Rochester Fund Municipals
350 Linden Oaks, Rochester, New York 14624
1-800-525-7048
Statement of Additional Information dated April 28, 2000
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 28, 2000. 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...............................................2
Other Investment Techniques and Strategies.........................18
Investment Restrictions............................................26
How the Fund is Managed.................................................29
Organization and History...........................................29
Trustees and Officers of the Fund..................................30
The Manager........................................................35
Brokerage Policies of the Fund..........................................36
Distribution and Service Plans..........................................38
Performance of the Fund.................................................41
About Your Account
How To Buy Shares.......................................................47
How To Sell Shares......................................................54
How to Exchange Shares..................................................59
Dividends and Taxes.....................................................62
Additional Information About the Fund...................................65
Financial Information About the Fund
Report of Independent Accountants.......................................66
Financial Statements ...................................................67
Appendix A: Municipal Bond Ratings Definitions..........................A-1
Appendix B: Industry Classifications....................................B-1
Appendix C: Special Sales Charge Arrangements and Waivers...............C-1
<PAGE>
A B O U T T H E F U N D
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.
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.
o 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.
o 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.
o 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% of the proceeds or $5.0 million. 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 advisors 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.
o 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.
o 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.
o 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.
o 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.
o 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 tax-exempt investments 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 the State's Annual Information Statement,
dated August 24, 1999, as supplemented on October 20, 1999 and as updated on
February 3, 2000, and on publicly available official statements relating to
offerings of the City of municipal securities on or prior to November 3, 1999,
and it does not purport to be a complete description of the considerations
contained therein. 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 shows continued expansion during the 1999 and
2000 calendar years, with employment growth gradually slowing from the 1998
calendar year. 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 lower than in
1998. Personal income is expected to have recorded moderate gains in 1999. Wage
growth in 1999 and 2000 is expected to have been slower than in the 1998
calendar year, because the recent robust growth in bonus payments has moderated.
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 16.9
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 over 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.
The 1999-2000 Fiscal Year. The 1999-2000 State Plan projects a closing
balance of $2.85 billion in the General Fund. Total receipts and transfers from
other funds are projected to reach $39.31 billion, and increase of over $2.57
billion from the prior fiscal year, and disbursements and transfers to other
funds are projected to be $37.36 billion, an increase of $868 million from the
total disbursed in the prior fiscal year.
As a result of the late budget, the State issued its Annual Information
Statement and the first of the three required quarterly updates (the "First
Quarterly Update") to the State Plan on August 24, 1999. The State issued its
second quarterly update to the State Plan (the "Mid-Year Update") on October 29,
1999. The Mid-Year Update projected continued balance in the State's 1999-2000
Financial Plan with estimated receipts and transfers of $39.32 Billion,
increased by $15 million as compared to the First Quarterly Update. The State
also lowered its disbursement projections by $10 million, with total
disbursements of $37.35 billion expected for the current fiscal year. The
additional receipts and lower disbursements increased the State's projected
cash-basis surplus by $25 million over the First Quarterly Update. The State
earmarked the additional resources for the Contingency Reserve Fund. The State
Plan projected a closing balance in the General Fund of $2.87 billion. The
balance was comprised of $1.82 billion reserved to finance already-enacted tax
cuts, $473 million in the Tax Stabilization Reserve Fund, $250 million in the
Debt Reduction Reserve Fund, $132 million in the Contingency Reserve Fund (after
the proposed deposit of $25 million) and $200 million in the Community Projects
Fund.
The State issued its Third Quarterly Update to the 1999-2000 Financial
Plan on January 11, 2000, in conjunction with the release of the 2000-01
Executive Budget. On January 31, 2000, the Governor submitted amendments to his
2000-01 Executive Budget as permitted by law. Accordingly, the State published a
revised Financial Plan on January 31, 2000 that reflects the impact of the
Governor's amendments. The State revised the cash-basis 1999-2000 State
Financial Plan on January 11, 2000, with the release of the 2000-01 Executive
Budget. The State updated the Financial Plan on January 31, 2000 to reflect the
Governor's amendments to his Executive Budget. After these changes, the Division
of the Budget (the "DoB") now expects the State to close the 1999-2000 fiscal
year with an available cash surplus of $758 million in the General Fund, an
increase of $733 million over the surplus estimate in the Mid-Year Update. The
larger projected surplus derives from $499 million in net higher projected
receipts and $259 million in net lower estimated disbursements. The DoB revised
both its projected receipts and disbursements based on a review of actual
operating results through December 1999, as well as an analysis of underlying
economic and programmatic trends it believes may affect the Financial Plan for
the balance of the year. The State plans to use the entire $758 million surplus
to make additional deposits to reserve funds. At the close of the current fiscal
year, the State expects to deposit $75 million from the surplus into the State's
Tax Stabilization Reserve Fund. In the 2000-01 Executive Budget, as amended, the
Governor is proposing to use the remaining $683 million from the 1999-2000
surplus to fully finance the estimated 2001-02 and 2002-03 costs of his proposed
tax reduction package ($433 million) and to increase the Debt Reduction Reserve
Fund ($250 million). Through the first nine months of 1999-2000, General Fund
receipts, including transfers from other funds, have totaled $30.07 billion.
General Fund disbursements, including transfers to other funds, totaled $25.19
billion over the same period.
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.
o 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.
2000-01 Fiscal Year (Executive Budget Forecast). The Governor presented
his 2000-01 Executive Budget to the Legislature on January 10, 2000. The
Executive Budget contains financial projections for the State's 1999-2000
through 2002-03 fiscal years, a detailed explanation of receipts estimates and
the economic forecast on which it is based, and a proposed Capital Program and
Financing Plan for the 2000-01 through 2004-05 fiscal years. On January 31,
2000, the Governor submitted amendments to his Executive Budget, the most
significant of which recommends eliminating all gross receipts taxes on energy
providers. There can be no assurance that the Legislature will enact into law
the Governor's Executive Budget, as amended, or that the State's adopted budget
projections will not differ materially and adversely from the projections set
forth in this Update.
The 2000-01 Financial Plan is projected to have receipts in excess of
disbursements on a cash basis in the General fund, after accounting for the
transfer of available receipts from 1999-2000 to 2000-01. Under the Governor's
Executive Budget, as amended, total General Fund receipts, including transfers
from the other funds, are projected at $38.62 billion, an increase of $1.28
billion (3.4 percent) over the current fiscal year. General Fund disbursements,
including transfers to other funds, are recommended to grow by 2.3 percent to
$37.93 billion, an increase of $869 million over 1999-2000. State Funds spending
(the portion of the budget supported exclusively by State taxes, fees, and
revenues) is projected to total $52.46 billion, an increase of $2.57 billion or
5.1 percent. Spending from All Governmental Funds is expected to grow by 5.5
percent, increasing by $4.0 billion to $76.82 billion.
The economic forecast of the state has also been modified for 2000 and
2001 from the mid-year forecast to reflect a stronger-than-expected economy.
Continued growth is projected for 2000 and 2001 for employment, wages, and
personal income, although the growth in employment will moderate from the 1999
pace. Personal income is estimated to have grown by 4.7 percent in 1999, fueled
in part by a large increase in financial sector bonus payments at the year's
end. Personal income is projected to grow 5.5 percent in 2000 and 4.8 percent
2001. Total bonus payments are projected to increase by 11 percent in 2000 and
10.5 percent in 2001. Overall employment growth is expected to continue at a
more modest pace than in 1999, reflecting the slower growth in the national
economy, continued spending restraint by government employers, and restructuring
in the manufacturing, health care, social service, and banking sectors.
Many uncertainties exist in any forecast of the national and State
economies. Given the recent volatility in the international and domestic
financial markets, such uncertainties are particularly present at this time. The
timing and impact of changes in economic conditions are difficult to estimate
with a high degree of accuracy. Unforeseeable events may occur. The actual rate
of change, in any, or all, of the concepts that are forecasted may differ
substantially and adversely from the outlook described.
o 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.
|X| 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, 1998, 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 $94 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.
|X| Ratings of the State's Securities. S&P rates the State's general
obligation bonds A, Moody's rates the State's general obligation bonds A2.
Ratings reflect only the respective views of such organizations, and an
explanation of the significance of such ratings must be obtained from the rating
agency furnishing the same. There is no assurance that a particular rating will
continue for any given period of time or that any such rating will not be
revised downward or withdrawn entirely if, in the judgment of the agency
originally establishing the rating, circumstances so warrant. A downward
revision or withdrawal of such ratings, or either of them, may have an effect on
the market price of the State municipal securities in which the Fund invests.
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.
|X| The State's General Obligation Debt. As of March 31, 1999, the State
had approximately $4.78 billion in general obligation bonds outstanding
including $185 million in bond anticipation notes. Principal and interest due on
general obligation bonds and interest due on bond anticipation notes were $748.2
million for the 1998-99 fiscal year and are estimated to be $730.7 million for
the State's 1999-2000 fiscal year.
|X| 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 1999-2000 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 1999-2000 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 1999-2000 State Plan. The General Purpose Financial Statements for the
1998-1999 fiscal year report estimated probable awarded and anticipated
unfavorable judgments of $895 million, of which $132 million is expected to be
paid during the 1999-2000 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 1999-2000 fiscal year or thereafter.
|X| 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 1999-2000 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. Much of the increase can
be traced to the performance of the securities industry, but the City's economy
also produced gains in the retail trade sector, the hotel and tourism industry,
and business services, with private sector employment higher than previously
forecasted. The City's current financial plan assumes that, after strong growth
in 1998-1999 moderate economic growth will occur through calendar year 2003,
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 2000 through 2003 fiscal
years (referred to below as the "2000-2003 Financial Plan", or "Financial
Plan").
The City's projections set forth in the Financial Plan are based on
various assumptions and contingencies which are uncertain and which may not
materialize. Implementation of the Financial Plan is dependent upon the City's
ability to market its securities successfully. The City's financing program for
fiscal years 2000 through 2003 contemplates the issuance of $7.449 billion of
general obligation bonds and $3.35 billion of bonds to be issued by the New York
City Transitional Finance Authority (the "Finance Authority") to finance City
capital projects. In addition, it is currently expected that approximately $2.4
billion of bonds will be issued by the Tobacco Settlement Asset Securitization
Corporation ("TSASC") and paid from revenues received from a settlement with
leading tobacco companies. The Finance Authority and TSASC were 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. If TSASC is unable to issue
bonds in the amount expected, the City will need to find another source of
financing or substantially curtail or halt its capital program.
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, Finance Authority bonds and TSASC 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, Finance Authority and TSASC 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.
|X| The City's 2000-2003 Financial Plan. The Financial Plan projects
revenues and expenditures for the 2000 fiscal year balanced in accordance with
GAAP and projects gaps of $1.8 billion, $1.9 billion and $1.8 billion for the
years 2001 through 2003, respectively. The Financial Plan takes into account an
increase in projected tax revenues in fiscal years 2000 through 2003; projected
resources in fiscal years 2000 through 2003, respectively, from the receipt by
the City of funds from the settlement of litigation with the leading cigarette
companies; a reduction in the assumed collection of projected rent payments for
the City's airports and a delay in the receipt of such payments from fiscal year
2000 to fiscal year 2001; net increases in spending in fiscal years 2000 through
2003, including spending for Medicaid, education initiatives, anti-smoking
programs, employee fringe benefit costs, and other agency programs. In addition,
the Financial Plan includes a proposed discretionary transfer in fiscal year
2000 to pay debt service due in fiscal year 2001 totaling $429 million, and a
proposed discretionary transfer in fiscal year 2001 to pay debt service due in
fiscal year 2002 totaling $345 million.
The Financial Plan is based on numerous assumptions, including the
condition of the City's and the region's economies and modest employment growth
and the concomitant receipt of economically sensitive tax revenues in the
amounts projected. The Financial Plan is subject to various other uncertainties
and contingencies relating to, among other factors, the extent, if any, to which
wage increases for City employees exceed the annual wage costs assumed for the
2000 through 2003 fiscal years; continuation of projected interest earnings
assumptions for pension fund assets and current assumptions with respect to
wages for City employees affecting the City's required pension fund
contributions; the willingness and ability of the State to provide the aid
contemplated by the Financial Plan and to take various other actions to assist
the City; the ability of the Health and Hospitals Corporation, the Board of
Education and other such agencies to maintain balanced budgets; the willingness
of the federal government to provide the amount of federal aid contemplated in
the Financial Plan; the impact on City revenues and expenditures of federal and
state welfare reform and any future legislation affecting Medicare or other
entitlement programs; adoption of the City's budgets by the City Council in
substantially the forms submitted by the Mayor; the ability of the City to
implement cost reduction initiatives, and the success with which the City
controls expenditures; the impact of conditions in the real estate market on
real estate tax revenues; the City's ability to market its securities
successfully in the public credit markets; and unanticipated expenditures that
may be incurred as a result of the need to maintain the City's infrastructure.
On July 14, 1999, the City Comptroller issued a report, which projected a
surplus for fiscal year 2000 of between $223 million and $891 million. In
addition, the report projected budget gaps of between $1.8 billion and $3.5
billion, $1.7 billion and $3.6 billion, and $1.7 billion and $4.1 billion in
fiscal years 2001 through 2003, respectively. The report further noted that the
City Comptroller's forecast is contingent on the continued growth of the City
economy and that the fear of renewed inflationary pressures has created
uncertainty in the bond market which may dampen economic growth in the future.
The City depends on aid from the State 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, in future years, State budgets will be adopted by the April 1
statutory deadline, or interim appropriations will be enacted; or that any such
reductions or delays will not have adverse effects on the City's cash flow or
expenditures. In addition, the federal budget negotiation process could result
in a reduction or a delay in the receipt of federal grants, which could have
additional adverse effects on the City's cash flow or revenues.
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.
|X| 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 revised in
February 1998 to "A3" from "Baal." On March 8, 1999, Fitch revised its rating of
City bonds upward to "A."
|X| The City's Outstanding Indebtedness. As of September 30, 1999, the
City and the Municipal Assistance Corporation for the City of New York had,
respectively, $26.315 billion and $2.846 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.
|X| 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 constitutional violations, torts, breaches of contract, and other
violations of law and condemnation proceedings. While the ultimate outcome and
fiscal impact, if any, of the proceedings and claims brought against the City
are not currently predictable, adverse determinations in certain of them might
have a material adverse effect upon the City's ability to carry out the
Financial Plan. The 2000-2003 Financial Plan includes provisions for the payment
of claims of $393 million, $407 million, $429 million and $448 million for the
2000 through 2003 fiscal years, respectively. As of June 30, 1999, the City
estimates its potential future liability for outstanding claims against it to be
$3.5 billion.
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 rate 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 total 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.
|X| 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.
o 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).
o 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.
o 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 advisor as the
Fund (or an advisor that is an affiliate of the Fund's advisor). 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 receives 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 of entering 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 net asset value. The
Fund will identify on its books liquid securities 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. The Fund can acquire "stand-by
commitments" or "puts" with respect to municipal securities it purchases in
order to enhance portfolio liquidity. These arrangements give the Fund the right
to sell the securities at a set price on demand to the issuing broker-dealer or
bank. However, securities having this feature may have a relatively lower
interest rate.
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.
<PAGE>
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 value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. 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. The Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will monitor the collateral's value on an
ongoing basis.
|X| Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has limitations that apply to purchases of restricted securities,
as stated in the Prospectus. Those percentage restrictions do not limit
purchases of restricted securities that are eligible for sale to qualified
institutional purchasers under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid by the Manager under Board-approved
guidelines. Those guidelines take into account the trading activity for such
securities and the availability of reliable pricing information, among other
factors. If there is a lack of trading interest in a particular Rule 144A
security, the Fund's holdings of that security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than seven
days.
|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.
The Fund has entered into an agreement enabling it to participate with
either OppenheimerFunds in an unsecured line of credit with a bank. Interest is
charged to each fund based on its respective borrowings. The Fund pays a
commitment fee equal to its pro rata share of the average amortized amount of
the credit line. This fee is described in the notes to the Financial Statements
at the end of this Statement of Additional Information.
|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 net
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.
|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 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%.
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:
o 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
o 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.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund:
o 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.
o The Fund cannot buy any securities on margin or sell any securities short.
o 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.
o 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.
o 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 advisor, own beneficially more than 1/2 of 1% of the securities of
such issuer and all such officers and trustees together own beneficially more
than 5% of those securities.
o 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.
o 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.
o The Fund cannot invest in companies for the purpose of exercising control or
management.
o 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.
o 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.
|X| 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 four classes of
shares, Class A, Class B, Class C and Class Y. 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. Additionally, the
Trustees shall have no personal liability to any such person, to the extent
permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers 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. All of the
other Trustees are also trustees or directors of the following Oppenheimer
funds:1
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 Value 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,
Bond Fund Series, a series fund having one series: Oppenheimer Convertible
Securities Fund,
Rochester Fund Municipals, and
Oppenheimer MidCap Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Wixted, Zack, Bishop and Farrar
respectively hold the same offices with the other Quest/Rochester-based
Oppenheimer funds as with the Fund. As of April 3, 2000, the Trustees and the
officers of the Fund as a group owned less than 1% of the outstanding 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.
1 Mr. Cannon is only a Trustee of the Fund as well as Limited Term New York
Municipal Fund and Oppenheimer Convertible Securities Fund.
Bridget A. Macaskill*, Chairman of the Board of Trustees and President; Age: 51
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 Corporation, an investment advisor subsidiary of
the Manager; Chairman and a director of Shareholder Services, Inc. (since August
1994) and Shareholder Financial Services, Inc. (since September 1995), (both are
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., an investment advisory subsidiary of the Manager (since July
1996); President and a director (since October 1997) of OppenheimerFunds
International Ltd. and of Oppenheimer Millennium Funds plc, off-shore investment
companies managed by the Manager; President and a director of other Oppenheimer
funds; a director of Prudential Corporation plc (a U.K. financial service
company).
John Cannon, Trustee; Age: 70
620 Sentry Parkway West Suite 220, Blue Bell, PA 19422
Independent Consultant; Chief Investment Officer, CDC Associates, a registered
investment advisor; Director, Neuberger & Berman Income Managers Trust,
Neuberger & Berman Income Funds and Neuberger Berman Trust, (1995 - present);
formerly Chairman and Treasurer, CDC Associates, (1993 - February 1996); prior
thereto, President, AMA Investment Advisers, Inc., a mutual fund investment
advisor, (1976 - 1991); Senior Vice President AMA Investment Advisers, Inc.,
(1991 - 1993).
Paul Y. Clinton, Trustee; Age: 69
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; Trustee of Capital Cash Management Trust, a money-market fund
and Narragansett Tax-Free Fund, a tax-exempt bond fund; Director of OCC Cash
Reserves, Inc. and Trustee of OCC Accumulation Trust, both of which are open-end
investment companies. Formerly: Director, External Affairs, Kravco Corporation,
a national real estate owner and property management corporation; President of
Essex Management Corporation, a management consulting company; a general partner
of Capital Growth Fund, a venture capital partnership; a general partner of
Essex Limited Partnership, an investment partnership; President of Geneve Corp.,
a venture capital fund; Chairman of Woodland Capital Corp., a small business
investment company; and Vice President of W.R. Grace & Co.
