and on or prior to December 15, 1998
with respect to offerings by New York City. No representation is made as to the
accuracy of this 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 reducing 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.
|X| Factors Affecting Investments in New York State Securities. The
forecast of the State's economy showed continued expansion during the 1998
calendar year, with employment growth gradually slowing as the year progressed.
The financial and business service sectors are expected to continue to do well,
while employment in the manufacturing and government sectors are expected to
post only small, if any, declines. On an average annual basis, the employment
growth rate in the State is expected to be higher than in 1997 and the
unemployment rate is expected to drop to 6.1%. Personal income is expected to
have recorded moderate gains in 1998. Wage growth in 1998 is expected to have
been slower than in the previous year, because the recent robust growth in bonus
payments has moderated.
The State's General Fund (the major operating Fund of the State) was
projected in the 1997-1998 New York State Financial Plan (referred to in this
section as the "State Plan") to be balanced on a cash basis for the 1997-98
fiscal year. Total receipts and transfers from other funds were projected to
reach $37.84 billion an increase of over $3 billion from the prior fiscal year,
and disbursements and transfers to other funds are projected to be $36.78
billion, an increase of $2.43 billion from the total disbursed in the prior
fiscal year.
The forecast for continued growth, and any resultant impact on the State
Plan, contains some uncertainties. Stronger-than-expected gains in employment
and wages could lead to surprisingly strong growth in consumer spending.
Investments could also remain robust. Conversely, net exports could plunge even
more sharply than expected, with adverse impacts on the growth of both consumer
spending and investment. The inflation rate may differ significantly from
expectations due to the upward pressure of a tight labor market and the downward
pressure of price reductions emanating from the current economic weakness in
Asia. In addition, the State economic forecast could over- or under-estimate the
level of future bonus payments or inflation growth, resulting in forecasted
average wage growth that could differ significantly from actual growth.
Similarly, the State forecast could fail to correctly account for declines in
banking employment and the direction of employment change that is likely to
accompany telecommunications and energy deregulation.
The national economy has maintained a robust rate of growth with over 16.5
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 400,000 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.
Projections of total State receipts in the State 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. In preparing projections of State receipts, economic forecasts
relating to personal income, wages, consumption, profits and employment have
been particularly important. The projection of receipts from most tax or revenue
sources is generally made by estimating the change in yield of such tax or
revenue source caused by economic and other factors, rather than by estimating
the total yield of such tax or revenue source from its estimated tax base. The
forecasting methodology, however, ensures that State fiscal year collection
estimates for taxes that are based on a computation of annual liability, such as
the business and personal income taxes, are consistent with estimates of total
liability under those taxes.
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 the 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.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy, and
actions of the federal government have help to create projected structural
budget gaps for the State. These gaps result 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.
|_| State Governmental Funds Group. Substantially all State non-pension
financial operations are accounted for in the State's governmental funds group.
Governmental funds include:
o the General Fund, which receives all income not required by law to be
deposited in another fund;
o Special Revenue Funds, which receive most of the money the State gets
from the Federal government and other income the use of which is legally
restricted to certain purposes;
o Capital Projects Funds, used to finance the acquisition and construction
of major capital facilities by the State and to aid in certain projects
conducted by local governments or public authorities; and
o Debt Service Funds, which are used for the accumulation of money for the
payment of principal of and interest on long-term debt and to meet
lease-purchase and other contractual-obligation commitments.
<PAGE>
|_| Local Government Assistance Corporation. In 1990, as part of a
State fiscal reform program, legislation was enacted creating Local Government
Assistance Corporation, a public benefit corporation empowered to issue
long-term obligations to fund payments to local governments that had been
traditionally funded through the State's annual seasonal borrowing. The
legislation authorized the corporation to issue its bonds and notes in an amount
not in excess of $4.7 billion (exclusive of certain refunding bonds). Over a
period of years, the issuance of these long-term obligations, which are to be
amortized over no more than 30 years, was expected to eliminate the need for
continued short-term seasonal borrowing.
The legislation also dedicated revenues equal to one-quarter of the
four-cent State sales and use tax to pay debt service on these bonds. The
legislation also imposed a cap on the annual seasonal borrowing of the State at
$4.7 billion, less net proceeds of bonds issued by the corporation and bonds
issued to provide for capitalized interest. An exception is in cases where the
Governor and the legislative leaders have certified the need for additional
borrowing and have provided a schedule for reducing it to the cap. If borrowing
above the cap is thus permitted in any fiscal year, it is required by law to be
reduced to the cap by the fourth fiscal year after the limit was first exceeded.
This provision capping the seasonal borrowing was included as a covenant with
the corporation's bondholders in the resolution authorizing such bonds.
As of June 1995, the corporation had issued bonds and notes to provide net
proceeds of $4.7 billion completing the program. The impact of its borrowing, as
well as other changes in revenue and spending patterns, is that the State has
been able to meet its cash flow needs throughout the fiscal year without relying
on short-term seasonal borrowings.
|_| Authorities. The fiscal stability of the State is related to the
fiscal stability of its public Authorities. Authorities have various
responsibilities, including those which finance, construct and/or operate
revenue-producing public facilities. Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the State
itself, and may issue bonds and notes within the amounts, and restrictions set
forth in their legislative authorization. As of December 31, 1997, there were 17
Authorities that had outstanding debt of $100 million or more, and the aggregate
outstanding debt, including refunding bonds, of all Authorities was $84 billion,
only a portion of which constitutes State-supported or State-related debt.
Authorities are generally supported by revenues generated by the projects
financed or operated, such as tolls charged for use of highways, bridges or
tunnels, charges for electric power, electric and gas utility services, rentals
charged for and housing units and charges for occupancy at medical care
facilities. In addition, State legislation authorizes several financing
techniques for Authorities. 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.
<PAGE>
|_| Ratings of the State's Securities. On January 13, 1992, Standard &
Poor's reduced its ratings on the State's general obligation bonds from "A" to
"A-" and, in addition, reduced its ratings on the State's moral obligation,
lease purchase, guaranteed and contractual obligation debt. Standard & Poor's
also continued its negative rating outlook assessment on State general
obligation debt. On April 26, 1993, Standard & Poor's revised its rating outlook
assessment to "stable." On February 14, 1994, Standard & Poor's raised its
outlook to "positive" and, on October 3, 1995, confirmed its A-rating. On August
28, 1997, Standard & Poor's raised its ratings on the State's general obligation
bonds from A- to A and, in addition, raised its ratings on the State's moral
obligation, lease purchase, guaranteed and contractual obligation debt.
On January 6, 1992, Moody's reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from "A" to
"Baa1." On October 2, 1995, Moody's reconfirmed its "A" rating of the State's
general obligation long-term indebtedness. On February 10, 1997, Moody's
confirmed its "A2" rating of the State's general obligation long-term
indebtedness.
Ratings reflect only the views of the ratings organizations, and an
explanation of the significance of a rating may be obtained from the rating
agency furnishing the rating. There is no assurance that a particular rating
will continue for any given period of time or that a rating will not be revised
downward or withdrawn entirely, if, in the judgment of the agency originally
establishing the rating, circumstances warrant. A downward revision or
withdrawal of a ratings, could have an effect on the market price of the State
municipal securities in which the Fund invests.
|_| The State's General Obligation Debt. As of March 31, 1998, the
State had approximately $5.03 billion in general obligation bonds outstanding,
including $294 million in bond anticipation notes. Principal and interest due on
general obligation bonds and interest due on bond anticipation notes were $749.6
million for the 1998-99 fiscal year and are estimated to be $695 million for the
State's 1999-2000 fiscal year.
|_| Pending Litigation. The State is a defendant in numerous legal
proceedings pertaining to matters incidental to the performance of routine
governmental operations. That 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 1998-1999 fiscal year or thereafter.
The State believes that the State Plan includes sufficient reserves for
the payment of judgments that may be required during the 1998-99 fiscal year.
There can be no assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount the State Plan reserves for the payment
of judgments and, therefore, could affect the ability of the State to maintain a
balanced 1998-1999 Financial Plan. The General Purpose Financial Statements for
the 1997-1998 fiscal year report estimated probable awarded and anticipated
unfavorable judgements of $872 million, of which $90 million is expected to be
paid during the 1998-1999 fiscal year.
In addition, the State is party to other claims and litigations that its
legal counsel has advised are not probable of adverse court decisions or are not
deemed to be materially adverse. 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 1998-99 fiscal year or thereafter.
|_| Other Functions. 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 in the State's 1998-99 fiscal year.
|X| Factors Affecting Investments in New York City Municipal Securities.
The fiscal health of New York City (the "City") has a more significant effect on
the fiscal health of the State than any other municipality. 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 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
Gross City Product increased, boosted by strong wage gains. After noticeable
improvements in the City's economy during 1994, economic growth slowed in 1995.
It improved commencing in calendar year 1996, reflecting improved securities
industry earnings and employment in other sectors. Overall, the City's economic
improvement accelerated significantly in 1997 and 1998. The City's current
financial plan assumes that, after strong growth in 1993 - 1998 moderate
economic growth will occur through calendar year 2002, with moderating job
growth and wage increases.
For each of the 1981 through 1998 fiscal years, the City had an operating
surplus, before discretionary and other transfers, and achieved balanced
operating results as reported in accordance with generally accepted accounting
principles. The City has been required to close substantial gaps between
forecast revenues and forecast expenditures in order to maintain balanced
operating results. There can be no assurance that the City will continue to
maintain balanced operating results as required by State law without tax or
other revenue increases or reductions in City services or entitlement 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 1999 through 2002 fiscal
years (referred to below as the "City's Financial Plan").
The City's projections set forth in the City's Financial Plan are based on
various assumptions and contingencies which are uncertain and which may not
materialize. Implementation of the City's Financial Plan is dependent upon the
City's ability to market its securities successfully. The City's financing
program for fiscal years 1999 through 2002 contemplates the issuance of $5.2
billion of general obligation bonds and $5.4 billion of bonds to be issued by
the New York City Transitional Finance Authority (the "Finance Authority") to
finance City capital projects. The Finance Authority was created to assist the
City in financing its capital program while 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 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, New York City Municipal Water Finance Authority ("Water
Authority") bonds and Finance Authority bonds will be subject to prevailing
market conditions. The City's planned capital and operating expenditures are
dependent upon the sale of its general obligation bonds and notes, and the Water
Authority and Finance Authority bonds. Future developments concerning the City
and public discussion of such developments, as well as prevailing market
conditions, may affect the market for outstanding City general obligation bonds
and notes.
The City Comptroller and other agencies and public officials issue reports
and make public statements which, among other things, state that projected
revenues and expenditures may be different from those forecasted in the City's
Financial Plan. It is reasonable to expect that such reports and statements will
continue to be issued and to engender public comment.
|_| The City's Financial Plan. The City's Financial Plan projects
revenues and expenditures for the 1998 fiscal year balanced in accordance with
GAAP. The City's Financial Plan takes into account a projected increase in tax
revenues in 1999 and 2000 and a projected decrease in tax revenues in 2001 and
2002, an increase in planned expenditures for health insurance; a decrease in
projected pension expenditures; and other agency spending increases. In
addition, the City's Financial Plan includes a proposed discretionary transfer
to the 1999 fiscal year of $46.5 million to pay debt service due in fiscal year
2000. The City's Financial Plan also sets forth projections for the 2000 through
2002 fiscal years and projects gaps of $2.2 billion, $2.9 billion and $2.4
billion for the 2000 through 2002 fiscal years, respectively.
The City's Financial Plan assumes that the Governor and the State
Legislature approve extension of the 14% personal income tax surcharge, which is
scheduled to expire on December 31, 1999, and which is projected to provide
revenue of $183 million, $524 million and $544 million in 2000, 2001 and 2002
fiscal years, respectively. It also assumes collection of the projected rent
payments for the City's airports, totaling $6 million, $365 million, $155
million and $185 million in the 1999 through 2002 fiscal years, respectively. A
substantial portion of those collections may depend on the successful completion
of negotiations with The Port Authority of New York and New Jersey or on the
enforcement of the City's rights under the existing leases through pending legal
actions. The City's Financial Plan provides no additional wage increases for
City employees after their contracts expire in fiscal years 2000 and 2001. In
addition, the economic and financial condition of the City may be affected by
various financial, social, economic and political factors that could have a
material effect on the City.
On July 23, 1998, the New York State Comptroller issued a report that
noted that a significant cause for concern is the budget gaps in the 1999-2000
and 2000-2001 fiscal year. The State Comptroller projected them at $1.8 billion
and $5.5 billion, respectively, after excluding the uncertain receipt by the
State of $250 million of funds from the tobacco settlement assumed for each of
such fiscal years, as well as the unspecified actions assumed in the State's
projections. The State Comptroller also stated that if the securities industry
or economy slows, the size of the gaps would increase.
Various actions proposed in the City's Financial Plan are uncertain. If
these measures cannot be implemented, the City will be required to take other
actions to decrease expenditures or increase revenues to maintain a balanced
financial plan.
|_| Ratings of the City's Bonds. Moody's Investors Service, Inc. has
rated the City's general obligation bonds "A3." Standard & Poor's Ratings Group
has rated those bonds "A-." Fitch IBCA, Inc. has rated these bonds "A-." Those
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 those ratings will continue for any given period of time or
that they will not be revised downward or withdrawn entirely. Any downward
revision or withdrawal could have an adverse effect on the market prices of the
City's bonds. On July 10, 1995, Standard & Poor's revised its rating of City
bonds downward to "BBB+." On July 16, 1998, Standard & Poor's revised its rating
of City bonds upward to "A-." Moody's rating of City bonds was raised in
February 1998 to "A3" from "Baa1."
|_| The City's Outstanding Indebtedness. As of September 30, 1998, the
City and the Municipal Assistance Corporation for the City of New York had,
respectively, $26.391 billion and $3.141 billion of outstanding net long-term
debt.
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. There can be no assurance
that there will not be reductions in State aid to the City from amounts
currently projected; that State budgets in future fiscal years will be adopted
by the April 1 statutory deadline, or interim appropriations enacted; or that
any such reductions or delays will not have adverse effects on the City's cash
flow or expenditures.
|_| Pending Litigation. The City is a defendant in lawsuits pertaining
to material matters, including claims asserted that are incidental to performing
routine governmental and other functions. That 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, 1998 and 1997, claims in excess of $472
billion and $530 billion, respectively, were outstanding against the City for
which the City estimates its potential future liability to be $3.5 billion for
each fiscal year.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time employ the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times,
and at times may not use them.
|X| Floating Rate and Variable Rate Obligations. Variable rate demand
obligations may have a demand feature that allows the Fund to tender the
obligation to the issuer or a third party prior to its maturity. The tender may
be at par value plus accrued interest, according to the terms of the
obligations.
The interest rate on a floating rate demand note is based on a stated
prevailing market rate, such as a bank's prime rate, the 91-day U.S. Treasury
Bill rate, or some other standard, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate note is also based on a
stated prevailing market rate but is adjusted automatically at specified
intervals of not less than one year. Generally, the changes in the interest rate
on such securities reduce the fluctuation in their market value. As interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than that for fixed-rate obligations of the same maturity.
The
Manager may determine that an unrated floating rate or variable rate obligation
meets the Fund's quality standards by reason of the backing provided by a letter
of credit or guarantee issued by a bank that meets those quality standards.
Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice. The issuer of that type of note
normally has a corresponding right in its discretion, after a given period, to
prepay the outstanding principal amount of the note plus accrued interest.
Generally the issuer must provide a specified number of days' notice to the
holder.
|X| Inverse Floaters and Other Derivative Investments. "Inverse floaters"
are municipal obligations on which the interest rates typically fall as market
rates increase and increase as market rates fall. Changes in market interest
rates or the floating rate of the security inversely affect the residual
interest ate of an inverse floater. As a result, the price of an inverse floater
will be considerably more volatile than that of a fixed-rate obligation when
interest rates change. The Fund can invest up to 20% of its net assets in
inverse floaters. Certain inverse floaters may be illiquid and therefore subject
to the Fund's limitation on illiquid securities.
To provide investment leverage, a municipal issuer might decide to issue
two variable rate obligations instead of a single long-term, fixed-rate bond.
The interest rate on one obligation reflects short-term interest rates. 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
a factor of two, minus the rate paid on the short-term instrument. The two
portions may be recombined to create a fixed-rate bond. The Manager might
acquire both portions of that type of offering, to reduce the effect of the
volatility of the individual securities. This provides the Manager with a
flexible portfolio management tool to vary the degree of investment leverage
efficiently under different market conditions.
Inverse floaters may offer relatively high current income, reflecting the
spread between short-term and long-term tax-exempt interest rates. As long as
the municipal yield curve remains relatively steep and short term rates remain
relatively low, owners of inverse floaters will have the opportunity to earn
interest at above-market rates because they receive interest at the higher
long-term rates but have paid for bonds with lower short-term rates. If the
yield curve flattens and shifts upward, an inverse floater will lose value more
quickly than a conventional long-term bond. The Fund might invest in inverse
floaters to seek higher tax-exempt yields than are available from fixed-rate
bonds that have comparable maturities and credit ratings. In some cases, the
holder of an inverse floater may have an option to convert the floater to a
fixed-rate bond, pursuant to a "rate-lock" option.
Some inverse floaters have a feature known as an interest rate "cap" as
part of the terms of the investment. Investing in inverse floaters that have
interest rate caps might be part of a portfolio strategy to try to maintain a
high current yield for the Fund when the Fund has invested in inverse floaters
that expose the Fund to the risk of short-term interest rate fluctuations.
"Embedded" caps can be used to hedge a portion of the Fund's exposure to rising
interest rates. When interest rates exceed a pre-determined rate, the cap
generates additional cash flows that offset the decline in interest rates on the
inverse floater, and the hedge is successful. However, the Fund bears the risk
that if interest rates do not rise above the pre-determined rate, the cap (which
is purchased for additional cost) will not provide additional cash flows and
will expire worthless.
Inverse floaters are a form of derivative investment. Certain derivatives,
such as options, futures, indexed securities and entering into swap agreements,
can be used to increase or decrease the Fund's exposure to changing security
prices, interest rates or other factors that affect the value of securities.
However, these techniques could result in losses to the Fund, if the Manager
judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's other investments. These techniques can cause
losses if the counterparty does not perform its promises. An additional risk of
investing in municipal securities that are derivative investments is that their
market value could be expected to vary to a much greater extent than the market
value of municipal securities that are not derivative investments but have
similar credit quality, redemption provisions and maturities.
n Options Transactions. The Fund can write (that is, sell) call options.
The Fund's call writing is subject to a number of restrictions:
(1) Calls the Fund sells must be listed on a national securities exchange.
(2) Each call the Fund writes must be "covered" while it is outstanding.
That means the Fund must own the investment on which the call was written.
(3) As an operating policy, no more than 5% of the Fund's net assets will
be invested in options transactions.
When the Fund writes a call on a security, it receives cash (a premium).
The Fund agrees to sell the underlying investment to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has retained the risk
of loss that the price of the underlying security may decline during the call
period. That risk may be offset to some extent by the premium the Fund receives.
If the value of the investment does not rise above the call price, it is likely
that the call will lapse without being exercised. In that case the Fund would
keep the cash premium and the investment.
The Fund's custodian bank, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges, or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC
will release the securities on the expiration of the calls or upon the Fund's
entering into a closing purchase transaction.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
was more or less than the price of the call the Fund purchased to close out the
transaction. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium received. Any
such profits are considered short-term capital gains for Federal tax purposes,
as are premiums on lapsed calls. When distributed by the Fund they are taxable
as ordinary income.
|_| Purchasing Calls and Puts. The Fund may buy calls only to close out
a call it has written, as discussed above. Calls the Fund buys must be listed on
a securities exchange. A call or put option may not be purchased if the purchase
would cause the value of all the Fund's put and call options to exceed 5% of its
total assets. The Fund may not sell puts other than puts it has previously
purchased, to close out a position.
When the Fund purchases a put, it pays a premium. The Fund then has the
right to sell the underlying investment to a seller of a corresponding put on
the same investment during the put period at a fixed exercise price. Puts on
municipal bond indices are settled in cash. Buying a put on a debt security,
interest rate future or municipal bond index future the Fund owns enables it to
protect itself during the put period against a decline in the value of the
underlying investment below the exercise price. If the market price of the
underlying investment is equal to or above the exercise price and as a result
the put is not exercised or resold, the put will become worthless at its
expiration date. In that case the Fund will lose its premium payment and the
right to sell the underlying investment. A put may be sold prior to expiration
(whether or not at a profit).
|_| Risks of Hedging with Options. The use of hedging instruments
requires special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management. If the Manager
uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's returns.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The Fund could pay a brokerage commission each time it buys a call or put, sells
a call, or buys or sells an underlying investment in connection with the
exercise of a call or put. Such commissions might be higher on a relative basis
than the commissions for direct purchases or sales of the underlying
investments. Premiums paid for options are small in relation to the market value
of the underlying investments. Consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investment.
If a covered call written by the Fund is exercised on an investment that
has increased in value, the Fund will be required to sell the investment at the
call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
An option position may be closed out only on a market that provides
secondary trading for options of the same series. There is no assurance that a
liquid secondary market will exist for a particular option. If the Fund could
not effect a closing purchase transaction due to a lack of a market, it would
have to hold the callable investment until the call lapsed or was exercised, and
could experience losses.
|_| Regulatory Aspects of Hedging Instruments. Transactions in options
by the Fund are subject to limitations established by the option exchanges. The
exchanges limit the maximum number of options that may be written or held by a
single investor or group of investors acting in concert. Those limits apply
regardless of whether the options were written or purchased on the same or
different exchanges, or are held in one or more accounts or through one or more
different exchanges or through one or more brokers. Thus, the number of options
that the Fund may write or hold may be affected by options written or held by
other entities, including other investment companies having the same adviser as
the Fund (or an adviser that is an affiliate of the Fund's adviser). An exchange
may order the liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.
|X| When-Issued and Delayed-Delivery Transactions. The Fund can purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed-delivery" (or "forward commitment") basis. "When-issued" or "delayed
delivery" refers to securities whose terms and indenture are available and for
which a market exists, but which are not available for immediate delivery.
When such transactions are negotiated the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date. Normally the
settlement date is within six months of the purchase of municipal bonds and
notes. However, the Fund may, from time to time, purchase municipal securities
having a settlement date more than six months and possibly as long as two years
or more after the trade date. The securities are subject to change in value from
market fluctuation during the settlement period. The value at delivery may be
less than the purchase price. For example, changes in interest rates in a
direction other than that expected by the Manager before settlement will affect
the value of such securities and may cause loss to the Fund. No income begins to
accrue to the Fund on a when-issued security until the Fund received the
security at settlement of the trade.
The Fund may engage in when-issued transactions in order to secure what is
considered to be an advantageous price and yield at the time the Fund enters
into the obligation. When the Fund engages in when-issued or delayed-delivery
transactions, it relies on the buyer or seller, as the case may be, to complete
the transaction. Its failure to do so may cause the Fund to lose the opportunity
to obtain the security at a price and yield it considers advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies or for delivery pursuant to options contracts
it has entered into, and not for the purposes of investment leverage. Although
the Fund will enter into when-issued or delayed-delivery purchase transactions
to acquire securities, the Fund may dispose of a commitment prior to settlement.
If the Fund chooses to dispose of the right to acquire a when-issued security
prior to its acquisition or to dispose of its right to deliver or receive
against a forward commitment, it may incur a gain or loss.
At the time the Fund makes a commitment to purchase or sell a security on
a when-issued or forward commitment basis, it records the transaction on its
books and reflects the value of the security purchased. In a sale transaction,
it records the proceeds to be received, in determining its
<PAGE>
net asset value. The Fund will identify on its books cash, U.S. government
securities or other high grade debt obligations at least equal to the value of
purchase commitments until the Fund pays for the investment.
When-issued transactions and forward commitments can be used by the Fund
as a defensive technique to hedge against anticipated changes in interest rates
and prices. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities in its portfolio on a forward commitment
basis to attempt to limit its exposure to anticipated falling prices. In periods
of falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
forward commitment basis, to obtain the benefit of currently higher cash yields.
|X| Zero-Coupon Securities. The Fund can invest without limit in
zero-coupon and delayed interest municipal securities. Zero-coupon securities do
not make periodic interest payments and are sold at a deep discount from their
face value. The buyer recognizes a rate of return determined by the gradual
appreciation of the security, which is redeemed at face value on a specified
maturity date. This discount depends on the time remaining until maturity, as
well as prevailing interest rates, the liquidity of the security and the credit
quality of the issuer. In the absence of threats to the issuer's credit quality,
the discount typically decreases as the maturity date approaches. Some
zero-coupon securities are convertible, in that they are zero-coupon securities
until a predetermined date, at which time they convert to a security with a
specified coupon rate.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities. Their value may fall more
dramatically than the value of interest-bearing securities when interest rates
rise. When prevailing interest rates fall, zero-coupon securities tend to rise
more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
|X| Puts and Standby Commitments. When the Fund buys a municipal security
subject to a standby commitment to repurchase the security, the Fund is entitled
to same-day settlement from the purchaser. The Fund receives an exercise price
equal to the amortized cost of the underlying security plus any accrued interest
at the time of exercise. A put purchased in conjunction with a municipal
security enables the Fund to sell the underlying security within a specified
period of time at a fixed exercise price.
The Fund might purchase a standby commitment or put separately in cash or
it might acquire the security subject to the standby commitment or put (at a
price that reflects that additional feature). The Fund will enter into these
transactions only with banks and securities dealers that, in the Manager's
opinion, present minimal credit risks. The Fund's ability to exercise a put or
standby commitment will depend on the ability of the bank or dealer to pay for
the securities if the put or standby commitment is exercised. If the bank or
dealer should default on its obligation, the Fund might not be able to recover
all or a portion of any loss sustained from having to sell the security
elsewhere.