Thomas W. Courtney, Trustee; Age 66
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc. (venture capital firm); former General
Partner of Trivest Venture Fund (private venture capital fund); former President
of Investment Counseling Federated Investors, Inc.; Trustee of Cash Assets
Trust, a money market fund; Director of OCC Cash Reserves, Inc., and Trustee of
OCC Accumulation Trust, both of which are open-end investment companies; former
President of Boston Company Institutional Investors; Trustee of Hawaiian
Tax-Free Trust and Tax Free Trust of Arizona, tax-exempt bond funds; Director of
several privately owned corporations; former Director of Financial Analysts
Federation.
Robert G. Galli, Trustee; Age: 66
19750 Beach Road, Jupiter, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Lacy B. Herrmann, Trustee; Age: 70
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 ("CCMT"), and
an Officer and Trustee/Director of its predecessors; President and Director of
STCM Management Company, Inc., sponsor and advisor to CCMT; Chairman, President
and a Director of InCap Management Corporation, formerly sub-advisor and
administrator of Prime Cash Fund and Short Term Asset Reserves; Director of OCC
Cash Reserves, Inc., and Trustee of OCC Accumulation Trust, both of which are
open-end investment companies; Trustee Emeritus of Brown University.
George Loft, Trustee; Age: 85
51 Herrick Road, Sharon, Connecticut 06069
Private Investor.
Ronald H. Fielding, Vice President; Age: 51
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), Oppenheimer Convertible
Securities Fund (1986 - 1995) and Rochester Fund Municipals (1986 - 1995);
President and a director of Rochester Tax Managed Fund, Inc. (1982 - 1995) and
of Fielding Management Company, Inc. (1982 - 1995), an investment advisor.
Andrew J. Donohue, Secretary; Age: 49
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 OppenheimerFunds Distributor, Inc., the Fund's Distributor;
Executive Vice President, General Counsel and a director of HarbourView Asset
Management Corporation, 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), , an investment advisory subsidiary of the Manager; 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: 40
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert Bishop, Assistant Treasurer; Age: 41
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 36
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: 34
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: 51
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.
|X| 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, 1999. 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 1999.
<PAGE>
- -------------------------------------------------------------------------------
Total Compensation
Retirement From all
Aggregate Benefits Accrued Oppenheimer
Compensation as Part of Fund Quest/Rochester
Trustee's Name From Fund1 Expenses Funds (10 Funds)2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
John Cannon $37,609 $9,189 $28,4393
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Paul Y. Clinton $114,003 $85,584 $140,1903
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Thomas W. Courtney $93,368 $64,948 $140,1903
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Robert G. Galli $28,420 $0 $176,2154
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Lacy B. Herrmann $127,312 $98,892 $139,2903
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
George Loft $121,664 $93,245 $140,1903
- -------------------------------------------------------------------------------
1. Aggregate compensation from the Fund includes fees and any retirement plan
benefits accrued for a Trustee.
2. For the 1999 calendar year.
3. Total compensation for the 1999 calendar year includes compensation from 12
funds for which OpCap Advisors served as the investment advisor. Each series
of an investment company is considered a separate "fund" for this purpose.
4. Total compensation for the 1999 calendar year also includes compensation
received for serving as trustee or director of 24 other Oppenheimer funds.
|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.
|X| 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 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.
|X| Major Shareholders. As of April 3, 2000, 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, Class C or Class Y shares was:
Merrill Lynch Pierce Fenner & Smith Inc. 4800 Deer Lake Drive East, Floor
3, Jacksonville, Florida 32246, which owned 23,785,458.996 Class A shares
(approximately 12%of the Class A shares then outstanding); 5,330,997.537
Class B shares (approximately 13% of the Class B shares then outstanding;
and 2,777,984.497 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.
|X| Code of Ethics. The Fund, the Manager and the Distributor 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. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
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 the Fund sustains by reason of
good faith errors or omissions on its part with respect to any of its duties
under the agreement. The agreement permits the Manager to act as investment
advisor for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with other investment companies for which it may act
as investment advisor or general distributor.
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 Administrative
Fiscal Year Management Fee Paid to Services Fee Paid to
Ended 12/31 OppenheimerFunds, Inc. OppenheimerFunds, Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $12,249,672 $778,253
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $16,898,272 $1,082,541
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $20,655,696 $1,327,586
- -------------------------------------------------------------------------------
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.
<PAGE>
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
Front-End Front-End Commissions Commissions Commissions
Fiscal Sales Sales on Class A on Class B on Class C
Year Charges Charges Shares Shares Shares
Ended on Class A Retained by Advanced by Advanced by Advanced by
12/31: Shares Distributor Distributor1 Distributor1 Distributor1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $15,666,528 $2,234,617 $2,064,409 $13,060,682 $1,290,419
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
Class A Contingent Class B Contingent Class C Contingent
Deferred Sales Deferred Sales Deferred Sales
Fiscal Year Charges Retained by Charges Retained by Charges Retained by
Ended 12/31: Distributor Distributor Distributor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $308,596 $2,142,722 $163,332
- -------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the
Distributor for all or a portion of its costs incurred 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, including a majority of
the Independent Trustees2, cast in person at a meeting called for the purpose of
voting on that plan.
2 In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund 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 its profits from the advisory fee it receives
from the Fund. In their sole discretion, the Distributor and the Manager may
increase or decrease the amount of payments they make from their own resources
to plan recipients.
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 of Trustees 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 a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A Plan that would materially increase payments under the 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 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.
Each plan states that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund is
committed to the discretion of the Independent Trustees. This does not prevent
the involvement of others in 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 plans 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 of that
class 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
Independent Trustees. 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, 1999, payments under the Plan for
Class A shares totaled $5,198,680, all of which was paid by the Distributor to
recipients. That amount included $34,603 paid to an affiliate of the
Distributor. Any unreimbursed expenses the Distributor incurs 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.
<PAGE>
|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:
o pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o 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,
o employs personnel to support distribution of Class B and Class C shares,
and
o 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.
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
either the Class B or the Class C 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 for distributing shares before the plan was terminated. The
Class B plan allows for the carry-forward of unreimbursed distribution expenses,
to be recovered from asset-based sales charges in subsequent fiscal periods.
- --------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 12/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributor's
Distributor's Unreimbursed
Total Amount Aggregate Expenses as %
Payments Retained by Unreimbursed of Net Assets
Class: Under Plan Distributor Expenses Under Plan of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $6,346,313 $5,705,7451 $29,900,996 4.44%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $2,211,014 $1,432,7992 $3,167,350 1.44%
- --------------------------------------------------------------------------------
1. Includes $2,395 paid to an affiliate of the Distributor's parent company.
2. Includes $4,928 paid to an affiliate of the Distributor's parent company.
All payments under the Class B and the 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.
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 dividends
and capital gains 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.
o 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.
o Dividend Yield. The Fund may quote a "dividend yield" for each class of its
shares. Dividend yield is based on the dividends paid on 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. There is no sales charge on Class Y shares. The Class A
dividend yield may also be quoted without deducting the maximum initial sales
charge.
oTax-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 12/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tax-Equivalent Yield
(43.74% Combined
Class of Federal/
Shares Standardized Yield Dividend Yield New York Tax Bracket)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Without After Without After After
Sales Sales Sales Sales Without Sales
Charge Charge Charge Charge Sales Charge Charge
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A 5.10% 4.85% 6.22% 5.93% 8.44% 8.03%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B 4.22% N/A 5.19% N/A 6.99% N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C 4.24% N/A 5.21% N/A 7.02% N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y1 N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------
1 Inception of Class Y shares: 4/28/00.
|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. There is no sales charge on Class Y
shares.
o 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" in the formula) 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 )
o
<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 each class of 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 12/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative Total
Returns (10 Years
Class of or Life-of-Class, Average Annual Total Returns
Shares if Less)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5-Years 10-Years
(or (or
Life-of-Class, Life-of-Class,
1-Year if Less) if Less)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 A1 86.67% 95.99% -9.99% -5.51% 5.72% 6.75% 6.44% 6.96%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B 4.82%2 7.64%2 -10.73% -6.27% 1.70%2 2.67%2 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C 7.60%3 7.60%3 -7.21% -6.32% 2.66%3 2.66%3 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y4 N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------
1. Inception of Class A: 5/15/86.
2. Inception of Class B: 3/17/97.
3. Inception of Class C: 3/17/97.
4. Inception of Class Y: 4/28/00.
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
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 in categories based on
investment styles. The Lipper performance rankings are based on total returns
that include the reinvestment of capital gain distributions and income dividends
but
<PAGE>
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.
o 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%/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 rating. 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 classes of 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 returns on the Fund's share classes
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 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: o 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
o 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
o
<PAGE>
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 Main Street California
Oppenheimer California Municipal Fund Municipal Fund
Oppenheimer Main Street Growth & Income
Oppenheimer Capital Appreciation Fund Fund
Oppenheimer Capital Preservation Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Income Fund Oppenheimer MidCap Fund
Oppenheimer Champion Income Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Convertible Securities Fund Oppenheimer Municipal Bond Fund
Oppenheimer Developing Markets Fund Oppenheimer New York Municipal Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Discovery Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Emerging Technologies Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Europe Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer
Florida Municipal Fund Oppenheimer Quest Small Cap Value Fund Oppenheimer Global
Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Global Growth & Income Fund
Oppenheimer Real Asset Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer
Senior Floating Rate Fund Oppenheimer Growth Fund Oppenheimer Strategic Income
Fund Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc. Oppenheimer
Insured Municipal Fund Oppenheimer Trinity Core Fund Oppenheimer Intermediate
Municipal Fund Oppenheimer Trinity Growth Fund Oppenheimer International Bond
Fund Oppenheimer Trinity Value Fund Oppenheimer International Growth Fund
Oppenheimer U.S. Government Trust Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund Oppenheimer Large Cap Growth Fund Limited-Term New
York Municipal Fund
Rochester Fund Municipals
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 bound 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 (the minimum is $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 are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employer-sponsored qualified retirement accounts.
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 debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
Application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor ) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your 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.
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.
<PAGE>
The availability of different 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 from his or her
firm for 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. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that 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
shareholder, 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 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 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. The
calculation is done by dividing the value of the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding. The
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, Presidents' Day,
Martin Luther King, Jr. 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 of some of the Fund's
portfolio securities may change significantly on those days, when shareholders
may not purchase or redeem shares.
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:
o 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.
o 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. o 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) debt instruments held by a money market fund that have a
remaining maturity of 397 days or less.
o 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, and 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
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below provides additional information about the procedures for
redeeming.
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
the Bank or the Fund's custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
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 the registered owner(s);
(3)
<PAGE>
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.
Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of
redemption proceeds may be delayed if the Fund's custodian bank is not open for
business on a day when the Fund would normally authorize the wire to be made,
which is usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next bank
business day on which the Fund is open for business. No dividends will be paid
on the proceeds of redeemed shares awaiting transfer by Federal Funds wire.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
o Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
o 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
or Class Y 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.
<PAGE>
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. 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 to this
Statement of Additional Information.)
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.
<PAGE>
|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.
o 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.
o Oppenheimer Main Street California Municipal Fund currently offers only
Class A and Class B shares.
o 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.
o Only certain Oppenheimer funds currently offer Class Y shares. Class Y
shares of Oppenheimer Real Asset Fund may not be exchanged for shares
of any other fund.
o Class M shares of Oppenheimer Convertible Securities Fund may be
exchanged only for Class A shares of other Oppenheimer funds. They may
not be acquired by exchange of shares of any class of any other
Oppenheimer funds except Class A shares of Oppenheimer Money Market
Fund or Oppenheimer Cash Reserves acquired by exchange of Class M
shares.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not
available by exchange of shares of Oppenheimer Money Market Fund or
Class A shares of Oppenheimer Cash Reserves. If any Class A shares of
another Oppenheimer fund that are exchanged for Class A shares of
Oppenheimer Senior Floating Rate Fund are subject to the Class A
contingent deferred sales charge of the other Oppenheimer fund at the
time of exchange, the holding period for that Class A contingent
deferred sales charge will carry over to the Class A shares of
Oppenheimer Senior Floating Rate Fund acquired in the exchange. The
Class A shares of Oppenheimer Senior Floating Rate Fund acquired in
that exchange will be subject to the Class A Early Withdrawal Charge
of Oppenheimer Senior Floating Rate Fund if they are repurchased
before the expiration of the holding period.
o Class X shares of this Fund can be exchanged only for Class B shares of
other Oppenheimer funds and no exchanges may be made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged
for shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash
Reserves or Oppenheimer Limited-Term Government Fund. Only participants
in certain retirement plans may purchase shares of Oppenheimer Capital
Preservation Fund, and only those participants may exchange shares of
other Oppenheimer funds for shares of Oppenheimer Capital Preservation
Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. 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
an early withdrawal charge or 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 sales charge 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.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by applicable
law. It may be required to provide 60 days' notice prior to materially amending
or terminating the exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|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 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.
|X| 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. 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.
|X| 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.
When you exchange some or all of your shares from one fund to another, any
special account feature such as an Asset Builder Plan or Automatic Withdrawal
Plan will be switched to the new fund account unless you tell the Transfer Agent
not to do so. However, special redemption and exchange features such as
Automatic Exchange Plans and Automatic Withdrawal Plans cannot be switched to an
account in Oppenheimer Senior Floating Rate Fund.
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.
<PAGE>
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. To the extent the Fund fails to qualify to pay
exempt-interest dividends in any given form, such dividends would be included in
the 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,
and (5) any market discount amortization on tax-exempt bonds.
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 such an instance, all of the Fund's dividends would be taxable
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.
<PAGE>
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 Auditors. KPMG LLP are the independent auditors of the Fund for the
year ending December 31, 2000. They audit the Fund's financial statements and
perform other related audit services. They also act as auditors for certain
other funds advised by the Manager and its affiliates. PricewaterhouseCoopers
LLP were the independent accountants of the Fund, including audits of the
financial statements and other related audit services for the year ended
December 31, 1999.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS 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, 1999, 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 accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the United States, 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, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
January 24, 2000
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
=================================================================================================================================
$ 2,900,000 Chautauqua County IDA (Jamestown Devel. Corp.)
5.250 % 08/01/2028 $ 2,459,809
1,580,000 Chautauqua County IDA (Jamestown Devel. Corp.)
7.125 11/01/2008 1,496,323
3,395,000 Chautauqua County IDA (Jamestown Devel. Corp.)
7.125 11/01/2018 3,137,591
9,800,000 Chemung County IDA (St. Joseph's Hospital)
6.000 01/01/2013 8,984,150
10,165,000 Chemung County IDA (St. Joseph's Hospital)
6.350 01/01/2013 9,504,377
4,910,000 Chemung County IDA (St. Joseph's Hospital)
6.500 01/01/2019 4,483,910
1,000,000 Clifton Park Water Authority
5.000 10/01/2029 839,600
1,960,000 Clifton Springs Hospital & Clinic
7.650 01/01/2012 2,032,108
4,075,000 Clifton Springs Hospital & Clinic
8.000 01/01/2020 4,233,599
35,000 Cohoes GO
6.200 03/15/2012 33,471
25,000 Cohoes GO
6.200 03/15/2013 23,643
25,000 Cohoes GO
6.250 03/15/2014 23,465
25,000 Cohoes GO
6.250 03/15/2015 23,359
25,000 Cohoes GO
6.250 03/15/2016 23,083
530,000 Columbia County IDA (ARC)
7.750 06/01/2005 552,695
2,650,000 Columbia County IDA (ARC)
8.650 06/01/2018 2,845,517
520,000 Columbia County IDA (Berkshire Farms)
6.900 12/15/2004 530,962
1,855,000 Columbia County IDA (Berkshire Farms)
7.500 12/15/2014 1,934,839
30,000 Cortland County IDA (Paul Bunyon Products)
8.000 07/01/2000 30,293
3,500,000 Dutchess County IDA (Bard College)
7.000 11/01/2017 3,665,900
1,000,000 Dutchess County Res Rec (Solid Waste)
5.450 01/01/2014 976,390
1,700,000 Dutchess County Res Rec (Solid Waste)
6.800 01/01/2010 (p) 1,825,970
1,805,000 Dutchess County Res Rec (Solid Waste)
7.000 01/01/2010 (p) 1,947,884
1,540,000 Dutchess County Water & Wastewater Authority
0.000 06/01/2025 304,489
1,540,000 Dutchess County Water & Wastewater Authority
0.000 06/01/2026 284,946
1,000,000 Dutchess County Water & Wastewater Authority
0.000 06/01/2027 173,400
2,000,000 East Rochester Hsg. Authority (Linden Knoll)
5.350 02/01/2038 1,757,740
3,125,000 East Rochester Hsg. Authority (St. John's Meadows)
5.250 08/01/2038 2,687,375
3,250,000 East Rochester Hsg. Authority (St. John's Meadows)
5.675 08/01/2022 3,094,260
4,250,000 East Rochester Hsg. Authority (St. John's Meadows)
5.700 08/01/2027 4,017,142
4,095,000 East Rochester Hsg. Authority (St. John's Meadows)
5.950 08/01/2027 3,700,324
25,000 Elmira HDC
7.500 08/01/2007 25,280
3,320,000 Erie County IDA (Affordable Hospitality) (b)
9.250 12/01/2015 3,075,980
1,175,000 Erie County IDA (Air Cargo)
8.250 10/01/2007 1,203,376
2,380,000 Erie County IDA (Air Cargo)
8.500 10/01/2015 2,487,838
41,500,000 Erie County IDA (Canfibre Lackawanna)
9.050 12/01/2025 43,965,100
25,000 Erie County IDA (Episcopal Church Home)
5.875 02/01/2018 21,524
9,050,000 Erie County IDA (Episcopal Church Home) (w)
6.000 02/01/2028 7,646,254
3,230,000 Erie County IDA (Medaille College)
8.000 12/30/2022 3,415,531
2,655,000 Erie County IDA (Mercy Hospital)
6.250 06/01/2010 2,473,982
1,850,000 Essex County IDA (International Paper Co.)
5.500 08/15/2022 1,599,861
5,720,000 Franklin County IDA (Adirondack Medical Center)
5.500 12/01/2029 5,054,650
4,245,000 Franklin County SWMA
6.250 06/01/2015 4,118,244
535,000 Geneva IDA (Finger Lakes Cerebral Palsy)
8.250 11/01/2004 558,882
1,000,000 Geneva IDA (Finger Lakes Cerebral Palsy)
8.500 11/01/2016 1,047,470
890,000 Glen Cove IDA (SLCD)
6.875 07/01/2008 866,860
3,775,000 Glen Cove IDA (SLCD)
7.375 07/01/2023 3,552,539
16,855,000 Glen Cove IDA (The Regency at Glen Cove)
0.000 10/15/2019 (p) 4,596,527
1,055,000 Glen Cove IDA (The Regency at Glen Cove)
0.000 10/15/2019 287,709
2,375,000 Grand Central BID (Grand Central District Management)
5.250 01/01/2022 2,081,569
2,015,000 Groton Community Health Care Center
7.450 07/15/2021 2,207,050
735,000 Hamilton EHC (Hamilton Apartments)
11.250 01/01/2015 761,658
6,175,000 Hempstead IDA (Engel Burman Senior Hsg.)
6.250 11/01/2010 5,819,814
18,825,000 Hempstead IDA (Engel Burman Senior Hsg.)
6.750 11/01/2024 17,366,439
</TABLE>
10 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 4,810,000 Hempstead IDA (Franklin Hospital Medical Center)
5.750 % 11/01/2008 $ 4,454,397
9,375,000 Hempstead IDA (Franklin Hospital Medical Center)
6.375 11/01/2018 8,332,781
6,355,000 Hempstead IDA (South Shore Y JCC)
6.750 11/01/2024 5,880,154
525,000 Herkimer County IDA (Burrows Paper)
7.250 01/01/2001 526,659
14,440,000 Herkimer County IDA (Burrows Paper)
8.000 01/01/2009 15,067,562
430,000 Herkimer Hsg. Authority
7.150 03/01/2011 438,019
60,000 Hsg. NY Corp.
5.500 11/01/2020 54,922
3,595,000 Hsg. NY Corp.
5.500 11/01/2020 3,310,420
990,000 Hudson IDA (Have)
8.125 12/01/2017 1,024,551
1,300,000 Hudson IDA (Wittcomm)
7.125 11/01/2009 906,750
1,000,000 Huntington Hsg. Authority (GJSR)
6.000 05/01/2029 863,880
2,500,000 Huntington Hsg. Authority (GJSR)
6.000 05/01/2039 2,120,125
935,000 Islip IDA (Leeway School)
9.000 08/01/2021 977,524
50,000 Islip IDA (WJL Realty)
7.800 03/01/2003 50,931
100,000 Islip IDA (WJL Realty)
7.850 03/01/2004 102,057
100,000 Islip IDA (WJL Realty)
7.900 03/01/2005 102,058
500,000 Islip IDA (WJL Realty)
7.950 03/01/2010 510,875
2,000,000 Islip Res Rec
6.500 07/01/2009 2,173,200
3,000,000 Kenmore Hsg. Authority (SUNY at Buffalo)
5.500 08/01/2024 2,686,320
410,000 L.I. Power Authority
5.125 12/01/2022 358,922
14,900,000 L.I. Power Authority
5.250 12/01/2026 13,120,940
6,800,000 L.I. Power Authority
5.500 12/01/2029 6,050,300
21,000,000 L.I. Power Authority RITES (a)
0.567 (f) 12/01/2022 10,535,280
5,905,000 L.I. Power Authority RITES (a)
0.579 (f) 12/01/2022 2,962,420
12,500,000 L.I. Power Authority RITES (a)
1.079 (f) 12/01/2026 6,530,000
13,000,000 L.I. Power Authority RITES (a)
2.057 (f) 12/01/2029 8,563,880
11,250,000 L.I. Power Authority RITES (a)
4.300 (f) 12/01/2029 7,411,050
2,650,000 Lockport HDC
6.000 10/01/2018 2,570,023
100,000 Lowville GO
7.200 09/15/2005 109,090
75,000 Lowville GO
7.200 09/15/2007 82,947
100,000 Lowville GO
7.200 09/15/2012 113,749
100,000 Lowville GO
7.200 09/15/2013 113,447
100,000 Lowville GO
7.200 09/15/2014 113,223
5,350,000 Lyons Community Health Initiatives Corp.
6.800 09/01/2024 5,493,487
4,585,000 Macleay Hsg. Corp. (Larchmont Woods)
8.500 01/01/2031 4,781,055
1,805,000 Madison County IDA (Oneida Healthcare Center)
6.100 07/01/2014 1,663,903
2,475,000 Mechanicsville HDC
6.900 08/01/2022 2,516,258
190,000 Middleton IDA (Flanagan Design & Display)
7.000 11/01/2006 181,456
690,000 Middleton IDA (Flanagan Design & Display)
7.500 11/01/2018 631,736
905,000 Middleton IDA (Fleurchem)
8.000 12/01/2016 943,653
3,955,000 Middletown IDA (Southwinds Retirement Home)
6.375 03/01/2018 3,575,241
3,740,000 Middletown IDA (Southwinds Retirement Home)
8.375 03/01/2018 (p) 4,176,159
660,000 Middletown IDA (YMCA)
6.250 11/01/2009 618,644
1,255,000 Middletown IDA (YMCA)
7.000 11/01/2019 1,149,078
75,000 Monroe County Airport Authority (GRIA)
7.250 01/01/2019 76,500
415,000 Monroe County COP
8.050 01/01/2011 422,375
4,260,000 Monroe County IDA (Al Sigl Center)
6.600 12/15/2017 3,983,100
1,590,000 Monroe County IDA (Al Sigl Center)
7.250 12/15/2015 1,595,183
3,080,000 Monroe County IDA (Brazill Merk)
7.900 12/15/2014 3,190,634
900,000 Monroe County IDA (Canal Ponds)
7.000 06/15/2013 951,768
10,000 Monroe County IDA (Cohber Press)
7.550 12/01/2001 10,018
10,000 Monroe County IDA (Cohber Press)
7.650 12/01/2002 10,181
10,000 Monroe County IDA (Cohber Press)
7.700 12/01/2003 10,185
170,000 Monroe County IDA (Cohber Press)
7.850 12/01/2009 173,669
</TABLE>
11 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
===================================================================================================================================
$ 1,265,000 Monroe County IDA (Collegiate Hsg. Foundation - RIT)
5.375 % 04/01/2029 $ 1,077,742
2,074,584 Monroe County IDA (Cottrone Devel.)
9.500 12/01/2010 2,164,248
950,000 Monroe County IDA (Dayton Rogers Manufacturing)
6.100 12/01/2009 906,461
5,750,000 Monroe County IDA (DePaul Community Facilities)
5.950 08/01/2028 5,053,732
880,000 Monroe County IDA (DePaul Community Facilities)
6.450 02/01/2014 924,959
1,285,000 Monroe County IDA (DePaul Community Facilities)
6.500 02/01/2024 1,302,090
4,485,000 Monroe County IDA (DePaul Properties)
6.150 09/01/2021 4,120,863
260,000 Monroe County IDA (DePaul Properties)
8.300 09/01/2002 275,564
4,605,000 Monroe County IDA (DePaul Properties)
8.800 09/01/2021 4,986,432
14,565,000 Monroe County IDA (Genesee Hospital)
7.000 11/01/2018 12,837,300
1,000,000 Monroe County IDA (Jewish Home)
6.875 04/01/2017 954,760
4,945,000 Monroe County IDA (Jewish Home)
6.875 04/01/2027 4,658,882
545,000 Monroe County IDA (Machine Tool Research)
7.750 12/01/2006 539,452
600,000 Monroe County IDA (Machine Tool Research)
8.000 12/01/2011 582,498
300,000 Monroe County IDA (Machine Tool Research)
8.500 12/01/2013 295,956
1,345,000 Monroe County IDA (Melles Groit)
9.500 12/01/2009 1,362,700
1,790,000 Monroe County IDA (Morrell/Morrell)
7.000 12/01/2007 1,794,010
500,000 Monroe County IDA (Nazareth College)
5.250 04/01/2023 446,090
4,330,000 Monroe County IDA (Piano Works)
7.625 11/01/2016 4,488,911
2,625,000 Monroe County IDA (Roberts Wesleyan College)
6.700 09/01/2011 2,652,982
3,075,000 Monroe County IDA (St. John Fisher College)
5.375 06/01/2024 2,696,683
1,215,000 Monroe County IDA (St. Joseph's Parking Garage)
7.000 11/01/2008 1,152,500
4,345,000 Monroe County IDA (St. Joseph's Parking Garage)
7.500 11/01/2022 3,954,341
7,420,000 Monroe County IDA (The Children's Beverage Group)
8.750 11/01/2010 7,375,925
915,000 Monroe County IDA (Volunteers of America)
5.700 08/01/2018 816,720
2,710,000 Monroe County IDA (Volunteers of America)
5.750 08/01/2028 2,358,730
400,000 Monroe County IDA (West End Business)
6.750 12/01/2004 403,444
95,000 Monroe County IDA (West End Business)
6.750 12/01/2004 95,818
55,000 Monroe County IDA (West End Business)
6.750 12/01/2004 55,474
1,375,000 Monroe County IDA (West End Business)
8.000 12/01/2014 1,444,960
345,000 Monroe County IDA (West End Business)
8.000 12/01/2014 362,554
170,000 Monroe County IDA (West End Business)
8.000 12/01/2014 178,650
515,000 Monroe County IDA (West End Business)
8.000 12/01/2014 541,203
465,000 Monroe HDC (Multifamily Hsg.)
7.000 08/01/2021 474,639
5,860,000 Montgomery County IDA (ASMF) (a) (b) (c)
7.250 01/15/2019 4,049,260
970,000 Montgomery County IDA (New Dimensions in Living)
8.900 05/01/2016 1,007,830
495,000 Mt. Vernon IDA (Meadowview)
6.150 06/01/2019 438,233
2,500,000 Mt. Vernon IDA (Meadowview)
6.200 06/01/2029 2,152,800
3,800,000 MTA Dedicated Tax Fund RITES (a)
0.079 (f) 04/01/2023 1,642,968
10,000,000 MTA IVRC (a)
4.863 (f) 06/15/2029 10,100,000
9,400,000 MTA YCR (a)
6.933 (f) 07/01/2013 8,834,308
3,000,000 MTA YCR (a)
6.933 (f) 07/01/2022 2,579,820
12,500,000 MTA, Series B
4.750 07/02/2026 10,142,375
50,000 MTA, Series J
5.500 07/01/2022 46,498
802,824 Municipal Assistance Corp. for Troy, NY
0.000 07/15/2021 215,510
1,218,573 Municipal Assistance Corp. for Troy, NY
0.000 01/15/2022 315,927
2,725,000 Nassau County IDA (ACLDD)
8.125 10/01/2022 2,850,595
2,290,000 Nassau County IDA (NSCFGA)
6.750 05/01/2024 2,115,273
3,900,000 Nassau County IDA (NY Institute of Technology)
6.150 03/01/2029 3,446,781
245,000 Nassau County IDA (RJS Scientific)
8.050 12/01/2005 256,118
2,700,000 Nassau County IDA (RJS Scientific)
9.050 12/01/2025 2,956,986
2,850,000 Nassau County IDA (Sharp International)
7.375 12/01/2007 2,080,500
1,810,000 Nassau County IDA (Sharp International)
7.375 12/01/2007 1,321,300
2,610,000 Nassau County IDA (Sharp International)
7.875 12/01/2012 1,905,300
</TABLE>
12 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
===================================================================================================================================
$ 1,650,000 Nassau County IDA (Sharp International)
7.875 % 12/01/2012 $ 1,204,500
2,050,000 Nassau County IDA (United Cerebral Palsy) (w)
6.250 11/01/2014 2,003,301
25,000,000 Nassau County IDA (Westbury Senior Living) (w)
7.900 11/01/2031 25,019,750
1,715,000 Nassau County Tobacco Settlement Corp.
6.250 07/15/2019 1,661,441
3,295,000 Nassau County Tobacco Settlement Corp.
6.250 07/15/2020 3,185,935
2,040,000 Nassau County Tobacco Settlement Corp.
6.250 07/15/2021 1,966,397
4,900,000 Nassau County Tobacco Settlement Corp.
6.300 07/15/2021 4,734,282
1,320,000 Nassau County Tobacco Settlement Corp.
6.300 07/15/2022 1,276,084
29,885,000 Nassau County Tobacco Settlement Corp.
6.400 07/15/2033 28,444,543
21,070,000 Nassau County Tobacco Settlement Corp.
6.500 07/15/2027 20,447,592
26,685,000 Nassau County Tobacco Settlement Corp.
6.600 07/15/2039 25,802,527
20,000 New Hartford HDC (Village Point)
7.375 01/01/2024 20,662
1,485,000 New Hartford Sunset Wood Project
5.950 08/01/2027 1,439,945
13,010,000 New Rochelle IDA (College of New Rochelle)
5.250 07/01/2027 11,019,340
3,500,000 New Rochelle IDA (College of New Rochelle)
5.500 07/01/2019 3,197,285
3,000,000 New Rochelle IDA (College of New Rochelle)
6.750 07/01/2022 3,195,810
4,950,000 Newark-Wayne Community Hospital
5.875 01/15/2033 4,675,275
2,290,000 Newark-Wayne Community Hospital
7.600 09/01/2015 2,377,799
185,000 Newburgh GO
7.100 09/15/2007 (p) 205,881
185,000 Newburgh GO
7.100 09/15/2008 (p) 205,881
180,000 Newburgh GO
7.150 09/15/2009 (p) 200,693
150,000 Newburgh GO
7.150 09/15/2010 (p) 167,244
155,000 Newburgh GO
7.200 09/15/2011 (p) 173,141
155,000 Newburgh GO
7.200 09/15/2012 (p) 173,141
160,000 Newburgh GO
7.250 09/15/2013 (p) 179,061
155,000 Newburgh GO
7.250 09/15/2014 (p) 173,465
2,310,000 Newburgh IDA (ARMA Textile Printers)
7.125 11/01/2007 2,079,000
4,880,000 Newburgh IDA (ARMA Textile Printers)
8.000 11/01/2017 4,392,000
1,900,000 Niagara County IDA (Sevenson Hotel)
6.600 05/01/2007 1,910,583
1,700,000 Niagara Falls COP (High School Facility)
5.375 06/15/2028 1,414,349
715,000 North Babylon Volunteer Fire Company
5.750 08/01/2022 681,631
1,555,000 North Country Devel. Authority (Clarkson University)
5.500 07/01/2019 1,407,555
3,145,000 North Country Devel. Authority (Clarkson University)
5.500 07/01/2029 2,732,628
585,000 North Tonawanda HDC (Bishop Gibbons Associates)
6.800 12/15/2007 611,237
3,295,000 North Tonawanda HDC (Bishop Gibbons Associates)
7.375 12/15/2021 3,576,657
25,000 Nunda GO
8.000 05/01/2010 29,874
20,000,000 NY Convention Center COP (w)
6.500 12/01/2004 20,022,400
270,000 NYC GO
0.000 05/15/2011 143,281
4,990,000 NYC GO
0.000 11/15/2011 2,575,289
200,000 NYC GO
0.000 05/15/2012 99,540
40,000 NYC GO
0.000 10/01/2012 19,488
9,025,000 NYC GO
5.000 08/01/2023 7,598,328
12,125,000 NYC GO
5.000 08/01/2023 10,208,280
8,900,000 NYC GO
5.000 08/15/2028 7,350,599
23,000,000 NYC GO
5.000 03/15/2029 18,961,430
250,000 NYC GO
5.125 08/01/2013 233,272
855,000 NYC GO
5.125 08/01/2025 727,631
12,250,000 NYC GO
5.125 08/01/2025 10,425,117
11,265,000 NYC GO
5.250 08/01/2020 9,987,662
22,970,000 NYC GO
5.250 08/01/2021 20,279,524
1,015,000 NYC GO
5.250 08/15/2023 888,775
500,000 NYC GO
5.250 08/01/2024 436,180
5,910,000 NYC GO
5.300 08/01/2024 5,197,786
570,000 NYC GO
5.375 08/01/2019 517,965
</TABLE>
13 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 1,170,000 NYC GO
5.375 % 08/01/2027 $ 1,033,625
13,170,000 NYC GO
5.375 11/15/2027 11,627,003
85,000 NYC GO
5.500 10/01/2018 79,116
15,015,000 NYC GO
5.500 11/15/2037 13,300,888
20,000 NYC GO
5.625 08/01/2016 19,228
35,000 NYC GO
5.750 02/01/2020 33,376
1,155,000 NYC GO
6.000 02/01/2011 (p) 1,229,844
4,845,000 NYC GO
6.000 02/01/2011 4,989,962
50,000 NYC GO
6.000 10/15/2016 50,086
50,000 NYC GO
6.000 02/15/2020 49,108
160,000 NYC GO
6.000 05/15/2020 157,128
75,000 NYC GO
6.000 02/15/2024 73,174
80,000 NYC GO
6.000 10/15/2026 (p) 85,459
13,680,000 NYC GO
6.125 02/01/2025 13,557,974
8,735,000 NYC GO
6.125 08/01/2025 8,656,472
7,070,000 NYC GO
6.250 04/15/2027 (p) 7,637,226
5,130,000 NYC GO
6.250 04/15/2027 5,145,133
103,000 NYC GO
6.500 08/01/2014 (p) 111,773
397,000 NYC GO
6.500 08/01/2014 422,610
420,000 NYC GO
6.500 08/01/2015 (p) 455,771
1,580,000 NYC GO
6.500 08/01/2015 1,655,413
1,580,000 NYC GO
6.625 08/01/2025 1,657,799
5,000 NYC GO
7.000 02/01/2010 5,011
620,000 NYC GO
7.000 10/01/2012 (p) 665,923
5,000 NYC GO
7.000 10/01/2012 5,322
5,000 NYC GO
7.000 02/01/2018 5,301
20,000 NYC GO
7.000 02/01/2018 21,041
650,000 NYC GO
7.000 02/01/2020 (p) 689,195
5,000 NYC GO
7.000 02/01/2020 5,298
5,000 NYC GO
7.000 02/01/2020 5,260
190,000 NYC GO
7.000 02/01/2022 200,087
915,000 NYC GO
7.100 02/01/2009 (p) 971,968
85,000 NYC GO
7.100 02/01/2009 89,780
315,000 NYC GO
7.100 02/01/2010 332,712
140,000 NYC GO
7.100 02/01/2011 147,872
220,000 NYC GO
7.200 02/01/2015 232,540
5,000 NYC GO
7.250 08/15/2024 5,187
5,000 NYC GO
7.400 02/01/2002 5,251
30,000 NYC GO
7.500 02/01/2016 (p) 32,128
15,000 NYC GO
7.500 02/01/2016 15,928
10,000 NYC GO
7.500 02/01/2018 10,618
1,000,000 NYC GO
7.500 08/01/2021 (p) 1,082,780
265,000 NYC GO
7.625 02/01/2014 (p) 284,451
5,000 NYC GO
7.625 02/01/2014 5,327
15,000 NYC GO
7.750 08/15/2012 15,966
5,000 NYC GO
8.250 08/01/2012 (p) 5,353
5,000 NYC GO
8.250 08/01/2014 5,333
1,750,000 NYC GO CAB
0.000 (v) 05/15/2014 1,457,907
500,000 NYC GO CAB
0.000 (v) 08/01/2014 399,195
16,387,000 NYC GO CARS
7.070 (f) 08/12/2010 17,534,090
8,387,000 NYC GO CARS
7.070 (f) 09/01/2011 8,932,155
95,000 NYC GO DIAMONDS
0.000 (v) 08/15/2016 89,271
100,000 NYC GO DIAMONDS
0.000 (v) 08/01/2025 59,661
13,640,000 NYC GO Indexed Inverse Floater
3.185 (f) 08/01/2014 13,383,432
</TABLE>
14 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
===================================================================================================================================
$ 6,200,000 NYC GO RIBS
6.521 % (f) 08/13/2009 $ 6,378,250
4,200,000 NYC GO RIBS
6.521 (f) 07/29/2010 4,305,000
5,400,000 NYC GO RIBS
6.619 (f) 08/22/2013 5,332,500
3,050,000 NYC GO RIBS
6.619 (f) 08/01/2015 2,935,625
13,150,000 NYC GO RIBS
8.107 (f) 08/01/2013 13,643,125
15,000,000 NYC GO RITES
5.494 (f) 10/01/2011 15,978,750
3,375,000 NYC GO RITES (a)
0.079 (f) 05/15/2023 1,395,630
3,500,000 NYC GO RITES (a)
0.079 (f) 05/15/2028 1,227,940
308,211 NYC HDC (Albert Einstein Staff Hsg.)