Puts and standby commitments are not transferable by the Fund. They
terminate if the Fund sells the underlying security to a third party. The Fund
intends to enter into these arrangements to facilitate portfolio liquidity,
although such arrangements might enable the Fund to sell a security at a
pre-arranged price that may be higher than the prevailing market price at the
time the put or standby commitment is exercised. However, the Fund might refrain
from exercising a put or standby commitment if the exercise price is
significantly higher than the prevailing market price, to avoid imposing a loss
on the seller that could jeopardize the Fund's business relationships with the
seller.
A put or standby commitment increases the cost of the security and reduces
the yield otherwise available from the security. Any consideration paid by the
Fund for the put or standby commitment will be reflected on the Fund's books as
unrealized depreciation while the put or standby commitment is held, and a
realized gain or loss when the put or commitment is exercised or expires.
Interest income received by the Fund from municipal securities subject to puts
or stand-by commitments may not qualify as tax exempt in its hands if the terms
of the put or stand-by commitment cause the Fund not to be treated as the tax
owner of the underlying municipal securities.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to an approved vendor for delivery on an agreed upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks or broker-dealers that have been
designated a primary dealer in government securities, which meet the credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day. Delivery pursuant
to resale typically will occur within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price to
fully collateralize the repayment obligation. Additionally, the Manager will
monitor the vendor's creditworthiness to confirm that the vendor is financially
sound and will continuously monitor the collateral's value. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may incur
costs in disposing of the collateral and may experience losses if there is any
delay in its ability to do so.
|X| Borrowing for Leverage. As a fundamental policy, the Fund may borrow
up to 5% of its total assets from banks on an unsecured basis for temporary and
emergency purposes or to purchase additional portfolio securities. Borrowing to
purchase portfolio securities 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 required under applicable
provisions of the Investment Company Act. If the value of the Fund's assets
fails to meet this 300% asset coverage requirement, the Fund is required to
reduce its bank debt within 3 days to meet the requirement. To do so, the Fund
might have to sell a portion of its investments at a disadvantageous time.
The Fund will pay interest on these loans, and that interest expense will
raise the overall expenses of the Fund and reduce its returns. If it does
borrow, its expenses will be greater than comparable funds that do not borrow
for leverage. The interest on a loan might be more (or less) than the yield on
the securities purchased with the loan proceeds. Additionally, the Fund's net
asset value per share might fluctuate more than that of funds that do not
borrow.
|X| Investing in Other Investment Companies. The Fund can invest on a
short-term basis up to 5% of its net assets in other investment companies that
have an objective similar to the Fund's objective. Because the Fund would be
subject to its ratable share of the other investment company's expenses, the
Fund will not make these investments unless the Manager believes that the
potential investment benefits justify the added costs and expenses.
|X| Taxable Investments. While the Fund can invest up to 20% of its total
assets in investments that generate income subject to income taxes, it attempts
to invest 100% of its assets in tax-exempt securities under normal market
conditions. The Fund does not anticipate investing substantial amounts of its
assets in taxable investments under normal market conditions or as part of its
normal trading strategies and policies. To the extent it invests in taxable
securities, the Fund would not be able to meet its objective of providing tax
exempt income to its shareholders. Taxable investments include, for example,
options, repurchase agreements, and some of the types of securities it would buy
for temporary defensive purposes.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, such a "majority" vote is defined as the vote
of the holders of the lesser of:
|_| 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or |_| more than 50% of the
outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
[_] Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund:
|_| The Fund cannot 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 days to the extent necessary to meet that asset coverage
requirement. To reduce its borrowings, the Fund might 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.
|_| The Fund cannot buy any securities on margin or sell any securities
short.
|_| The Fund cannot 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.
|_| The Fund cannot act as underwriter of securities issued by other
persons. A permitted exception is if the Fund technically is deemed to be an
underwriter under the federal securities laws in connection with the disposition
of its portfolio securities.
o The Fund cannot purchase the securities of any issuer that would result in the
Fund owning more than 10% of the voting securities of that issuer.
|_| The Fund cannot purchase securities from or sell them to its officers
and trustees, or any firm of which any officer or trustee is a member, as
principal. However, the Fund may deal with such persons or firms as brokers and
pay a customary brokerage commission. The Fund cannot 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 2 of 1% of the securities of
such issuer and all such officers and trustees together own beneficially more
than 5% of those securities.
|_| The Fund cannot acquire, lease or hold real estate, except as may be
necessary or advisable for the maintenance of its offices or to enable the Fund
to take appropriate such action 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.
|_| The Fund cannot 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. The Fund can also purchase call options (and sell
put options) to the extent necessary to close out call options it previously
wrote or put options it previously purchased.
|_| The Fund cannot invest in companies for the purpose of exercising
control or management.
|_| The Fund cannot invest more than 25% of its total assets in securities
of issuers of a particular industry. For the purposes of this limitation,
tax-exempt securities and United States government obligations are not
considered to be part of an industry. However, 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.
|_| The Fund cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Fund are designated as
segregated, or margin, collateral or escrow arrangements are established, to
cover the related obligations. Examples of those activities include borrowing
money, reverse repurchases agreements, delayed-delivery and when-issued
arrangements for portfolio securities transactions and contracts to buy or sell
derivatives, hedging instruments, options or futures.
Unless the Prospectus or Statement of Additional Information states that a
percentage restriction applies on an ongoing basis, it applies only at the time
the Fund makes an investment. In that case 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.
Diversification. The Fund intends to be "diversified," as defined in the
Investment Company Act, with respect to 75% of its total assets, and to satisfy
the restrictions against investing too much of its assets in any "issuer" as set
forth above. Under the Investment Company Act's requirements for
diversification, as to 75% of its total assets, the Fund cannot invest more than
5% of its net assets in the securities of any one issuer (other than the U.S.
government, its agencies or instrumentalities) nor can it own more than 10% of
an issuer's voting securities.
In implementing this policy, the identification of the issuer of a
municipal security depends on the terms and conditions of the security. When the
assets and revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating it and the
security is backed only by the assets and revenues of the subdivision, agency,
authority or instrumentality, the latter would be deemed to be the sole issuer.
Similarly, if an industrial development bond is backed only by the assets and
revenues of the non-governmental user, then that user would be deemed to be the
sole issuer. However, if in either case the creating government or some other
entity guarantees a security, the guarantee would be considered a separate
security and would be treated as an issue of that government or other entity.
In implementing the Fund's policy not to concentrate its investments, the
Manager will consider a non-governmental user of facilities financed by
industrial development bonds as being in a particular industry. That is done
even though the bonds are municipal securities, as to which the Fund has no
concentration limitation. Although this application of the concentration
restriction is not a fundamental policy of the Fund, it will not be changed
without shareholder approval.
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 B 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, from time to time the Fund may
increase the relative emphasis of its investments in a particular segment of the
municipal securities market above 25% of its net assets. For example, these
might include, among others, general obligation bonds, pollution control bonds,
hospital bonds, or any other segment of the municipal securities market as
listed in Appendix A to this Statement of Additional Information. To the extent
it does so, the Fund's exposure to market risks from economic, business,
political or other changes affecting one bond in a particular segment (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.
n 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:
o The Fund may not acquire more than 3% of the voting securities issued by
any one investment company. An exception is if the acquisition results from a
dividend or a merger, consolidation or other reorganization. Also, the Fund
cannot invest more than 5% of its 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.
o For purposes of the Fund's investment restriction as to concentration
described above, its 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.
How the Fund Is Managed
Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund is organized as a Massachusetts business trust.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager.
|X| Classes of Shares. 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 classes invest in the same
investment portfolio. Shares are freely transferable. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value, o may have separate voting rights
on matters in which the interests of one class are different from the
interests of another class, and o votes as a class on matters that affect
that class alone.
|X| Meetings of Shareholders. 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. It will also do so 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.
If the Trustees receive a request from at least 10 shareholders 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. The shareholders making the request
must have been shareholders for at least six months and must hold shares of the
Fund valued at $25,000 or more or constituting at least 1% of the Fund's
outstanding shares, whichever is less. The Trustees may also take other action
as permitted by the Investment Company Act.
|X| Shareholder and Trustee Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under its Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. The Trustees shall have
no personal liability to any such person, to the extent permitted by law.
<PAGE>
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations during the past five years are
listed below. Trustees denoted with an asterisk (*) below are deemed to be
"interested persons" of the Fund under the Investment Company Act. Mr. Cannon is
a Trustee of the Fund as well as Limited Term New York Municipal Fund and the
Bond Fund Series. All of the other Trustees are also trustees or directors of
the following Oppenheimer funds:
Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest For Value Funds, a series fund having the following series:
Oppenheimer Quest Small Cap Value Fund,
Oppenheimer Quest Balanced Fund, and
Oppenheimer Quest Opportunity Value Fund,
Oppenheimer Quest Global Value Fund, Inc.,
Oppenheimer Quest Capital Value Fund, Inc.,
Rochester Portfolio Series (a series fund having one series:
Limited-Term New York Municipal Fund),
Rochester Fund Municipals,
Bond Fund Series (a series fund having one series:
Oppenheimer Convertible Securities Fund), and
Oppenheimer MidCap Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Wixted, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of April 1, 1999, the Trustees and officers of the
Fund as a group owned of record or beneficially 3.1% of the Fund's Class A
shares and less than 1% of Class B and Class C shares of the Fund. The foregoing
statement does not reflect ownership of shares of the Fund held of record by an
employee benefit plan for employees of the Manager, other than the shares
beneficially owned under the plan by the officers of the Fund listed above. Ms.
Macaskill and Mr. Donohue are trustees of that plan.
Bridget A. Macaskill*, Chairman of the Board of Trustees and President; Age: 50
Two World Trade Center, New York, New York 10048-0203 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 Corp., an investment adviser subsidiary of the
Manager; Chairman and a director of Shareholder Services, Inc. (since August
1994) and Shareholder Financial Services, Inc. (since September 1995), transfer
agent subsidiaries of the Manager; President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp., the Manager's
parent holding company; President (since September 1995) and a director (since
November 1989) of Oppenheimer Partnership Holdings, Inc., 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 management subsidiary of
the Manager and of Oppenheimer Millennium Funds plc; President and a director of
other Oppenheimer funds; a director of Hillsdown Holdings plc (a U.K. food
company).
<PAGE>
John Cannon, Trustee; Age: 69
620 Sentry Parkway West, Suite 220, Blue Bell, Pennsylvania 19422
Independent Consultant; Chief Investment Officer of CDC Associates, a registered
investment advisor; a Director of Neuberger & Berman Income Managers Trust,
Neuberger & Berman Income Funds and Neuberger and Berman Trust (since 1995);
formerly Chairman and Treasurer of CDC Associates (1993 - February 1996) and
President (1976 - 1991) and Senior Vice President (1991 - 1993) of AMA
Investment Advisers, Inc., a mutual fund investment advisor.
Paul Y. Clinton, Trustee; Age: 68
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; Trustee or Director of Capital Cash Management Trust,
Narangansett Tax-Free Fund, OCC Accumulation Trust, OCC Cash Reserves
(investment companies); formerly Director, External Affairs, Kravco Corporation,
a national real estate owner and property management corporation.
Thomas W. Courtney, Trustee; Age 65
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc. (venture capital firm); Trustee or
Directors of Cash Assets Trust, OCC Cash Reserves, Inc., OCC Accumulation Trust,
Hawaiian Tax-Free Trust and Tax Free Trust of Arizona (investment companies);
Director of several privately owned corporations; former General Partner of
Trivest Venture Fund (private venture capital fund); former President of
Investment Counseling Federated Investors, Inc.; former Director of Financial
Analysts Federation.
Robert G. Galli, Trustee; Age: 65
19750 Beach Road, Jupiter, Florida 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 to
December 1997); General Counsel of Oppenheimer Acquisition Corp., the Manager's
parent holding company; Executive Vice President of the Manager (December 1977
to October 1995); Executive Vice President and a director (April 1986 to October
1995) of HarbourView Asset Management Corporation.
Lacy B. Herrmann, Trustee; Age: 69
380 Madison Avenue, Suite 2300, New York, New York 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, 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, a mutual fund sub-adviser and
administrator; Director of OCC Cash Reserves, Inc., and Trustee of OCC
Accumulation Trust (open-end investment companies); Trustee Emeritus of Brown
University.
George Loft, Trustee; Age: 84
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc., and Trustee of OCC
Accumulation Trust, (open-end investment companies).
Ronald H. Fielding, Vice President; Age: 50
350 Linden Oaks, Rochester, NY 14625
Senior Vice President (since January 1996) of the Manager; Chairman of the
Rochester Division of the Manager (since January 1996); an officer and portfolio
manager of other Oppenheimer funds; prior to joining the Manager in January
1996, he was President and a director of Rochester Capital Advisors, Inc.
(1993-1995), the Fund's prior investment advisor, and of Rochester Fund
Services, Inc. (1986-1995), the Fund's prior distributor; President and a
trustee of Limited Term New York Municipal Fund (1991-1995), Convertible
Securities Fund (1986-1995) and Rochester Fund Municipals (1986-1995); President
and a director of Rochester Tax Manager Fund, Inc. (1982-1995) and of Fielding
Management Company, Inc. (1982-1995), an investment advisor.
Andrew J. Donohue, Secretary; Age: 48
Two World Trade Center, New York, New York 10048-0203
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 Asset Management Corp., Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and (since September 1995) Oppenheimer
Partnership Holdings, Inc.; President and a director of Centennial Asset
Management Corporation (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 Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Brian W. Wixted, Treasurer; Age: 392
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; formerly
Principal and Chief Operating Officer, Bankers Trust Company - Mutual Fund
Services Division (1995 - 1999), Vice President and Chief Financial Officer of
CS First Boston Investment Management Corp. (1991 - 1995) and Vice President and
Accounting Manager, Merrill Lynch Asset Management, Inc. (1987 - 1991).
<PAGE>
Robert Bishop, Assistant Treasurer; Age: 40
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.
Adele A. Campbell, Assistant Treasurer; Age 35
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).
Scott T. Farrar, Assistant Treasurer; Age: 33
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: 50
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of Shareholder Services, Inc. (since
May 1985), and Shareholder Financial Services, Inc. (since November 1989);
Assistant Secretary of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
n Remuneration of Trustees. The officers of the Fund and one Trustee, Ms.
Macaskill, are affiliated with the Manager and receive no salary or fee from the
Fund. The remaining Trustees of the Fund received the compensation shown below.
The compensation from the Fund was paid during its fiscal year ended December
31, 1998. The table below also shows the total compensation from all of the
Oppenheimer funds listed above (referred to as the "Oppenheimer Quest/Rochester
Funds"), including the compensation from the Fund. That amount represents
compensation received as a director or trustee or member of a committee of the
Board during the calendar year 1998.
<PAGE>
- --------------------------------------------------------------------------------
Total Compensation
From all Oppenheimer
Aggregate Retirement Quest/Rochester
Compensation Benefits Accrued Funds
Trustee' Name From Fund1 as Part of Fund (11 Funds)2
Expenses
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
John Cannon $70,885 $65,000 $ 26,054
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Paul Y. Clinton $55,790 $39,594 $ 71,700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Thomas W. Courtney $45,091 $28,895 $ 71,700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Robert G. Galli $ 8,6993 None $113,383
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lacy B. Herrmann $60,704 $44,508 $ 71,700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
George Loft $62,907 $46,709 $ 71,700
- --------------------------------------------------------------------------------
1. Aggregate compensation from the Fund includes fees and any retirement plan
benefits accrued for a Trustee.
2. For the 1998 calendar year. Includes compensation for a portion of the year
paid by Oppenheimer Quest Officers Value Fund, which was reorganized into
another fund in June 1998. Each series of an investment company is considered
a separate "fund" for this purpose. For Mr. Galli, compensation is for the
period from 6/2/98 to 12/31/98.
3. For Mr. Galli, the aggregate compensation from the Fund is for the period
from 6/2/98 to 10/31/98. His total compensation for the 1998 calendar year
also includes compensation from 22 other Oppenheimer funds for which he
serves as a trustee or director.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan
that provides for payments to retired Trustees. Payments are up to 80% of the
average compensation paid during a Trustee's five years of service in which the
highest compensation was received. A Trustee must serve as Trustee for any of
the Oppenheimer Quest/Rochester/MidCap funds listed above for at least 15 years
to be eligible for the maximum payment. Each Trustee's retirement benefits will
depend on the amount of the Trustee's future compensation and length of service.
Therefore the amount of those benefits cannot be determined at this time, nor
can we estimate the number of years of credited service that will be used to
determine those benefits.
n Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested directors that enables them 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 level of
compensation to any Trustee. Pursuant to an Order issued by the
<PAGE>
Securities and Exchange Commission, the Fund may invest in the funds selected by
the Trustee under the plan without shareholder approval for the limited purpose
of determining the value of the Trustee's deferred fee account.
n Major Shareholders. As of April 1, 1999, the only person who owned of
record or were known by the Fund to own beneficially 5% or more of the Fund's
outstanding Class A, Class B, or Class C shares was:
Merrill Lynch Pierce Fenner & Smith Inc. 4800 Deer Lake Drive East, Floor
3, Jacksonville, Florida 32246, which owned 24,558,654.91 Class A shares
(approximately 13%of the Class A shares then outstanding), 4,500,853.12
Class B shares (approximately 14% of the Class B shares then outstanding,
and 2,501,214.383 Class C shares (approximately 22% of the Class C shares
then outstanding), for the benefit of its customers.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company. 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 enforced by the
Manager.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to day business. That agreement
requires the Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment. It also requires the Manager to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective corporate administration for the Fund. Those
responsibilities include the compilation and maintenance of records with respect
to the Fund's 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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The investment advisory agreement lists examples of expenses
paid by the Fund. The major categories relate to interest, taxes, fees to
disinterested Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs,
brokerage commissions, and non-recurring expenses, including litigation cost.
The management fees paid by the Fund to the Manager are calculated at the rates
described in the Prospectus, which are applied to the assets of the Fund as a
whole. The fees are allocated to each class of shares based upon the relative
proportion of the Fund's net assets represented by that class. The management
fees paid by the Fund to the Manager during its last three fiscal years are
listed below.
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties, or
reckless disregard for its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss sustained by reason of any
investment of the Fund assets made with due care and in good faith.
o Accounting and Record-Keeping Services. The Manager provides
accounting and record-keeping services to the Fund pursuant to an Accounting and
Administration Agreement approved by the Board of Trustees. Under that
agreement, the Manager maintains the general ledger accounts and records
relating to the Fund's business and calculates the daily net asset values of the
Fund's shares.
- -------------------------------------------------------------------------------
Accounting and
Fiscal Year Ended Management Fee Paid to Administrative Services Fee
12/31 OppenheimerFunds, Inc. Paid to OppenheimerFunds,
Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1996 $10,305,1431 $660,089
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $12,249,672 $778,253
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $16,898,272 $1,082,541
- -------------------------------------------------------------------------------
1. The Fund paid its prior investment advisor, Rochester Capital Advisors, L.P.,
$113,595 for advisory services in the fiscal year ended 12/31/96.
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 buy and sell portfolio
securities for the Fund. The investment advisory agreement allows the Manager to
use broker-dealers to effect the Fund's portfolio transactions. Under the
agreement, the Manager may employ those broker-dealers (including "affiliated"
brokers, as that term is defined in the Investment Company Act) that, in the
Manager's best judgment based on all relevant factors, will implement the Fund's
policy to obtain, at reasonable expense, the "best execution" of portfolio
transactions. "Best execution" refers to prompt and reliable execution at the
most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, the Manager 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 may select brokers
that provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager or its affiliates have investment discretion.
The commissions paid to such brokers may be higher than another qualified broker
would charge, if the Manager makes a good faith determination that the
commission is fair and reasonable in relation to the services provided. Subject
to those other considerations, as a factor in selecting brokers for the Fund's
portfolio transactions, the Manager may also consider sales of shares of the
Fund and other investment companies managed by the Manager or its affiliates.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally the Manager's portfolio traders
allocate brokerage upon recommendations from the Manager's portfolio managers.
In certain instances, portfolio managers may directly place trades and allocate
brokerage. In either case, the Manager's executive officers supervise the
allocation of brokerage.
Most securities purchases made by the Fund are in principal transactions
at net prices. 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 the Manager determines that a better price or execution may
be obtained by using the services of a broker. Therefore, the Fund does not
incur substantial brokerage costs. Portfolio securities purchased from
underwriters include a commission or concession paid by the issuer to the
underwriter in the price of the security. Portfolio securities purchased 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. In an option transaction, the Fund ordinarily uses the same broker
for the purchase or sale of the option and any transaction in the investment to
which the option relates. Other funds advised by the Manager have investment
objectives and policies similar to those of the Fund. Those other funds may
purchase or sell the same securities as the Fund at the same time as the Fund,
which could affect the supply and price of the securities. When possible, the
Manager tries to combine concurrent orders to purchase or sell the same security
by more than one of the accounts managed by the Manager or its affiliates. The
transactions under those combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each account.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. 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. Investment research received by the Manager for the
commissions paid by those other accounts may be useful both to the Fund and one
or more of the Manager's other accounts. Investment research services may be
supplied to the Manager by a third party at the instance of a broker through
which trades are placed.
Investment research services include information and analyses on
particular companies and industries as well as market or economic trends and
portfolio strategy, market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If a research
service also assists the Manager in a non-research capacity (such as bookkeeping
or other administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making process may
be paid in commission dollars.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager. That research provides additional views
and comparisons for consideration and helps the Manager to obtain market
information for the valuation of securities that are either held in the Fund's
portfolio or are being considered for purchase. The Manager provides information
to the Board of the Fund about the commissions paid to brokers furnishing
research services, together with the Manager's representation that the amount of
such commissions was reasonably related to the value or benefit of such
services.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of the different classes of shares of the Fund. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is discussed in the table below:
------------------------------------------------------------------------------
Aggregate Class A Commissions Commissions Commissions
Fiscal Front-End Front-End on Class A on Class B on Class C
Year Sales Sales Shares Shares Shares
Ended Charges Charges Advanced by Advanced by Advanced by
12/31: on Class A Retained by Distributor1 Distributor1 Distributor1
Shares Distributor
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1996 $ 9,802,584 $1,377,087 None None None
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1997 $15,588,173 $2,324,962 $ 577,976 $ 6,618,261 $ 478,210
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1998 $19,163,247 $2,805,718 $1,933,360 $12,869,741 $1,286,192
------------------------------------------------------------------------------
(1)The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
----------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent Class C Contingent
Year Deferred Sales Deferred Sales Deferred Sales
Ended Charges Retained by Charges Retained by Charges Retained by
12/31: Distributor Distributor Distributor
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1998 $50,933 $620,222 $60,471
----------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for its
Class A shares and Distribution and Service Plans for its Class B and Class C
shares under Rule 12b-1 of the Investment Company Act. Under those plans, the
Fund makes payments to the Distributor in connection with the distribution
and/or servicing of the shares of the particular class.
Each plan has been approved by a vote of 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. Each plan has also been
approved by a vote of the holders of a "majority" (as defined in the Investment
Company Act) of the shares of each class.
* In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to the
Trustees who are not "interested persons" of the Fund (or its parent trust) and
who do not have any direct or indirect financial interest in the operation of
the distribution plan or any agreement under the plan.
Under the plans the Manager and the Distributor may make payments to
affiliates and, in their sole discretion, from time to time may use their own
resources (at no direct cost to the Fund) to make payments to brokers, dealers
or other financial institutions for distribution and administrative services
they perform. The Manager may use profits from the advisory fee it receives from
the Fund. The Distributor and the Manager may, in their sole discretion,
increase or decrease the amount of payments they make to plan recipients from
their own resources.
Unless a plan is terminated as described below, the plan continues in
effect from year to year, but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A 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.
The Board and the Independent Trustees must approve all material
amendments to a plan. An amendment to increase materially the amount of payments
to be made under the plan must be approved by shareholders of the class affected
by the amendment. Because Class B shares automatically convert into Class A
shares after six years, the Fund must obtain the approval of both Class A and
Class B shareholders for an amendment to the Class A plan that would materially
increase the amount to be paid under that plan. That approval must be by a
"majority" (as defined in the Investment Company Act) of the shares of each
class, voting separately by Class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Fund's Board of Trustees at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees in
the exercise of their fiduciary duty.
Each plan states that while it is in effect, the selection or replacement
and nomination of those Trustees of the Fund who are not "interested persons" of
the Fund is committed to the discretion of the Independent Trustees. This
provision does not prevent the involvement of others in the selection and
nomination process as long as the final decision as to selection or nomination
is approved by a majority of the Independent Trustees.
Under the plan for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares held by
the recipient for itself and its customers does not exceed a minimum amount, if
any, that may be set from time to time by a majority of the Fund's Independent
Trustees. The Board of Trustees has set the fees at the maximum rate allowed
under the Class B and C plans and has set no minimum asset amount needed to
qualify for payments under any of the plans. The Board of Trustees currently
limits aggregate payments under the Class A plan to 0.15% of average daily net
assets.
|X| Class A Service Plan. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions (they are referred to as "recipients") for personal
services and account maintenance services they provide for their customers who
hold Class A shares. The services 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. The Distributor makes
payments to plan recipients quarterly at an annual rate currently not to exceed
0.15% of the average daily net assets of Class A shares held in accounts of the
service provider or their customers.
For the fiscal year ended December 31, 1998, payments under the Plan for
Class A shares totaled $4,738,601, all of which was paid by the Distributor to
recipients. That amount included $29,055 paid to an affiliate of the
Distributor. Any unreimbursed expenses the Distributor incurs
<PAGE>
with respect to Class A shares for any fiscal year may not be recovered in
subsequent years. The Distributor may not use payments received under the Class
A plan to pay any of its interest expenses, carrying charges, other financial
costs, or allocation of overhead.
|X| Class B and Class C Service and Distribution Plans. Under each plan,
service fees and distribution 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 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 under
the plans during that period. The Class B and Class C plans permit the
Distributor to retain both the asset-based sales charges and the service fee on
shares or to pay recipients the service fee on a quarterly basis, without
payment in advance. The types of services that recipients provide are similar to
the services provided under the Class A plan, described above.