6.500 12/15/2017 312,160
1,451,213 NYC HDC (Atlantic Plaza Towers)
7.034 02/15/2019 1,500,671
1,045,000 NYC HDC (Barclay Avenue)
6.450 04/01/2017 1,049,504
4,055,000 NYC HDC (Barclay Avenue)
6.600 04/01/2033 4,072,355
361,502 NYC HDC (Bay Towers)
6.500 08/15/2017 366,087
2,701,648 NYC HDC (Boulevard Towers)
6.500 08/15/2017 2,735,419
462,319 NYC HDC (Bridgeview III)
6.500 12/15/2017 468,241
488,215 NYC HDC (Cadman Plaza North)
7.000 12/15/2018 502,310
1,247,581 NYC HDC (Cadman Towers)
6.500 11/15/2018 1,270,637
183,049 NYC HDC (Candia House)
6.500 06/15/2018 179,387
3,511,604 NYC HDC (Clinton Towers)
6.500 07/15/2017 3,555,570
299,804 NYC HDC (Contello III)
7.000 12/15/2018 309,038
1,448,878 NYC HDC (Cooper Gramercy)
6.500 08/15/2017 1,466,989
1,105,483 NYC HDC (Court Plaza)
6.500 08/15/2017 1,125,404
1,659,285 NYC HDC (Crown Gardens)
7.250 01/15/2019 1,742,648
3,520,554 NYC HDC (East Midtown Plaza)
6.500 11/15/2018 3,566,427
3,393,631 NYC HDC (Esplanade Gardens)
7.000 01/15/2019 3,499,275
81,027 NYC HDC (Essex Terrace)
6.500 07/15/2018 79,504
496,372 NYC HDC (Forest Park Crescent)
6.500 12/15/2017 502,667
1,618,163 NYC HDC (Gouverneur Gardens)
7.034 02/15/2019 1,673,861
356,275 NYC HDC (Heywood Towers)
6.500 10/15/2017 360,739
4,017,870 NYC HDC (Hudsonview Terrace)
6.500 09/15/2017 4,068,094
1,134,926 NYC HDC (Janel Towers)
6.500 09/15/2017 1,149,113
396,457 NYC HDC (Kingsbridge Arms)
6.500 08/15/2017 401,413
225,185 NYC HDC (Kingsbridge Arms)
6.500 11/15/2018 228,104
1,214,952 NYC HDC (Leader House)
6.500 03/15/2018 1,230,370
1,695,358 NYC HDC (Lincoln-Amsterdam)
7.250 11/15/2018 1,780,092
202,409 NYC HDC (Middagh St. Studio Apartments)
6.500 01/15/2018 204,982
2,638,737 NYC HDC (Montefiore Hospital Hsg. Sec. II)
6.500 10/15/2017 2,671,800
895,000 NYC HDC (Multifamily Hsg.), Series A
5.750 11/01/2018 864,006
100,000 NYC HDC (Multifamily Hsg.), Series A
5.850 05/01/2025 95,793
38,880,000 NYC HDC (Multifamily Hsg.), Series A
6.600 04/01/2030 40,515,682
30,000 NYC HDC (Multifamily Hsg.), Series A
7.300 06/01/2010 31,477
1,145,000 NYC HDC (Multifamily Hsg.), Series A
7.350 06/01/2019 1,202,158
3,275,000 NYC HDC (Multifamily Hsg.), Series B
5.850 05/01/2026 3,143,214
4,390,000 NYC HDC (Multifamily Hsg.), Series B
5.850 05/01/2026 4,202,327
775,000 NYC HDC (Multifamily Hsg.), Series C
5.700 05/01/2031 720,641
854,781 NYC HDC (New Amsterdam House)
6.500 08/15/2018 838,618
873,777 NYC HDC (New Amsterdam House)
6.500 08/15/2018 873,899
1,060,742 NYC HDC (Riverbend)
6.500 11/15/2018 1,074,681
6,524,642 NYC HDC (Riverside Park Community)
7.250 11/15/2018 6,852,440
464,016 NYC HDC (RNA House)
7.000 12/15/2018 478,429
666,124 NYC HDC (Robert Fulton Terrace)
6.500 12/15/2017 674,658
242,478 NYC HDC (Rosalie Manning Apartments)
7.034 11/15/2018 250,791
644,839 NYC HDC (Scott Tower)
7.000 12/15/2018 641,531
884,634 NYC HDC (Seaview Towers)
6.500 01/15/2018 895,878
</TABLE>
15 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 1,645,875 NYC HDC (Sky View Towers)
6.500 % 11/15/2018 $ 1,667,206
3,135,000 NYC HDC (South Bronx Cooperatives)
8.100 09/01/2023 3,236,856
364,917 NYC HDC (St. Martin Tower)
6.500 11/15/2018 369,647
1,680,654 NYC HDC (Stevenson Commons)
6.500 05/15/2018 1,702,134
481,400 NYC HDC (Strycker's Bay Apartments)
7.034 11/15/2018 476,394
1,683,790 NYC HDC (Tivoli Towers)
6.500 01/15/2018 1,705,410
228,723 NYC HDC (Town House West)
6.500 01/15/2018 231,631
351,439 NYC HDC (Tri-Faith House)
7.000 01/15/2019 362,292
1,491,871 NYC HDC (University River View)
6.500 08/15/2017 1,510,789
447,855 NYC HDC (Washington Square Southeast)
7.000 01/15/2019 459,254
403,736 NYC HDC (West Side Manor)
6.500 11/15/2018 408,969
4,424,118 NYC HDC (West Village)
6.500 11/15/2013 4,472,076
258,903 NYC HDC (Westview Apartments)
6.500 10/15/2017 262,202
597,602 NYC HDC (Woodstock Terrace)
7.034 02/15/2019 591,961
5,235,000 NYC HDC, Series B
5.875 11/01/2018 5,069,522
24,100,000 NYC Health & Hospital Corp.
5.250 02/15/2017 21,251,621
26,500,000 NYC Health & Hospital Corp. LEVRRS
6.242 (f) 02/15/2011 26,201,875
5,875,000 NYC Health & Hospital Corp. RITES (a)
0.067 (f) 02/15/2020 2,668,425
300,000 NYC IDA (A Very Special Place)
5.750 01/01/2029 242,895
3,600,000 NYC IDA (Acme Architectural Products)
6.375 11/01/2019 3,247,128
1,035,000 NYC IDA (ALA Realty)
7.500 12/01/2010 1,064,694
1,450,000 NYC IDA (ALA Realty)
8.375 12/01/2015 1,565,101
680,000 NYC IDA (A-Lite Vertical Products)
6.750 11/01/2009 637,099
1,330,000 NYC IDA (A-Lite Vertical Products)
7.500 11/01/2019 1,260,042
425,000 NYC IDA (Allied Metal)
6.375 12/01/2014 398,641
940,000 NYC IDA (Allied Metal)
7.125 12/01/2027 885,386
3,500,000 NYC IDA (Amboy Properties)
6.750 06/01/2020 3,318,805
2,595,000 NYC IDA (American Airlines)
5.400 07/01/2019 2,258,740
29,260,000 NYC IDA (American Airlines)
5.400 07/01/2020 25,374,857
17,685,000 NYC IDA (American Airlines)
6.900 08/01/2024 18,043,475
1,255,000 NYC IDA (Amplaco Group)
7.250 11/01/2008 1,142,050
2,645,000 NYC IDA (Amplaco Group)
8.125 11/01/2018 2,406,950
1,635,000 NYC IDA (Atlantic Paste & Glue Co.)
6.000 11/01/2007 1,547,854
4,620,000 NYC IDA (Atlantic Paste & Glue Co.)
6.625 11/01/2019 4,214,364
1,160,000 NYC IDA (Atlantic Veal & Lamb)
8.375 12/01/2016 1,223,835
525,000 NYC IDA (Bark Frameworks)
6.000 11/01/2007 499,453
1,500,000 NYC IDA (Bark Frameworks)
6.750 11/01/2019 1,384,620
11,480,000 NYC IDA (Berkeley Carroll School)
6.100 11/01/2028 10,090,461
500,000 NYC IDA (Blood Center)
7.200 05/01/2012 (p) 544,465
3,000,000 NYC IDA (Blood Center)
7.250 05/01/2022 (p) 3,272,580
14,745,000 NYC IDA (British Airways)
5.250 12/01/2032 12,142,950
130,000 NYC IDA (Brooklyn Heights Montessori School)
8.400 09/01/2002 130,231
3,075,000 NYC IDA (Brooklyn Heights Montessori School)
8.500 01/01/2027 3,349,690
660,000 NYC IDA (Brooklyn Heights Montessori School)
8.900 09/01/2011 702,313
1,690,000 NYC IDA (Brooklyn Heights Montessori School)
9.200 09/01/2021 1,838,247
53,285,000 NYC IDA (Brooklyn Navy Yard Cogeneration Partners)
5.650 10/01/2027 47,011,757
107,825,000 NYC IDA (Brooklyn Navy Yard Cogeneration Partners)
5.750 10/01/2036 95,002,451
450,000 NYC IDA (Cellini Furniture Crafters)
6.625 11/01/2009 437,688
885,000 NYC IDA (Cellini Furniture Crafters)
7.125 11/01/2019 852,627
2,235,000 NYC IDA (Chardan Corp.)
7.750 11/01/2020 2,223,892
1,550,000 NYC IDA (CNC Associates NY)
6.500 11/01/2007 1,511,482
4,685,000 NYC IDA (CNC Associates NY)
7.500 11/01/2019 4,549,088
6,390,000 NYC IDA (College of Aeronautics)
5.500 05/01/2028 5,519,043
2,500,000 NYC IDA (College of New Rochelle)
5.750 09/01/2017 2,383,875
</TABLE>
16 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 2,900,000 NYC IDA (College of New Rochelle)
5.800 % 09/01/2026 $ 2,694,187
3,765,000 NYC IDA (Community Hospital of Brooklyn)
6.875 11/01/2010 3,506,495
3,975,000 NYC IDA (Comprehensive Care Management)
6.375 11/01/2028 3,456,978
1,575,000 NYC IDA (Comprehensive Care Management)
6.375 11/01/2028 1,374,282
1,770,000 NYC IDA (Comprehensive Care Management)
7.875 12/01/2016 1,833,065
1,810,000 NYC IDA (Comprehensive Care Management)
8.000 12/01/2011 1,895,323
7,750,000 NYC IDA (Crowne Plaza-LaGuardia)
6.000 11/01/2028 6,696,387
1,280,000 NYC IDA (Dioni)
6.000 11/01/2007 1,217,421
3,600,000 NYC IDA (Dioni)
6.625 11/01/2019 3,310,200
1,600,000 NYC IDA (Display Creations)
9.250 06/01/2008 1,673,456
310,000 NYC IDA (Eden II School)
7.750 06/01/2004 319,443
2,505,000 NYC IDA (Eden II School)
8.750 06/01/2019 2,668,000
10,255,000 NYC IDA (Elmhurst Parking Garage)
7.500 07/30/2003 10,765,494
3,705,000 NYC IDA (Friends Seminary School)
7.000 12/01/2017 3,803,516
1,000,000 NYC IDA (Fund for NYC Project)
7.625 07/01/2010 1,025,960
3,280,000 NYC IDA (Gabrielli Truck Sales)
8.125 12/01/2017 3,394,472
2,325,000 NYC IDA (Gateway School of NY)
6.200 11/01/2012 2,194,800
2,265,000 NYC IDA (Gateway School of NY)
6.500 11/01/2019 2,124,479
2,175,000 NYC IDA (Good Shepherd Services)
5.875 06/01/2014 2,037,301
1,235,000 NYC IDA (Graphic Artists)
8.250 12/30/2023 1,286,117
775,000 NYC IDA (Gutmann Plastics)
7.750 12/01/2007 769,660
2,235,000 NYC IDA (Hebrew Academy)
10.000 03/01/2021 2,416,571
690,000 NYC IDA (Herbert G. Birch Childhood Project)
7.375 02/01/2009 708,092
2,195,000 NYC IDA (Herbert G. Birch Childhood Project)
8.375 02/01/2022 2,350,625
80,000 NYC IDA (HiTech Res Rec)
8.750 08/01/2000 80,499
695,000 NYC IDA (HiTech Res Rec)
9.250 08/01/2008 721,473
5,000,000 NYC IDA (Holiday Inn/JFK Airport)
6.000 11/01/2028 4,320,250
220,000 NYC IDA (House of Spices)
9.000 10/15/2001 226,530
2,140,000 NYC IDA (House of Spices)
9.250 10/15/2011 2,254,533
3,170,000 NYC IDA (Japan Airlines)
6.000 11/01/2015 3,276,100
6,040,000 NYC IDA (JBFS)
6.750 12/15/2012 6,116,829
1,605,000 NYC IDA (Julia Gray) (w)
7.500 11/01/2020 1,588,212
1,675,000 NYC IDA (Koenig Iron Works)
8.375 12/01/2025 1,767,577
2,490,000 NYC IDA (L&M Optical Disc)
7.125 11/01/2010 2,362,462
1,000,000 NYC IDA (Lighthouse)
6.500 07/01/2022 (p) 1,060,650
3,025,000 NYC IDA (Little Red Schoolhouse)
6.750 11/01/2018 2,781,457
805,000 NYC IDA (Lucky Polyethylene Manufacturing Co.)
7.000 11/01/2009 792,353
2,995,000 NYC IDA (Lucky Polyethylene Manufacturing Co.)
7.800 11/01/2024 2,942,318
3,500,000 NYC IDA (Marymount Manhattan College)
7.000 07/01/2023 (p) 3,623,060
19,335,000 NYC IDA (MediSys Health Network)
6.250 03/15/2024 17,938,046
2,510,000 NYC IDA (Mesorah Publications) (w)
6.450 02/01/2011 2,489,267
4,790,000 NYC IDA (Mesorah Publications) (w)
6.950 02/01/2021 4,718,294
2,275,000 NYC IDA (Morrisons Pastry)
6.500 11/01/2019 2,085,538
5,320,000 NYC IDA (Nekboh)
9.625 05/01/2011 5,480,770
13,600,000 NYC IDA (Northwest Airlines)
6.000 06/01/2027 12,131,744
740,000 NYC IDA (NY Hostel Co.)
6.750 01/01/2004 737,573
4,400,000 NYC IDA (NY Hostel Co.)
7.600 01/01/2017 4,416,544
695,000 NYC IDA (NY Vanities & Manufacturing)
7.000 11/01/2009 666,227
1,405,000 NYC IDA (NY Vanities & Manufacturing)
7.500 11/01/2019 1,331,097
3,435,000 NYC IDA (Ohel Children's Home & Family Services)
8.250 03/15/2023 3,839,334
960,000 NYC IDA (Paradise Products)
7.125 11/01/2007 957,398
4,475,000 NYC IDA (Paradise Products)
8.250 11/01/2022 4,627,821
1,525,000 NYC IDA (Petrocelli Electric)
7.250 11/01/2007 1,542,263
425,000 NYC IDA (Petrocelli Electric)
7.250 11/01/2008 430,257
</TABLE>
17 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 3,780,000 NYC IDA (Petrocelli Electric)
8.000 % 11/01/2017 $ 3,896,424
940,000 NYC IDA (Petrocelli Electric)
8.000 11/01/2018 970,625
785,000 NYC IDA (Pop Display)
6.750 12/15/2004 804,994
2,645,000 NYC IDA (Pop Display)
7.900 12/15/2014 2,782,461
1,910,000 NYC IDA (Precision Gear)
6.375 11/01/2024 1,747,421
2,240,000 NYC IDA (Precision Gear)
6.375 11/02/2024 2,049,331
930,000 NYC IDA (Precision Gear)
7.625 11/01/2024 927,694
815,000 NYC IDA (PRFF)
7.000 10/01/2016 844,984
1,575,000 NYC IDA (Priority Mailers)
9.000 03/01/2010 1,642,441
710,000 NYC IDA (Promotional Slideguide)
7.500 12/01/2010 728,006
1,065,000 NYC IDA (Promotional Slideguide)
7.875 12/01/2015 1,109,815
665,000 NYC IDA (Psycho Therapy)
9.625 04/01/2010 681,625
3,705,000 NYC IDA (Riverdale Terrace Hsg. Devel. Fund)
6.250 11/01/2014 3,433,868
8,595,000 NYC IDA (Riverdale Terrace Hsg. Devel. Fund)
6.750 11/01/2028 7,841,734
2,170,000 NYC IDA (Sahadi Fine Foods)
6.250 11/01/2009 2,083,352
4,085,000 NYC IDA (Sahadi Fine Foods)
6.750 11/01/2019 3,901,543
115,000 NYC IDA (Sequins International)
8.500 04/30/2000 115,827
4,555,000 NYC IDA (Sequins International)
8.950 01/30/2016 4,813,314
4,255,000 NYC IDA (Special Needs Facilities Pooled Program)
6.650 07/01/2023 3,888,730
1,830,000 NYC IDA (Special Needs Pooled Program) (w)
7.125 08/01/2006 1,823,595
7,010,000 NYC IDA (Special Needs Pooled Program) (w)
7.875 08/01/2025 6,984,764
5,115,000 NYC IDA (St. Bernard's School)
7.000 12/01/2021 5,272,286
4,140,000 NYC IDA (St. Christopher Ottilie)
7.500 07/01/2021 4,311,769
585,000 NYC IDA (Streamline Plastics)
7.750 12/01/2015 598,835
1,275,000 NYC IDA (Streamline Plastics)
8.125 12/01/2025 1,327,683
130,000 NYC IDA (Summit School)
7.250 12/01/2004 131,977
1,485,000 NYC IDA (Summit School)
8.250 12/01/2024 1,556,295
15,050,000 NYC IDA (Terminal One Group Association)
6.000 01/01/2019 14,692,111
8,525,000 NYC IDA (Terminal One Group Association)
6.125 01/01/2024 8,346,827
12,250,000 NYC IDA (Touro College)
6.350 06/01/2029 11,386,497
4,485,000 NYC IDA (Ulano)
6.950 11/01/2019 4,320,400
90,000 NYC IDA (Ultimate Display)
8.750 10/15/2000 91,513
1,910,000 NYC IDA (Ultimate Display)
9.000 10/15/2011 2,013,274
10,465,000 NYC IDA (United Air Lines)
5.650 10/01/2032 9,050,132
1,000,000 NYC IDA (United Nations School)
6.350 12/01/2015 955,080
1,720,000 NYC IDA (Urban Health Plan)
6.250 09/15/2009 1,640,760
9,830,000 NYC IDA (Urban Health Plan)
7.050 09/15/2026 9,082,134
230,000 NYC IDA (Utleys)
6.625 11/01/2006 225,292
1,335,000 NYC IDA (Utleys)
7.375 11/01/2023 1,297,834
1,180,000 NYC IDA (Van Blarcom Closures)
7.125 11/01/2007 1,189,511
2,965,000 NYC IDA (Van Blarcom Closures)
8.000 11/01/2017 3,067,470
1,125,000 NYC IDA (Visual Display)
7.250 11/01/2008 1,068,244
2,375,000 NYC IDA (Visual Display)
8.325 11/01/2018 2,254,207
10,500,000 NYC IDA (Visy Paper)
7.800 01/01/2016 11,088,105
26,750,000 NYC IDA (Visy Paper)
7.950 01/01/2028 28,323,702
1,660,000 NYC IDA (World Casing Corp.)
6.700 11/01/2019 1,620,359
530,000 NYC Municipal Water Finance Authority
0.000 06/15/2018 173,909
530,000 NYC Municipal Water Finance Authority
0.000 06/15/2019 162,185
6,030,000 NYC Municipal Water Finance Authority
0.000 06/15/2020 1,725,967
75,000 NYC Municipal Water Finance Authority
5.500 06/15/2023 69,466
65,000 NYC Municipal Water Finance Authority
5.500 06/15/2027 59,550
40,000 NYC Municipal Water Finance Authority
5.750 06/15/2020 38,761
12,500,000 NYC Municipal Water Finance Authority IRS
5.920 (f) 06/15/2013 11,625,000
30,000,000 NYC Municipal Water Finance Authority IVRC (a)
6.045 (f) 06/15/2017 30,300,000
</TABLE>
18 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 10,000,000 NYC Municipal Water Finance Authority LEVRRS
6.611 % (f) 06/15/2019 $ 9,150,000
4,775,000 NYC Municipal Water Finance Authority RITES (a)
0.079 (f) 06/15/2021 2,186,759
2,805,000 NYC Municipal Water Finance Authority RITES (a)
0.079 (f) 06/15/2027 1,045,704
18,240,000 NYC Municipal Water Finance Authority RITES (a)
0.567 (f) 06/15/2030 7,513,421
5,000,000 NYC Municipal Water Finance Authority RITES (a)
0.579 (f) 06/15/2030 2,059,600
5,000,000 NYC Municipal Water Finance Authority RITES (a)
0.579 (f) 06/15/2030 2,059,600
4,030,000 NYC Municipal Water Finance Authority RITES (a)
0.579 (f) 06/15/2030 1,660,038
2,150,000 NYC TFA RITES (a)
0.067 (f) 08/15/2027 778,214
10,000,000 NYC TFA, Series B
4.750 11/15/2023 8,178,200
21,328,164 NYS Certificate of Lease (a)
5.875 01/02/2023 19,175,300
315,000 NYS COP (BOCES) (a)
7.875 10/01/2000 318,988
135,000 NYS COP (Hanson Redevelopment)
8.250 11/01/2001 137,766
10,000 NYS DA (Bethel Springvale Home)
6.000 02/01/2035 9,603
4,950,000 NYS DA (Brookdale Hospital)
5.200 02/15/2015 4,470,592
1,355,000 NYS DA (Brookdale Hospital)
5.300 02/15/2017 1,219,026
11,615,000 NYS DA (Brooklyn Hospital)
5.200 02/01/2039 9,849,404
14,360,000 NYS DA (Buena Vida Nursing Home)
5.250 07/01/2028 12,254,537
8,435,000 NYS DA (Center for Nursing)
5.550 08/01/2037 7,500,486
1,100,000 NYS DA (Chapel Oaks)
5.375 07/01/2017 1,009,954
2,855,000 NYS DA (Chapel Oaks)
5.450 07/01/2026 2,539,894
11,485,000 NYS DA (City University)
5.000 07/01/2028 9,298,026
21,180,000 NYS DA (City University)
5.250 07/01/2025 18,078,824
11,845,000 NYS DA (City University)
5.375 07/01/2024 10,346,608
20,000 NYS DA (Cornell University)
7.375 07/01/2030 20,678
4,750,000 NYS DA (Dept. of Health)
5.000 07/01/2024 3,920,222
410,000 NYS DA (Dept. of Health)
5.500 07/01/2020 372,756
525,000 NYS DA (Dept. of Health)
5.500 07/01/2021 475,613
150,000 NYS DA (Dept. of Health)
5.500 07/01/2025 134,259
265,000 NYS DA (Episcopal Health Services)
7.550 08/01/2029 270,859
6,480,000 NYS DA (Frances Schervier Home & Hospital)
5.500 07/01/2027 5,748,926
2,500,000 NYS DA (German Masonic Home)
6.000 08/01/2036 2,397,225
1,000,000 NYS DA (Grace Manor Health Care Facility)
6.150 07/01/2018 1,006,640
2,000,000 NYS DA (Highland Hospital)
5.450 08/01/2037 1,781,020
10,600,000 NYS DA (Hospital for Special Surgery)
5.000 02/01/2038 8,676,418
140,510,000 NYS DA (Insured Hospital)
0.000 08/15/2036 14,102,989
10,735,000 NYS DA (Interfaith Medical Center)
5.300 02/15/2019 9,466,982
38,650,000 NYS DA (Interfaith Medical Center)
5.400 02/15/2028 33,424,133
1,000,000 NYS DA (Jones Memorial Hospital)
5.375 08/01/2034 881,960
35,000 NYS DA (KMH Homes)
6.950 08/01/2031 36,457
1,800,000 NYS DA (L.I. University)
5.125 09/01/2023 1,530,702
1,400,000 NYS DA (L.I. University)
5.250 09/01/2028 1,195,320
4,380,000 NYS DA (Lakeside Home)
6.000 02/01/2037 4,197,485
25,000 NYS DA (Lakeside Memorial Hospital)
6.000 02/01/2021 24,458
9,650,000 NYS DA (LSSUNY) RITES (a)
3.944 (f) 02/01/2038 7,043,921
2,000,000 NYS DA (Marymount Manhattan College)
6.250 07/01/2029 1,980,060
7,400,000 NYS DA (Menorah Campus)
6.100 02/01/2037 7,201,606
23,300,000 NYS DA (Menorah Home & Hospital)
5.150 08/01/2038 19,576,660
3,115,000 NYS DA (Menorah Home & Hospital) RITES (a)
0.444 (f) 08/01/2038 1,282,259
25,000,000 NYS DA (Mental Health Services Facility)
5.125 08/15/2021 21,807,750
4,625,000 NYS DA (Mental Health) RITES (a)
0.079 (f) 02/15/2023 1,885,520
2,810,000 NYS DA (Mental Health) RITES (a)
0.079 (f) 02/15/2028 965,853
7,230,000 NYS DA (Methodist Hospital)
6.050 02/01/2034 7,143,168
3,465,000 NYS DA (Millard Hospital)
5.375 02/01/2032 3,070,510
1,500,000 NYS DA (Montefiore Medical Center)
5.500 08/01/2038 1,347,615
</TABLE>
19 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 2,850,000 NYS DA (Municipal Health Facilities) RITES (a)
0.079 % (f) 01/15/2023 $ 1,165,080
9,800,000 NYS DA (North General Hospital)
5.300 02/15/2019 8,662,220
29,440,000 NYS DA (NY & Presbyterian Hospital)
4.750 08/01/2027 23,585,267
15,120,000 NYS DA (NY & Presbyterian Hospital)
5.000 08/01/2032 12,536,597
2,200,000 NYS DA (NY & Presbyterian Hospital)
6.500 08/01/2034 2,242,812
10,700,000 NYS DA (NY Downtown Hospital)
5.300 02/15/2020 9,392,032
7,000,000 NYS DA (NY Hospital Medical Center)
5.600 02/15/2039 6,404,160
25,000 NYS DA (NY Medical College)
6.875 07/01/2021 26,729
14,157,461 NYS DA (Our Lady of Mercy Medical Center) Computer Lease
(a)6.200 08/15/2006 13,842,174
855,000 NYS DA (Park Ridge Hsg.)
7.850 02/01/2029 874,109
12,750,000 NYS DA (Rochester General Hospital) RITES (a)
4.630 (f) 08/01/2033 10,678,635
3,230,000 NYS DA (Rosalind & Joseph Gurwin Geriatric Home)
5.700 02/01/2037 3,014,462
5,000,000 NYS DA (Ryan-Clinton Community Health Center) (w)
6.100 07/01/2019 4,858,600
600,000 NYS DA (Sarah Neumann Home)
5.450 08/01/2027 544,002
1,900,000 NYS DA (Sarah Neumann Home)
5.500 08/01/2037 1,708,765
3,045,000 NYS DA (Special Surgery) RITES (a)
0.079 (f) 02/01/2028 1,104,239
4,500,000 NYS DA (St. Agnes Hospital)
5.300 02/15/2019 3,977,550
9,000,000 NYS DA (St. Agnes Hospital)
5.400 02/15/2025 7,870,770
3,000,000 NYS DA (St. Barnabas Hospital)
5.450 08/01/2035 2,680,200
1,500,000 NYS DA (St. Clare's Hospital)
5.300 02/15/2019 1,325,850
2,970,000 NYS DA (St. Clare's Hospital)
5.400 02/15/2025 2,597,354
2,580,000 NYS DA (St. James Mercy Hospital)
5.400 02/01/2038 2,226,617
1,500,000 NYS DA (St. Thomas Aquinas College)
5.250 07/01/2028 1,272,645
3,885,000 NYS DA (St. Vincent's Hospital)
5.300 07/01/2018 3,498,171
5,000 NYS DA (St. Vincent's Hospital)
7.400 08/01/2030 5,262
50,000 NYS DA (State University Educational Facilities)
0.000 05/15/2007 33,854
30,000 NYS DA (State University Educational Facilities)
6.000 05/15/2017 29,917
225,000 NYS DA (State University Educational Facilities)
7.000 05/15/2016 (p) 231,842
3,315,000 NYS DA (Suffolk County Judicial Facilities)
9.500 04/15/2014 3,818,118
3,990,000 NYS DA (Teresian House)
5.250 07/01/2017 3,475,091
5,000,000 NYS DA (Upstate Community Colleges)
5.000 07/01/2028 4,064,500
50,000 NYS DA (Upstate Community Colleges)
5.700 07/01/2021 46,599
1,700,000 NYS DA (Vassar Brothers)
5.375 07/01/2025 1,520,480
1,750,000 NYS DA (Victory Memorial Hospital)
5.375 08/01/2025 1,575,158
2,250,000 NYS DA (Victory Memorial Hospital)
5.500 08/01/2038 2,021,423
5,000,000 NYS DA (W.K. Nursing Home)
6.050 02/01/2026 4,881,850
4,200,000 NYS DA (W.K. Nursing Home)
6.125 02/01/2036 4,106,592
32,915,000 NYS DA (Wyckoff Heights Medical Center)
5.300 08/15/2021 28,714,388
1,840,000 NYS EFC (Consolidated Water)
7.150 11/01/2014 1,900,830
7,500,000 NYS EFC (NYS Water Services)
8.375 01/15/2020 7,730,400
8,955,000 NYS EFC (Occidental Petroleum)
5.700 09/01/2028 7,738,553
15,300,000 NYS EFC (Occidental Petroleum)
6.100 11/01/2030 14,009,751
1,700,000 NYS ERDA (Brooklyn Union Gas) RIBS
6.626 (f) 07/08/2026 1,413,125
7,000,000 NYS ERDA (Brooklyn Union Gas) RIBS
8.143 (f) 04/01/2020 7,341,250
10,300,000 NYS ERDA (Brooklyn Union Gas) RIBS
8.652 (f) 07/01/2026 12,205,500
11,040,000 NYS ERDA (Con Ed)
6.375 12/01/2027 11,078,971
290,000 NYS ERDA (Con Ed)
6.375 12/01/2027 291,523
40,000 NYS ERDA (Con Ed)
7.500 01/01/2026 40,491
100,000 NYS ERDA (Con Ed)
7.500 01/01/2026 101,232
9,350,000 NYS ERDA (Con Ed) RITES (a)
3.844 (f) 08/15/2020 7,507,676
10,000,000 NYS ERDA (LILCO)
5.150 03/01/2016 8,894,500
7,500,000 NYS ERDA (LILCO)
5.300 11/01/2023 6,480,225
300,000 NYS ERDA (LILCO)
5.300 10/01/2024 258,222
2,500,000 NYS ERDA (LILCO)
5.300 08/01/2025 2,144,450
</TABLE>
20 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 14,810,000 NYS ERDA (LILCO)
7.150 % 09/01/2019 (p) $ 15,855,734
4,775,000 NYS ERDA (LILCO)
7.150 09/01/2019 (p) 5,112,163
11,740,000 NYS ERDA (LILCO)
7.150 09/01/2019 12,308,333
2,575,000 NYS ERDA (LILCO)
7.150 06/01/2020 (p) 2,756,821
12,625,000 NYS ERDA (LILCO)
7.150 06/01/2020 13,236,176
7,545,000 NYS ERDA (LILCO)
7.150 12/01/2020 (p) 8,086,806
3,530,000 NYS ERDA (LILCO)
7.150 12/01/2020 3,700,887
10,975,000 NYS ERDA (LILCO)
7.150 02/01/2022 (p) 11,749,945
11,115,000 NYS ERDA (LILCO)
7.150 02/01/2022 (p) 11,899,830
4,135,000 NYS ERDA (LILCO)
7.150 02/01/2022 4,335,175
3,485,000 NYS ERDA (NIMO) RITES (a)
0.679 (f) 11/01/2025 1,673,358
400,000 NYS ERDA (NYSEG)
5.700 12/01/2028 371,064
30,000 NYS ERDA (NYSEG)
5.950 12/01/2027 28,874
3,625,000 NYS ERDA (RG&E) Residual Certificates (a)
6.220 (f) 09/01/2033 3,004,944
3,555,000 NYS HFA (Children's Rescue)
7.625 05/01/2018 3,689,592
2,200,000 NYS HFA (Dominican Village)
6.600 08/15/2027 2,295,172
4,205,000 NYS HFA (Fulton Manor)
6.100 11/15/2025 4,161,478
20,000 NYS HFA (General Hsg.)
6.600 11/01/2008 20,432
13,080,000 NYS HFA (HELP-Bronx Hsg.)
8.050 11/01/2005 13,356,904
1,210,000 NYS HFA (HELP-Suffolk Hsg.)
8.100 11/01/2005 1,211,609
2,000 NYS HFA (Hospital & Nursing Home)
6.875 11/01/2010 (p) 2,246
205,000 NYS HFA (Hospital & Nursing Home)
7.000 11/01/2017 227,755
5,000 NYS HFA (Meadow Manor)
7.750 11/01/2019 5,011
15,730,000 NYS HFA (Multifamily Hsg.)
0.000 11/01/2014 6,687,610
14,590,000 NYS HFA (Multifamily Hsg.)
0.000 11/01/2015 5,766,114
50,000 NYS HFA (Multifamily Hsg.)
0.000 11/01/2016 18,214
12,695,000 NYS HFA (Multifamily Hsg.)
0.000 11/01/2017 4,156,470
745,000 NYS HFA (Multifamily Hsg.)
5.250 11/15/2028 643,248
1,340,000 NYS HFA (Multifamily Hsg.)
5.300 08/15/2024 1,174,899
1,700,000 NYS HFA (Multifamily Hsg.)
5.300 11/15/2039 1,446,309
2,860,000 NYS HFA (Multifamily Hsg.)
5.350 08/15/2031 2,475,244
1,135,000 NYS HFA (Multifamily Hsg.)
5.400 08/15/2031 990,015
2,075,000 NYS HFA (Multifamily Hsg.)
5.500 08/15/2030 1,840,567
1,215,000 NYS HFA (Multifamily Hsg.)
5.550 08/15/2019 1,114,362
1,385,000 NYS HFA (Multifamily Hsg.)
5.600 08/15/2019 1,278,023
1,255,000 NYS HFA (Multifamily Hsg.)
5.650 08/15/2030 1,138,511
3,200,000 NYS HFA (Multifamily Hsg.)
5.650 08/15/2030 2,902,976
1,000,000 NYS HFA (Multifamily Hsg.)
5.650 08/15/2031 906,210
500,000 NYS HFA (Multifamily Hsg.)
5.700 08/15/2030 456,950
95,000 NYS HFA (Multifamily Hsg.)
5.950 08/15/2024 90,632
2,000,000 NYS HFA (Multifamily Hsg.)
6.050 08/15/2032 1,936,320
1,285,000 NYS HFA (Multifamily Hsg.)
6.100 11/15/2036 1,264,517
4,700,000 NYS HFA (Multifamily Hsg.)
6.125 08/15/2038 4,594,250
50,000 NYS HFA (Multifamily Hsg.)
6.200 08/15/2012 51,326
25,000 NYS HFA (Multifamily Hsg.)
6.200 08/15/2016 25,348
100,000 NYS HFA (Multifamily Hsg.)
6.250 08/15/2027 100,301
5,000,000 NYS HFA (Multifamily Hsg.)
6.300 08/15/2026 5,043,450
725,000 NYS HFA (Multifamily Hsg.)
6.300 02/15/2032 716,075
4,100,000 NYS HFA (Multifamily Hsg.)
6.350 08/15/2023 4,215,415
1,255,000 NYS HFA (Multifamily Hsg.)
6.400 11/15/2027 1,275,243
2,905,000 NYS HFA (Multifamily Hsg.)
6.500 08/15/2024 2,992,092
11,980,000 NYS HFA (Multifamily Hsg.)
6.700 08/15/2025 12,201,630
5,655,000 NYS HFA (Multifamily Hsg.)
6.750 11/15/2036 5,870,116
75,000 NYS HFA (Multifamily Hsg.)
6.950 08/15/2012 78,860
</TABLE>
21 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 2,790,000 NYS HFA (Multifamily Hsg.)
6.950 % 08/15/2024 $ 2,854,756
5,375,000 NYS HFA (Multifamily Hsg.)
7.050 08/15/2024 5,622,949
1,551,000 NYS HFA (Multifamily Hsg.)
7.450 11/01/2028 1,584,719
2,485,000 NYS HFA (Multifamily Hsg.)
7.550 11/01/2029 2,547,050
50,000 NYS HFA (Multifamily Hsg.)
7.850 02/15/2030 52,073
500,000 NYS HFA (Multifamily Hsg.)
8.000 11/01/2008 517,865
3,035,000 NYS HFA (NH&HC) RITES (a)
0.679 (f) 11/01/2016 1,872,352
15,000 NYS HFA (Nonprofit Hsg.)
6.400 11/01/2010 15,317
25,000 NYS HFA (Nonprofit Hsg.)
6.400 11/01/2013 25,529
20,000 NYS HFA (Nonprofit Hsg.)
6.600 11/01/2010 20,432
20,000 NYS HFA (Nonprofit Hsg.)
6.600 11/01/2013 20,429
5,000,000 NYS HFA (Phillips Village)
7.750 08/15/2017 5,340,150
8,920,000 NYS HFA (Service Contract)
5.375 03/15/2023 7,855,844
4,185,000 NYS HFA (Service Contract)
5.500 09/15/2022 3,771,438
5,600,000 NYS HFA (Service Contract)
5.500 09/15/2022 5,046,608
5,525,000 NYS HFA (Service Contract)
5.500 03/15/2025 4,934,654
125,000 NYS HFA (Service Contract)
5.875 09/15/2014 124,500
25,000 NYS HFA (Service Contract)
6.125 03/15/2020 24,641
255,000 NYS HFA (Service Contract)
6.500 03/15/2025 258,121
5,000 NYS HFA (Service Contract)
7.700 03/15/2006 5,261
1,010,000 NYS HFA (Shorehill Hsg.)