The Distributor presently intends to pay recipients the service fee on
Class B and Class C shares in advance for the first year the shares are
outstanding. After the first year shares are outstanding, the Distributor makes
payments quarterly on those shares. The advance payment is based on the net
asset value of shares sold. Shares purchased by exchange do not qualify for an
advance service fee payment. If Class B or Class C shares are redeemed during
the first year after their purchase, the recipient of the service fees on those
shares will be obligated to repay the Distributor a pro rata portion of the
advance payment made on those shares.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing commission to the dealer on Class C shares outstanding for a year
or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fees and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commission and
service fee in advance at the time of purchase.
The asset-based sales charge on Class B and Class C shares allows
investors to buy shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. 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 plans. The Fund pays the asset-based
sales charge to the Distributor for its services rendered in distributing Class
B and Class C shares. The payments are made to the Distributor in recognition
that the Distributor:
|_| pays sales commissions to authorized brokers and dealers at the time
of sale and pays service fees as described in the Prospectus,
|_| may finance payment of sales commissions and/or the advance of the
service fee payment to recipients under the plans, or may provide such financing
from its own resources or from the resources of an affiliate,
|_| employs personnel to support distribution of shares, and
|_| bears 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.
- --------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 12/31/98
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributor's Distributor's
Aggregate Unreimbursed
Class: Total Amount Unreimbursed Expenses as %
Payments Retained by Expenses Under Plan of Net Assets
Under Plan Distributor of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $3,283,860 $2,946,247 $20,508,219 4.2%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $1,110,9801 $ 979,347 $ 2,161,280 1.2%
- --------------------------------------------------------------------------------
1. Includes $1,168 paid to an affiliate of the Distributor.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and from the Fund under the plans. If a
plan is terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to the Distributor to
compensate it for its expenses incurred for distributing shares before the plan
was terminated. All payments under the Class B and Class C plans 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 to NASD members.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield,"
"tax-equivalent yield," "dividend yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset value" and
"total return at net asset value." An explanation of how yields and total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the its most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication). Certain types of yields may also be shown, provided that they are
accompanied by standardized average annual total returns.
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
o Yields and total returns measure the performance of a hypothetical account in
the Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model.
o The Fund's performance returns do not reflect the effect of taxes on
distributions.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o The principal value of the Fund's shares, and its yields and total returns
are not guaranteed and normally will fluctuate on a daily basis.
o When an investor's shares are redeemed, they may be worth more or less than
their original cost.
o Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future yields or returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The yields and total
returns of each class of shares of the Fund are affected by market conditions,
the quality of the Fund's investments, the maturity of those investments, the
types of investments the Fund holds, and its operating expenses that are
allocated to the particular class.
|X| Yields. The Fund uses a variety of different yields to illustrate its
current returns. Each class of shares calculates its yield separately because of
the different expenses that affect each class.
|_| Standardized Yield. The "standardized yield" (sometimes referred to
just 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.
Standardized yield 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:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense assumptions).
c = the average daily number of shares of that class outstanding during
the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last day
of the period, adjusted for undistributed net investment income.
The standardized yield for a particular 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.
|_| Dividend Yield. The Fund may quote a "dividend yield" for each
class of its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated 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 current 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.
|_| Tax-Equivalent Yield. The "tax-equivalent yield" of a class of
shares is the equivalent yield that would have to be earned on a taxable
investment to achieve the after-tax results represented by the Fund's
tax-equivalent yield. It adjusts the Fund's standardized yield, as calculated
above, by a stated tax rate. Using different tax rates to show different tax
equivalent yields shows investors in different tax brackets the tax equivalent
yield of the Fund based on their own tax bracket.
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. The result is added 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. Your tax bracket is determined by your federal taxable income (the net
amount subject to federal income tax after deductions and exemptions). The
tax-equivalent yield table assumes that the investor is taxed at the highest
bracket, regardless of whether a switch to non-taxable investments would cause a
lower bracket to apply.
----------------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 12/31/98
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tax-Equivalent Yield
Standardized Yield Dividend Yield (46.43% combined
Federal/NY Tax
Class of Bracket)
Shares
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Without After Without After Without After
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Class A 4.70% 4.47% 5.43% 5.17% 8.77% 8.34%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Class B 3.83% N/A 4.43% N/A 7.15% N/A
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Class C 3.84% N/A 4.45% N/A 7.17% N/A
----------------------------------------------------------------------------
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
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 without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period.
|_| Average Annual Total Return. 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" in the
formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
<PAGE>
|_| Cumulative Total Return. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis.
Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
o Total Returns at Net Asset Value. From time to time the Fund may also quote a
cumulative or an average annual total return "at net asset value" (without
deducting sales charges) for Class A, Class B or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 12/31/98
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Cumulative Average Annual Total Returns
Total Returns
(10 years or
life of class)
Class of
Shares
------------------------------------------------------------------------------
------------------------------------------------------------------------------
5-Year 10-Year
1-Year (or life of (or life of
class) class)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A 114.70% 125.42% 1.46% 6.52% 5.07% 6.10% 7.94% 8.47%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B 10.84%* 14.84%* 0.61% 5.61% 5.92%* 8.04%* N/A N/A
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C N/A 14.85%** 4.56% 5.56% N/A 8.04%** N/A N/A
------------------------------------------------------------------------------
Inception of Class A: 5/15/86.
*Inception of Class B: 3/17/97.
**Inception of Class C: 3/17/97.
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
("Lipper"). Lipper is 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 by Lipper against all other New York municipal debt funds. The Lipper
performance
<PAGE>
rankings are based on total returns that include the reinvestment of capital
gain distributions and income dividends but do not take sales charges or taxes
into consideration. Lipper also publishes "peer-group" indices of the
performance of all mutual funds in a category that it monitors and averages of
the performance of the funds in particular categories.
n Morningstar Ratings and Rankings. From time to time the Fund may publish
the ranking and/or star rating of the performance of its classes of shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.
The Fund is included in the municipal bond funds category.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) one-,
three-, five- and ten-year average annual total returns (depending on the
inception of the fund or class) in excess of 90-day U.S. Treasury bill returns
after considering the fund's sales charges and expenses. Risk is measured by a
fund's (or class's) performance below 90-day U.S. Treasury bill returns. Risk
and investment return are combined to produce star ratings reflecting
performance relative to the other funds in the fund's category. Five stars is
the "highest" ranking (top 10% of funds in a category), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). The current star
rating is the fund's (or class's) overall rating, which is the fund's 3-year
rating or its combined 3- and 5-year ranking (weighted 60%/40% respectively), or
its combined 3-, 5-, and 10-year rating (weighted 40%, 30% and 30%,
respectively), depending on the inception date of the fund (or class). Ratings
are subject to change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star ratings. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk-adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information 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 the
performance of various market indices or other investments, and averages,
performance rankings or other benchmarks prepared by recognized mutual fund
statistical services.
Investors may also wish to compare the Fund's Class A, Class B or Class C
returns to the return on fixed-income investments available from banks and
thrift institutions. Those include certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed or
variable time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed or insured by the
FDIC or any other agency and
<PAGE>
will fluctuate daily, while bank depository obligations may be insured by the
FDIC and may provide fixed rates of return. Repayment of principal and payment
of interest on Treasury securities is backed by the full faith and credit of the
U.S.
government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to shareholders
of the Oppenheimer funds, other than performance rankings of the Oppenheimer
funds themselves. Those ratings or rankings of shareholder and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Additional information is presented below about the methods that can be used to
buy shares of the Fund. Appendix C contains more information about the special
sales charge arrangements offered by the Fund, and the circumstances in which
sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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 for your joint accounts, or for trust or custodial accounts on
behalf of your children who are minors, and
|_|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, and
|_|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.
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. 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 reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Bond Fund Oppenheimer Limited-Term Government Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Main Street California
Municipal Fund
Oppenheimer California Municipal Fund Oppenheimer Main Street Growth & Income
Fund
Oppenheimer Champion Income Fund Oppenheimer MidCap Fund Oppenheimer Convertible
Securities Fund Oppenheimer Multiple Strategies Fund Oppenheimer Developing
Markets Fund Oppenheimer Municipal Bond Fund Oppenheimer Disciplined Allocation
Fund Oppenheimer New York Municipal Fund Oppenheimer Disciplined Value Fund
Oppenheimer New Jersey Municipal Fund Oppenheimer Discovery Fund Oppenheimer
Pennsylvania Municipal Fund Oppenheimer Enterprise Fund Oppenheimer Quest
Balanced Value Fund Oppenheimer Capital Income Fund Oppenheimer Quest Capital
Value Fund, Inc.
Oppenheimer Florida Municipal Fund Oppenheimer Quest Global Value Fund,
Inc.
Oppenheimer Global Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer
Global Growth & Income Fund Oppenheimer Quest Small Cap Value Fund Oppenheimer
Gold & Special Minerals Oppenheimer Quest Value Fund, Inc. Fund Oppenheimer
Growth Fund Oppenheimer Real Asset Fund Oppenheimer High Yield Fund Oppenheimer
Strategic Income Fund Oppenheimer Insured Municipal Fund Oppenheimer Total
Return Fund, Inc. Oppenheimer Intermediate Municipal Fund Oppenheimer U.S.
Government Trust Oppenheimer International Bond Fund Oppenheimer World Bond Fund
Oppenheimer International Growth Fund Limited-Term New York Municipal Fund
Oppenheimer International Small Rochester Fund Municipals Company Fund
Oppenheimer Large Cap Growth Fund Oppenheimer Europe Fund
and the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust 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 the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or
Class A and Class B shares of the Fund and other Oppenheimer funds during a
13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. You can include purchases made up
to 90 days before the date of the Letter.
A Letter of Intent 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"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter states
the investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases made
at net asset value without sales charge do not count toward satisfying the
amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bounded by the amended terms and
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 Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
|X| 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. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:
(a) Class A shares sold with a front-end sales charge or subject to a
Class A contingent deferred sales charge,
(b) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) Class
A shares of one of the other Oppenheimer funds that were acquired
subject to a Class A initial or contingent deferred sales charge or
(2) 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 to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. Shares purchased by Asset Builder Plan payments
from bank accounts are subject to the redemption restrictions for recent
purchases described in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use their fund account to make
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 Application. Neither
the Distributor, the Transfer Agent nor the Fund shall be responsible for any
delays in purchasing shares resulting from delays in ACH transmissions.
Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
application from the Distributor, complete it and return it. 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. The Transfer Agent
requires a reasonable period (approximately 15 days) after receipt of such
instructions to implement them. The Fund reserves the right to amend, suspend,
or discontinue offering Asset Builder 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.
<PAGE>
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C are subject.
The availability of three classes of shares permits an investor to choose
the method of purchasing shares that is more appropriate for the investor. That
may depend on the amount of the purchase, the length of time the investor
expects to hold shares, and other relevant circumstances. Class A shares
normally are sold subject to an initial sales charge. While Class B and Class C
shares have no initial sales charge, the purpose of the deferred sales charge
and asset-based sales charge on Class B and Class C shares is the same as that
of the initial sales charge on Class A shares - to compensate the Distributor
and brokers, dealers and financial institutions that sell shares of the Fund. A
salesperson who is entitled to receive compensation for from his or her firm
selling Fund shares may receive different levels of compensation for selling one
class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. The conversion of Class B shares to Class A shares
after six years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel or tax
adviser, to the effect that the conversion of Class B shares does not constitute
a taxable event for the holder under federal income tax law. If such a revenue
ruling or opinion is no longer available, the automatic conversion feature may
be suspended, in which event no further conversions of Class B shares would
occur while such suspension remained in effect. Although Class B shares could
then be exchanged for Class A shares on the basis of relative net asset value of
the two classes, without the imposition of a sales charge or fee, such exchange
could constitute a taxable event for the holder, and absent such exchange, Class
B shares might continue to be subject to the asset-based sales charge for longer
than six years.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian bank fees, trustees' fees, transfer agency fees,
legal fees and auditing costs. Those expenses are paid out of the Fund's assets
and are not paid directly by shareholders. However, those expenses reduce the
net asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees
to unaffiliated Trustees, custodian bank expenses, share issuance costs,
organization and start-up costs, interest, taxes and brokerage commissions, and
non-recurring expenses, such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. It is done by
dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class that are outstanding. The Exchange normally
closes at 4:00 P.M., New York time, but may close earlier on some other days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual announcement (which is subject to
change) states that it will close on New Year's Day, 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 municipal
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the values Fund's portfolio
securities may change significantly on those days, when shareholders cannot
purchase or redeem shares.
|X| Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
|_| 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.
|_| The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when-issued,
(2) debt instruments that had a maturity of 397 days or less when-issued
and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or
less when-issued and which have a remaining maturity of 60 days or
less.
|_|The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1) money market 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
(2)
<PAGE>
debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
|_| 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, a 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).
In the case of municipal securities, when last sale information is not
generally available, the Manager may use pricing services approved by the Board
of Trustees. The pricing service may use "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity. Other special
factors may be involved (such as the tax-exempt status of the interest paid by
municipal securities). The Manager will monitor the accuracy of the pricing
services. That monitoring may include comparing prices used for portfolio
valuation to actual sales prices of selected securities.
Puts and calls are valued at the last sale price on the principal exchange
on which they are traded or on Nasdaq, as applicable, as determined by a pricing
service approved by the Board of Trustees or by the Manager. If there were no
sales that day, they shall be valued at 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. If not, the 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 by the mean between "bid" and "asked" prices obtained by the
Manager from two active market makers. In certain cases that may be at the "bid"
price if no "asked" price is available.
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call written by the Fund is
exercised, the proceeds are increased by the premium received. If a call written
by the Fund expires, the Fund has a gain in the amount of the premium. If the
Fund enters into a closing purchase transaction, it will have a gain or loss,
depending on whether the premium received was more or less than the cost of the
closing transaction. If the Fund exercises a put it holds, the amount the Fund
receives on its sale of the underlying investment is reduced by the amount of
premium paid by the Fund.
How to Sell Shares
The information below supplements the terms and conditions for redeeming shares
set forth in the Prospectus.
Checkwriting. When a check is presented to the Fund's 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 to receive 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 listed on the check or at the Fund's custodian bank.
That 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.
In choosing to take advantage of the Checkwriting privilege by signing the
Account Application or by completing a Checkwriting card, each individual who
signs:
(1) for individual accounts, represents that they are the registered
owner(s) of the shares of the Fund in that account;
(2) for accounts for corporations, partnerships, trusts and other entities,
represents that they are an officer, general partner, trustee or other
fiduciary or agent, as applicable, duly authorized to act on behalf of
such registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through which the
Fund's drafts (checks) are payable to pay all checks drawn on the Fund
account of such person(s) and to redeem a sufficient amount of shares
from that account to cover payment of each check;
(4) specifically acknowledges that if they choose to permit checks to be
honored if there is 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 the
account, even if that account is registered in the names of more than
one person or more than one authorized signature appears on the
Checkwriting card or the Application, as applicable;
(5) understands that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Fund's bank; and
(6) acknowledges and agrees that neither the Fund nor its bank shall incur
any liability for that amendment or termination of checkwriting
privileges or for redeeming shares to pay checks reasonably believed by
them to be genuine, or for returning or not paying checks that have not
been accepted for any reason.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
|_| Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
|_| Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
shares. 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.
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.
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 liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
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 such shares has fallen
below the stated minimum solely as a result of market fluctuations. If the Board
exercises this right, it may also fix the requirements for any notice to be
given to the shareholders in question (not less than 30 days). The Board may
alternatively set requirements for the shareholder to increase the investment,
or set other terms and conditions so that the shares would not be involuntarily
redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. Shareholders should contact their
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. However, 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, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
transmitted to and received by the Distributor prior to its close of business
that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form. The signature(s) of the registered owners on the redemption
documents must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal 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. The
Fund reserves the right to amend, suspend or discontinue offering these 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.
<PAGE>
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
Appendix C below).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (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 not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. 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 Oppenheimer funds that have a
single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048.
|_| All of the Oppenheimer funds currently offer Class A, B and C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial America
Fund, L.P., which only offer Class A shares.
|_| Oppenheimer Main Street California Municipal Fund currently offers
only Class A and Class B shares.
|_| Class B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other Oppenheimer
funds or through OppenheimerFunds-sponsored 401 (k) plans.
|_| Class Y shares of Oppenheimer Real Asset Fund are not exchangeable.
o For accounts established on or before March 8, 1996 holding Class M shares of
Oppenheimer Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Convertible Securities Fund are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange of Class M shares. No other exchanges may be made to Class
M shares.
o Class X shares of Limited Term New York Municipal Fund can be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges can be made
from shares of any other funds to class X shares of Limited Term New York
Municipal Fund.
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. They may also be used to
purchase shares of Oppenheimer funds subject to a contingent deferred sales
charge.
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 30 days 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. 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. If requested, they must
supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds 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.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares. 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. Before exchanging
shares, shareholders should take into account how the exchange may
<PAGE>
affect 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 which class of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
n Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. 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.
n Processing 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 Fund may refuse the request.
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.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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 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 will not be declared or paid
on newly purchased shares 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 (that is, up 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.
The Fund's practice of attempting to pay dividends on Class A shares at a
constant level requires the Manager to monitor the Fund's portfolio and, if
necessary, to select higher-yielding securities when it is deemed appropriate to
seek income at the level needed to meet the target. Those securities must be
within the Fund's investment parameters, however. The Fund expects to pay
dividends at a targeted level from its net investment income and other
distributable income without any impact on the net asset values per share.
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.
Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
The amount of a distribution paid on a class of shares 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. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B and Class C shares are expected to
be lower than dividends on Class A shares. That is due to the effect of the
asset-based sales charge on Class B and Class C shares. Those dividends will
also differ in amount as a consequence of any difference in net asset value
among the different classes of shares.
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 that
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 that are free from Federal
income taxes. This allocation will be made by the use of one designated
percentage applied uniformly to all income dividends paid during the Fund's tax
year. That 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.
A portion of the exempt-interest dividends paid by the Fund may be an item
of tax preference for shareholders subject to the federal 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.
A shareholder receiving a dividend from income earned by the Fund from one
or more of the following sources must treat the dividend as ordinary income in
the computation of the shareholder's gross income, regardless of whether the
dividend is reinvested:
(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; and
(4) any excess of net short-term capital gain over net long-term capital loss.
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 (and the extent to which) such benefits are subject to federal income
tax. Losses realized by shareholders on the redemption of Fund shares within six
months of purchase 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 tax on amounts
it pays as dividends and other distributions. That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without having to pay tax on them. 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 qualifies. The Fund might not
meet those tests in a particular year. If it does not qualify, the Fund will be
treated for tax purposes as an ordinary corporation and will receive no tax
deduction for payments of dividends and other distributions made to
shareholders.
In any year in which the Fund qualifies as a regulated investment company
under the Internal Revenue Code, the Fund will also be exempt from New York
corporate income and franchise taxes. It will also be qualified under New York
law to pay exempt-interest dividends that will be exempt from New York State and
New York City personal income taxes. That exemption applies to the extent that
the Fund's distributions are attributable to interest on New York municipal
securities. Distributions from the Fund attributable to income from sources
other than New York municipal securities and U.S. government obligations will
generally be subject to New York State and New York City personal income taxes
as ordinary income.
Distributions by the Fund from investment income and long- and short-term
capital gains will generally not be excludable from taxable net investment
income in determining New York corporate franchise tax and New York City general
corporation tax for corporate shareholders of the Fund. Additionally, certain
distributions paid to corporate shareholders of the Fund may be includable in
income subject to the New York alternative minimum tax.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute at least 98% of the sum of its taxable investment income earned from
January 1 through December 31 of that year and its net capital gains realized in
the period from November 1 of the prior year through October 31 of the current
year. If it does not, the Fund must pay an excise tax on the amounts not
distributed. It is presently anticipated that the Fund will meet those
requirements. However, the Fund's Board of Trustees and the Manager might
determine in a particular year that it would be in the best interest of
shareholders 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.
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 above. Reinvestment will be
made at net asset value without sales charge. To elect this option, the
shareholder must notify the Transfer Agent in writing and must have an existing
account in the fund selected for reinvestment. Otherwise the shareholder must
first obtain a prospectus for that fund and an application from the Transfer
Agent to establish an account. The investment will be made at the net asset
value per share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or other distributions from certain of
the other Oppenheimer funds may be invested in shares of this Fund on the same
basis.
Additional Information About the Fund
The Distributor. The Fund's shares are sold through dealers, brokers and other
financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc. a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as 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 numbers shown on the back cover.
The Custodian Bank. Citibank, N.A. is the custodian bank 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 bank in
a manner uninfluenced by any banking relationship the custodian may have with
the Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by Federal Deposit Insurance. Those
uninsured balances may at times be substantial.
Independent Accountants. PricewaterhouseCoopers LLP are the independent
accountants of the Fund. They audit the Fund's financial statements and perform
other related audit services. They also act as accountants 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, 1998, 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, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
January 22, 1999
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
MUNICIPAL BONDS AND NOTES--102.5%
================================================================================================================================
NEW YORK--93.6%
<S> <C>
<C> <C> <C>
$ 200,000 Albany County IDA (Upper Hudson Library)
8.750% 05/01/2007 $ 204,414
955,000 Albany County IDA (Upper Hudson Library)
8.750 05/01/2022 1,015,537
409,336 Albany Hsg. Authority
0.000 10/01/2012 (p) 112,224
620,000 Albany Hsg. Authority (Lark Drive)
5.500 12/01/2028 622,362
2,275,000 Albany IDA (Albany Medical Center)
8.250 08/01/2004 2,418,279
400,000 Albany IDA (Albany Municipal Golf Course Clubhouse)
7.500 05/01/2012 436,940
1,015,000 Albany IDA (Albany Rehab.)
8.375 06/01/2023 1,120,966
1,715,000 Albany IDA (MARA Mansion Rehab.)
6.500 02/01/2023 1,782,725
1,395,000 Albany IDA (Port of Albany)
7.250 02/01/2024 1,512,389
1,770,000 Albany Parking Authority
0.000 11/01/2017 683,078
10,070,000 Allegany County IDA (Alfred University)
7.500 09/01/2011 10,904,400
4,200,000 Allegany County IDA (Houghton College)
5.250 01/15/2024 4,191,180
4,190,000 Amherst IDA (Amherst Rink)
5.650 10/01/2022 4,366,189
1,010,000 Babylon IDA (JFB & Sons Lithographers)
7.625 12/01/2006 1,065,409
2,570,000 Babylon IDA (JFB & Sons Lithographers)
8.625 12/01/2016 2,755,991
1,330,000 Babylon IDA (WWH Ambulance)
7.375 09/15/2008 1,464,091
3,850,000 Batavia Hsg. Authority (Trocaire Place) (a)
8.750 04/01/2025 3,869,250
515,000 Batavia Hsg. Authority (Washington Towers)
6.500 01/01/2023 540,307
800,000 Battery Park City Authority
5.750 06/01/2023 817,800
1,050,000 Battery Park City Authority
5.800 11/01/2022 1,122,954
700,000 Battery Park City Authority
10.000 06/01/2023 736,575
1,445,000 Bayshore HDC
7.500 02/01/2023 1,561,221
335,000 Beacon IDA (Craig House)
9.000 07/01/2011 335,951
1,000,000 Bethany Retirement Home
7.450 02/01/2024 1,166,420
1,065,000 Blauvelt Volunteer Fire Company
6.250 10/15/2017 1,085,970
35,000 Bleeker Terrace HDC
8.100 07/01/2001 35,365
45,000 Bleeker Terrace HDC
8.350 07/01/2004 45,524
900,000 Bleeker Terrace HDC
8.750 07/01/2007 912,240
6,965,000 Brookhaven IDA (Dowling College)
6.750 03/01/2023 7,492,111
870,000 Brookhaven IDA (Farber) (a)
6.000(v) 12/01/2002 870,000
490,000 Brookhaven IDA (Farber) (a)
6.000(v) 12/01/2004 490,000
475,000 Brookhaven IDA (Interdisciplinary School)
8.500 12/01/2004 518,819
3,220,000 Brookhaven IDA (Interdisciplinary School)
9.500 12/01/2019 3,638,278
645,000 Broome County IDA (Binghamton Simulator)
8.250 01/01/2002 653,275
190,000 Broome County IDA (Industrial Park)
7.550 12/01/2000 191,469
195,000 Broome County IDA (Industrial Park)
7.600 12/01/2001 196,626
600,000 Capital District Youth Center
6.000 02/01/2017 644,820
500,000 Carnegie Redevelopment Corp. (a)
7.000 09/01/2021 547,025
6,250,000 Castle Rest Residential Health Care Facility
5.750 08/01/2037 6,644,500
1,830,000 Cattaraugus County IDA (Cherry Creek)
9.800 09/01/2010 1,996,182
1,250,000 Cattaraugus County IDA (Olean General Hospital)
5.250 08/01/2023 1,253,712
8,075,000 Cattaraugus County IDA (St. Bonaventure University)
8.300 12/01/2010 (p) 8,929,981
8,600,000 Cayuga County COP (Auburn Hospital)
6.000 01/01/2021 9,148,078
2,900,000 Chautauqua County IDA (Jamestown Devel. Corp.)
5.250 08/01/2028 2,880,454
1,700,000 Chautauqua County IDA (Jamestown Devel. Corp.)
7.125 11/01/2008 1,704,403
3,395,000 Chautauqua County IDA (Jamestown Devel. Corp.)