7.500 05/01/2008 1,021,514
1,395,000 NYS HFA, Series A
6.125 11/01/2020 1,396,214
80,000 NYS LGAC
5.500 04/01/2023 73,466
810,000 NYS LGSC (SCSB) (a)
7.375 12/15/2016 828,816
4,600,000 NYS Medcare (Brookdale Hospital Medical Center)
6.850 02/15/2017 (p) 5,064,002
1,015,000 NYS Medcare (Central Suffolk Hospital)
6.125 11/01/2016 910,313
2,255,000 NYS Medcare (Downtown Hospital)
6.800 02/15/2020 (p) 2,477,839
45,000 NYS Medcare (Hospital & Nursing Home)
5.750 08/15/2019 43,134
4,450,000 NYS Medcare (Hospital & Nursing Home)
5.850 02/15/2033 4,163,732
10,000 NYS Medcare (Hospital & Nursing Home)
6.200 08/15/2022 10,004
95,000 NYS Medcare (Hospital & Nursing Home)
6.200 02/15/2023 95,004
60,000 NYS Medcare (Hospital & Nursing Home)
6.375 08/15/2029 60,340
1,000,000 NYS Medcare (Hospital & Nursing Home)
6.375 08/15/2033 1,004,880
30,000 NYS Medcare (Hospital & Nursing Home)
6.500 02/15/2019 30,432
2,090,000 NYS Medcare (Hospital & Nursing Home)
6.500 02/15/2034 2,114,369
12,230,000 NYS Medcare (Hospital & Nursing Home)
6.650 08/15/2032 12,774,113
4,505,000 NYS Medcare (Hospital & Nursing Home)
7.400 11/01/2016 4,655,918
1,740,000 NYS Medcare (Hospital & Nursing Home)
9.000 02/15/2026 1,796,550
3,560,000 NYS Medcare (Hospital & Nursing Home)
9.375 11/01/2016 3,681,289
2,620,000 NYS Medcare (Hospital & Nursing Home)
0.000 11/01/2006 2,790,824
2,000,000 NYS Medcare (Insured Mortgage Nursing)
6.375 08/15/2024 (p) 2,161,620
70,000 NYS Medcare (Insured Mortgage Nursing)
6.500 11/01/2015 73,348
1,650,000 NYS Medcare (M.G. Nursing Home)
6.375 02/15/2035 1,660,626
630,000 NYS Medcare (Mental Health)
10.000 08/15/2018 152,271
600,000 NYS Medcare (Mental Health)
5.250 08/15/2023 528,066
250,000 NYS Medcare (Mental Health)
5.500 08/15/2024 227,593
890,000 NYS Medcare (Mental Health)
5.800 08/15/2022 853,715
305,000 NYS Medcare (Mental Health)
7.500 02/15/2021 319,341
295,000 NYS Medcare (Mental Health)
7.625 08/15/2017 312,505
3,330,000 NYS Medcare (Mental Health)
7.700 02/15/2018 3,341,422
35,000 NYS Medcare (Mental Health)
7.750 08/15/2011 36,793
220,000 NYS Medcare (Mental Health)
7.875 08/15/2015 222,750
1,725,000 NYS Medcare (Mental Health)
8.875 08/15/2007 1,731,107
25,000 NYS Medcare (Montefiore Medical Center)
5.750 02/15/2025 23,681
</TABLE>
22 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 3,000,000 NYS Medcare (NY & Presbyterian Hospital)
5.375 % 02/15/2025 $ 2,674,470
25,000 NYS Medcare (Secured Hospital)
6.250 02/15/2024 24,798
1,350,000 NYS Medcare (St. Charles Memorial Hospital)
6.375 08/15/2034 1,464,170
10,000 NYS Medcare (St. Luke's Hospital)
7.375 02/15/2019 10,233
22,000,000 NYS Medcare (St. Luke's Hospital) IVRC (a)
5.434 (f) 02/15/2029 18,645,000
12,500,000 NYS Medcare (St. Luke's Hospital) RITES (a)
4.572 (f) 02/15/2029 10,655,000
8,400,000 NYS Medcare (St. Luke's Hospital) RITES (a)
4.630 (f) 02/15/2029 7,160,160
5,750,000 NYS Medcare (St. Luke's Hospital) RITES (a)
4.630 (f) 02/15/2029 4,901,300
10,000,000 NYS Medcare (St. Luke's Hospital) RITES (a)
4.630 (f) 02/15/2029 8,524,000
5,925,000 NYS Medcare RITES (a)
3.844 (f) 02/15/2019 4,691,652
10,000,000 NYS Medcare RITES (a)
4.094 (f) 02/15/2025 7,783,600
10,000 NYS Power Authority
6.750 01/01/2018 10,448
1,000,000 NYS Thruway Authority
0.000 01/01/2003 860,780
2,000,000 NYS Thruway Authority
0.000 01/01/2004 1,630,640
260,000 NYS Thruway Authority
0.000 01/01/2005 200,455
25,000,000 NYS Thruway Authority Convertible INFLOS
5.195 (f) 01/01/2024 17,531,250
7,140,000 NYS Thruway Authority RITES (a)
0.067 (f) 01/01/2025 2,765,465
15,000 NYS UDC (Correctional Facilities)
0.000 01/01/2003 12,969
900,000 NYS UDC (Correctional Facilities)
0.000 01/01/2008 584,910
3,500,000 NYS UDC (Correctional Facilities)
5.000 01/01/2019 2,981,055
12,845,000 NYS UDC (Correctional Facilities)
5.000 01/01/2020 10,864,173
13,270,000 NYS UDC (Correctional Facilities)
5.000 01/01/2028 10,835,220
2,555,000 NYS UDC (Correctional Facilities)
5.250 01/01/2021 2,232,840
8,775,000 NYS UDC (Correctional Facilities)
5.375 01/01/2023 7,752,362
5,590,000 NYS UDC (Correctional Facilities)
5.375 01/01/2025 4,908,411
3,500,000 NYS UDC (Correctional Facilities)
5.375 01/01/2025 3,153,885
1,000,000 NYS UDC (Correctional Facilities)
5.500 01/01/2025 920,540
3,200,000 NYS UDC (Correctional Facilities) RITES (a)
0.079 (f) 01/01/2028 1,163,392
103,335,000 NYS UDC (South Mall)
0.000 01/01/2011 51,975,438
65,000 NYS UDC (South Mall)
0.000 01/01/2011 33,359
95,000 NYS UDC (South Mall)
0.000 01/01/2011 48,756
5,480,000 Oneida County IDA (Bonide Products)
6.250 11/01/2018 5,177,778
1,180,000 Oneida County IDA (Mobile Climate Control)
8.000 11/01/2008 1,237,596
2,825,000 Oneida County IDA (Mobile Climate Control)
8.750 11/01/2018 2,958,679
450,000 Oneida County IDA (Mohawk Valley Handicapped Services)
5.300 03/15/2019 400,275
740,000 Oneida County IDA (Mohawk Valley Handicapped Services)
5.350 03/15/2029 637,192
1,190,000 Oneida County IDA (Presbyterian Home)
5.250 03/01/2019 1,026,446
10,000 Oneida Healthcare Corp.
7.100 08/01/2011 10,419
130,000 Oneida Healthcare Corp.
7.200 08/01/2031 135,637
555,000 Onondaga County IDA (Coltec Industries)
7.250 06/01/2008 564,380
770,000 Onondaga County IDA (Coltec Industries)
9.875 10/01/2010 807,961
1,770,000 Onondaga County IDA (Community General Hospital)
5.500 11/01/2018 1,488,641
8,345,000 Onondaga County IDA (Community General Hospital)
6.625 01/01/2018 8,069,698
1,520,000 Onondaga County IDA (Gear Motion)
8.900 12/15/2011 1,564,278
6,765,000 Onondaga County IDA (Iroquois Nursing Home)
5.250 02/01/2039 5,673,535
5,000,000 Onondaga County IDA (Solvay Paperboard)
6.800 11/01/2014 4,872,050
32,400,000 Onondaga County IDA (Solvay Paperboard)
7.000 11/01/2030 31,972,320
750,000 Onondaga County IDA (Syracuse Home)
5.200 12/01/2018 645,780
27,850,000 Onondaga County Res Rec
6.875 05/01/2006 27,907,093
68,510,000 Onondaga County Res Rec
7.000 05/01/2015 69,991,871
995,000 Ontario County IDA (Ontario Design)
6.500 11/01/2005 960,046
3,250,000 Orange County IDA (Glen Arden)
5.625 01/01/2018 2,706,600
4,590,000 Orange County IDA (Glen Arden)
5.700 01/01/2028 3,711,245
22,450,000 Orange County IDA (Glen Arden)
8.875 01/01/2025 (p) 26,464,285
</TABLE>
23 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 7,600,000 Orange County IDA (Kingston Manufacturing)
8.000 % 11/01/2017 $ 7,834,688
495,000 Orange County IDA (Mental Retardation Project)
7.800 07/01/2011 507,459
8,000,000 Orange County IDA (Tuxedo Place)
7.000 08/01/2032 7,718,640
2,500,000 Orange County IDA (Tuxedo Place)
7.000 08/01/2033 2,411,725
2,770,000 Oswego County IDA (Bishop's Common)
5.375 02/01/2049 2,352,783
4,750,000 Oswego County IDA (SLRHF)
5.400 02/01/2038 4,099,393
3,260,000 Oswego IDA (Seneca Hill Manor)
5.650 08/01/2037 2,943,682
2,970,000 Otsego County IDA (Bassett Healthcare Project)
5.350 11/01/2020 2,695,691
1,280,000 Otsego County IDA (Bassett Healthcare Project)
5.375 11/01/2020 1,166,349
3,000,000 Otsego County IDA (Hartwick College)
5.500 07/01/2019 2,724,870
10,900,000 Peekskill IDA (Drum Hill)
6.375 10/01/2028 9,534,993
1,403,659 Peekskill IDA (Karta)
9.000 07/01/2010 1,426,216
1,080,000 Pilgrim Village HDC (Multifamily Hsg.)
6.800 02/01/2021 1,090,519
10,000 Port Authority NY/NJ (JFK International Air Terminal)
5.750 12/01/2025 9,528
465,000 Port Authority NY/NJ (KIAC)
6.750 10/01/2019 471,519
7,650,000 Port Authority NY/NJ (US Airways)
9.000 12/01/2006 8,012,840
590,000 Port Authority NY/NJ (US Airways)
9.000 12/01/2010 617,984
22,785,000 Port Authority NY/NJ (US Airways)
9.125 12/01/2015 23,901,237
45,000 Port Authority NY/NJ, 67th Series
6.875 01/01/2025 45,537
220,000 Port Authority NY/NJ, 68th Series
7.250 02/15/2025 222,851
70,000 Port Authority NY/NJ, 69th Series
7.125 06/01/2025 71,456
85,000 Port Authority NY/NJ, 70th Series
7.250 08/01/2025 87,026
15,000 Port Authority NY/NJ, 70th Series
7.250 08/01/2025 15,358
65,000 Port Authority NY/NJ, 71st Series
6.500 01/15/2026 66,767
70,000 Port Authority NY/NJ, 73rd Series
6.750 04/15/2026 72,073
15,000 Port Authority NY/NJ, 73rd Series
6.750 04/15/2026 15,444
15,000 Port Authority NY/NJ, 74th Series
6.750 08/01/2026 15,602
85,000 Port Authority NY/NJ, 76th Series
6.500 11/01/2026 86,117
4,255,000 Port Jervis IDA (Franciscan Health Partnership)
5.500 11/01/2016 (p) 3,621,643
60,000 Portchester CDC (Southport)
7.300 08/01/2011 60,721
25,000 Portchester CDC (Southport)
7.375 08/01/2022 25,320
1,990,000 Putnam County IDA (Brewster Plastics)
8.500 12/01/2016 2,085,480
15,000 Rensselaer Hsg. Authority (Renwyck)
7.650 01/01/2011 15,923
30,000 Rensselaer IDA (Millbrook Millwork)
8.500 12/15/2002 30,282
15,000,000 Rensselaer Municipal Leasing Corp.
6.900 06/01/2024 15,519,900
40,000 Riverhead HDC
8.250 08/01/2010 41,022
20,990,000 Rochester Hsg. Authority (Crossroads Apartments)
7.700 01/01/2017 22,409,344
6,790,000 Rochester Museum & Science Center
6.125 12/01/2015 6,277,898
2,000,000 Rockland County IDA (Dominican College)
6.250 05/01/2028 1,794,600
2,090,000 Rockland County IDA (Dominican College)
8.000 03/01/2013 (p) 2,319,545
1,705,000 Rockland County IDA (SWMA)
5.750 12/15/2018 1,610,117
1,395,000 Saratoga County IDA (ARC)
8.400 03/01/2013 1,481,434
490,000 Schroon Lake Fire District (a)
7.250 03/01/2009 496,826
175,000 Scotia Hsg. Authority (Holyrood House)
7.000 06/01/2009 180,388
25,000 SONYMA, Series 27
6.450 04/01/2004 25,759
5,000 SONYMA, Series 28
6.450 10/01/2020 4,895
10,000,000 SONYMA, Series 28
6.650 04/01/2022 10,167,200
8,830,000 SONYMA, Series 28
7.050 10/01/2023 9,105,496
610,000 SONYMA, Series 30
5.800 10/01/2025 574,272
10,000 SONYMA, Series 30-A
4.375 10/01/2023 9,643
16,005,000 SONYMA, Series 30-B
6.650 10/01/2025 16,388,320
100,000 SONYMA, Series 30-C1
5.850 10/01/2025 94,292
15,000 SONYMA, Series 30-C2
5.800 10/01/2025 14,215
11,510,000 SONYMA, Series 36-A
6.625 04/01/2025 11,826,755
</TABLE>
24 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 12,895,000 SONYMA, Series 38 RITES (a)
5.394 % (f) 04/01/2025 $ 12,711,891
80,000 SONYMA, Series 40-A
6.350 04/01/2021 80,007
7,595,000 SONYMA, Series 40-A
6.700 04/01/2025 7,833,483
75,000 SONYMA, Series 40-B
6.400 10/01/2012 77,017
5,885,000 SONYMA, Series 40-B
6.600 04/01/2025 6,042,188
40,000 SONYMA, Series 42
6.000 10/01/2023 40,356
13,605,000 SONYMA, Series 42
6.650 04/01/2026 14,008,388
110,000 SONYMA, Series 42
6.650 04/01/2026 113,687
11,990,000 SONYMA, Series 44
7.500 04/01/2026 12,933,613
100,000 SONYMA, Series 46
6.500 04/01/2013 103,127
65,000 SONYMA, Series 46
6.600 10/01/2019 67,025
23,050,000 SONYMA, Series 46
6.650 10/01/2025 23,780,455
535,000 SONYMA, Series 48
6.100 04/01/2025 529,500
6,690,000 SONYMA, Series 50
6.625 04/01/2025 6,902,474
180,000 SONYMA, Series 52
6.100 04/01/2026 179,980
915,000 SONYMA, Series 52
6.100 04/01/2026 905,447
30,000 SONYMA, Series 53
5.900 10/01/2017 29,672
100,000 SONYMA, Series 54
6.100 10/01/2015 101,215
55,000 SONYMA, Series 54
6.200 10/01/2026 55,205
45,000 SONYMA, Series 54
6.200 10/01/2026 45,167
6,015,000 SONYMA, Series 58
6.400 04/01/2027 6,143,420
540,000 SONYMA, Series 60
6.000 10/01/2022 529,443
12,635,000 SONYMA, Series 60
6.050 04/01/2026 12,373,329
9,700,000 SONYMA, Series 63
6.125 04/01/2027 9,686,129
10,180,000 SONYMA, Series 65
5.850 10/01/2028 9,548,331
3,000,000 SONYMA, Series 67
5.700 10/01/2017 2,873,790
11,660,000 SONYMA, Series 67
5.800 10/01/2028 10,859,658
200,000 SONYMA, Series 69
5.400 10/01/2019 180,846
4,725,000 SONYMA, Series 69 RITES (a)
4.287 (f) 10/01/2028 3,702,794
1,255,000 SONYMA, Series 7
9.250 10/01/2014 1,264,174
940,000 SONYMA, Series 71
5.350 10/01/2018 861,792
10,150,000 SONYMA, Series 71 RITES (a)
4.087 (f) 04/01/2029 7,671,573
5,500,000 SONYMA, Series 73 RITES (a)
1.107 (f) 10/01/2028 2,566,520
1,675,000 SONYMA, Series 73A
5.300 10/01/2028 1,451,656
10,830,000 SONYMA, Series 79
5.300 04/01/2029 9,249,686
3,000,000 SONYMA, Series 84
5.900 04/01/2022 2,905,860
400,000 SONYMA, Series 8-A
6.875 04/01/2017 400,224
95,000 SONYMA, Series EE-2
7.450 10/01/2010 96,982
190,000 SONYMA, Series EE-2
7.500 04/01/2016 193,971
245,000 SONYMA, Series EE-3
7.700 10/01/2010 251,078
15,000 SONYMA, Series EE-3
7.750 04/01/2016 15,372
85,000 SONYMA, Series EE-4
7.750 10/01/2010 87,373
350,000 SONYMA, Series HH-2
7.700 10/01/2009 355,156
10,000 SONYMA, Series HH-2
7.850 04/01/2022 10,212
5,000 SONYMA, Series II (a)
0.000 04/01/2006 3,085
5,000 SONYMA, Series II (a)
0.000 04/01/2008 2,631
25,000 SONYMA, Series MM-1
7.750 10/01/2005 25,381
100,000 SONYMA, Series MM-2
7.700 04/01/2005 101,359
15,000 SONYMA, Series NN
7.550 10/01/2017 15,314
15,000 SONYMA, Series QQ
7.700 10/01/2012 15,331
70,000 SONYMA, Series RR
7.700 10/01/2010 71,981
5,000 SONYMA, Series TT
6.950 10/01/2002 5,156
50,000 SONYMA, Series VV
0.000 10/01/2023 8,376
70,000 SONYMA, Series VV
7.375 10/01/2011 72,445
</TABLE>
25 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 2,370,000 St. Lawrence County IDA (Clarkson University)
5.500 % 07/01/2029 $ 2,064,791
2,805,000 St. Lawrence County IDA (Hepburn Medical Center)
5.375 12/01/2019 2,511,260
3,595,000 St. Lawrence County IDA (Hepburn Medical Center)
5.500 12/01/2024 3,204,655
725,000 Suffolk County GO
6.375 11/01/2016 (p) 770,218
1,310,000 Suffolk County IDA (ACLDD)
6.500 03/01/2018 1,228,177
490,000 Suffolk County IDA (ALIA - ACLDD)
6.375 06/01/2014 456,832
395,000 Suffolk County IDA (ALIA - ADD) (w)
6.950 12/01/2014 390,999
2,085,000 Suffolk County IDA (ALIA - DDI)
6.375 06/01/2014 1,943,866
850,000 Suffolk County IDA (ALIA - DDI) (w)
6.950 12/01/2014 841,390
1,080,000 Suffolk County IDA (ALIA - FREE)
6.375 06/01/2014 1,006,895
2,455,000 Suffolk County IDA (ALIA - FREE) (w)
6.950 12/01/2014 2,430,131
870,000 Suffolk County IDA (ALIA - IGHL)
6.375 06/01/2014 811,110
840,000 Suffolk County IDA (ALIA - IGHL) (w)
6.950 12/01/2014 831,491
515,000 Suffolk County IDA (ALIA - LIHIA)
6.375 06/01/2014 480,140
1,000,000 Suffolk County IDA (ALIA - LIHIA) (w)
6.950 12/01/2014 989,870
845,000 Suffolk County IDA (ALIA - MCH)
6.375 06/01/2014 787,802
2,540,000 Suffolk County IDA (ALIA - MCH) (w)
6.950 12/01/2014 2,514,270
365,000 Suffolk County IDA (ALIA - UCPAGS)
6.375 06/01/2014 340,293
1,460,000 Suffolk County IDA (ALIA - UCPAGS) (w)
6.950 12/01/2014 1,445,210
515,000 Suffolk County IDA (ALIA - WORCA) (w)
6.950 12/01/2014 509,783
23,000,000 Suffolk County IDA (Camelot Village) (w)
7.900 11/01/2031 23,018,170
865,000 Suffolk County IDA (CPCLI)
6.000 06/01/2009 823,523
3,230,000 Suffolk County IDA (CPCLI)
6.875 06/01/2024 3,028,610
390,000 Suffolk County IDA (CPCLI)
7.250 11/01/2007 390,519
1,825,000 Suffolk County IDA (CPCLI)
8.250 11/01/2010 1,896,869
1,505,000 Suffolk County IDA (DDI)
6.250 03/01/2009 1,444,454
5,270,000 Suffolk County IDA (DDI)
7.250 03/01/2024 5,014,458
655,000 Suffolk County IDA (DDI)
7.375 03/01/2003 654,882
9,675,000 Suffolk County IDA (DDI)
8.750 03/01/2023 10,417,847
2,000,000 Suffolk County IDA (Dowling College)
6.625 06/01/2024 1,923,500
3,115,000 Suffolk County IDA (Dowling College)
6.700 12/01/2020 3,046,657
920,000 Suffolk County IDA (Dowling College)
8.250 12/01/2020 (p) 968,870
445,000 Suffolk County IDA (Fil-Coil Corp.)