7.125 11/01/2018 3,406,984
4,255,000 City of Port Jervis IDA (FHP)
5.500 11/01/2016 4,285,721
640,000 City of Port Jervis IDA (FHT)
10.000 11/01/2008 662,419
3,115,000 Clifton Springs Hospital & Clinic
8.000 01/01/2020 3,467,805
</TABLE>
9 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 35,000 Cohoes GO
6.200% 03/15/2012 $ 36,050
25,000 Cohoes GO
6.200 03/15/2013 25,595
25,000 Cohoes GO
6.250 03/15/2014 25,555
25,000 Cohoes GO
6.250 03/15/2015 25,555
25,000 Cohoes GO
6.250 03/15/2016 25,450
595,000 Columbia County IDA (ARC)
7.750 06/01/2005 650,383
2,650,000 Columbia County IDA (ARC)
8.650 06/01/2018 3,001,019
605,000 Columbia County IDA (Berkshire Farms)
6.900 12/15/2004 649,304
1,855,000 Columbia County IDA (Berkshire Farms)
7.500 12/15/2014 2,052,706
60,000 Cortland County IDA (Paul Bunyon Products)
8.000 07/01/2000 61,325
3,500,000 Dutchess County IDA (Bard College)
7.000 11/01/2017 3,882,865
1,700,000 Dutchess County Res Rec (Solid Waste)
6.800 01/01/2010 1,915,832
1,805,000 Dutchess County Res Rec (Solid Waste)
7.000 01/01/2010 2,047,448
2,420,000 Dutchess County Res Rec (Solid Waste) (w)
5.150 01/01/2010 2,483,452
1,700,000 Dutchess County Res Rec (Solid Waste) (w)
5.400 01/01/2013 1,743,384
1,000,000 Dutchess County Res Rec (Solid Waste) (w)
5.450 01/01/2014 1,024,040
1,540,000 Dutchess County Water & Waste
0.000 06/01/2025 390,914
1,540,000 Dutchess County Water & Waste
0.000 06/01/2026 370,940
1,000,000 Dutchess County Water & Waste
0.000 06/01/2027 228,690
3,000,000 Dutchess County Water & Waste
5.375 06/01/2019 3,077,130
2,000,000 East Rochester Hsg. Authority (Linden Knoll)
5.350 02/01/2038 2,028,300
3,125,000 East Rochester Hsg. Authority (St. John's Meadows)
5.250 08/01/2038 3,119,656
3,250,000 East Rochester Hsg. Authority (St. John's Meadows)
5.675 08/01/2022 3,424,330
4,250,000 East Rochester Hsg. Authority (St. John's Meadows)
5.700 08/01/2027 4,504,532
1,885,000 East Rochester Hsg. Authority (St. John's Meadows)
5.750 08/01/2037 2,005,583
4,095,000 East Rochester Hsg. Authority (St. John's Meadows)
5.950 08/01/2027 4,323,583
25,000 Elmira HDC
7.500 08/01/2007 25,780
3,425,000 Erie County IDA (Affordable Hospitality) (b)
9.250 12/01/2015 3,425,000
1,275,000 Erie County IDA (Air Cargo)
8.250 10/01/2007 1,319,880
2,380,000 Erie County IDA (Air Cargo)
8.500 10/01/2015 2,509,924
35,000,000 Erie County IDA (Canfibre Lackawanna)
9.050 12/01/2025 35,054,600
300,000 Erie County IDA (Episcopal Church Home)
6.000 02/01/2028 305,820
3,230,000 Erie County IDA (Medaille College)
8.000 12/30/2022 3,540,048
1,355,000 Erie County IDA (Mercy Hospital)
6.250 06/01/2010 1,396,707
1,850,000 Essex County IDA (International Paper Co.)
5.500 08/15/2022 1,847,447
3,800,000 Franklin County IDA (Alice Hyde Hospital)
4.750 10/01/2018 3,642,224
4,245,000 Franklin County SWMA
6.250 06/01/2015 4,404,018
620,000 Geneva IDA (FLCP)
8.250 11/01/2004 671,410
1,000,000 Geneva IDA (FLCP)
8.500 11/01/2016 1,085,540
925,000 Glen Cove IDA (SLCD)
6.875 07/01/2008 920,144
3,775,000 Glen Cove IDA (SLCD)
7.375 07/01/2023 3,742,799
15,000,000 Glen Cove IDA (The Regency at Glen Cove)
0.000 10/15/2019 (p) 4,954,650
2,375,000 Grand Central BID (Grand Central District Management)
5.250 01/01/2022 2,390,889
2,045,000 Groton Community Health Care Center
7.450 07/15/2021 2,402,118
690,000 Hamilton Elderly Hsg. Corp.
11.250 01/01/2015 718,918
5,210,000 Hempstead IDA (Franklin Hospital Medical Center)
5.750 11/01/2008 5,233,237
9,375,000 Hempstead IDA (Franklin Hospital Medical Center)
6.375 11/01/2018 9,423,750
1,015,000 Herkimer County IDA (Burrows Paper)
7.250 01/01/2001 1,039,248
14,440,000 Herkimer County IDA (Burrows Paper)
8.000 01/01/2009 15,674,331
60,000 Housing NY Corp.
5.500 11/01/2020 61,400
6,595,000 Housing NY Corp.
5.500 11/01/2020 6,737,452
</TABLE>
10 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 990,000 Hudson IDA (Have, Inc.)
8.125% 12/01/2017 $ 1,067,943
1,300,000 Hudson IDA (Wittcomm, Inc.)
7.125 11/01/2009 1,298,206
950,000 Islip IDA (Leeway School)
9.000 08/01/2021 1,033,495
50,000 Islip IDA (WJL Realty)
7.800 03/01/2003 51,786
100,000 Islip IDA (WJL Realty)
7.850 03/01/2004 103,574
100,000 Islip IDA (WJL Realty)
7.900 03/01/2005 103,585
500,000 Islip IDA (WJL Realty)
7.950 03/01/2010 521,945
2,000,000 Islip Res Rec
6.500 07/01/2009 2,303,440
20,600,000 L.I. Power Authority
5.250 12/01/2026 20,695,790
21,450,000 L.I. Power Authority
5.500 12/01/2029 22,149,484
10,000,000 L.I. Power Authority
5.750 12/01/2024 10,725,400
5,905,000 L.I. Power Authority RITES (a)
5.357(f) 12/01/2022 5,913,917
12,500,000 L.I. Power Authority RITES (a)
5.857(f) 12/01/2026 13,617,875
3,725,000 L.I. Power Authority RITES (a)
7.590(f) 12/01/2026 4,058,127
2,650,000 Lockport HDC
6.000 10/01/2018 2,790,291
100,000 Lowville GO
7.200 09/15/2005 116,774
75,000 Lowville GO
7.200 09/15/2007 89,907
100,000 Lowville GO
7.200 09/15/2012 124,085
100,000 Lowville GO
7.200 09/15/2013 124,098
100,000 Lowville GO
7.200 09/15/2014 124,192
5,350,000 Lyons Community Health Initiatives Corp.
6.800 09/01/2024 5,886,551
4,610,000 Macleay Hsg. Corp. (Larchmont Woods)
8.500 01/01/2031 4,856,358
2,485,000 Mechanicsville HDC
6.900 08/01/2022 2,597,620
200,000 Middleton IDA (Flanagan)
7.000 11/01/2006 200,198
690,000 Middleton IDA (Flanagan)
7.500 11/01/2018 692,070
905,000 Middleton IDA (Fleurchem)
8.000 12/01/2016 1,000,269
3,740,000 Middleton IDA (Southwinds)
8.375 03/01/2018 4,147,473
660,000 Middletown IDA (YMCA)
6.250 11/01/2009 659,003
1,255,000 Middletown IDA (YMCA)
7.000 11/01/2019 1,252,352
75,000 Monroe County Airport Authority (GRIA)
7.250 01/01/2019 78,971
440,000 Monroe County COP
8.050 01/01/2011 458,520
4,260,000 Monroe County IDA (Al Sigl Center)
6.600 12/15/2017 4,566,464
1,590,000 Monroe County IDA (Al Sigl Center)
7.250 12/15/2015 1,749,238
3,080,000 Monroe County IDA (Brazill Merk)
7.900 12/15/2014 3,238,558
900,000 Monroe County IDA (Canal Ponds)
7.000 06/15/2013 989,775
10,000 Monroe County IDA (Cohber)
7.550 12/01/2001 10,237
10,000 Monroe County IDA (Cohber)
7.650 12/01/2002 10,270
10,000 Monroe County IDA (Cohber)
7.700 12/01/2003 10,275
170,000 Monroe County IDA (Cohber)
7.850 12/01/2009 175,180
2,186,291 Monroe County IDA (Cottrone Devel.)
9.500 12/01/2010 2,351,662
5,750,000 Monroe County IDA (DePaul CF)
5.950 08/01/2028 5,752,012
880,000 Monroe County IDA (DePaul CF)
6.450 02/01/2014 980,250
1,285,000 Monroe County IDA (DePaul CF)
6.500 02/01/2024 1,429,922
335,000 Monroe County IDA (DePaul Properties)
8.300 09/01/2002 363,468
4,605,000 Monroe County IDA (DePaul Properties)
8.800 09/01/2021 5,022,673
14,565,000 Monroe County IDA (Genesee Hospital)
7.000 11/01/2018 15,338,110
1,000,000 Monroe County IDA (Jewish Home)
6.875 04/01/2017 1,059,310
4,945,000 Monroe County IDA (Jewish Home)
6.875 04/01/2027 5,200,904
1,425,000 Monroe County IDA (Melles Groit)
9.500 12/01/2009 1,463,418
1,926,000 Monroe County IDA (Morrell/Morrell)
7.000 12/01/2007 2,015,212
500,000 Monroe County IDA (Nazareth College)
5.250 04/01/2023 511,695
</TABLE>
11 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 4,330,000 Monroe County IDA (Piano Works)
7.625% 11/01/2016 $ 4,766,897
2,625,000 Monroe County IDA (Roberts Wesleyan College)
6.700 09/01/2011 2,708,632
3,490,000 Monroe County IDA (RTM Turbine) (a) (d)
7.750 12/01/2006 1,570,500
3,060,000 Monroe County IDA (RTM Turbine) (a) (d)
8.000 12/01/2011 1,377,031
770,000 Monroe County IDA (RTM Turbine) (a) (d)
8.500 12/01/2016 346,500
1,310,000 Monroe County IDA (St. Joseph's Parking Garage)
7.000 11/01/2008 1,310,419
4,345,000 Monroe County IDA (St. Joseph's Parking Garage)
7.500 11/01/2022 4,346,608
915,000 Monroe County IDA (Volunteers of America)
5.700 08/01/2018 903,370
2,610,000 Monroe County IDA (Volunteers of America)
5.750 08/01/2028 2,569,728
465,000 Monroe County IDA (West End Business)
6.750 12/01/2004 492,003
110,000 Monroe County IDA (West End Business)
6.750 12/01/2004 116,388
65,000 Monroe County IDA (West End Business)
6.750 12/01/2004 68,775
1,375,000 Monroe County IDA (West End Business)
8.000 12/01/2014 1,512,981
345,000 Monroe County IDA (West End Business)
8.000 12/01/2014 379,621
170,000 Monroe County IDA (West End Business)
8.000 12/01/2014 187,059
515,000 Monroe County IDA (West End Business)
8.000 12/01/2014 566,680
285,000 Monroe HDC (Multi-Family)
7.000 08/01/2021 296,679
5,860,000 Montgomery County IDA (Amsterdam) (a)
7.250 01/15/2019 4,102,000
1,015,000 Montgomery County IDA (New Dimensions in Living)
8.900 05/01/2016 1,094,596
3,800,000 MTA Dedicated Tax Fund RITES (a)
5.030(f) 04/01/2023 3,609,544
10,000,000 MTA IVRC (a)
6.784(f) 07/01/2011 11,375,000
3,125,000 MTA RITES (a)
4.030(f) 07/01/2026 2,535,187
1,000,000 MTA Service Contract, Series 8
5.375 07/01/2021 1,015,240
1,000,000 MTA Service Contract, Series R
5.500 07/01/2012 1,071,940
1,270,000 MTA Service Contract, Series R
5.500 07/01/2012 1,361,364
815,000 MTA Service Contract, Series R
5.500 07/01/2013 867,804
2,500,000 MTA Service Contract, Series R
5.500 07/01/2014 2,652,125
3,320,000 MTA Service Contract, Series R
5.500 07/01/2017 3,476,638
4,360,000 MTA Service Contract, Series R
5.500 07/01/2017 4,565,705
9,400,000 MTA YCR (a)
7.203(f) 07/01/2013 10,297,230
3,000,000 MTA YCR (a)
7.203(f) 07/01/2022 3,193,650
9,690,000 MTA, Series C1
5.500 07/01/2022 9,934,769
13,480,000 MTA, Series C1
5.625 07/01/2027 14,093,744
5,000,000 MTA, Series C2
5.375 07/01/2027 5,174,450
802,824 Municipal Assistance Corp. for Troy, NY
0.000 07/15/2021 258,477
1,218,573 Municipal Assistance Corp. for Troy, NY
0.000 01/15/2022 382,425
2,725,000 Nassau County IDA (ACLDD)
8.125 10/01/2022 3,000,852
275,000 Nassau County IDA (RJS Scientific)
8.050 12/01/2005 302,940
2,700,000 Nassau County IDA (RJS Scientific)
9.050 12/01/2025 3,111,426
2,850,000 Nassau County IDA (Sharp International)
7.375 12/01/2007 3,039,610
1,810,000 Nassau County IDA (Sharp International)
7.375 12/01/2007 1,930,419
2,610,000 Nassau County IDA (Sharp International)
7.875 12/01/2012 2,774,952
1,650,000 Nassau County IDA (Sharp International)
7.875 12/01/2012 1,760,797
500,000 Nassau County IDA (Structural Industries)
7.750 02/01/2012 566,080
20,000 New Hartford HDC (Village Point)
7.375 01/01/2024 21,402
1,505,000 New Hartford Sunset Wood Project
5.950 08/01/2027 1,609,823
3,000,000 New Rochelle IDA (CNR)
6.750 07/01/2022 3,230,700
4,950,000 Newark/Wayne Community Hospital
5.875 01/15/2033 5,171,958
2,340,000 Newark/Wayne Community Hospital
7.600 09/01/2015 2,531,646
185,000 Newburgh GO
7.100 09/15/2007 201,650
185,000 Newburgh GO
7.100 09/15/2008 200,891
</TABLE>
12 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 180,000 Newburgh GO
7.150% 09/15/2009 $ 195,298
150,000 Newburgh GO
7.150 09/15/2010 162,520
155,000 Newburgh GO
7.200 09/15/2011 167,577
155,000 Newburgh GO
7.200 09/15/2012 166,949
160,000 Newburgh GO
7.250 09/15/2013 172,048
155,000 Newburgh GO
7.250 09/15/2014 166,048
2,310,000 Newburgh IDA (ARMA Textile Printers)
7.125 11/01/2007 2,392,190
4,880,000 Newburgh IDA (ARMA Textile Printers)
8.000 11/01/2017 5,113,264
995,000 Niagara County IDA (Maryland Maple)
10.250 11/15/2009 1,028,492
1,000,000 Niagara County IDA (Niagara University)
5.375 10/01/2023 1,033,390
1,900,000 Niagara County IDA (Sevenson Hotel)
6.600 05/01/2007 1,941,952
1,700,000 Niagara Falls COP (High School Facility)
5.375 06/15/2028 1,712,971
715,000 North Babylon Volunteer Fire Co.
5.750 08/01/2022 756,842
585,000 North Tonawanda HDC (Bishop Gibbons Assoc.)
6.800 12/15/2007 645,150
3,295,000 North Tonawanda HDC (Bishop Gibbons Assoc.)
7.375 12/15/2021 3,911,132
270,000 NYC GO
0.000 05/15/2011 147,801
4,990,000 NYC GO
0.000 11/15/2011 2,665,858
200,000 NYC GO
0.000 05/15/2012 103,196
40,000 NYC GO
0.000 10/01/2012 20,257
9,025,000 NYC GO
5.000 08/01/2023 8,794,050
12,125,000 NYC GO
5.000 08/01/2023 11,814,721
8,900,000 NYC GO
5.000 08/15/2028 8,638,518
1,285,000 NYC GO
5.125 02/01/2011 1,344,444
1,250,000 NYC GO
5.125 08/01/2013 1,285,525
855,000 NYC GO
5.125 08/01/2025 842,748
12,250,000 NYC GO
5.125 08/01/2025 12,074,457
2,060,000 NYC GO
5.250 02/01/2012 2,163,268
16,265,000 NYC GO
5.250 08/01/2020 16,428,789
26,970,000 NYC GO
5.250 08/01/2021 27,219,472
1,015,000 NYC GO
5.250 08/15/2023 1,020,643
500,000 NYC GO
5.250 08/01/2024 502,270
5,910,000 NYC GO
5.300 08/01/2024 5,968,332
570,000 NYC GO
5.375 08/01/2019 582,392
1,170,000 NYC GO
5.375 08/01/2027 1,192,078
13,170,000 NYC GO
5.375 11/15/2027 13,386,120
85,000 NYC GO
5.500 10/01/2018 87,231
4,380,000 NYC GO
5.500 02/15/2026 4,501,414
15,015,000 NYC GO
5.500 11/15/2037 15,441,126
20,000 NYC GO
5.625 08/01/2016 20,774
35,000 NYC GO
5.750 02/01/2020 37,101
2,000,000 NYC GO
5.875 08/01/2024 2,144,940
4,865,000 NYC GO
5.875 08/01/2024 5,207,934
6,000,000 NYC GO
6.000 02/01/2011 6,626,940
10,000 NYC GO
6.000 08/01/2015 10,024
50,000 NYC GO
6.000 10/15/2016 54,605
15,000 NYC GO
6.000 02/15/2020 (p) 16,726
55,000 NYC GO
6.000 02/15/2020 58,798
90,000 NYC GO
6.000 05/15/2020 (p) 99,048
180,000 NYC GO
6.000 05/15/2020 191,453
15,000 NYC GO
6.000 02/15/2024 (p) 16,975
75,000 NYC GO
6.000 02/15/2024 81,007
</TABLE>
13 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 65,000 NYC GO
6.000% 02/15/2025 (p) $ 72,591
610,000 NYC GO
6.000 02/15/2025 654,804
80,000 NYC GO
6.000 10/15/2026 (p) 91,670
8,180,000 NYC GO
6.000 10/15/2026 8,908,838
4,920,000 NYC GO
6.125 02/01/2025 (p) 5,602,798
13,680,000 NYC GO
6.125 02/01/2025 14,873,443
8,735,000 NYC GO
6.125 08/01/2025 9,595,922
55,000 NYC GO
6.250 04/01/2021 (p) 63,187
15,000 NYC GO
6.250 04/01/2021 16,511
5,870,000 NYC GO
6.250 04/15/2027 (p) 6,794,877
6,330,000 NYC GO
6.250 04/15/2027 6,955,024
103,000 NYC GO
6.500 08/01/2014 (p) 118,648
397,000 NYC GO
6.500 08/01/2014 447,725
420,000 NYC GO
6.500 08/01/2015 (p) 483,806
1,580,000 NYC GO
6.500 08/01/2015 1,751,841
1,630,000 NYC GO
6.600 02/15/2010 (p) 1,873,017
370,000 NYC GO
6.600 02/15/2010 418,807
15,580,000 NYC GO
6.625 02/15/2025 (p) 17,923,855
420,000 NYC GO
6.625 08/01/2025 (p) 486,822
1,580,000 NYC GO
6.625 08/01/2025 1,783,393
5,000 NYC GO
7.000 02/01/2010 5,040
610,000 NYC GO
7.000 10/01/2012 (p) 688,153
15,000 NYC GO
7.000 10/01/2012 16,722
25,000 NYC GO
7.000 02/01/2018 27,427
625,000 NYC GO
7.000 02/01/2020 (p) 693,469
25,000 NYC GO
7.000 02/01/2020 27,427
10,000 NYC GO
7.000 02/01/2020 10,953
190,000 NYC GO
7.000 02/01/2022 208,447
4,410,000 NYC GO
7.000 02/01/2022 (p) 4,893,115
875,000 NYC GO
7.100 02/01/2009 (p) 973,280
125,000 NYC GO
7.100 02/01/2009 137,927
3,525,000 NYC GO
7.100 02/01/2010 (p) 3,920,928
475,000 NYC GO
7.100 02/01/2010 524,124
1,555,000 NYC GO
7.100 02/01/2011 (p) 1,729,658
210,000 NYC GO
7.100 02/01/2011 231,622
3,520,000 NYC GO
7.200 02/01/2014 (p) 3,925,082
480,000 NYC GO
7.200 02/01/2014 530,357
2,465,000 NYC GO
7.200 02/01/2015 (p) 2,748,672
335,000 NYC GO
7.200 02/01/2015 369,448
13,800,000 NYC GO
7.250 08/15/2024 (p) 15,061,596
20,000 NYC GO
7.250 08/15/2024 21,599
300,000 NYC GO
7.400 02/01/2002 (p) 332,217
30,000 NYC GO
7.400 02/01/2002 33,106
1,825,000 NYC GO
7.500 02/01/2003 (p) 2,050,734
175,000 NYC GO
7.500 02/01/2003 195,447
2,955,000 NYC GO
7.500 02/01/2016 (p) 3,323,252
45,000 NYC GO
7.500 02/01/2016 50,014
1,470,000 NYC GO
7.500 02/01/2018 (p) 1,653,191
30,000 NYC GO
7.500 02/01/2018 33,343
45,000 NYC GO
7.500 08/01/2019 50,653
1,820,000 NYC GO
7.500 08/01/2019 (p) 2,074,290
</TABLE>
14 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 180,000 NYC GO
7.500% 08/01/2020 $ 202,612
7,320,000 NYC GO
7.500 08/01/2020 (p) 8,342,750
6,180,000 NYC GO
7.500 08/15/2020 (p) 7,343,879
975,000 NYC GO
7.500 08/01/2021 (p) 1,111,227
25,000 NYC GO
7.500 08/01/2021 28,140
3,790,000 NYC GO
7.625 02/01/2013 (p) 4,276,030
55,000 NYC GO
7.625 02/01/2013 61,493
265,000 NYC GO
7.625 02/01/2014 (p) 298,984
5,000 NYC GO
7.625 02/01/2014 5,586
1,380,000 NYC GO
7.750 02/01/2010 1,559,359
120,000 NYC GO
7.750 02/01/2010 134,653
135,000 NYC GO
7.750 08/15/2012 (p) 150,862
15,000 NYC GO
7.750 08/15/2012 16,626
6,000,000 NYC GO
7.750 02/01/2013 (p) 6,785,460
985,000 NYC GO
7.750 08/15/2013 (p) 1,100,737
15,000 NYC GO
7.750 08/15/2013 16,626
115,000 NYC GO
7.750 08/15/2017 (p) 128,512
15,000 NYC GO
7.750 08/15/2017 16,587
250,000 NYC GO
8.000 08/15/2021 (p) 280,925
5,000 NYC GO
8.250 08/01/2012 (p) 5,641
1,620,000 NYC GO
8.250 08/01/2014 (p) 1,826,890
5,000 NYC GO
8.250 08/01/2014 5,584
1,000,000 NYC GO
8.250 11/15/2015 (p) 1,140,260
3,000,000 NYC GO
8.250 11/15/2018 (p) 3,420,780
20,000 NYC GO
8.250 11/15/2020 (p) 22,805
1,750,000 NYC GO CAB
0.000(c) 05/15/2014 1,497,597
500,000 NYC GO CAB
0.000(c) 08/01/2014 414,625
16,387,000 NYC GO CARS
8.120(f) 08/12/2010 18,763,115
8,387,000 NYC GO CARS
8.120(f) 09/01/2011 9,540,212
70,000 NYC GO DIAMONDS
0.000(c) 08/15/2016 63,143
100,000 NYC GO DIAMONDS
0.000(c) 08/01/2025 64,990
13,640,000 NYC GO Indexed Inverse Floater
5.375(c) (f) 08/01/2014 14,435,212
6,200,000 NYC GO RIBS
7.383(f) 08/13/2009 6,990,500
4,200,000 NYC GO RIBS
7.383(f) 07/29/2010 4,730,250
5,400,000 NYC GO RIBS
7.481(f) 08/22/2013 6,041,250
3,050,000 NYC GO RIBS
7.481(f) 08/01/2015 3,408,375
13,150,000 NYC GO RIBS
8.564(f) 08/01/2013 15,188,250
15,000,000 NYC GO RITES
7.063(f) 10/01/2011 16,486,650
3,375,000 NYC GO RITES (a)
4.857(f) 05/15/2023 3,205,609
3,500,000 NYC GO RITES (a)
4.857(f) 05/15/2028 3,324,335
2,285,000 NYC HDC
5.250 11/01/2031 2,304,902
316,251 NYC HDC (Albert Einstein Staff Hsg.)