9.000 12/01/2015 442,775
1,060,000 Suffolk County IDA (Fil-Coil Corp.)
9.250 12/01/2025 1,054,700
3,860,000 Suffolk County IDA (Huntington First Aid Squad)
6.650 11/01/2017 3,709,537
12,265,000 Suffolk County IDA (Huntington Res Rec)
5.950 10/01/2009 12,743,580
13,190,000 Suffolk County IDA (Huntington Res Rec)
6.000 10/01/2010 13,716,413
14,170,000 Suffolk County IDA (Huntington Res Rec)
6.150 10/01/2011 14,864,047
17,155,000 Suffolk County IDA (Huntington Res Rec)
6.250 10/01/2012 18,071,592
3,250,000 Suffolk County IDA (Jefferson's Ferry)
6.125 11/01/2029 3,152,500
6,500,000 Suffolk County IDA (Jefferson's Ferry)
7.200 11/01/2019 6,378,190
10,000,000 Suffolk County IDA (Jefferson's Ferry)
7.250 11/01/2028 9,785,800
195,000 Suffolk County IDA (Microwave Power)
7.750 06/30/2002 197,424
4,320,000 Suffolk County IDA (Microwave Power)
8.500 06/30/2022 4,558,248
2,500,000 Suffolk County IDA (Nissequogue Cogeneration Partners)
5.500 01/01/2023 2,132,425
715,000 Suffolk County IDA (OBPWC)
7.500 11/01/2022 746,346
290,000 Suffolk County IDA (Rainbow Chimes)
7.000 05/01/2007 287,999
2,210,000 Suffolk County IDA (Rainbow Chimes)
8.000 11/01/2024 2,213,426
1,670,000 Suffolk County IDA (Rimland Facilities) (a)
6.375 (v) 12/01/2009 1,670,234
1,260,000 Suffolk County IDA (Wireless Boulevard Realty)
7.875 12/01/2012 1,308,044
4,005,000 Suffolk County IDA (Wireless Boulevard Realty)
8.625 12/01/2026 4,265,846
2,890,000 Sunnybrook EHC
11.250 12/01/2014 2,991,208
9,590,000 Syracuse Hsg. Authority (LRRHCF)
5.800 08/01/2037 8,963,294
625,000 Syracuse Hsg. Authority (LRRHCF)
7.500 08/01/2010 595,219
</TABLE>
26 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 1,990,000 Syracuse Hsg. Authority (Seneca Heights)
7.500 % 12/01/2007 $ 1,771,100
4,720,000 Syracuse Hsg. Authority (Seneca Heights)
8.500 12/01/2017 4,160,491
470,000 Syracuse IDA (Anoplate Corp.)
7.250 11/01/2007 479,588
2,195,000 Syracuse IDA (Anoplate Corp.)
8.000 11/01/2022 2,270,859
40,975,000 Syracuse IDA (James Square)
0.000 08/01/2025 7,598,404
7,050,000 Syracuse IDA (Pavilion on James Senior Hsg.)
7.500 08/01/2030 6,752,772
1,150,000 Syracuse IDA (Rockwest Center I) (a)
8.000 06/01/2013 1,158,625
980,000 Syracuse IDA (Rockwest Center II) (a)
7.625 12/01/2010 833,000
1,470,000 Syracuse IDA (Rockwest Center II) (a)
8.625 12/01/2015 1,249,500
8,085,000 Syracuse IDA (Spectrum Medsystems Corp.)
8.500 11/01/2010 7,993,154
25,000 34th Street BID (34th Street Partnership)
5.500 01/01/2023 22,518
3,750,000 Tompkins County IDA (Ithacare Center)
6.200 02/01/2037 3,737,325
50,000 Tompkins County IDA (Kendall at Ithaca)
7.250 06/01/2003 49,854
10,000 Tompkins County IDA (Kendall at Ithaca)
7.625 06/01/2009 10,020
2,790,000 Tompkins County IDA (Kendall at Ithaca)
7.875 06/01/2015 2,833,747
5,735,000 Tompkins County IDA (Kendall at Ithaca)
7.875 06/01/2024 5,872,124
220,000 Tompkins Healthcare Corp. (Reconstruction Home)
10.800 02/01/2007 254,375
60,000 Tompkins Healthcare Corp. (Reconstruction Home)
10.800 02/01/2028 72,293
730,000 Tonawanda SCHC
6.500 12/01/2010 705,100
3,525,000 TSASC, Inc. (TFABs)
6.000 07/15/2020 3,386,362
1,505,000 TSASC, Inc. (TFABs)
6.000 07/15/2020 1,445,808
1,940,000 TSASC, Inc. (TFABs)
6.000 07/15/2021 1,861,915
23,000,000 TSASC, Inc. (TFABs)
6.250 07/15/2034 22,044,350
84,200,000 TSASC, Inc. (TFABs) (w)
6.375 07/15/2039 81,489,602
65,000 Tupper Lake HDC
8.125 10/01/2010 65,164
995,000 UCP/HCA of Chemung County
6.600 08/01/2022 1,019,616
4,870,000 UFA Devel. Corp. (Loretto-Utica Corp.)
5.950 07/01/2035 4,627,377
725,000 Ulster County IDA (Benedictine Hospital)
6.400 06/01/2014 678,122
1,945,000 Ulster County IDA (Benedictine Hospital)
6.450 06/01/2024 1,747,563
360,000 Ulster County IDA (Brooklyn Bottling)
7.800 06/30/2002 363,874
1,915,000 Ulster County IDA (Brooklyn Bottling)
8.600 06/30/2022 2,002,190
4,000,000 Ulster County IDA (Kingston Hospital)
5.650 11/15/2024 3,561,120
1,465,000 Ulster County IDA (Mid-Hsg. Family Health)
5.350 07/01/2023 1,276,616
2,250,000 Ulster County Res Rec
6.000 03/01/2014 2,242,350
2,470,000 Union Hsg. Authority (Methodist Homes)
7.625 11/01/2016 2,587,325
110,000 Union Hsg. Authority (Methodist Homes)
8.150 04/01/2000 110,636
120,000 Union Hsg. Authority (Methodist Homes)
8.250 04/01/2001 123,368
150,000 Union Hsg. Authority (Methodist Homes)
8.350 04/01/2002 157,193
2,010,000 Union Hsg. Authority (Methodist Homes)
8.500 04/01/2012 2,169,192
20,005,000 United Nations Devel. Corp., Series B
5.600 07/01/2026 17,966,090
17,150,000 United Nations Devel. Corp., Series C
5.600 07/01/2026 15,420,080
540,000 Upper Mohawk Valley Water Finance Authority
5.750 08/01/2029 515,284
100,000 Utica GO
5.900 12/01/2002 98,524
580,000 Utica GO
6.000 01/15/2006 554,961
560,000 Utica GO
6.250 01/15/2007 538,294
3,000,000 Utica IDA (Utica College)
5.750 08/01/2028 2,704,620
25,000 Utica SCHC (Brook Apartments)
0.000 07/01/2002 19,759
3,410,000 Utica SCHC (Brook Apartments)
0.000 07/01/2026 272,936
20,000 Valley Health Devel. Corp.
7.850 08/01/2035 21,375
375,000 Valley Health Devel. Corp.
11.300 02/01/2007 423,409
165,000 Valley Health Devel. Corp.
11.300 02/01/2023 185,054
950,000 Vigilant EHL (Thomaston Volunteer Fire Dept.)
7.500 11/01/2012 983,184
8,440,000 Warren & Washington Counties IDA (Adirondack Res Rec)
8.000 12/15/2012 7,797,125
8,555,000 Warren & Washington Counties IDA (Adirondack Res Rec)
8.200 12/15/2010 8,079,855
</TABLE>
27 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 8,965,000 Warren & Washington Counties IDA (Adirondack Res Rec)
8.200 % 12/15/2010 $ 8,467,084
100,000 Watervliet EHC
8.000 11/15/2003 100,814
95,000 Watervliet EHC
8.000 11/15/2004 95,773
95,000 Watervliet EHC
8.000 11/15/2005 95,773
100,000 Watervliet EHC
8.000 11/15/2006 100,814
100,000 Watervliet EHC
8.000 11/15/2007 100,814
100,000 Watervliet EHC
8.000 11/15/2008 100,814
100,000 Watervliet EHC
8.000 11/15/2009 100,814
315,000 Wayne County IDA (ARC)
7.250 03/01/2003 315,252
2,925,000 Wayne County IDA (ARC)
8.375 03/01/2018 3,073,005
1,870,000 Westchester County IDA (Beth Abraham Hospital)
8.375 12/01/2025 2,017,674
1,285,200 Westchester County IDA (Clearview School)
9.375 01/01/2021 1,385,420
2,220,000 Westchester County IDA (JBFS)
6.750 12/15/2012 2,239,647
1,560,000 Westchester County IDA (JDAM)
6.750 04/01/2016 1,542,980
3,250,000 Westchester County IDA (Lawrence Hospital)
5.000 01/01/2028 2,522,000
800,000 Westchester County IDA (Lawrence Hospital)
5.125 01/01/2018 674,168
1,750,000 Westchester County IDA (Rippowam-Cisqua School)
5.750 06/01/2029 1,591,450
65,000 Westchester County IDA (Westchester Airport)
5.950 08/01/2024 59,487
19,860,000 Westchester County Tobacco Asset Securitization Corp.
0.000 (v) 07/15/2029 16,409,524
70,275,000 Westchester County Tobacco Asset Securitization Corp.
0.000 (v) 07/15/2039 36,221,843
1,815,000 Yates County IDA (Keuka College)
8.750 08/01/2015 2,022,745
975,000 Yates County IDA (Keuka College)
9.000 08/01/2011 1,037,488
3,825,000 Yates County IDA (SSMH)
5.650 02/01/2039 3,459,483
4,685,000 Yonkers IDA (Hudson Scenic Studio)
6.625 11/01/2019 4,331,704
4,520,000 Yonkers IDA (Michael Malotz Skilled Nursing Pavilion)
5.650 02/01/2039 4,173,587
1,590,000 Yonkers IDA (Philipsburgh Hall) (w)
7.500 11/01/2030 1,593,657
720,000 Yonkers IDA (St. Joseph's Hospital)
7.500 12/30/2003 726,228
3,270,000 Yonkers IDA (St. Joseph's Hospital)
8.500 12/30/2013 3,496,284
2,200,000 Yonkers IDA (St. Joseph's Hospital), Series 98-A
6.150 03/01/2015 1,965,326
2,100,000 Yonkers IDA (St. Joseph's Hospital), Series 98-B
6.150 03/01/2015 1,875,993
1,000,000 Yonkers IDA (St. Joseph's Hospital), Series 98-C
6.200 03/01/2020 878,570
250,000 Yonkers IDA (Westchester School)
7.375 12/30/2003 254,178
3,375,000 Yonkers IDA (Westchester School)
8.750 12/30/2023 3,646,654
800,000 Yonkers Parking Authority
6.000 06/15/2018 747,160
1,215,000 Yonkers Parking Authority
6.000 06/15/2024 1,105,905
655,000 Yonkers Parking Authority
7.750 12/01/2004 672,377
- -----------------
3,947,227,235
- -----------------
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--8.3%
400,000 American Samoa Power Authority
6.800 09/01/2000 404,824
400,000 American Samoa Power Authority
6.850 09/01/2001 409,888
400,000 American Samoa Power Authority
6.900 09/01/2002 414,524
500,000 American Samoa Power Authority
6.950 09/01/2003 523,475
500,000 American Samoa Power Authority
7.000 09/01/2004 528,030
800,000 American Samoa Power Authority
7.100 09/01/2001 821,584
800,000 American Samoa Power Authority
7.200 09/01/2002 834,856
3,675,000 Guam Airport Authority, Series B
6.600 10/01/2010 3,838,097
60,730,000 Guam Airport Authority, Series B
6.700 10/01/2023 62,654,534
2,995,000 Guam EDA (Harmon Village Apartments) (b) (d)
9.375 11/01/2018 2,396,359
2,530,000 Guam EDA (Royal Socio Apartments)
9.500 11/01/2018 2,544,472
1,500,000 Guam GO, Series A
5.400 11/15/2018 1,325,805
1,500,000 Guam Hsg. Corp., Series A
5.750 09/01/2031 1,401,240
837,866 Puerto Rico Dept. of Corrections Equipment Lease (a)
8.000 04/17/2003 839,333
17,800,000 Puerto Rico Electric Power Authority LEVRRS
7.478 (f) 07/01/2023 19,357,500
</TABLE>
28 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 834,900 Puerto Rico Family Dept. Furniture Lease (a)
8.000 % 08/18/2003 $ 839,810
2,643,177 Puerto Rico Family Dept. Furniture Lease (a)
12.725 08/12/2003 2,859,336
30,000 Puerto Rico GO
5.875 07/01/2018 31,411
1,600,000 Puerto Rico GO RITES (a)
6.740 (f) 07/01/2022 1,578,000
40,250,000 Puerto Rico GO YCN
7.982 (f) 07/01/2020 38,891,563
1,000,000 Puerto Rico GO YCN (a)
7.745 (f) 07/01/2015 (p) 1,092,960
5,599,899 Puerto Rico Health Dept. Computer Lease (a)
7.438 03/26/2003 5,564,788
790,000 Puerto Rico HFA (Affordable Hsg.)
6.250 04/01/2029 792,141
10,000 Puerto Rico HFC
7.300 10/01/2006 10,252
210,000 Puerto Rico HFC
7.500 10/01/2015 215,384
5,240,000 Puerto Rico HFC
7.500 04/01/2022 5,375,192
25,000 Puerto Rico HFC
7.650 10/15/2022 25,729
185,000 Puerto Rico IMEPCF (Instituto Medico)
9.500 04/01/2003 187,329
557,951 Puerto Rico Industrial Commission Computer Lease (a)
8.000 03/26/2003 559,882
1,215,000 Puerto Rico Infrastructure
7.500 07/01/2009 1,230,090
660,000 Puerto Rico Infrastructure
7.750 07/01/2008 668,336
165,000 Puerto Rico Infrastructure
7.900 07/01/2007 167,104
2,500,000 Puerto Rico ITEMECF (Ana G. Mendez University)
5.375 02/01/2029 2,135,925
485,000 Puerto Rico ITEMECF (Mennonite General Hospital)
5.625 07/01/2017 419,186
985,000 Puerto Rico ITEMECF (Mennonite General Hospital)
5.625 07/01/2027 811,936
12,205,000 Puerto Rico ITEMECF (Mennonite General Hospital)
6.500 07/01/2026 11,418,510
5,000 Puerto Rico ITEMECF (Polytech University)
5.700 08/01/2013 4,815
750,000 Puerto Rico ITEMECF (Ryder Memorial Hospital)
6.400 05/01/2009 765,893
2,150,000 Puerto Rico ITEMECF (Ryder Memorial Hospital)
6.600 05/01/2014 2,100,185
5,250,000 Puerto Rico ITEMECF (Ryder Memorial Hospital)
6.700 05/01/2024 5,213,880
4,000,000 Puerto Rico ITEMECF (San Lucas & Cristo Redentor Hospitals)
5.750 06/01/2029 3,551,440
172,492 Puerto Rico Medical Services Equipment Lease (a) (b)
7.300 02/27/2003 171,458
592,049 Puerto Rico Medical Services Ventilator Lease (a)
7.500 04/01/2003 590,652
15,000 Puerto Rico Port Authority
7.300 07/01/2007 15,014
4,300,000 Puerto Rico Port Authority (American Airlines)
6.250 06/01/2026 4,167,474
1,520,000 Puerto Rico Port Authority (American Airlines)
6.300 06/01/2023 1,484,478
15,124,296 Puerto Rico Public Buildings Authority Computer Lease (a)
6.528 05/01/2004 14,873,082
788,582 Puerto Rico Rio Grande Computer Lease (a)
8.000 09/02/2003 777,070
2,247,808 Puerto Rico Rio Grande Equipment Lease (a)
8.800 10/13/2003 2,302,587
127,454 Puerto Rico Rio Grande Vehicle Lease (a)
9.000 01/23/2003 126,227
537,240 Puerto Rico San Sebastian Garage Lease (a)
10.000 09/16/2005 567,933
355,013 Puerto Rico State Courts Vehicle Lease (a)
8.000 03/26/2003 358,748
16,550,000 Puerto Rico Telephone Authority RIBS
6.560 (f) 01/16/2015 17,646,438
15,000,000 Puerto Rico Telephone Authority RIBS (a)
6.382 (f) 01/01/2022 16,240,800
2,000,000 University of V.I.
6.250 12/01/2029 1,969,280
1,205,000 University of V.I.
7.250 10/01/2004 1,327,067
3,570,000 University of V.I.
7.700 10/01/2019 (p) 4,065,802
5,175,000 University of V.I.
7.750 10/01/2024 (p) 5,904,572
298,000 V.I. GO (Hugo Insurance Claims Program)
7.750 10/01/2006 314,095
60,000 V.I. HFA
6.450 03/01/2016 61,024
3,000,000 V.I. Public Finance Authority
5.500 10/01/2014 2,801,340
5,000,000 V.I. Public Finance Authority
5.500 10/01/2015 4,627,100
1,250,000 V.I. Public Finance Authority
5.500 10/01/2022 1,099,738
7,500,000 V.I. Public Finance Authority
5.625 10/01/2025 6,649,950
7,750,000 V.I. Public Finance Authority
5.875 10/01/2018 7,100,705
6,500,000 V.I. Public Finance Authority
6.000 10/01/2022 5,962,515
18,000,000 V.I. Public Finance Authority
6.125 10/01/2029 17,424,360
7,750,000 V.I. Public Finance Authority
6.500 10/01/2024 7,673,740
1,135,000 V.I. Public Finance Authority
7.125 10/01/2004 (p) 1,205,211
</TABLE>
29 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C>
Face
Market Value
Amount
Coupon Maturity See Note 1
====================================================================================================================================
$ 1,735,000 V.I. Public Finance Authority
7.375 % 10/01/2010 (p) $ 1,966,518
13,550,000 V.I. Public Finance Authority Computer Lease (a)
6.250 01/01/2005 13,125,750
75,000 V.I. Water & Power Authority
5.300 07/01/2018 66,686
2,515,000 V.I. Water & Power Authority
5.300 07/01/2021 2,200,927
2,500,000 V.I. Water & Power Authority
5.500 07/01/2017 2,220,625
5,655,000 V.I. Water & Power Authority
7.400 07/01/2011 (p) 5,943,066
6,850,000 V.I. Water & Power Authority
7.600 01/01/2012 (p) 7,454,924
- --------------
345,292,554
- --------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$4,516,970,748)--102.7%
4,292,519,789
- ----------------------------------------------------------------------------------------------------------------------------------
- --------------
LIABILITIES IN EXCESS OF OTHER
ASSETS--(2.7%)
(111,290,646)
- --------------
NET ASSETS
- --100.0%
$4,181,229,143
==============
</TABLE>
FOOTNOTES TO STATEMENT OF INVESTMENTS
(a) Illiquid security--See Note 5 of Notes to Financial Statements.