6.500 12/15/2017 332,181
1,484,986 NYC HDC (Atlantic Plaza Towers)
7.034 02/15/2019 1,559,547
1,045,000 NYC HDC (Barclay Avenue)
6.450 04/01/2017 1,109,111
4,055,000 NYC HDC (Barclay Avenue)
6.600 04/01/2033 4,302,112
370,337 NYC HDC (Bay Towers)
6.500 08/15/2017 388,991
2,767,497 NYC HDC (Boulevard Towers)
6.500 08/15/2017 2,906,398
474,378 NYC HDC (Bridgeview III)
6.500 12/15/2017 498,273
499,761 NYC HDC (Cadman Plaza North)
7.000 12/15/2018 524,909
1,277,325 NYC HDC (Cadman Towers)
6.500 11/15/2018 1,341,459
187,595 NYC HDC (Candia House)
6.500 06/15/2018 197,010
</TABLE>
15 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 3,599,745 NYC HDC (Clinton Towers)
6.500% 07/15/2017 $ 3,780,416
306,895 NYC HDC (Contello III)
7.000 12/15/2018 322,322
1,487,950 NYC HDC (Cooper Gramercy)
6.500 08/15/2017 1,562,630
1,135,295 NYC HDC (Court Plaza)
6.500 08/15/2017 1,192,480
1,692,684 NYC HDC (Crown Gardens)
7.250 01/15/2019 1,778,401
3,604,488 NYC HDC (East Midtown Plaza)
6.500 11/15/2018 3,787,452
3,473,244 NYC HDC (Esplanade Gardens)
7.000 01/15/2019 3,648,504
82,826 NYC HDC (Essex Terrace)
6.500 07/15/2018 86,984
509,321 NYC HDC (Forest Park Crescent)
6.500 12/15/2017 534,884
1,655,820 NYC HDC (Gouverneur Gardens)
7.034 02/15/2019 1,739,357
364,982 NYC HDC (Heywood Towers)
6.500 10/15/2017 383,300
4,115,193 NYC HDC (Hudsonview Terrace)
6.500 09/15/2017 4,321,735
1,162,909 NYC HDC (Janel Towers)
6.500 09/15/2017 1,221,275
406,146 NYC HDC (Kingsbridge Arms)
6.500 08/15/2017 426,530
230,553 NYC HDC (Kingsbridge Arms)
6.500 11/15/2018 242,130
1,242,868 NYC HDC (Leader House)
6.500 03/15/2018 1,305,248
1,730,090 NYC HDC (Lincoln-Amsterdam)
7.250 11/15/2018 1,817,079
207,646 NYC HDC (Middagh St. Studio Apartments)
6.500 01/15/2018 218,068
2,709,305 NYC HDC (Montefiore Hospital Hsg. Sec. II)
6.500 10/15/2017 2,845,285
4,390,000 NYC HDC (Multi-Family)
5.850 05/01/2026 4,587,682
38,880,000 NYC HDC (Multi-Family)
6.600 04/01/2030 41,908,363
30,000 NYC HDC (Multi-Family)
7.300 06/01/2010 32,062
1,145,000 NYC HDC (Multi-Family)
7.350 06/01/2019 1,224,978
100,000 NYC HDC (Multi-Family), Series A
5.850 05/01/2025 104,282
1,735,000 NYC HDC (Multi-Family), Series B
5.850 05/01/2026 1,809,293
873,586 NYC HDC (New Amsterdam House)
6.500 08/15/2018 917,449
892,999 NYC HDC (New Amsterdam House)
6.500 08/15/2018 893,677
1,086,032 NYC HDC (Riverbend)
6.500 11/15/2018 1,140,561
6,658,308 NYC HDC (Riverside Park Community)
7.250 11/15/2018 6,995,817
474,991 NYC HDC (RNA House)
7.000 12/15/2018 498,959
683,500 NYC HDC (Robert Fulton Terrace)
6.500 12/15/2017 717,928
248,260 NYC HDC (Rosalie Manning Apartments)
7.034 11/15/2018 260,725
660,089 NYC HDC (Scott Tower)
7.000 12/15/2018 693,271
905,320 NYC HDC (Seaview Towers)
6.500 01/15/2018 950,758
1,685,114 NYC HDC (Sky View Towers)
6.500 11/15/2018 1,769,723
3,175,000 NYC HDC (South Bronx Cooperatives)
8.100 09/01/2023 3,372,866
373,537 NYC HDC (St. Martin Tower)
6.500 11/15/2018 392,292
1,718,603 NYC HDC (Stevenson Commons)
6.500 05/15/2018 1,804,859
492,878 NYC HDC (Strycker's Bay Apartments)
7.034 11/15/2018 528,626
1,723,163 NYC HDC (Tivoli Towers)
6.500 01/15/2018 1,809,752
234,072 NYC HDC (Town House West)
6.500 01/15/2018 245,803
359,684 NYC HDC (Tri-Faith House)
7.000 01/15/2019 377,765
1,528,331 NYC HDC (University River View)
6.500 08/15/2017 1,605,313
458,362 NYC HDC (Washington Square Southeast)
7.000 01/15/2019 481,408
413,362 NYC HDC (West Side Manor)
6.500 11/15/2018 434,116
4,601,987 NYC HDC (West Village)
6.500 11/15/2013 4,833,651
265,804 NYC HDC (Westview Apartments)
6.500 10/15/2017 279,193
611,509 NYC HDC (Woodstock Terrace)
7.034 02/15/2019 642,213
5,235,000 NYC HDC, Series B
5.875 11/01/2018 5,527,165
800,000 NYC Health & Hospital Corp.
5.750 02/15/2022 841,800
26,500,000 NYC Health & Hospital Corp. LEVRRS
7.252(f) 02/15/2011 29,580,625
</TABLE>
16 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 3,600,000 NYC IDA (Acme Architectural Products)
6.375% 11/01/2019 $ 3,609,648
1,035,000 NYC IDA (ALA Realty)
7.500 12/01/2010 1,128,005
1,355,000 NYC IDA (ALA Realty)
8.375 12/01/2015 1,542,938
680,000 NYC IDA (A-Lite Vertical Products)
6.750 11/01/2009 677,593
1,330,000 NYC IDA (A-Lite Vertical Products)
7.500 11/01/2019 1,324,241
440,000 NYC IDA (Allied Metal)
6.375 12/01/2014 445,575
940,000 NYC IDA (Allied Metal)
7.125 12/01/2027 951,402
16,685,000 NYC IDA (American Airlines)
6.900 08/01/2024 18,499,661
1,795,000 NYC IDA (American Airlines)
7.750 07/01/2019 1,836,016
11,445,000 NYC IDA (American Airlines)
8.000 07/01/2020 11,708,922
1,255,000 NYC IDA (Amplaco Group)
7.250 11/01/2008 1,313,157
2,645,000 NYC IDA (Amplaco Group)
8.125 11/01/2018 2,804,917
530,000 NYC IDA (Amster Novelty) (d)
8.000 12/01/2010 344,500
790,000 NYC IDA (Amster Novelty) (d)
8.375 12/01/2015 513,500
1,160,000 NYC IDA (Atlantic Veal & Lamb)
8.375 12/01/2016 1,256,338
11,480,000 NYC IDA (Berkeley Carroll School)
6.100 11/01/2028 11,456,122
165,000 NYC IDA (BHMS)
8.400 09/01/2002 165,431
3,075,000 NYC IDA (BHMS)
8.500 01/01/2027 3,430,531
660,000 NYC IDA (BHMS)
8.900 09/01/2011 717,229
1,690,000 NYC IDA (BHMS)
9.200 09/01/2021 1,879,348
500,000 NYC IDA (Blood Center)
7.200 05/01/2012 (p) 575,865
3,000,000 NYC IDA (Blood Center)
7.250 05/01/2022 (p) 3,462,030
45,285,000 NYC IDA (Brooklyn Navy Yard Cogeneration Partners)
5.650 10/01/2027 46,339,235
86,910,000 NYC IDA (Brooklyn Navy Yard Cogeneration Partners)
5.750 10/01/2036 89,370,422
3,975,000 NYC IDA (CCM)
6.375 11/01/2028 3,995,749
1,575,000 NYC IDA (CCM)
6.375 11/01/2028 1,577,567
1,770,000 NYC IDA (CCM)
7.875 12/01/2016 1,981,568
1,900,000 NYC IDA (CCM)
8.000 12/01/2011 2,102,369
1,500,000 NYC IDA (CNR)
5.800 09/01/2026 1,567,230
6,390,000 NYC IDA (College of Aeronautics)
5.500 05/01/2028 6,532,880
3,990,000 NYC IDA (Community Hospital of Brooklyn)
6.875 11/01/2010 4,047,975
5,750,000 NYC IDA (Crowne Plaza-LaGuardia)
6.000 11/01/2028 5,736,775
1,700,000 NYC IDA (Display Creations)
9.250 06/01/2008 1,840,896
360,000 NYC IDA (Eden II School)
7.750 06/01/2004 383,105
2,505,000 NYC IDA (Eden II School)
8.750 06/01/2019 2,760,310
10,255,000 NYC IDA (EPG)
7.500 07/30/2003 11,273,116
3,705,000 NYC IDA (Friends Seminary School)
7.000 12/01/2017 4,017,072
1,000,000 NYC IDA (Fund for NYC Project)
7.625 07/01/2010 1,051,340
3,280,000 NYC IDA (Gabrielli Truck Sales)
8.125 12/01/2017 3,474,340
1,250,000 NYC IDA (Graphic Artists)
8.250 12/30/2023 1,346,712
845,000 NYC IDA (Gutmann Plastics)
7.750 12/01/2007 880,236
2,265,000 NYC IDA (Hebrew Academy)
10.000 03/01/2021 2,526,041
735,000 NYC IDA (Herbert G. Birch Childhood Project)
7.375 02/01/2009 794,395
2,195,000 NYC IDA (Herbert G. Birch Childhood Project)
8.375 02/01/2022 2,437,482
160,000 NYC IDA (HiTech Res Rec)
8.750 08/01/2000 164,918
695,000 NYC IDA (HiTech Res Rec)
9.250 08/01/2008 743,594
5,000,000 NYC IDA (Holiday Inn/JFK Airport)
6.000 11/01/2028 4,988,500
320,000 NYC IDA (House of Spices)
9.000 10/15/2001 341,386
2,140,000 NYC IDA (House of Spices)
9.250 10/15/2011 2,331,894
3,280,000 NYC IDA (Japan Airlines)
6.000 11/01/2015 3,514,684
6,040,000 NYC IDA (JBFS)
6.750 12/15/2012 6,458,693
</TABLE>
17 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 1,675,000 NYC IDA (Koenig Iron Works)
8.375% 12/01/2025 $ 1,805,918
2,600,000 NYC IDA (L&M Optical Disc)
7.125 11/01/2010 2,615,652
1,000,000 NYC IDA (Lighthouse)
6.500 07/01/2022 (p) 1,105,410
3,025,000 NYC IDA (Little Red Schoolhouse)
6.750 11/01/2018 3,028,751
845,000 NYC IDA (Loehmann's)
9.500 12/31/2004 856,898
3,500,000 NYC IDA (MMC)
7.000 07/01/2023 3,762,360
5,550,000 NYC IDA (Nekboh)
9.625 05/01/2011 5,876,395
11,600,000 NYC IDA (Northwest Airlines)
6.000 06/01/2027 11,989,528
514,583 NYC IDA (Novelty Cord & Tassel)
6.000(v) 12/01/2006 518,700
895,000 NYC IDA (NY Hostel Co.)
6.750 01/01/2004 924,723
4,400,000 NYC IDA (NY Hostel Co.)
7.600 01/01/2017 4,631,924
695,000 NYC IDA (NY Vanities & Manufacturing)
7.000 11/01/2009 692,567
1,405,000 NYC IDA (NY Vanities & Manufacturing)
7.500 11/01/2019 1,398,916
3,435,000 NYC IDA (Ohel Children's Home and Family Services)
8.250 03/15/2023 3,770,290
1,045,000 NYC IDA (Paradise Products)
7.125 11/01/2007 1,079,339
4,475,000 NYC IDA (Paradise Products)
8.250 11/01/2022 4,689,755
56,536 NYC IDA (Penguin Air Conditioning)
12.222 12/01/1999 58,509
1,660,000 NYC IDA (Petrocelli Electric)
7.250 11/01/2007 1,728,342
460,000 NYC IDA (Petrocelli Electric)
7.250 11/01/2008 477,089
3,780,000 NYC IDA (Petrocelli Electric)
8.000 11/01/2017 3,979,093
940,000 NYC IDA (Petrocelli Electric)
8.000 11/01/2018 988,034
915,000 NYC IDA (Pop Display)
6.750 12/15/2004 965,746
2,645,000 NYC IDA (Pop Display)
7.900 12/15/2014 2,915,531
2,240,000 NYC IDA (Precision Gear)
6.375 11/02/2024 2,242,083
815,000 NYC IDA (PRFF)
7.000 10/01/2016 878,480
1,655,000 NYC IDA (Priority Mailers)
9.000 03/01/2010 1,785,066
710,000 NYC IDA (Promotional Slideguide)
7.500 12/01/2010 771,692
1,065,000 NYC IDA (Promotional Slideguide)
7.875 12/01/2015 1,176,612
700,000 NYC IDA (Psycho Therapy)
9.625 04/01/2010 739,200
220,000 NYC IDA (Sequins International)
8.500 04/30/2000 228,884
4,555,000 NYC IDA (Sequins International)
8.950 01/30/2016 4,993,237
5,115,000 NYC IDA (St. Bernard's School)
7.000 12/01/2021 5,590,951
4,140,000 NYC IDA (St. Christopher Ottilie)
7.500 07/01/2021 4,469,171
585,000 NYC IDA (Streamline Plastics)
7.750 12/01/2015 627,810
1,275,000 NYC IDA (Streamline Plastics)
8.125 12/01/2025 1,385,453
150,000 NYC IDA (Summit School)
7.250 12/01/2004 159,174
1,485,000 NYC IDA (Summit School)
8.250 12/01/2024 1,618,695
15,050,000 NYC IDA (Terminal One Group Assoc.)
6.000 01/01/2019 16,009,136
6,715,000 NYC IDA (Terminal One Group Assoc.)
6.125 01/01/2024 7,145,902
170,000 NYC IDA (Ultimate Display)
8.750 10/15/2000 179,081
1,910,000 NYC IDA (Ultimate Display)
9.000 10/15/2011 2,088,967
10,465,000 NYC IDA (United Air Lines)
5.650 10/01/2032 10,497,441
1,000,000 NYC IDA (United Nations School)
6.350 12/01/2015 1,061,420
255,000 NYC IDA (Utleys)
6.625 11/01/2006 254,220
1,335,000 NYC IDA (Utleys)
7.375 11/01/2023 1,330,114
1,285,000 NYC IDA (Van Blarcom Closures)
7.125 11/01/2007 1,317,690
2,965,000 NYC IDA (Van Blarcom Closures)
8.000 11/01/2017 3,056,915
1,125,000 NYC IDA (Visual Display)
7.250 11/01/2008 1,128,904
2,375,000 NYC IDA (Visual Display)
8.325 11/01/2018 2,389,464
8,000,000 NYC IDA (Visy Paper)
7.800 01/01/2016 8,892,400
24,750,000 NYC IDA (Visy Paper)
7.950 01/01/2028 27,569,767
</TABLE>
18 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 5,000,000 NYC Municipal Water Finance Authority
5.000% 06/15/2021 $ 4,949,950
3,500,000 NYC Municipal Water Finance Authority
5.125 06/15/2021 3,505,110
40,200,000 NYC Municipal Water Finance Authority
5.125 06/15/2030 40,198,794
1,200,000 NYC Municipal Water Finance Authority
5.500 06/15/2019 1,249,848
65,000 NYC Municipal Water Finance Authority
5.500 06/15/2027 68,298
40,000 NYC Municipal Water Finance Authority
5.750 06/15/2020 42,638
12,500,000 NYC Municipal Water Finance Authority IRS
6.720(f) 06/15/2013 13,500,000
30,000,000 NYC Municipal Water Finance Authority IVRC (a)
7.460(f) 06/15/2017 34,162,500
10,000,000 NYC Municipal Water Finance Authority LEVVRS
7.645(f) 06/15/2019 11,012,500
4,775,000 NYC Municipal Water Finance Authority RITES (a)
5.030(f) 06/15/2021 4,545,991
2,805,000 NYC Municipal Water Finance Authority RITES (a)
5.030(f) 06/15/2027 2,653,754
5,000,000 NYC Municipal Water Finance Authority RITES (a)
5.530(f) 06/15/2030 4,860,500
4,030,000 NYC Municipal Water Finance Authority RITES (a)
5.530(f) 06/15/2030 3,917,482
2,500,000 NYC TFA RITES (a)
4.030(f) 11/15/2023 2,009,350
21,747,332 NYS Certificate of Lease (a)
5.875 01/02/2023 21,933,924
600,000 NYS COP (BOCES) (a)
7.875 10/01/2000 618,816
200,000 NYS COP (Hanson Redevelopment)
8.250 11/01/2001 210,350
10,000 NYS Dorm (Bethel Springvale Home)
6.000 02/01/2035 10,771
1,000,000 NYS Dorm (Brookdale Hospital)
5.200 02/15/2013 1,033,060
1,355,000 NYS Dorm (Brookdale Hospital)
5.300 02/15/2017 1,386,842
9,660,000 NYS Dorm (Buena Vida)
5.250 07/01/2028 9,705,595
1,120,000 NYS Dorm (Cardinal Cooke)
5.000 07/01/2018 1,106,941
8,435,000 NYS Dorm (Center for Nursing)
5.550 08/01/2037 8,789,776
1,100,000 NYS Dorm (Chapel Oaks)
5.375 07/01/2017 1,136,234
2,855,000 NYS Dorm (Chapel Oaks)
5.450 07/01/2026 2,914,955
11,485,000 NYS Dorm (City University)
5.000 07/01/2028 11,115,183
21,180,000 NYS Dorm (City University)
5.250 07/01/2025 21,279,970
13,400,000 NYS Dorm (City University)
5.375 07/01/2024 13,588,940
20,000 NYS Dorm (Cornell University)
7.375 07/01/2030 21,458
215,000 NYS Dorm (Court Facility)
5.375 05/15/2016 218,988
495,000 NYS Dorm (Court Facility)
5.500 05/15/2023 504,949
4,750,000 NYS Dorm (Dept. of Health)
5.000 07/01/2024 4,587,360
5,000,000 NYS Dorm (Dept. of Health)
5.500 08/15/2017 5,214,550
410,000 NYS Dorm (Dept. of Health)
5.500 07/01/2020 418,708
525,000 NYS Dorm (Dept. of Health)
5.500 07/01/2021 538,261
150,000 NYS Dorm (Dept. of Health)
5.500 07/01/2025 154,075
250,000 NYS Dorm (Dept. of Health)
6.625 07/01/2024 (p) 291,180
3,750,000 NYS Dorm (Dept. of Health)
7.250 07/01/2011 (p) 4,237,987
265,000 NYS Dorm (Episcopal Health Services)
7.550 08/01/2029 278,589
2,500,000 NYS Dorm (German Masonic Home)
6.000 08/01/2036 2,701,150
1,000,000 NYS Dorm (Grace Manor Health Care Facility)
6.150 07/01/2018 1,112,620
10,285,000 NYS Dorm (Hebrew Hospital)
5.900 08/01/2036 10,986,540
125,010,000 NYS Dorm (Insured Hospital)
0.000 08/15/2036 16,446,316
10,735,000 NYS Dorm (Interfaith Medical Center)
5.300 02/15/2019 10,801,557
36,500,000 NYS Dorm (Interfaith Medical Center)
5.400 02/15/2028 36,939,095
35,000 NYS Dorm (KMH Homes)
6.950 08/01/2031 37,625
4,380,000 NYS Dorm (Lakeside Home)
6.000 02/01/2037 4,746,694
25,000 NYS Dorm (Lakeside Memorial Hospital)
6.000 02/01/2021 26,704
9,650,000 NYS Dorm (LSSUNY) RITES (a)
5.595(f) 02/01/2038 10,051,150
7,400,000 NYS Dorm (Menorah Campus)
6.100 02/01/2037 8,068,368
20,000 NYS Dorm (Menorah Campus)
7.300 08/01/2016 (p) 22,160
</TABLE>
19 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 120,000 NYS Dorm (Mental Health)
5.000% 02/15/2023 $ 118,750
7,500,000 NYS Dorm (Mental Health)
5.250 02/15/2019 7,590,975
4,625,000 NYS Dorm (Mental Health) RITES (a)
5.030(f) 02/15/2023 4,394,259
2,810,000 NYS Dorm (Mental Health) RITES (a)
5.030(f) 02/15/2028 2,656,658
7,230,000 NYS Dorm (Methodist Hospital)
6.050 02/01/2034 7,984,089
85,000 NYS Dorm (MHMC)
8.625 07/01/2010 85,292
3,465,000 NYS Dorm (Millard Hospital)
5.375 02/01/2032 3,546,289
2,850,000 NYS Dorm (Municipal Health Facilities) RITES (a)
5.030(f) 01/15/2023 2,708,497
2,400,000 NYS Dorm (Niagara Nursing Home)
5.600 08/01/2037 2,512,104
4,100,000 NYS Dorm (North General Hospital)
5.200 02/15/2015 4,226,977
4,800,000 NYS Dorm (North General Hospital)
5.300 02/15/2019 4,829,760
3,500,000 NYS Dorm (North Shore Hospital)
5.250 11/01/2019 3,585,050
2,200,000 NYS Dorm (NY & Presbyterian Hospital)
6.500 08/01/2034 2,407,548
4,860,000 NYS Dorm (NY & Presbyterian Hospital) RITES (a)
4.030(f) 08/01/2027 3,841,587
3,780,000 NYS Dorm (NY & Presbyterian Hospital) RITES (a)
5.030(f) 08/01/2032 3,395,347
10,700,000 NYS Dorm (NY Downtown Hospital)
5.300 02/15/2020 10,824,013
25,000 NYS Dorm (NY Medical College)
6.875 07/01/2021 28,028
855,000 NYS Dorm (Park Ridge Hsg.)
7.850 02/01/2029 874,528
12,750,000 NYS Dorm (RGH) RITES (a)
6.279(f) 08/01/2033 13,695,030
4,725,000 NYS Dorm (Rosalind & Joseph Gurwin Geriatric Home)
5.600 02/01/2027 4,941,452
3,230,000 NYS Dorm (Rosalind & Joseph Gurwin Geriatric Home)
5.700 02/01/2037 3,403,289
600,000 NYS Dorm (Sarah Neumann Home)
5.450 08/01/2027 620,208
1,900,000 NYS Dorm (Sarah Neumann Home)
5.500 08/01/2037 1,968,552
3,045,000 NYS Dorm (Special Surgery) RITES (a)
5.030(f) 02/01/2028 2,806,637
2,650,000 NYS Dorm (Special Surgery) RITES (a)
5.030(f) 02/01/2038 2,348,456
4,500,000 NYS Dorm (St. Agnes Hospital)
5.300 02/15/2019 4,527,900
9,000,000 NYS Dorm (St. Agnes Hospital)
5.400 02/15/2025 9,115,830
3,000,000 NYS Dorm (St. Barnabas Hospital)
5.450 08/01/2035 3,079,830
1,500,000 NYS Dorm (St. Clare's Hospital)
5.300 02/15/2019 1,509,300
2,970,000 NYS Dorm (St. Clare's Hospital)
5.400 02/15/2025 3,008,224
2,580,000 NYS Dorm (St. James Mercy Hospital)
5.400 02/01/2038 2,654,717
1,500,000 NYS Dorm (St. Thomas Aquinas College)
5.250 07/01/2028 1,503,210
75,000 NYS Dorm (St. Thomas Aquinas College)
6.250 07/01/2014 (p) 84,882
3,885,000 NYS Dorm (St. Vincent's Hospital)
5.300 07/01/2018 3,926,686
5,000 NYS Dorm (St. Vincent's Hospital)
7.400 08/01/2030 5,469
50,000 NYS Dorm (State University)
0.000 05/15/2007 34,759
5,000 NYS Dorm (State University)
6.000 05/15/2017 (p) 5,181
30,000 NYS Dorm (State University)
6.000 05/15/2017 30,846
50,000 NYS Dorm (State University)
6.000 05/15/2022 (p) 55,345
225,000 NYS Dorm (State University)
7.000 05/15/2016 239,060
32,865,000 NYS Dorm (Suffolk-Judicial)
9.500 04/15/2014 38,366,930
3,990,000 NYS Dorm (Teresian House)
5.250 07/01/2017 4,010,788
50,000 NYS Dorm (UCC)
5.700 07/01/2021 52,405
1,700,000 NYS Dorm (Vassar Brothers)
5.375 07/01/2025 1,761,455
4,200,000 NYS Dorm (W.K. Nursing Home)
6.125 02/01/2036 4,570,818
32,915,000 NYS Dorm (WHMC)
5.300 08/15/2021 33,091,424
1,840,000 NYS Environ. (Consolidated Water)
7.150 11/01/2014 2,013,770
58,860,000 NYS Environ. (Huntington Res Rec)
7.500 10/01/2012 61,608,173
7,500,000 NYS Environ. (NYS Water Services)
8.375 01/15/2020 7,968,450
6,120,000 NYS Environ. (Occidental Petroleum)
5.700 09/01/2028 6,209,536
9,000,000 NYS Environ. (Occidental Petroleum)
6.100 11/01/2030 9,454,590
</TABLE>
20 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 7,000,000 NYS ERDA (Brooklyn Union Gas) RIBS
7.751% (f) 07/08/2026 $ 7,472,500
7,000,000 NYS ERDA (Brooklyn Union Gas) RIBS
8.655(f) 04/01/2020 9,135,000
10,300,000 NYS ERDA (Brooklyn Union Gas) RIBS
10.324(f) 07/01/2026 13,673,250
2,215,000 NYS ERDA (Central Hudson G&E)
8.375 12/01/2028 2,268,116
11,040,000 NYS ERDA (Con Ed)
6.375 12/01/2027 11,595,864
290,000 NYS ERDA (Con Ed)
6.375 12/01/2027 309,908
15,630,000 NYS ERDA (Con Ed)
7.250 11/01/2024 15,971,359
9,350,000 NYS ERDA (Con Ed) RITES (a)
5.495(f) 08/15/2020 9,623,861
440,000 NYS ERDA (LILCO)
6.900 08/01/2022 497,222
845,000 NYS ERDA (LILCO)
6.900 08/01/2022 941,169
15,465,000 NYS ERDA (LILCO)
7.150 09/01/2019 17,388,846
16,760,000 NYS ERDA (LILCO)
7.150 09/01/2019 18,385,720
17,090,000 NYS ERDA (LILCO)
7.150 06/01/2020 18,747,730
13,285,000 NYS ERDA (LILCO)
7.150 12/01/2020 14,731,338
10,975,000 NYS ERDA (LILCO)
7.150 02/01/2022 12,340,290
15,360,000 NYS ERDA (LILCO)
7.150 02/01/2022 17,032,243
3,485,000 NYS ERDA (NIMO) RITES (a)
5.629(f) 11/01/2025 3,557,593
400,000 NYS ERDA (NYSEG)
5.700 12/01/2028 418,920
30,000 NYS ERDA (NYSEG)
5.950 12/01/2027 31,949
12,500,000 NYS ERDA (RG&E)
5.950 09/01/2033 13,579,500
3,555,000 NYS HFA (Children's Rescue)
7.625 05/01/2018 3,807,405
2,200,000 NYS HFA (Dominican Village)
6.600 08/15/2027 2,401,806
4,205,000 NYS HFA (Fulton Manor)
6.100 11/15/2025 4,568,312
2,000 NYS HFA (H&NH)
6.875 11/01/2010 (p) 2,189
205,000 NYS HFA (H&NH)
7.000 11/01/2017 249,231
1,040,000 NYS HFA (HELP/Bronx)
7.850 05/01/1999 1,049,464
1,080,000 NYS HFA (HELP/Bronx)
7.850 11/01/1999 1,104,613
13,080,000 NYS HFA (HELP/Bronx)
8.050 11/01/2005 13,602,284
1,210,000 NYS HFA (HELP/Suffolk)
8.100 11/01/2005 1,235,761
5,000 NYS HFA (Meadow Manor)
7.750 11/01/2019 5,061
15,730,000 NYS HFA (Multi-Family)
0.000 11/01/2014 6,787,495
14,590,000 NYS HFA (Multi-Family)
0.000 11/01/2015 5,906,470
50,000 NYS HFA (Multi-Family)
0.000 11/01/2016 18,905
12,695,000 NYS HFA (Multi-Family)
0.000 11/01/2017 4,310,079
745,000 NYS HFA (Multi-Family)
5.250 11/15/2028 745,603
1,700,000 NYS HFA (Multi-Family)
5.300 11/15/2039 1,701,377
2,075,000 NYS HFA (Multi-Family)
5.500 08/15/2030 2,122,974
85,000 NYS HFA (Multi-Family)
5.950 08/15/2024 89,026
2,000,000 NYS HFA (Multi-Family)
6.050 08/15/2032 2,138,840
1,285,000 NYS HFA (Multi-Family)
6.100 11/15/2036 1,387,749
4,700,000 NYS HFA (Multi-Family)
6.125 08/15/2038 5,015,605
50,000 NYS HFA (Multi-Family)
6.200 08/15/2012 53,262
100,000 NYS HFA (Multi-Family)
6.250 08/15/2027 108,213
5,000,000 NYS HFA (Multi-Family)
6.300 08/15/2026 5,396,100
4,170,000 NYS HFA (Multi-Family)
6.350 08/15/2023 4,516,527
1,175,000 NYS HFA (Multi-Family)
6.400 11/15/2027 1,283,934
2,905,000 NYS HFA (Multi-Family)
6.500 08/15/2024 3,091,123
11,980,000 NYS HFA (Multi-Family)
6.700 08/15/2025 12,685,263
5,695,000 NYS HFA (Multi-Family)
6.750 11/15/2036 6,214,555
75,000 NYS HFA (Multi-Family)
6.950 08/15/2012 81,763
2,830,000 NYS HFA (Multi-Family)
6.950 08/15/2024 2,998,838
</TABLE>
21 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 5,375,000 NYS HFA (Multi-Family)
7.050% 08/15/2024 $ 5,817,954
1,566,000 NYS HFA (Multi-Family)
7.450 11/01/2028 1,625,915
2,460,000 NYS HFA (Multi-Family)
7.550 11/01/2029 2,556,727
1,020,000 NYS HFA (Multi-Family)
7.750 11/01/2020 1,087,085
50,000 NYS HFA (Multi-Family)
7.850 02/15/2030 54,389
500,000 NYS HFA (Multi-Family)
8.000 11/01/2008 540,780
3,035,000 NYS HFA (NH&HC) RITES (a)
5.619(f) 11/01/2016 3,256,069
15,000 NYS HFA (Non Profit)
6.400 11/01/2010 15,328
25,000 NYS HFA (Non Profit)
6.400 11/01/2013 25,545
20,000 NYS HFA (Non Profit)
6.600 11/01/2008 20,448
25,000 NYS HFA (Non Profit)
6.600 11/01/2010 25,563
20,000 NYS HFA (Non Profit)
6.600 11/01/2013 20,451
5,000,000 NYS HFA (Phillips Village)
7.750 08/15/2017 5,580,150
35,000 NYS HFA (Service Contract)
5.375 03/15/2023 35,370
4,185,000 NYS HFA (Service Contract)
5.500 09/15/2022 4,260,497
5,600,000 NYS HFA (Service Contract)
5.500 09/15/2022 5,748,008
5,525,000 NYS HFA (Service Contract)
5.500 03/15/2025 5,661,578
25,000 NYS HFA (Service Contract)
6.125 03/15/2020 26,740
9,010,000 NYS HFA (Service Contract)
6.500 03/15/2025 (p) 10,461,421
255,000 NYS HFA (Service Contract)
6.500 03/15/2025 289,020
145,000 NYS HFA (Service Contract)
7.700 03/15/2006 (p) 160,205
5,000 NYS HFA (Service Contract)
7.700 03/15/2006 5,486
1,095,000 NYS HFA (Shorehill Hsg.)
7.500 05/01/2008 1,108,436
1,395,000 NYS HFA, Series A
6.125 11/01/2020 1,513,254
80,000 NYS LGAC
5.500 04/01/2023 82,523
810,000 NYS LGSC (SCSB) (a)
7.375 12/15/2016 882,949
22,230,000 NYS Medcare (Brookdale Hospital)
5.900 08/15/2033 23,453,539
4,600,000 NYS Medcare (Brookdale Hospital)
6.850 02/15/2017 (p) 5,389,406
1,015,000 NYS Medcare (Central Suffolk Hospital)
6.125 11/01/2016 1,022,775
500,000 NYS Medcare (Downtown Hospital)
6.700 02/15/2012 (p) 581,760
2,255,000 NYS Medcare (Downtown Hospital)
6.800 02/15/2020 (p) 2,635,892
45,000 NYS Medcare (H&NH)
5.750 08/15/2019 46,645
4,690,000 NYS Medcare (H&NH)
5.850 02/15/2033 4,988,143
10,000 NYS Medcare (H&NH)
6.200 08/15/2022 10,654
95,000 NYS Medcare (H&NH)
6.200 02/15/2023 101,755
60,000 NYS Medcare (H&NH)
6.375 08/15/2029 64,687
1,000,000 NYS Medcare (H&NH)
6.375 08/15/2033 1,073,290
160,000 NYS Medcare (H&NH)
6.500 02/15/2019 (p) 177,418
30,000 NYS Medcare (H&NH)
6.500 02/15/2019 32,771
2,170,000 NYS Medcare (H&NH)
6.500 02/15/2034 2,372,244
250,000 NYS Medcare (H&NH)
6.600 02/15/2031 272,958
590,000 NYS Medcare (H&NH)
6.650 08/15/2032 (p) 658,906
12,230,000 NYS Medcare (H&NH)
6.650 08/15/2032 13,420,713
385,000 NYS Medcare (H&NH)
6.875 02/15/2032 (p) 427,697
2,615,000 NYS Medcare (H&NH)
6.875 02/15/2032 2,861,281
50,000 NYS Medcare (H&NH)
7.250 02/15/2024 51,252
4,505,000 NYS Medcare (H&NH)
7.400 11/01/2016 4,610,192
5,000 NYS Medcare (H&NH)
7.600 02/15/2029 5,127
5,000 NYS Medcare (H&NH)
7.600 02/15/2029 5,124
12,600,000 NYS Medcare (H&NH)
8.000 02/15/2027 12,766,950
25,000 NYS Medcare (H&NH)
8.000 02/15/2028 25,581
</TABLE>
22 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 3,560,000 NYS Medcare (H&NH)
9.375% 11/01/2016 $ 3,719,915
1,740,000 NYS Medcare (H&NH) (a)
9.000 02/15/2026 1,796,202
2,865,000 NYS Medcare (H&NH) (a)
10.000 11/01/2006 3,053,804
2,000,000 NYS Medcare (Insured Mortgage Nursing)
6.375 08/15/2024 2,283,440
4,000,000 NYS Medcare (Insured Mortgage Nursing)
6.450 08/15/2034 (p) 4,581,880
70,000 NYS Medcare (Insured Mortgage Nursing)
6.500 11/01/2015 77,118
7,725,000 NYS Medcare (Kingston Hospital)
8.875 11/15/2017 7,951,343
1,650,000 NYS Medcare (M.G. Nursing Home)
6.375 02/15/2035 1,817,459
630,000 NYS Medcare (Mental Health)
0.000 08/15/2018 142,128
600,000 NYS Medcare (Mental Health)
5.250 08/15/2023 609,756
8,000,000 NYS Medcare (Mental Health)
5.250 08/15/2023 8,130,080
250,000 NYS Medcare (Mental Health)
5.500 08/15/2024 257,625
14,515,000 NYS Medcare (Mental Health)
5.800 08/15/2022 15,280,086
5,000 NYS Medcare (Mental Health)
5.900 08/15/2022 5,415
65,000 NYS Medcare (Mental Health)
5.900 08/15/2022 70,953
505,000 NYS Medcare (Mental Health)
7.500 02/15/2021 (p) 554,995
305,000 NYS Medcare (Mental Health)
7.500 02/15/2021 331,273
545,000 NYS Medcare (Mental Health)
7.625 08/15/2017 (p) 609,097
250,000 NYS Medcare (Mental Health)
7.625 08/15/2017 275,933
3,370,000 NYS Medcare (Mental Health)
7.700 02/15/2018 3,448,656
35,000 NYS Medcare (Mental Health)
7.750 05/15/2011 38,316
220,000 NYS Medcare (Mental Health)
7.875 08/15/2015 225,168
1,725,000 NYS Medcare (Mental Health)
8.875 08/15/2007 1,749,840
25,000 NYS Medcare (Montefiore Medical Center)
5.750 02/15/2025 26,331
10,000 NYS Medcare (North Shore University Hospital)
7.200 11/01/2020 (p) 10,870
15,000 NYS Medcare (NY Hospital)
6.900 08/15/2034 (p) 17,615
25,000 NYS Medcare (Secured Hospital)
6.250 02/15/2024 26,573
1,350,000 NYS Medcare (St. Charles Memorial Hospital)
6.375 08/15/2034 1,487,012
10,850,000 NYS Medcare (St. Francis Hospital)
7.625 11/01/2021 11,104,433
1,000,000 NYS Medcare (St. Luke's Hospital)
5.700 02/15/2029 1,040,990
10,000 NYS Medcare (St. Luke's Hospital)
7.375 02/15/2019 10,590
22,000,000 NYS Medcare (St. Luke's Hospital) IVRC (a)
6.213(f) 02/15/2029 23,705,000
8,400,000 NYS Medcare (St. Luke's Hospital) RITES (a)
6.222(f) 02/15/2029 9,054,108
12,500,000 NYS Medcare (St. Luke's Hospital) RITES (a)
6.222(f) 02/15/2029 13,473,375
5,750,000 NYS Medcare (St. Luke's Hospital) RITES (a)
6.279(f) 02/15/2029 6,197,753
10,000,000 NYS Medcare (St. Luke's Hospital) RITES (a)
6.279(f) 02/15/2029 10,778,700
5,255,000 NYS Medcare (WHMC)
7.400 08/15/2021 (p) 5,847,922
5,925,000 NYS Medcare RITES (a)
5.495(f) 02/15/2019 6,078,576
10,000,000 NYS Medcare RITES (a)
5.745(f) 02/15/2025 10,407,100
10,000 NYS Power Authority
6.750 01/01/2018 10,818
1,000,000 NYS Thruway Authority
0.000 01/01/2003 845,500
2,000,000 NYS Thruway Authority
0.000 01/01/2004 1,617,560
260,000 NYS Thruway Authority
0.000 01/01/2005 200,364
25,000,000 NYS Thruway Authority Convertible INFLOS
4.595(f) 01/01/2024 24,062,500
15,000 NYS UDC (Correctional Facilities)
0.000 01/01/2003 12,843
900,000 NYS UDC (Correctional Facilities)
0.000 01/01/2008 597,699
3,500,000 NYS UDC (Correctional Facilities)
5.000 01/01/2019 3,407,250
12,845,000 NYS UDC (Correctional Facilities)
5.000 01/01/2020 12,479,174
13,270,000 NYS UDC (Correctional Facilities)
5.000 01/01/2028 12,845,891
4,080,000 NYS UDC (Correctional Facilities)
5.250 01/01/2021 4,090,649
10,250,000 NYS UDC (Correctional Facilities)
5.375 01/01/2023 10,363,160
</TABLE>
23 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 5,590,000 NYS UDC (Correctional Facilities)
5.375% 01/01/2025 $ 5,665,633
500,000 NYS UDC (Correctional Facilities)
5.500 01/01/2018 516,615
1,000,000 NYS UDC (Correctional Facilities)
5.500 01/01/2025 1,045,710
2,000,000 NYS UDC (Correctional Facilities)
7.500 01/01/2018 (p) 2,191,980
3,200,000 NYS UDC (Correctional Facilities) RITES (a)
5.030(f) 01/01/2028 3,026,304
101,280,000 NYS UDC (South Mall)
0.000 01/01/2011 52,507,603
85,000 NYS UDC (South Mall)
0.000 01/01/2011 44,326
1,265,000 Oneida County IDA (MCC)
8.000 11/01/2008 1,343,772
2,825,000 Oneida County IDA (MCC)
8.750 11/01/2018 3,001,224
1,190,000 Oneida County IDA (Presbyterian Home)
5.250 03/01/2019 1,187,703
10,000 Oneida Healthcare Corp.
7.100 08/01/2011 10,772
130,000 Oneida Healthcare Corp.
7.200 08/01/2031 140,366
1,825,000 Onondaga County IDA (CGH)
5.500 11/01/2018 1,826,332
7,000,000 Onondaga County IDA (CGH)
6.625 01/01/2018 7,491,120
575,000 Onondaga County IDA (Coltec)
7.250 06/01/2008 587,823
770,000 Onondaga County IDA (Coltec)
9.875 10/01/2010 805,497
220,000 Onondaga County IDA (Crouse Irving Hospital)
7.800 01/01/2003 (p) 243,936
370,000 Onondaga County IDA (Gear Motion)
8.400 12/15/2001 374,917
1,580,000 Onondaga County IDA (Gear Motion)
8.900 12/15/2011 1,655,303
5,000,000 Onondaga County IDA (Solvay Paperboard)
6.800 11/01/2014 5,031,650
16,400,000 Onondaga County IDA (Solvay Paperboard)
7.000 11/01/2030 16,603,032
750,000 Onondaga County IDA (Syracuse Home)
5.200 12/01/2018 743,993
27,850,000 Onondaga County Res Rec
6.875 05/01/2006 29,571,687
67,435,000 Onondaga County Res Rec
7.000 05/01/2015 72,371,242
1,083,000 Ontario County IDA (Ontario Design)
6.500 11/01/2005 1,091,317
3,250,000 Orange County IDA (Glen Arden)
5.625 01/01/2018 3,234,985
4,590,000 Orange County IDA (Glen Arden)
5.700 01/01/2028 4,580,315
22,450,000 Orange County IDA (Glen Arden)
8.875 01/01/2025 (p) 28,392,291
7,600,000 Orange County IDA (Kingston Manufacturing)
8.000 11/01/2017 7,896,476
495,000 Orange County IDA (Mental Retardation Project)
7.800 07/01/2011 526,769
4,750,000 Oswego County IDA (SLRHF)
5.400 02/01/2038 4,859,203
3,260,000 Oswego IDA (Seneca Hill Manor)
5.650 08/01/2037 3,430,987
2,970,000 Otsego County IDA (Bassett Healthcare Project)
5.350 11/01/2020 3,065,812
1,280,000 Otsego County IDA (Bassett Healthcare Project)
5.375 11/01/2020 1,325,286
10,900,000 Peekskill IDA (Drum Hill)
6.375 10/01/2028 10,907,521
1,403,659 Peekskill IDA (Karta)
9.000 07/01/2010 1,432,925
1,090,000 Pilgrim Village HDC (Multi-Family)
6.800 02/01/2021 1,126,308
465,000 Port Authority NY/NJ (KIAC)
6.750 10/01/2019 515,434
7,340,000 Port Authority NY/NJ (US Airways)
9.000 12/01/2006 8,041,557
520,000 Port Authority NY/NJ (US Airways)
9.000 12/01/2010 569,702
22,390,000 Port Authority NY/NJ (US Airways)
9.125 12/01/2015 24,579,518
45,000 Port Authority NY/NJ, 67th Series
6.875 01/01/2025 46,944
220,000 Port Authority NY/NJ, 68th Series
7.250 02/15/2025 230,204
70,000 Port Authority NY/NJ, 69th Series
7.125 06/01/2025 74,114
85,000 Port Authority NY/NJ, 70th Series
7.250 08/01/2025 89,595
15,000 Port Authority NY/NJ, 70th Series
7.250 08/01/2025 15,890
40,000 Port Authority NY/NJ, 71st Series
6.500 01/15/2026 42,570
70,000 Port Authority NY/NJ, 73rd Series
6.750 04/15/2026 74,337
15,000 Port Authority NY/NJ, 73rd Series
6.750 04/15/2026 15,982
15,000 Port Authority NY/NJ, 74th Series
6.750 08/01/2026 16,258
60,000 Port Authority NY/NJ, 76th Series
6.500 11/01/2026 64,005
</TABLE>
24 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 60,000 Portchester CDC (Southport)
7.300% 08/01/2011 $ 62,262
25,000 Portchester CDC (Southport)
7.375 08/01/2022 25,979
1,990,000 Putnam County IDA (Brewster Plastics)
8.500 12/01/2016 2,152,086
25,000 Rensselaer Hsg. Authority (Renwyck)
7.650 01/01/2011 27,218
30,000 Rensselaer IDA (MMP)
8.500 12/15/2002 30,400
15,000,000 Rensselaer Municipal Leasing Corp.
6.900 06/01/2024 16,589,250
45,000 Riverhead HDC
8.250 08/01/2010 47,846
20,990,000 Rochester Hsg. Authority (Crossroads)
7.700 01/01/2017 23,594,019
6,790,000 Rochester Museum & Science Center
6.125 12/01/2015 6,938,701
2,000,000 Rockland County IDA (DC)
6.250 05/01/2028 2,042,960
2,090,000 Rockland County IDA (DC)
8.000 03/01/2013 2,456,356
1,395,000 Saratoga County IDA (ARC)
8.400 03/01/2013 1,535,728
500,000 Schenectady IDA (ASSC)
6.400 05/01/2014 545,670
2,655,000 Schenectady IDA (ASSC)
6.450 05/01/2024 2,903,667
522,000 Schroon Lake Fire District (a)
7.250 03/01/2009 548,340
175,000 Scotia Hsg. Authority (Holyrood House)
7.000 06/01/2009 187,329
20,000 SONYMA, Series 1
0.000 10/01/2014 4,636
685,000 SONYMA, Series 12
8.250 04/01/2017 695,501
4,510,000 SONYMA, Series 2
0.000 10/01/2014 1,020,884
95,000 SONYMA, Series 2
0.000 10/01/2014 21,621
25,000 SONYMA, Series 27
6.450 04/01/2004 26,596
5,350,000 SONYMA, Series 28
6.450 10/01/2020 5,548,860
10,000,000 SONYMA, Series 28
6.650 04/01/2022 10,561,900
8,830,000 SONYMA, Series 28
7.050 10/01/2023 9,428,321
605,000 SONYMA, Series 30
5.800 10/01/2025 626,611
15,000 SONYMA, Series 30-A
4.375 10/01/2023 15,024
16,005,000 SONYMA, Series 30-B
6.650 10/01/2025 17,102,623
100,000 SONYMA, Series 30-C1
5.850 10/01/2025 104,113
15,000 SONYMA, Series 30-C2
5.800 10/01/2025 15,599
11,510,000 SONYMA, Series 36-A
6.625 04/01/2025 12,433,908
13,500,000 SONYMA, Series 38 RITES (a)
7.029(f) 04/01/2025 15,121,620
80,000 SONYMA, Series 40-A
6.350 04/01/2021 84,255
7,560,000 SONYMA, Series 40-A
6.700 04/01/2025 8,192,243
75,000 SONYMA, Series 40-B
6.400 10/01/2012 81,080
5,885,000 SONYMA, Series 40-B
6.600 04/01/2025 6,358,919
13,605,000 SONYMA, Series 42
6.650 04/01/2026 14,743,739
110,000 SONYMA, Series 42
6.650 04/01/2026 119,603
11,990,000 SONYMA, Series 44
7.500 04/01/2026 13,119,578
100,000 SONYMA, Series 46
6.500 04/01/2013 108,911
65,000 SONYMA, Series 46
6.600 10/01/2019 70,771
24,300,000 SONYMA, Series 46
6.650 10/01/2025 26,467,074
515,000 SONYMA, Series 48
6.100 04/01/2025 550,875
7,260,000 SONYMA, Series 50
6.625 04/01/2025 7,928,283
160,000 SONYMA, Series 52
6.100 04/01/2026 171,680
915,000 SONYMA, Series 52
6.100 04/01/2026 985,144
25,000 SONYMA, Series 54
6.200 10/01/2026 27,026
45,000 SONYMA, Series 54
6.200 10/01/2026 48,789
6,170,000 SONYMA, Series 58
6.400 04/01/2027 6,752,818
835,000 SONYMA, Series 6
9.375 04/01/2010 860,217
540,000 SONYMA, Series 60
6.000 10/01/2022 577,265
345,000 SONYMA, Series 60
6.050 04/01/2026 370,985
</TABLE>
25 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 9,750,000 SONYMA, Series 63
6.125% 04/01/2027 $ 10,555,350
10,205,000 SONYMA, Series 65
5.850 10/01/2028 10,855,467
3,000,000 SONYMA, Series 67
5.700 10/01/2017 3,159,060
11,665,000 SONYMA, Series 67
5.800 10/01/2028 12,378,781
200,000 SONYMA, Series 69
5.400 10/01/2019 204,362
4,725,000 SONYMA, Series 69 RITES (a)
5.960(f) 10/01/2028 4,913,858
1,255,000 SONYMA, Series 7 (a)
9.250 10/01/2014 1,288,458
940,000 SONYMA, Series 71
5.350 10/01/2018 954,532
10,150,000 SONYMA, Series 71 RITES (a)
5.760(f) 04/01/2029 10,392,585
5,500,000 SONYMA, Series 73 RITES (a)
6.126(f) 10/01/2028 5,574,305
450,000 SONYMA, Series 8-A
6.875 04/01/2017 464,513
665,000 SONYMA, Series 8-E
8.100 10/01/2017 679,963
95,000 SONYMA, Series EE-2
7.450 10/01/2010 98,259
190,000 SONYMA, Series EE-2
7.500 04/01/2016 196,582
255,000 SONYMA, Series EE-3
7.700 10/01/2010 267,230
15,000 SONYMA, Series EE-3
7.750 04/01/2016 15,720
90,000 SONYMA, Series EE-4
7.750 10/01/2010 94,606
370,000 SONYMA, Series HH-2
7.700 10/01/2009 381,366
40,000 SONYMA, Series HH-2
7.850 04/01/2022 41,501
250,000 SONYMA, Series HH-3
7.875 10/01/2009 261,345
515,000 SONYMA, Series HH-3
7.950 04/01/2022 538,463
100,000 SONYMA, Series II
0.000 04/01/2005 64,003
90,000 SONYMA, Series II
0.000 04/01/2006 53,294
100,000 SONYMA, Series II
0.000 10/01/2007 52,496
170,000 SONYMA, Series II
0.000 04/01/2008 85,821
120,000 SONYMA, Series II
0.000 10/01/2008 58,264
180,000 SONYMA, Series II
0.000 10/01/2009 80,825
455,000 SONYMA, Series JJ
7.500 10/01/2017 472,063
50,000 SONYMA, Series KK
7.650 04/01/2019 51,628
285,000 SONYMA, Series KK
7.800 10/01/2020 295,038
180,000 SONYMA, Series MM-1
7.500 04/01/2013 187,830
25,000 SONYMA, Series MM-1
7.750 10/01/2005 26,079
100,000 SONYMA, Series MM-2
7.700 04/01/2005 103,947
60,000 SONYMA, Series NN
7.550 10/01/2017 62,479
5,000 SONYMA, Series OO
7.900 10/01/2011 5,167
20,000 SONYMA, Series QQ
7.700 10/01/2012 20,814
105,000 SONYMA, Series RR
7.700 10/01/2010 110,466
80,000 SONYMA, Series RR
7.750 10/01/2017 84,094
5,000 SONYMA, Series TT
6.950 10/01/2002 5,258
1,265,000 SONYMA, Series UU
7.750 10/01/2023 1,331,058
115,222,000 SONYMA, Series VV
0.000 10/01/2023 18,623,332
195,000 SONYMA, Series VV
7.375 10/01/2011 207,911
725,000 Suffolk County GO
6.375 11/01/2016 804,206
1,310,000 Suffolk County IDA (ACLDD)
6.500 03/01/2018 1,312,699
425,000 Suffolk County IDA (Community Program Ctr. of L.I.)
7.250 11/01/2007 447,572
1,825,000 Suffolk County IDA (Community Program Ctr. of L.I.)
8.250 11/01/2010 1,938,205
1,505,000 Suffolk County IDA (DDI)
6.250 03/01/2009 1,503,164
5,270,000 Suffolk County IDA (DDI)
7.250 03/01/2024 5,263,149
790,000 Suffolk County IDA (DDI)
7.375 03/01/2003 824,239
9,675,000 Suffolk County IDA (DDI)
8.750 03/01/2023 10,940,393
2,000,000 Suffolk County IDA (Dowling College)
6.625 06/01/2024 2,123,540
</TABLE>
26 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 2,870,000 Suffolk County IDA (Dowling College)
6.700% 12/01/2020 $ 3,101,753
935,000 Suffolk County IDA (Dowling College)
8.250 12/01/2020 (p) 1,034,933
1,060,000 Suffolk County IDA (Fil-Coil)
9.250 12/01/2025 1,079,440
445,000 Suffolk County IDA (Fil-Coil) (a)
9.000 12/01/2015 452,788
3,860,000 Suffolk County IDA (HFAS)
6.650 11/01/2017 3,879,493
8,545,000 Suffolk County IDA (Huntington Res Rec) (w)
5.550 10/01/2004 8,996,860
9,180,000 Suffolk County IDA (Huntington Res Rec) (w)
5.650 10/01/2005 9,759,717
9,875,000 Suffolk County IDA (Huntington Res Rec) (w)
5.750 10/01/2006 10,604,466
10,615,000 Suffolk County IDA (Huntington Res Rec) (w)
5.800 10/01/2007 11,492,436
11,410,000 Suffolk County IDA (Huntington Res Rec) (w)
5.850 10/01/2008 12,448,082
12,265,000 Suffolk County IDA (Huntington Res Rec) (w)
5.950 10/01/2009 13,588,639
13,190,000 Suffolk County IDA (Huntington Res Rec) (w)
6.000 10/01/2010 14,693,924
14,170,000 Suffolk County IDA (Huntington Res Rec) (w)
6.150 10/01/2011 15,946,210
17,155,000 Suffolk County IDA (Huntington Res Rec) (w)
6.250 10/01/2012 19,473,155
190,000 Suffolk County IDA (Marbar Assoc.)
8.300 03/01/2008 190,089
190,000 Suffolk County IDA (Marbar Assoc.)
8.300 03/01/2009 190,089
250,000 Suffolk County IDA (Microwave Power)
7.750 06/30/2002 261,748
4,320,000 Suffolk County IDA (Microwave Power)
8.500 06/30/2022 4,591,555
715,000 Suffolk County IDA (OBPWC)
7.500 11/01/2022 779,157
1,670,000 Suffolk County IDA (Rimland Facilities) (a)
6.000(v) 12/01/2009 1,670,000
1,315,000 Suffolk County IDA (Wireless Boulevard Realty)
7.875 12/01/2012 1,396,254
4,005,000 Suffolk County IDA (Wireless Boulevard Realty)
8.625 12/01/2026 4,328,644
2,960,000 Sunnybrook EHC
11.250 12/01/2014 3,166,460
9,590,000 Syracuse Hsg. Authority (LRRHCF)
5.800 08/01/2037 10,240,490
625,000 Syracuse Hsg. Authority (LRRHCF)
7.500 08/01/2010 646,569
1,990,000 Syracuse Hsg. Authority (Seneca Heights)
7.500 12/01/2007 2,047,491
4,720,000 Syracuse Hsg. Authority (Seneca Heights)
8.500 12/01/2017 4,874,202
510,000 Syracuse IDA (Anoplate Corp.)
7.250 11/01/2007 535,362
2,195,000 Syracuse IDA (Anoplate Corp.)
8.000 11/01/2022 2,306,155
42,920,000 Syracuse IDA (James Square)
0.000 08/01/2025 8,118,747
635,000 Syracuse IDA (Piscitell Stone & Supply)
8.400 12/01/2011 675,672
1,150,000 Syracuse IDA (Rockwest Center I) (a)
8.000 06/01/2013 1,178,750
980,000 Syracuse IDA (Rockwest Center II)
7.625 12/01/2010 980,000
1,470,000 Syracuse IDA (Rockwest Center II)
8.625 12/01/2015 1,470,000
3,770,000 Syracuse IDA (St. Joseph's Hospital)
7.500 06/01/2018 (p) 4,169,733
3,750,000 Tompkins County IDA (Ithacare Center)
6.200 02/01/2037 4,121,363
50,000 Tompkins County IDA (Kendall at Ithaca)
7.250 06/01/2003 50,945
2,790,000 Tompkins County IDA (Kendall at Ithaca)
7.875 06/01/2015 2,988,174
5,735,000 Tompkins County IDA (Kendall at Ithaca)
7.875 06/01/2024 6,119,532
240,000 Tompkins Healthcare Corp.
10.800 02/01/2007 293,566
45,000 Tompkins Healthcare Corp.
10.800 02/01/2028 57,983
505,000 Tonawanda Senior Citizens Hsg.
7.875 02/01/2011 520,493
70,000 Tupper Lake HDC
8.125 10/01/2010 70,317
1,000,000 UCP/HCA of Chemung County
6.600 08/01/2022 1,125,620
4,870,000 UFA Devel. Corp. (Loretto-Utica Corp.)
5.950 07/01/2035 5,192,199
445,000 Ulster County IDA (Brooklyn Bottling)
7.800 06/30/2002 464,794
1,915,000 Ulster County IDA (Brooklyn Bottling)
8.600 06/30/2022 2,045,948
1,465,000 Ulster County IDA (Mid-Hsg. Family Health)
5.350 07/01/2023 1,487,019
2,250,000 Ulster County Res Rec
6.000 03/01/2014 2,361,263
2,470,000 Union Hsg. Authority (Methodist Homes)
7.625 11/01/2016 2,740,267
105,000 Union Hsg. Authority (Methodist Homes)
8.050 04/01/1999 105,811
</TABLE>
27 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 110,000 Union Hsg. Authority (Methodist Homes)
8.150% 04/01/2000 $ 113,843
120,000 Union Hsg. Authority (Methodist Homes)
8.250 04/01/2001 127,504
150,000 Union Hsg. Authority (Methodist Homes)
8.350 04/01/2002 163,416
2,010,000 Union Hsg. Authority (Methodist Homes)
8.500 04/01/2012 2,256,567
23,140,000 United Nations Devel. Corp., Series B
5.600 07/01/2026 23,307,765
13,450,000 United Nations Devel. Corp., Series C
5.600 07/01/2026 13,547,513
100,000 Utica GO
5.900 12/01/2002 101,075
580,000 Utica GO
6.000 01/15/2006 581,792
560,000 Utica GO
6.250 01/15/2007 568,630
500,000 Utica IDA (Utica College)
5.750 08/01/2028 512,515
25,000 Utica Sr. Citizen Hsg. Corp. (Brook Apartments)
0.000 07/01/2002 17,985
3,410,000 Utica Sr. Citizen Hsg. Corp. (Brook Apartments)
0.000 07/01/2026 308,571
20,000 Valley Health Devel. Corp.
7.850 08/01/2035 22,023
420,000 Valley Health Devel. Corp.
11.300 02/01/2007 495,793
170,000 Valley Health Devel. Corp.
11.300 02/01/2023 200,029
950,000 Vigilant EHL (Thomaston Volunteer Fire Dept.)
7.500 11/01/2012 1,020,395
8,440,000 Warren & Washington Counties IDA (Res Rec)
8.000 12/15/2012 8,498,489
8,535,000 Warren & Washington Counties IDA (Res Rec)
8.200 12/15/2010 8,641,005
8,965,000 Warren & Washington Counties IDA (Res Rec)
8.200 12/15/2010 9,076,345
100,000 Watervliet Elderly Hsg. Corp.
8.000 11/15/2003 101,382
95,000 Watervliet Elderly Hsg. Corp.
8.000 11/15/2004 96,313
95,000 Watervliet Elderly Hsg. Corp.
8.000 11/15/2005 96,313
100,000 Watervliet Elderly Hsg. Corp.
8.000 11/15/2006 101,382
100,000 Watervliet Elderly Hsg. Corp.
8.000 11/15/2007 101,382
100,000 Watervliet Elderly Hsg. Corp.
8.000 11/15/2008 101,382
100,000 Watervliet Elderly Hsg. Corp.
8.000 11/15/2009 101,382
385,000 Wayne County IDA (ARC)
7.250 03/01/2003 402,090
2,925,000 Wayne County IDA (ARC)
8.375 03/01/2018 3,221,975
1,870,000 Westchester County IDA (BAH)
8.375 12/01/2025 2,160,168
1,346,400 Westchester County IDA (Clearview School)
9.375 01/01/2021 1,497,937
2,220,000 Westchester County IDA (JBFS)
6.750 12/15/2012 2,373,069
1,560,000 Westchester County IDA (JDAM)
6.750 04/01/2016 1,675,627
3,250,000 Westchester County IDA (Lawrence Hospital)
5.000 01/01/2028 3,122,665
65,000 Westchester County IDA (Westchester Airport)
5.950 08/01/2024 66,397
1,865,000 Yates County IDA (Keuka College)
8.750 08/01/2015 2,192,326
1,095,000 Yates County IDA (Keuka College)
9.000 08/01/2011 1,211,924
865,000 Yonkers IDA (St. Joseph's Hospital)
7.500 12/30/2003 918,232
3,270,000 Yonkers IDA (St. Joseph's Hospital)
8.500 12/30/2013 3,688,397
2,200,000 Yonkers IDA (St. Joseph's Hospital), Series 98-A
6.150 03/01/2015 2,223,980
2,100,000 Yonkers IDA (St. Joseph's Hospital), Series 98-B
6.150 03/01/2015 2,122,890
1,000,000 Yonkers IDA (St. Joseph's Hospital), Series 98-C
6.200 03/01/2020 1,010,870
300,000 Yonkers IDA (Westchester School)
7.375 12/30/2003 315,852
3,375,000 Yonkers IDA (Westchester School)
8.750 12/30/2023 3,758,400
760,000 Yonkers Parking Authority
7.750 12/01/2004 811,201
- --------------
3,842,326,875
- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Possessions--8.9%
400,000 American Samoa Power Authority
6.800 09/01/2000 418,220
400,000 American Samoa Power Authority
6.850 09/01/2001 426,592
400,000 American Samoa Power Authority
6.900 09/01/2002 434,140
500,000 American Samoa Power Authority
6.950 09/01/2003 551,780
</TABLE>
28 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 500,000 American Samoa Power Authority
7.000% 09/01/2004 $ 559,935
800,000 American Samoa Power Authority
7.100 09/01/2001 857,640
800,000 American Samoa Power Authority
7.200 09/01/2002 875,760
5,375,000 Guam Airport Authority, Series B
6.600 10/01/2010 5,877,724
60,730,000 Guam Airport Authority, Series B
6.700 10/01/2023 66,312,302
2,525,000 Guam Economic Devel. Authority
9.500 11/01/2018 2,570,854
2,995,000 Guam Economic Devel. Authority (d)
9.375 11/01/2018 2,852,588
45,000 Guam Power Authority
5.250 10/01/2023 45,110
10,000 Guam Power Authority
6.300 10/01/2022 10,714
450,000 Guam Power Authority
6.625 10/01/2014 498,488
4,780,000 Guam Power Authority
6.750 10/01/2024 5,324,777
1,215,000 Puerto Rico Commonwealth Infrastructure
7.500 07/01/2009 1,243,139
660,000 Puerto Rico Commonwealth Infrastructure
7.750 07/01/2008 675,418
165,000 Puerto Rico Commonwealth Infrastructure
7.900 07/01/2007 168,874
1,010,034 Puerto Rico Dept. of Corrections Equipment Lease (a)
8.000 04/17/2003 1,044,930
17,800,000 Puerto Rico Electric LEVRRS
8.178(f) 07/01/2023 20,692,500
9,935,000 Puerto Rico Electric Power Authority (w)
5.250 07/01/2014 10,369,855
1,005,800 Puerto Rico Family Dept. Furniture Lease (a)
8.000 08/18/2003 1,047,963
3,124,020 Puerto Rico Family Dept. Furniture Lease (a)
12.725 08/12/2003 3,554,541
4,150,000 Puerto Rico GO
5.000 07/01/2027 4,072,727
5,000,000 Puerto Rico GO
5.375 07/01/2025 5,130,300
30,000 Puerto Rico GO
5.875 07/01/2018 32,649
1,600,000 Puerto Rico GO RITES (a)
7.790(f) 07/01/2022 1,830,000
40,250,000 Puerto Rico GO YCN
8.332(f) 07/01/2020 45,583,125
1,000,000 Puerto Rico GO YCN (a)
8.113(f) 07/01/2015 (p) 1,172,790
6,766,263 Puerto Rico Health Dept. Computer Lease (a)
7.438 03/26/2003 6,926,759
385,000 Puerto Rico HFA (Affordable Hsg.)
6.250 04/01/2029 407,276
8,690,000 Puerto Rico HFC
0.000 08/01/2026 1,324,617
10,000 Puerto Rico HFC
7.300 10/01/2006 10,554
210,000 Puerto Rico HFC
7.500 10/01/2015 222,136
5,240,000 Puerto Rico HFC
7.500 04/01/2022 5,546,750
70,000 Puerto Rico HFC
7.650 10/15/2022 73,884
25,000 Puerto Rico HFC
7.800 10/15/2021 25,461
1,000,000 Puerto Rico Highway & Transportation Authority
5.500 07/01/2017 1,036,720
185,000 Puerto Rico IMEPCF (Instituto Medico)
9.500 04/01/2003 193,005
4,075,000 Puerto Rico IMEPCF (Upjohn)
7.500 12/01/2023 4,210,249
672,600 Puerto Rico Industrial Commission Computer Lease (a)
8.000 03/26/2003 696,901
500,000 Puerto Rico ITEMECF (MGH)
5.625 07/01/2017 513,425
985,000 Puerto Rico ITEMECF (MGH)
5.625 07/01/2027 1,007,192
3,000,000 Puerto Rico ITEMECF (MGH)
6.500 07/01/2026 3,245,430
5,000 Puerto Rico ITEMECF (Polytech University)
5.700 08/01/2013 5,162
5,250,000 Puerto Rico ITEMECF (RMH)
6.700 05/01/2024 5,710,005
190,780 Puerto Rico Medical Services Equipment Lease (a)
7.300 02/27/2003 195,340
735,018 Puerto Rico Medical Services Ventilator Lease (a)
7.500 04/01/2003 756,510
950,000 Puerto Rico Municipality of Rio Grande Computer Lease (a)
8.000 09/02/2003 989,748
2,247,808 Puerto Rico Municipality of Rio Grande Equipment Lease (a)
8.800 10/13/2003 2,390,499
157,218 Puerto Rico Municipality of Rio Grande Vehicle Lease (a)
9.000 01/23/2003 168,475
600,000 Puerto Rico Municipality of San Sebastian Garage Lease (a)
10.000 09/16/2005 659,112
20,000 Puerto Rico Port Authority
7.300 07/01/2007 20,040
7,000,000 Puerto Rico Public Buildings Authority
5.700 07/01/2016 7,396,830
15,124,297 Puerto Rico Public Buildings Authority Computer Lease (a)
6.528 05/01/2004 15,303,520
</TABLE>
29 ROCHESTER FUND MUNICIPALS
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
STATEMENT OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Face
Market
Amount Description
Coupon Maturity Value
================================================================================================================================
<S> <C>
<C> <C> <C>
$ 427,962 Puerto Rico State Courts Vehicle Lease (a)
8.000% 03/26/2003 $ 443,690
16,550,000 Puerto Rico Telephone Authority RIBS
7.320(f) 01/16/2015 17,832,625
15,000,000 Puerto Rico Telephone Authority RIBS (a)
7.806(f) 01/01/2022 16,786,650
1,205,000 University of V.I.
7.250 10/01/2004 1,314,727
3,570,000 University of V.I.
7.700 10/01/2019 4,085,401
5,175,000 University of V.I.
7.750 10/01/2024 5,934,897
328,000 V.I. GO (Hugo Insurance Claims Program)
7.750 10/01/2006 362,020
70,000 V.I. HFA
6.450 03/01/2016 75,118
1,000,000 V.I. Public Finance Authority
5.500 10/01/2022 1,017,680
7,500,000 V.I. Public Finance Authority
5.625 10/01/2025 7,695,300
5,500,000 V.I. Public Finance Authority
6.000 10/01/2022 5,752,120
1,135,000 V.I. Public Finance Authority
7.125 10/01/2004 (p) 1,268,851
28,750,000 V.I. Public Finance Authority
7.250 10/01/2018 (p) 32,819,275
1,735,000 V.I. Public Finance Authority
7.375 10/01/2010 (p) 2,074,505
75,000 V.I. Water & Power Authority
5.300 07/01/2018 75,676
1,515,000 V.I. Water & Power Authority
5.300 07/01/2021 1,524,726
2,500,000 V.I. Water & Power Authority
5.500 07/01/2017 2,464,350
5,945,000 V.I. Water & Power Authority
7.400 07/01/2011 6,524,994
6,850,000 V.I. Water & Power Authority
7.600 01/01/2012 7,753,995
4,930,000 V.I. Water & Power Authority
8.500 01/01/2010 5,176,254
- --------------
364,253,889
- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$3,959,930,558)--102.5%
4,206,580,764
LIABILITIES IN EXCESS OF OTHER
ASSETS--(2.5%)
(103,903,752)
- --------------
NET
ASSETS--100.0%
$4,102,677,012
==============
</TABLE>
(a) Illiquid security--See Note 5 of Notes to Financial Statements.
(b) Non-income accruing security.
(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) Represents the current interest rate for a variable rate bond known as an
"inverse floater" which pays interest at a rate that varies inversely with
short-term interest rates. As interest rates rise, inverse floaters
produce less current income. Their price may be more volatile than the
price of a comparable fixed-rate security. Inverse floaters amount to
$769,069,527, or 17.92% of the Fund's total assets as of December 31,
1998.
(p) This issue has been prerefunded to an earlier date.
(v) Represents the current interest rate for a 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.
30 ROCHESTER FUND MUNICIPALS
<PAGE>
================================================================================
PORTFOLIO ABBREVIATIONS
- --------------------------------------------------------------------------------
To simplify the listing of securities in the Statement of Investments,
abbreviations are used per the table below:
ACLDD Adults and Children with Learning and
Developmental Disabilities
ARC Association of Retarded Citizens
ASSC Annie Schaffer Senior Center
BAH Beth Abraham Hospital
BHMS Brooklyn Heights Montessori School
BID Business Improvement District
BOCES Board of Cooperative Educational Services
CAB Capital Appreciation Bond
CARS Complimentary Auction Rate Security
CCM Comprehensive Care Management
CDC Community Development Corporation
CF Community Facilities
CGH Community General Hospital
CNR College of New Rochelle
Con Ed Consolidated Edison Company
COP Certificate of Participation
DC Dominican College
DDI Developmental Disabilities Institute
Devel. Development
DIAMONDS Direct Investment of Accrued Municipals
EHC Elderly Housing Corporation
EHL Engine Hook and Ladder
EPG Elmhurst Parking Garage
ERDA Energy Research and Development Authority
FHP Franciscan Health Partnership
FHT Future Home Technology
FLCP Finger Lakes Cerebral Palsy
G&E Gas and Electric
GO General Obligation
GRIA Greater Rochester International Airport
H&NH Hospital and Nursing Home
HDC Housing Development Corporation
HELP Homeless Economic Loan Program
HFA Housing Finance Agency
HFAS Huntington First Aid Squad
HFC Housing Finance Corporation
Hsg. Housing
IDA Industrial Development Authority
IMEPCF Industrial, Medical and Environmental
Pollution Control Facilities
INFLOS Inverse Floating Rate Securities
IRS Inverse Rate Security
ITEMECF Industrial, Tourist, Educational, Medical
and Environmental Community Facilities
IVRC Inverse Variable Rate Certificate
JBFS Jewish Board of Family Services
JDAM Julia Dyckman Angus Memorial
JFK John Fitzgerald Kennedy
L.I. Long Island
LEVRRS Leveraged Reverse Rate Security
LGAC Local Government Assistance Corporation
LGSC Local Government Services Corporation
LILCO Long Island Lighting Corporation
LRRHCF Loretto Rest Residential Health Care Facility
LSSUNY Lutheran Social Services of Upstate New York
MCC Mobile Climate Control
MGH Mennonite General Hospital
MHMC Montefiore Hospital and Medical Center
MMC Marymount Manhattan College
MMP Millbrook Millwork Project
MTA Metropolitan Transit Authority
NH&HC Nursing Home and Health Care
NIMO Niagara Mohawk Power Corporation
NJ New Jersey
NY New York
NYC New York City
NYS New York State
NYSEG New York State Electric and Gas
OBPWC Ocean Bay Park Water Corporation
PRFF Puerto Rican Family Foundation
Res Rec Resource Recovery Facility
RG&E Rochester Gas and Electric
RGH Rochester General Hospital
RIBS Residual Interest Bonds
RITES Residual Interest Tax Exempt Security
RMH Ryder Memorial Hospital
SCSB Schuyler Community Services Board
SLCD School for Language and Communication
Development
SLRHF St. Luke Residential Healthcare Facility
SONYMA State of New York Mortgage Agency
SWMA Solid Waste Management Authority
TFA Transitional Finance Authority
UCC Upstate Community Colleges
UCP/HCA United Cerebral Palsy and Handicapped
UDC Urban Development Corporation
UFA Utica Free Academy
Children's Association
V.I. United States Virgin Islands
WHMC Wyckoff Heights Medical Center
WWH Wyandach/Wheatley Heights
YCN Yield Curve Note
YCR Yield Curve Receipt
YMCA Young Men's Christian Association
31 ROCHESTER FUND MUNICIPALS
<PAGE>
================================================================================
INDUSTRY CONCENTRATIONS December 31, 1998
- --------------------------------------------------------------------------------
Distribution of investments by industry, as a percentage of total investments at
value, is as follows:
Industry Market Value Percent
---------------------------------------------------------------------------
Hospital/Healthcare $663,320,170 15.8 %
General Obligation 489,559,388 11.6
Electric Utilities 420,009,037 10.0
Multi-Family Housing 400,197,409 9.5
Resource Recovery 336,313,414 8.0
Municipal Leases 304,004,710 7.2
Single-Family Housing 246,597,068 5.9
Marine/Aviation Facilities 171,286,445 4.1
Water Utilities 154,891,014 3.7
Non Profit Organization 132,541,826 3.2
Manufacturing, Non-Durable Goods 126,067,905 3.0
Higher Education 113,943,719 2.7
Manufacturing, Durable Goods 105,289,547 2.5
Highways/Railways 102,987,034 2.5
Adult Living Facilities 102,046,765 2.4
Corporate Backed 98,383,138 2.3
Education 79,662,507 1.9
Sales Tax Revenue 55,447,937 1.3
Other 104,031,731 2.4
============== =====
$4,206,580,764 100.0 %
============== =====
================================================================================
SUMMARY OF RATINGS December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Distribution of investments by rating category, as a percentage of total
investments at value, is as follows:
Rating Percent
- --------------------------------------------------------------------------------
AAA 25.0 %
AA 10.5
A 27.5
BBB 19.1
BB 2.3
B 0.8
CCC 0.0
CC 0.0
C 0.0
Not Rated 14.8
=====
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 are included in the "Not Rated"
category. For further information see "Credit Quality" in the Prospectus.
32 ROCHESTER FUND MUNICIPALS
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S>
<C>
Investments, at value (cost $3,959,930,558)-- see accompanying
statement $ 4,206,580,764
Cash
1,981,479
Receivables:
Interest
66,017,598
Shares of beneficial interest
sold 14,615,045
Investments
sold
2,576,340
Other
324,844
- ---------------
Total
assets
4,292,096,070
- ---------------
LIABILITIES
Payables and other liabilities:
Investments
purchased
128,316,105
Note payable to bank (interest rate 5.875% at 12/31/98)--Note
6 56,200,000
Shares of beneficial interest
redeemed 3,485,960
Trustees' fees--Note
1 678,579
Dividends
163,066
Other
575,348
- ---------------
Total
liabilities
189,419,058
- ---------------
Net
Assets
$ 4,102,677,012
===============
- -------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in
capital $
3,925,416,284
Excess of distributions over net investment
income (26,371)
Accumulated net realized loss on investment
transactions (69,363,107)
Net unrealized appreciation on investments--Note
3 246,650,206
- ---------------
Net
assets $
4,102,677,012
===============
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
CLASS A SHARES:
Net asset value and redemption price per share (based on net assets of
$3,434,940,188 and 182,640,976 shares of beneficial interest
outstanding) $ 18.81
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering
price) $ 19.75
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Net asset value, redemption price (excludes applicable contingent deferred
sales
charge) and offering price per share (based on net assets of $493,793,362 and
26,282,156 shares of beneficial interest
outstanding) $ 18.79
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES:
Net asset value, redemption price (excludes applicable contingent deferred
sales
charge) and offering price per share (based on net assets of $173,943,462 and
9,256,363 shares of beneficial interest
outstanding) $ 18.79
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
33 ROCHESTER FUND MUNICIPALS
<PAGE>
================================================================================
STATEMENT OF OPERATIONS For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 225,857,176
-------------
EXPENSES
Management fees--Note 4 16,898,272
Distribution and service plan
fees--Note 4:
Class A 4,738,601
Class B 3,283,860
Class C 1,110,980
Transfer and shareholder servicing agent fees--Note 4:
Class A 1,823,612
Class B 228,432
Class C 61,382
Accounting service fees--Note 4 1,082,541
Shareholder reports 422,000
Registration and filing fees 332,704
Trustees' fees and expenses--Note 1 304,076
Custodian fees and expenses 220,548
Legal, auditing and other professional fees 107,000
Other 245,855
Interest 1,131,409
-------------
Total expenses 31,991,272
-------------
NET INVESTMENT INCOME $ 193,865,904
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (4,390,468)
Net change in unrealized appreciation
or depreciation on investments 30,719,166
-------------
Net realized and unrealized gain 26,328,698
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 220,194,602
=============
================================================================================
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997
- ---- ----
<S> <C>
<C>
OPERATIONS
Net investment income $ 193,865,904 $
155,206,919
Net realized loss (4,390,468)
(5,735,552)
Net change in unrealized appreciation or depreciation 30,719,166
107,729,438
---------------
- ---------------
Net increase in net assets resulting from operations 220,194,602
257,200,805
- ----------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDER Dividends from net investment income:
Class A (175,270,973)
(152,050,014)
Class B (14,972,126)
(2,948,096)
Class C
(5,050,170) (808,459)
- ----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS Net increase in net assets resulting from
beneficial interest transactions--Note 2:
Class A 565,102,760
443,076,063
Class B 320,057,221
168,083,894
Class C 123,988,335
48,222,991
- ----------------------------------------------------------------------------------------------
NET ASSETS
Total increase 1,034,049,649
760,777,184
Beginning of period 3,068,627,363
2,307,850,179
---------------
- ---------------
End of period (including excess of distributions over
net investment income of $26,371 and undistributed
net investment income of $1,380,220, respectively) $ 4,102,677,012 $
3,068,627,363
===============
===============
</TABLE>
See accompanying Notes to Financial Statements
34 ROCHESTER FUND MUNICIPALS
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
- --------------------------------------------------------------------------
Year
Ended December 31,
1998 1997
1996 (b) 1995 1994
--------- ---------
- --------- --------- ---------
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 18.67 $ 18.00
$ 18.18 $ 16.31 $ 19.00
--------- ---------
- --------- --------- ---------
Income (loss) from investment operations:
Net investment income 1.04
1.10(c) 1.10 (c) 1.10(c) 1.13 (c)
Net realized and unrealized gain (loss) 0.15
0.67 (0.18) 1.86 (2.68)
--------- ---------
- --------- --------- ---------
Total income (loss) from investment operations 1.19
1.77 0.92 2.96 (1.55)
--------- ---------
- --------- --------- ---------
Dividends and distributions to shareholders:
Dividends from net investment income (1.04)
(1.10) (1.10) (1.09) (1.13)
Undistributed net investment income -
prior year (0.01)
- -- -- -- (0.01)
- ---------
--------- ---------
- --------- --------- ---------
Total dividends and distributions to shareholders (1.05)
(1.10) (1.10) (1.09) (1.14)
--------- ---------
- --------- --------- ---------
Net asset value, end of period $ 18.81 $ 18.67
$ 18.00 $ 18.18 $ 16.31
========= =========
========= ========= =========
TOTAL RETURN, AT NET ASSET VALUE (D) 6.52%
10.20% 5.37% 18.58% (8.35%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 3,435 $ 2,848
$ 2,308 $ 2,145 $ 1,791
Average net assets (in millions) $ 3,161 $ 2,539
$ 2,191 $ 2,005 $ 1,847
Ratios to average net assets:
Net investment income 5.50%
5.96% 6.20% 6.25% 6.43%
Expenses 0.78%
0.76%(f) 0.82%(f) 0.82%(f) 0.84%
Expenses (excluding interest) (g) 0.75%
0.75%(f) 0.77%(f) 0.78%(f) 0.73%
Portfolio turnover rate (h) 25.1%
4.6% 13.3% 14.6% 34.4%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period from March 17, 1997 (inception of offering) to December 31,
1997.
(b) On January 4, 1996, OppenheimerFunds, Inc. became the investment advisor
to the Fund.
(c) Based on average shares outstanding for the period.
(d) 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.
(e) Annualized.
(f) Expense ratio reflects the effect of expenses paid indirectly by the Fund.
(g) 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.
(h) 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, 1998 were
$1,956,460,821 and $932,190,087, respectively.
See accompanying Notes to Financial Statements.
35 ROCHESTER FUND MUNICIPALS
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS
B CLASS C
=========================================================
Year Ended December 31, Year
Ended December 31,
1998 1997(a)
1998 1997(a)
------- -------
- ------- --------
<S> <C> <C>
<C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 18.65 $ 17.89 $
18.66 $ 17.89
------- -------
- ------- -------
Income from investment operations:
Net investment income 0.89 0.74(c)
0.89 0.74(c)
Net realized and unrealized gain 0.14 0.76
0.13 0.77
------- -------
- ------- -------
Total income from investment operations 1.03 1.50
1.02 1.51
------- -------
- ------- -------
Dividends and distributions to shareholders:
Dividends from net investment income (0.89) (0.74)
(0.89) (0.74)
Total dividends and distributions to shareholders (0.89) (0.74)
(0.89) (0.74)
------- -------
- ------- -------
Net asset value, end of period $ 18.79 $ 18.65 $
18.79 $ 18.66
======= =======
======= =======
TOTAL RETURN, AT NET ASSET VALUE(D) 5.61% 8.74%
5.56% 8.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 494 $ 172 $
174 $ 49
Average net assets (in millions) $ 329 $ 76 $
111 $ 21
Ratios to average net assets:
Net investment income 4.57% 4.91%(e)
4.57% 4.92%(e)
Expenses 1.64% 1.59%(e)(f)
1.63% 1.58%(e)(f)
Expenses (excluding interest)(g) 1.61% 1.58%(e)(f)
1.59% 1.57%(e)(f)
Portfolio turnover rate(h) 25.1% 4.6%
25.1% 4.6%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period from March 17, 1997 (inception of offering) to December 31,
1997.
(b) On January 4, 1996, OppenheimerFunds, Inc. became the investment advisor
to the Fund.
(c) Based on average shares outstanding for the period.
(d) 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.
(e) Annualized.
(f) Expense ratio reflects the effect of expenses paid indirectly by the Fund.
(g) 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.
(h) 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, 1998 were
$1,956,460,821 and $932,190,087, respectively.
See accompanying Notes to Financial Statements.
36 ROCHESTER FUND MUNICIPALS
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Rochester Fund Municipals (the Fund) is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. The Fund's investment objective is to provide shareholders with as high
a level of income exempt from federal, New York State and New York City personal
income taxes as is consistent with its investment policies and prudent
investment management while seeking preservation of shareholders' capital. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge. Class B and Class C shares may be subject to a
contingent deferred sales charge. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to that class
and exclusive voting rights with respect to matters affecting that class. Class
B shares will automatically convert to Class A shares six years after the date
of purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued as of the close of the New
York Stock Exchange on each trading day. Long- term debt securities are valued
by a portfolio pricing service approved by the Board of Trustees. Such
securities which cannot be valued by an approved portfolio pricing service are
valued using dealer-supplied valuations provided the Manager is satisfied that
the firm rendering the quotes is reliable and that the quotes reflect current
market value, or are valued under consistently applied procedures established by
the Board of Trustees to determine fair value in good faith.
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. As of December 31, 1998, the Fund had entered into outstanding
when-issued or forward commitments (see Note 3).
SECURITY CREDIT RISK. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default. At December 31, 1998, securities with an
aggregate market value of $7,004,619, representing 0.17% of the Fund's net
assets, were in default.
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, 1998, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $69,193,000, which expires between 2000 and 2006.
TRUSTEES' FEES AND EXPENSES. In June, 1998, the Board of Trustees of the Fund
adopted a nonfunded retirement plan for the Fund's independent trustees.
Benefits are based on years of service and fees paid to each trustee during the
years of service. During the year ended December 31, 1998, a provision of
$159,076 was made for the Fund's projected benefit obligations. No payments were
made under this plan during 1998. At December 31, 1998, the Fund had recognized
an accumulated liability of $159,076.
37 ROCHESTER FUND MUNICIPALS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
In January, 1995, the then existing Board of Trustees of the Fund adopted a
nonfunded retirement plan for its independent trustees. The retirement plan, as
amended and restated in October, 1995, provides that no independent trustee of
the Fund who is elected after September, 1995 may be eligible to receive
benefits thereunder. Upon retirement, eligible trustees receive annual payments
based upon their years of service. 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 expense, which is included in trustees'
fees and expenses, amounted to $65,000 for the year ended December 31, 1998.
Payments of $64,125 were made to retired trustees during the year ended December
31, 1998. At December 31, 1998, the Fund had recognized an accumulated liability
of $508,181.
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 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 was recorded by
the Fund.
The Fund adjusts the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, during the year ended
December 31, 1998, amounts have been reclassified to reflect a decrease in
paid-in capital of $20,773, and a decrease in excess of distributions over net
investment income of $20,773.
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. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Interest income is accrued on a daily basis. In
computing net investment income, the Fund amortizes premiums and accretes
original issue discount, which is in accordance with federal income tax
requirements. For municipal bonds acquired 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. Realized gains and losses
on investments and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes.
The 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.
38 ROCHESTER FUND MUNICIPALS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
---------- ----------
DECEMBER 31, 1998 DECEMBER 31,
1997 (1)
-----------------
- ---------------------
SHARES AMOUNT SHARES
AMOUNT
===============================================================================================
<S> <C> <C> <C>
<C>
CLASS A:
Sold 44,149,177 $ 828,290,736 35,581,801 $
648,373,849
Dividends and distributions
reinvested 5,034,167 94,396,140 4,372,465
79,564,502
Redeemed (19,054,473) (357,584,116) (15,687,966)
(284,862,288)
------------- ------------- -------------
- -------------
Net increase 30,128,871 $ 565,102,760 24,266,300 $
443,076,063
============= ============= =============
=============
===============================================================================================
CLASS B:
Sold 17,637,855 $ 330,613,878 9,239,870 $
168,687,731
Dividends and distributions
reinvested 514,626 9,646,518
101,107 1,860,790
Redeemed (1,077,120) (20,203,175) (134,182)
(2,464,627)
------------- ------------- -------------
- -------------
Net increase 17,075,361 $ 320,057,221 9,206,795 $
168,083,894
============= ============= =============
=============
===============================================================================================
CLASS C:
Sold 7,026,163 $ 131,632,053 2,680,454 $
49,004,451
Dividends and distributions
reinvested 187,218 3,511,228
28,231 520,244
Redeemed (594,948) (11,154,946) (70,755)
(1,301,704)
------------- ------------- -------------
- -------------
Net increase 6,618,433 $ 123,988,335 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 17, 1997 (inception of offering) to December 31, 1997 for Class
B and Class C shares.
NOTE 3. PORTFOLIO INFORMATION
At December 31, 1998, net unrealized appreciation on investments of $246,650,206
was composed of gross appreciation of $258,084,344, and gross depreciation of
$11,434,138.
Unrealized appreciation (depreciation) at December 31, 1998 based on cost of
investments for federal income tax purposes of $3,960,101,097 was:
Gross unrealized appreciation $257,943,762
Gross unrealized depreciation (11,464,095)
------------
Net unrealized appreciation $246,479,667
============
39 ROCHESTER FUND MUNICIPALS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
At December 31, 1998, 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, 1998 was $121,638,830, which
represents 2.96% 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, 1998
=============================================================================================
<S> <C> <C> <C> <C>
<C>
Dutchess County Res
Rec (Solid Waste):
5.15% due 1/1/10 $2,420 8/07/98 10/15/99 100.000%
102.622%
5.40% due 1/1/13 1,700 8/07/98 10/15/99 100.000
102.552
5.45% due 1/1/14 1,000 8/07/98 10/15/99 100.000
102.404
=============================================================================================
Puerto Rico Electric
Power Authority:
5.25% due 7/1/14 9,935 7/23/98 4/06/99 101.800
104.377
=============================================================================================
Suffolk County IDA
(Huntington Res Rec):
5.55% due 10/1/04 8,545 1/28/97 7/29/99 100.000
105.288
5.65% due 10/1/05 9,180 1/28/97 7/29/99 100.000
106.315
5.75% due 10/1/06 9,875 1/28/97 7/29/99 100.000
107.387
5.80% due 10/1/07 10,615 1/28/97 7/29/99 100.000
108.266
5.85% due 10/1/08 11,410 1/28/97 7/29/99 100.000
109.098
5.95% due 10/1/09 12,265 1/28/97 7/29/99 100.000
110.792
6.00% due 10/1/10 13,190 1/28/97 7/29/99 100.000
111.402
6.15% due 10/1/11 14,170 1/28/97 7/29/99 100.000
112.535
6.25% due 10/1/12 17,155 1/28/97 7/29/99 100.000
113.513
=============================================================================================
</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% of the first
$100 million of the Fund's 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% of the net assets in excess of $5 billion. During the year ended December
31, 1998, the Fund paid $16,898,272 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 the year ended December 31, 1998, the Fund paid
$1,082,541 to the Manager for accounting and pricing services.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund and 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 the year ended
December 31, 1998, the Fund paid a total of $2,113,426 to OFS for transfer and
shareholder servicing agent fees.
For the year ended December 31, 1998, commissions (sales charges paid by
investors) on sales of Class A shares totaled $19,163,247, of which $2,805,718
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 A,
Class B and Class C shares totaled $1,933,360, $12,869,741 and $1,286,192,
respectively. Amounts paid to an affiliated broker/dealer for Class B and Class
C shares were $46,946 and $5,451, respectively. During the year ended December
31, 1998, OFDI received contingent deferred sales charges of $50,933, $620,222
and $60,471, respectively, upon redemption of Class A, Class B and Class C
shares, as reimbursement for sales commissions advanced by OFDI at the time of
sale of such shares.
40 ROCHESTER FUND MUNICIPALS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
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 maintenance of accounts of their customers
that hold Class A shares. During the year ended December 31, 1998, OFDI paid
$29,055 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 or Class C shares, determined as of
the close of each regular business day. During the year ended December 31, 1998,
OFDI paid $1,168 to an affiliated broker/dealer as compensation for Class C
personal service and maintenance expenses and retained $2,946,247 and $979,347,
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 costs incurred in distributing shares
before the Plan was terminated. At December 31, 1998, OFDI had incurred excess
distribution and servicing costs of $20,508,219 for Class B and $2,161,280 for
Class C.
NOTE 5. ILLIQUID AND RESTRICTED SECURITIES
At December 31, 1998, 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, 1998 was $394,902,244, which
represents 9.63% of the Fund's net assets.
NOTE 6. 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 $100 million, collectively. Interest is charged to each fund,
based on its borrowings, at a rate equal to the Federal Funds Rate plus 0.625%.
The Fund also pays a commitment fee equal to its pro rata share of the average
unutilized amount of the credit facility at a rate of 0.07% per annum. The
commitment fee allocated to the Fund for the year ended December 31, 1998 was
$19,547.
The Fund had borrowings outstanding of $56,200,000 at December 31, 1998. For the
year ended December 31, 1998, the average monthly loan balance was $18,832,176
at an average interest rate of 6.007%. The maximum amount of borrowings
outstanding at any month-end was $69,100,000.
41 ROCHESTER FUND MUNICIPALS
<PAGE>
A-7
Appendix A
- --------------------------------------------------------------------------------
MUNICIPAL BOND RATINGS DEFINITIONS
- --------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below for municipal securities. Those ratings represent
the opinion of the agency as to the credit quality of issues that they rate. The
summaries below are based upon publicly-available information provided by the
rating organizations.
Moody's Investors Service, Inc.
- -------------------------------------------------------------------------------
Long-Term Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. 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, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation 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 those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing and may be in default or there may be
present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high degree
and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These bonds are
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals that begin when facilities are
completed, or (d) payments to which some other limitation attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition. Moody's applies numerical
modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa.
The modifier "1" indicates that the obligation ranks in the higher end of its
category; the modifier "2" indicates a mid-range ranking and the modifier "3"
indicates a ranking in the lower end of the category. Advanced refunded issues
that are secured by certain assets are identified with a # symbol.
Short-Term Ratings - U.S. Tax-Exempt Municipals
There are four ratings below for short-term obligations that are investment
grade. Short-term speculative obligations are designated SG. For variable rate
demand obligations, a two-component rating is assigned. The first (MIG) element
represents an evaluation by Moody's of the degree of risk associated with
scheduled principal and interest payments, and the other (VMIG) represents an
evaluation of the degree of risk associated with the demand feature.
MIG 1/VMIG 1: Denotes best quality. There is strong protection by established
cash flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing..
MIG 2/VMIG 2: Denotes high quality. Margins of protection are ample although not
as large as in the preceding group.
MIG 3/VMIG 3: Denotes favorable quality. All security elements are accounted for
but there is lacking the undeniable strength of the preceding grades. Liquidity
and cash flow protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4: Denotes adequate quality. Protection commonly regarded as required
of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
SG: Denotes speculative quality. Debt instruments in this category lack margins
of protection.
Standard & Poor's Rating Services
- --------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being made
on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the due
date. The rating may also be used if a bankruptcy petition has been filed or
similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- --------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and are
extremely speculative. "DDD" designates the highest potential for recovery of
amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
<PAGE>
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
- --------------------------------------------------------------------------------
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free U.S.
Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
Appendix B
Municipal Bond Industry Classifications
Adult Living Facilities
Bond Anticipation Notes
Education
Electric Utilities
Gas Utilities
General Obligation
Higher Education
Highways/Railways
Hospital/Healthcare
Manufacturing, Durable Goods
Manufacturing, Non Durable Goods
Marine/Aviation Facilities
Multi-Family Housing
Municipal Leases
Non Profit Organization
Parking Fee Revenue
Pollution Control
Resource Recovery
Revenue Anticipation Notes
Sales Tax Revenue
Sewer Utilities
Single Family Housing
Special Assessment
Special Tax
Sports Facility Revenue
Student Loans
Tax Anticipation Notes
Tax & Revenue Anticipation Notes
Telephone Utilities
Water Utilities
<PAGE>
C-12
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of
Class A shares1 of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived. That is
because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.
Not all waivers apply to all funds. For example, waivers relating to
Retirement Plans do not apply to Oppenheimer municipal funds, because shares of
those funds are not available for purchase by or on behalf of retirement plans.
Other waivers apply only to shareholders of certain funds that were merged into
or became Oppenheimer funds.
For the purposes of some of the waivers described below and in the
Prospectus and Statement of Additional Information of the applicable Oppenheimer
funds, the term "Retirement Plan" refers to the following types of plans: (1)
plans qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(2) non-qualified deferred compensation plans, (3) employee benefit plans2 (4)
Group Retirement Plans3 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs, Roth
IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a
special arrangement or waiver in a particular case is in the sole discretion of
the Distributor or the transfer agent (referred to in this document as the
"Transfer Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager").
Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
- --------------
1. Certain waivers also apply to Class M. shares of Oppenheimer Convertible
Securities Fund.
2. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
3. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain
Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."1 This waiver provision applies to:
1 However, that commission will not be paid on purchases of shares in amounts of
$1 million or more (including any right of accumulation) by a Retirement Plan
that pays for the purchase with the redemption proceeds of Class C shares of one
or more Oppenheimer funds held by the Plan for more than one year.
o Purchases of Class A shares aggregating $1 million or more.
o Purchases by a Retirement Plan (other than an IRA or 403(b)(7) custodial plan)
that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or
total plan assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
o Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases
are made:
(1) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for those
purchases, or
(2) by a direct rollover of a distribution from a qualified Retirement
Plan if the administrator of that Plan has made special arrangements
with the Distributor for those purchases.
o Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan.
On the date the plan sponsor signs the record-keeping service agreement
with Merrill Lynch, the Plan must have $3 million or more of its assets
invested in (a) mutual funds, other than those advised or managed by
Merrill Lynch Asset Management, L.P. ("MLAM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or managed by
MLAM (the funds described in (a) and (b) are referred to as "Applicable
Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided under a
contract or arrangement between the Retirement Plan and Merrill Lynch. On
the date the plan sponsor signs the record keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets
(excluding assets invested in money market funds) invested in Applicable
Investments.
(3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs that
agreement, the Plan has 500 or more eligible employees (as determined by
the Merrill Lynch plan conversion manager). o Purchases by a Retirement
Plan whose record keeper had a cost-allocation agreement with the Transfer
Agent on or before May 1, 1999.
<PAGE>
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases):
o The Manager or its affiliates.
o Present or former officers, directors, trustees and employees (and their
"immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, a sibling's spouse, a spouse's siblings, aunts, uncles,
nieces and nephews; relatives by virtue of a remarriage (step-children,
step-parents, etc.) are included.
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 which are identified as such 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 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.
o "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that has
made special arrangements with the Distributor for those purchases.
o Clients of
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 (or its successor) is the
investment advisor (the Distributor must be advised of this arrangement)
and persons who are directors or trustees of the company or trust which is
the beneficial owner of such accounts.
o A unit investment trust that has entered into an appropriate agreement
with the Distributor.
o Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administration services.
<PAGE>
o Retirement Plans and deferred compensation plans and trusts used to
fund those plans (including, for example, plans qualified or created
under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
Code), in each case if those purchases are made through a broker,
agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases.
o A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value
Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and Class C TRAC-2000 program on November
24, 1995.
o A qualified Retirement Plan that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value
Funds at net asset value, with such shares to be held through
DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases): o Shares issued in plans of reorganization, such as mergers, asset
acquisitions
and exchange offers, to which the Fund is a party.
o Shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts for
which reinvestment arrangements have been made with the Distributor.
o Shares purchased through a broker-dealer that has entered into a special
agreement with the Distributor to allow the broker's customers to purchase
and pay for shares of Oppenheimer funds using 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 shares of the Fund, and the
Distributor may require evidence of qualification for this waiver.
o Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
o Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate
acts as sponsor.
C. 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 account value measured at the time the Plan is
established, adjusted annually.
o Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
o For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established.
(2) To return excess contributions.
(3) To return contributions made due to a mistake of fact.
(4) Hardship withdrawals, as defined in the plan.2
2 This provision does not apply to IRAs.
(5) Under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code, or, in the case of an IRA, a divorce or
separation agreement described in Section 71(b) of the Internal
Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t)
of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.
(9) Separation from service.3
3 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.
(10)Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) if the plan has made special arrangements with the
Distributor.
(11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
o For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
o For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below.
A. 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 Shares redeemed involuntarily,
as described in "Shareholder Account Rules and
Policies," in the applicable Prospectus.
o Redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a
trustee of a grantor trust or revocable living trust for which the
trustee is also the sole beneficiary. The death or disability must have
occurred after the account was established, and for disability you must
provide evidence of a determination of disability by the Social
Security Administration.
o Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
o Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
o Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
o Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
o Distributions from Retirement Plans or other employee benefit plans for
any of the following purposes:
(1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established in an Oppenheimer fund.
(2) To return excess contributions made to a participant's account.
(3) To
return contributions made due to a mistake of fact.
(4) To make hardship
withdrawals, as defined in the plan.4
4 This provision does not apply to IRAs.
(5) To make distributions required under a
Qualified Domestic Relations Order or,
in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t)
of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.5
5 This provision does not apply to loans from 403(b)(7) custodial
plans.
(9) On account of the participant's separation from service.6
6 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary
of the Manager) offered as an investment option in a Retirement
Plan if the plan has made special arrangements with the
Distributor.
(11) Distributions made on account of a plan termination or
"in-service" distributions," if the redemption proceeds are
rolled over directly to an OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the
Plan's elimination as investment options under the Plan of all
of the Oppenheimer funds that had been offered.
(13) For distributions from a participant's account under an
Automatic Withdrawal Plan after the participant reaches age
59 1/2 as long as the aggregate value of the distributions
does not exceed 10% of the account's value annually (measured
from the establishment of the Automatic Withdrawal Plan).
B. 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.
o Shares issued in plans of reorganization to which the Fund is a party.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap Value
Fund
Oppenheimer Quest Balanced Value Oppenheimer Quest Global Value Fund
Fund
Oppenheimer Quest Opportunity
Value Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Income Quest for Value New York Tax-Exempt
Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt
Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either: o acquired by such shareholder pursuant to an exchange of
shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds or
o purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of the
Former Quest for Value Funds into that other Oppenheimer fund on November
24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.
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. The rates in the
table apply 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.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either 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 Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
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
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders 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 who acquired shares of any Former Quest for Value Fund by
merger of any of the portfolios of the Unified Funds.
|X| 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 purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
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.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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 an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with: o 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
o 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.
|X| 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 an Oppenheimer fund. The shares must have been acquired by the merger
of a Former Quest for Value Fund into the fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995: o 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);
o 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
o 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 Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
n Class A Contingent Deferred Sales Charge. Certain shareholders of a Fund
and the other Former Connecticut Mutual Funds are entitled to continue to make
additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are:
(1) persons whose purchases of Class A shares of a Fund and other
Former Connecticut Mutual Funds were $500,000 prior to March 18, 1996,
as a result of direct purchases or purchases pursuant to the Fund's
policies on Combined Purchases or Rights of Accumulation, who still
hold those shares in that Fund or other Former Connecticut Mutual
Funds, and
(2) persons whose intended purchases under a Statement of Intention entered
into prior to March 18, 1996, with the former general distributor of
the Former Connecticut Mutual Funds to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to
purchase shares at net asset value without being subject to the Class A
initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18,
1996, remain subject to the prior Class A CDSC, or if any additional
shares are purchased by those shareholders at net asset value pursuant to
this arrangement they will be subject to the prior Class A CDSC.
n Class A Sales Charge Waivers. Additional Class A shares of a Fund may be
purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares: (1)
<PAGE>
anypurchaser, provided the total initial amount invested in the Fund or
any one or more of the Former Connecticut Mutual Funds totaled $500,000
or more, including investments made pursuant to the Combined Purchases,
Statement of Intention and Rights of Accumulation features available at
the time of the initial purchase and such investment is still held in
one or more of the Former Connecticut Mutual Funds or a Fund into which
such Fund merged;
(2) any participant in a qualified plan, provided that the total initial
amount invested by the plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and persons
who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a
marketing program between CMFS and such group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the Fund
or any one or more of the Former Connecticut Mutual Funds, provided the
institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section
72(m)(7) of the Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase of
shares of any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8)
<PAGE>
in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of Advance America
Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
o the Manager and its affiliates,
o present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
o registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or 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 in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
o dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
o dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
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Rochester Fund Municipals
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Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
1-800-525-7048
Custodian Bank
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Accountants
PricewaterhouseCoopers LLP
950 Seventeenth Street, Suite 2500
Denver, Colorado 80202
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
67890
PX0365.0499