(b) Non-income accruing security.
(c) Partial interest payment received.
(d) Issuer is in default.
(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 $874,845,440, or
19.98% of the Fund's total assets as of December 31, 1999.
(p) This issue has been prerefunded to an earlier date.
(v) Represents the current interest rate for a variable or increasing rate
security.
(w) When-issued security or forward purchase commitment to be delivered and
settled after December 31, 1999.
See accompanying Notes to Financial Statements.
30 ROCHESTER FUND MUNICIPALS
<PAGE>
FOOTNOTES TO STATEMENT OF INVESTMENTS Continued
==========================================================================
PORTFOLIO ABBREVIATIONS
To simplify the listing of securities in the Statement of Investments,
abbreviations are used per the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ACLDD Adults and Children with Learning and LSSUNY
Lutheran Social Services of Upstate New York
Developmental Disabilities MCH
Maryhaven Center of Hope
ADD Aid to the Developmentally Disabled MTA
Metropolitan Transportation Authority
ALIA Alliance of Long Island Agencies NH&HC
Nursing Home and Health Care
ARC Association of Retarded Citizens NIMO
Niagara Mohawk Power Corporation
ASMF Amsterdam Sludge Management Facility NJ New
Jersey
BID Business Improvement District NSCFGA North
Shore Child and Family Guidance Association
BOCES Board of Cooperative Educational Services NY New
York
CAB Capital Appreciation Bond NYC New
York City
CARS Complimentary Auction Rate Security NYS New
York State
CDC Community Development Corporation NYSEG New
York State Electric and Gas
Con Ed Consolidated Edison Company OBPWC Ocean
Bay Park Water Corporation
COP Certificates of Participation PRFF Puerto
Rican Family Foundation
CPCLI Community Programs Center of Long Island Res Rec
Resource Recovery Facility
DA Dormitory Authority RG&E
Rochester Gas and Electric
DDI Developmental Disabilities Institute RIBS
Residual Interest Bonds
DIAMONDS Direct Investment of Accrued Municipals RIT
Rochester Institute of Technology
EDA Economic Development Authority RITES
Residual Interest Tax Exempt Security
EFC Environmental Facilities Corporation SCHC Senior
Citizen Housing Corporation
EHC Elderly Housing Corporation SCSB
Schuyler Community Services Board
EHL Engine Hook and Ladder SLCD School
for Language and Communication
ERDA Energy Research and Development Authority
Development
FREE Family Residences and Essential Enterprises SLRHF St.
Luke Residential Healthcare Facility
GJSR Gurwin Jewish Senior Residences SONYMA State
of New York Mortgage Agency
GO General Obligation SSMH
Soldiers and Sailors Memorial Hospital
GRIA Greater Rochester International Airport SUNY State
University of New York
HDC Housing Development Corporation SWMA Solid
Waste Management Authority
HELP Homeless Economic Loan Program TFA
Transitional Finance Authority
HFA Housing Finance Agency TFABs
Tobacco Flexible Amortization Bonds
HFC Housing Finance Corporation UCPAGS United
Cerebral Palsy Association of Greater Suffolk
IDA Industrial Development Agency UCP/HCA United
Cerebral Palsy and Handicapped Children's
IGHL Independent Group Home for Living
Association
IMEPCF Industrial, Medical and Environmental Pollution UDC Urban
Development Corporation
Control Facilities UFA Utica
Free Academy
INFLOS Inverse Floating Rate Securities V.I. United
States Virgin Islands
IRS Inverse Rate Security WORCA
Working Organization for Retarded Children and Adults
ITEMECF Industrial, Tourist, Educational, Medical and WWH
Wyandach/Wheatley Heights
Environmental Community Facilities YCN Yield
Curve Note
IVRC Inverse Variable Rate Certificate YCR Yield
Curve Receipt
JBFS Jewish Board of Family Services YMCA Young
Men's Christian Association
JCC Jewish Community Center
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
LIHIA Long Island Head Injury Association
LILCO Long Island Lighting Corporation
LRRHCF Loretto Rest Residential Health Care Facility
</TABLE>
31 ROCHESTER FUND MUNICIPALS
<PAGE>
FOOTNOTES TO STATEMENT OF INVESTMENTS Continued
==========================================================================
INDUSTRY CONCENTRATIONS December 31, 1999
Distribution of investments by industry of issue, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
INDUSTRY MARKET VALUE
PERCENT
- ---------------------------------------------------------------------------------------------
Hospital/Healthcare $701,852,878
16.4 %
Multifamily Housing 396,644,715
9.3
Electric Utilities 350,755,968
8.2
General Obligation 314,344,796
7.3
Municipal Leases 288,720,362
6.7
Special Assessment 270,448,382
6.3
Adult Living Facilities 236,880,143
5.5
Manufacturing, Non-Durable Goods 220,206,959
5.1
Single Family Housing 219,179,652
5.1
Marine/Aviation Facilities 215,988,270
5.0
Resource Recovery 214,162,874
5.0
Nonprofit Organization 181,110,534
4.2
Manufacturing, Durable Goods 154,098,548
3.6
Higher Education 138,794,342
3.2
Water Utilities 92,000,804
2.2
Education 91,830,039
2.1
Sales Tax Revenue 68,138,024
1.6
Highways/Railways 56,334,559
1.3
Other 81,027,940
1.9
- ---------------------------------
$4,292,519,789
100.0 %
=================================
</TABLE>
================================================================================
SUMMARY OF RATINGS December 31, 1999 Unaudited
Distribution of investments by rating category, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
<S>
<C>
RATING
PERCENT
- ---------------------------------------------------------------------------------------------
AAA
22.6 %
AA
12.9
A
22.4
BBB
19.7
BB
1.6
B
0.7
CCC
0.0
CC
0.0
C
0.0
Not
Rated
20.1
- -----------
100.0 %
===========
</TABLE>
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.
32 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1999
<TABLE>
<CAPTION>
<S>
<C>
=====================================================================================================
ASSETS
Investments, at value (cost $4,516,970,748)--see accompanying
statement $4,292,519,789
- ------------------------------------------------------------------------------------------------------
Cash
4,069,723
- ------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest
72,894,297
Shares of beneficial interest
sold 8,170,488
Investments
sold
1,450,205
Other
52,491
- ---------------
Total
assets
4,379,156,993
======================================================================================================
LIABILITIES
Payables and other liabilities:
Investments
purchased
114,441,298
Note payable to bank (interest rate 5.625% at
12/31/99) 62,700,000
Shares of beneficial interest
redeemed 18,987,348
Trustees'
compensation
1,025,131
Dividends
181,093
Other
592,980
- ---------------
Total
liabilities
197,927,850
======================================================================================================
NET
ASSETS
$4,181,229,143
===============
=====================================================================================================
COMPOSITION OF NET ASSETS
Paid-in
capital
$4,514,701,382
- ------------------------------------------------------------------------------------------------------
Undistributed net investment
income 1,944,562
- ------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment
transactions (110,965,842)
- ------------------------------------------------------------------------------------------------------
Net unrealized depreciation on
investments (224,450,959)
- ---------------
Net
assets
$4,181,229,143
===============
=====================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$3,288,073,809 and 195,977,917 shares of beneficial interest outstanding) $16.78
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering
price) $17.62
- ------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $673,384,711 and
40,159,104 shares of beneficial interest outstanding) $16.77
- ------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $219,770,623 and
13,110,029 shares of beneficial interest outstanding) $16.76 </TABLE>
See accompanying Notes to Financial Statements.
33 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
<S>
<C>
======================================================================================================
INVESTMENT INCOME
Interest
$289,084,667
======================================================================================================
EXPENSES
Management
fees
20,655,696
- ------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class
A
5,198,680
Class
B
6,346,313
Class
C
2,211,014
- ------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class
A
1,428,360
Class
B
347,367
Class
C
88,252
- ------------------------------------------------------------------------------------------------------
Accounting service
fees 1,327,586
- ------------------------------------------------------------------------------------------------------
Trustees'
compensation
522,376
- ------------------------------------------------------------------------------------------------------
Custodian fees and
expenses 409,548
- ------------------------------------------------------------------------------------------------------
Other
1,153,885
- ------------------------------------------------------------------------------------------------------
Interest
1,832,697
- --------------
Total
expenses
41,521,774
Less expenses paid
indirectly (153,276)
- --------------
Net
expenses
41,368,498
======================================================================================================
NET INVESTMENT
INCOME
247,716,169
======================================================================================================
REALIZED AND UNREALIZED LOSS
Net realized loss on
investments (41,602,735)
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on
investments (471,101,165)
- ---------------
Net realized and unrealized
loss (512,703,900)
=======================================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(264,987,731)
===============
</TABLE>
See accompanying Notes to Financial Statements.
34 ROCHESTER FUND MUNICIPALS
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S>
<C> <C>
Year Ended December
31,
1999 1998
===========================================================================================================================
OPERATIONS
Net investment
income
$247,716,169 $193,865,904
- ---------------------------------------------------------------------------------------------------------------------------
Net realized
loss
(41,602,735) (4,390,468)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation (471,101,165) 30,719,166
- ---------------------------------------
Net increase (decrease) in net assets resulting from
operations (264,987,731) 220,194,602
===========================================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class
A
(204,429,524) (175,270,973)
Class
B
(30,543,603) (14,972,126)
Class
C
(10,772,109) (5,050,170)
===========================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest transactions:
Class
A
261,241,800 565,102,760
Class
B
255,736,157 320,057,221
Class
C
72,307,141 123,988,335
==========================================================================================================================
NET ASSETS
Total
increase
78,552,131 1,034,049,649
- ---------------------------------------------------------------------------------------------------------------------------
Beginning of
period
4,102,677,012 3,068,627,363
- ---------------------------------------
End of period (including undistributed net investment income of $1,944,562
and excess of distributions over net investment income of $26,371, respectively)
$4,181,229,143 $4,102,677,012
=======================================
</TABLE>
See accompanying Notes to Financial Statements.
35 ROCHESTER FUND MUNICIPALS
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C> <C>
CLASS A Year Ended December 31, 1999
1998 1997 1996 (1) 1995
================================================================================================================================
PER SHARE OPERATING DATA
Net asset value, beginning of period $18.81
$18.67 $18.00 $18.18 $16.31
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.04
1.04 1.10 (2) 1.10 (2) 1.10 (2)
Net realized and unrealized gain (loss) (2.03)
0.15 0.67 (0.18) 1.86
- --------------------------------------------------------------------
Total income (loss) from investment operations (0.99)
1.19 1.77 0.92 2.96
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.04)
(1.04) (1.10) (1.10) (1.09)
Undistributed net investment income - prior year -----
(0.01) ----- ----- -----
- --------------------------------------------------------------------
Total dividends and distributions to shareholders (1.04)
(1.05) (1.10) (1.10) (1.09)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.78
$18.81 $18.67 $18.00 $18.18
====================================================================
================================================================================================================================
Total Return, at Net Asset Value (3) (5.51)%
6.52% 10.20% 5.37% 18.58%
================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $3,288
$3,435 $2,848 $2,308 $2,145
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $3,559
$3,161 $2,539 $2,191 $2,005
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (4)
Net investment income 5.78%
5.50% 5.96% 6.20% 6.25%
Expenses 0.77%
0.78% (5) 0.76% 0.82% 0.82%
Expenses, net of indirect expenses and interest (6) (7) 0.73%
0.75% 0.74% 0.77% 0.78%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (8) 30%
25% 5% 13% 15%
</TABLE>
(1) On January 4, 1996, OppenheimerFunds, Inc. became the investment advisor
to the Fund.
(2) Based on average shares outstanding for the period.
(3) Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less than
one full year.
(4) Annualized for periods of less than one full year.
(5) Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
(6) During the periods shown above, the Fund's interest expense was
substantially offset by the incremental interest income generated on bonds
purchased with borrowed funds.
(7) Prior year ratios have been restated to conform to current year
presentation.
(8) 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, 1999, were
$1,930,375,402 and $1,337,576,882, respectively.
See accompanying Notes to Financial Statements.
36 ROCHESTER FUND MUNICIPALS
<PAGE>
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
CLASS B Year Ended December 31,
1999 1998 1997 (9)
==================================================================================================================
PER SHARE OPERATING DATA
Net asset value, beginning of period
$18.79 $18.65 $17.89
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
0.89 0.89 0.74 (2)
Net realized and unrealized gain (loss)
(2.03) 0.14 0.76
- -------------------------------------------
Total income (loss) from investment operations
(1.14) 1.03 1.50
- -------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income
(0.88) (0.89) (0.74)
Undistributed net investment income - prior year
- ----- ----- -----
- -------------------------------------------
Total dividends and distributions to shareholders
(0.88) (0.89) (0.74)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
$16.77 $18.79 $18.65
==========================================
==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE (3)
(6.27)% 5.61% 8.74%
==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)
$673 $494 $172
- -------------------------------------------------------------------------------------------------------------------
Average net assets (in millions)
$635 $329 $76
- -------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (4)
Net investment income
4.91% 4.57% 4.91%
Expenses
1.64% 1.64% (5) 1.59%
Expenses, net of indirect expenses and interest (6) (7)
1.59% 1.61% 1.58%
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (8)
30% 25% 5%
</TABLE>
(1) On January 4, 1996, OppenheimerFunds, Inc. became the investment advisor
to the Fund.
(2) Based on average shares outstanding for the period.
(3) Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less
than one full year.
(4) Annualized for periods of less than one full year.
(5) Expense ratio has not been grossed up to reflect the effect of expenses
paid indirectly.
(6) During the periods shown above, the Fund's interest expense was
substantially offset by the incremental interest income generated on bonds
purchased with borrowed funds.
(7) Prior year ratios have been restated to conform to current year
presentation.
(8) 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, 1999, were
$1,930,375,402 and $1,337,576,882, respectively.
(9) For the period from March 17, 1997 (inception of offering) to December 31,
1997.
See accompanying Notes to Financial Statements.
37 ROCHESTER FUND MUNICIPALS
<PAGE>
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
CLASS C Year Ended December 31,
1999 1998 1997 (9)
===============================================================================================================
PER SHARE OPERATING DATA
Net asset value, beginning of period
$18.79 $18.66 $17.89
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
0.89 0.89 0.74 (2)
Net realized and unrealized gain (loss)
(2.04) 0.13 0.77
- -------------------------------------------
Total income (loss) from investment operations
(1.15) 1.02 1.51
- ---------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income
(0.88) (0.89) (0.74)
Undistributed net investment income - prior year
- ----- ----- -----
- -------------------------------------------
Total dividends and distributions to shareholders
(0.88) (0.89) (0.74)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period
$16.76 $18.79 $18.66
===========================================
===============================================================================================================
TOTAL RETURN, AT NET ASSET VALUE (3)
(6.32)% 5.56% 8.80%
===============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)
$220 $174 $49
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in millions)
$221 $111 $21
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (4)
Net investment income
4.92% 4.57% 4.92%
Expenses
1.63% 1.63% (5) 1.58%
Expenses, net of indirect expenses and interest (6) (7)
1.58% 1.59% 1.56%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (8)
30% 25% 5%
</TABLE>
(1) On January 4, 1996, OppenheimerFunds, Inc. became the investment advisor
to the Fund.
(2) Based on average shares outstanding for the period.
(3) Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less
than one full year.
(4) Annualized for periods of less than one full year.
(5) Expense ratio has not been grossed up to reflect the effect of expenses
paid indirectly.
(6) During the periods shown above, the Fund's interest expense was
substantially offset by the incremental interest income generated on bonds
purchased with borrowed funds.
(7) Prior year ratios have been restated to conform to current year
presentation.
(8) 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, 1999, were
$1,930,375,402 and $1,337,576,882, respectively.
(9) For the period from March 17, 1997 (inception of offering) to December 31,
1997.
See accompanying Notes to Financial Statements.
38 ROCHESTER FUND MUNICIPALS
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
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 as high a level of income
exempt from federal income tax and New York State and New York City personal
income taxes as is consistent with its investment policies and prudent
investment management while seeking preservation of shareholders' capital. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B and Class C shares. Class A shares are
sold at their offering price, which is normally net asset value plus an initial
sales charge. Class B and Class C shares are sold without an initial sales
charge but may be subject to a contingent deferred sales charge (CDSC). All
classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own expenses directly attributable to
that class and exclusive voting rights with respect to matters affecting that
class. Classes A, B and C have separate distribution and/or service plans. 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.
- --------------------------------------------------------------------------------
SECURITIES 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 after the transaction date; however,
the Fund may, from time to time, purchase 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 segregated 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, 1999, the Fund had
entered into outstanding when-issued or forward commitments of $113,728,615.
- --------------------------------------------------------------------------------
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. As of December 31, 1999, securities with an
aggregate market value of $6,445,619, representing 0.15% of the Fund's net
assets, were in default.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), 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. As of December 31, 1999, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $110,651,000, which expires between 2000 and 2007.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. In June, 1998, the Fund adopted an unfunded retirement
plan for the Fund's independent Board of 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, 1999, a provision of $351,858 was made for the Fund's
projected benefit obligations, resulting in an accumulated liability of $510,934
as of December 31, 1999.
In January, 1995, the then existing Board of Trustees of the Fund adopted
an unfunded 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'
compensation, amounted to $65,335 for the year ended December 31, 1999. Payments
of $67,500 were made to retired trustees during the year ended December 31,
1999. As of December 31, 1999, the Fund had recognized an accumulated liability
of $506,016.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of annual compensation they are entitled to receive from the Fund. Under
the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Board of Trustees in shares of one
or more Oppenheimer funds selected by the trustee. The amount paid to the Board
of Trustees under the plan will be determined based upon the performance of the
selected funds. Deferral of trustees' fees under the plan will not affect the
net assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net investment income per share.
39 ROCHESTER FUND MUNICIPALS
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 as of trade date. Original
issue discount is accreted and premium is amortized in accordance with federal
income tax requirements. For municipal bonds acquired after April 30, 1993, on
disposition or maturity, taxable ordinary income is recognized to the extent of
the lesser of gain or market discount that would have accrued over the holding
period. 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.
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.
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.
================================================================================
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>
<S> <C> <C>
<C> <C>
Year Ended December 31, 1999
Year Ended December 31, 1998
Shares Amount
Shares Amount
- ------------------------------------------------------------------------------------------------------------
CLASS A
Sold 44,147,686 $802,354,647
44,149,177 $828,290,736
Dividends and/or distributions reinvested 6,141,926 110,148,797
5,034,167 94,396,140
Redeemed (36,952,671) (651,261,644)
(19,054,473) (357,584,116)
- ----------------------------------------------------------------
Net increase 13,336,941 $261,241,800
30,128,871 $565,102,76
================================================================
- ------------------------------------------------------------------------------------------------------------
CLASS B
Sold 18,541,189 $337,286,647
17,637,855 $330,613,878
Dividends and/or distributions reinvested 1,104,735 19,720,059
514,626 9,646,518
Redeemed (5,768,976) (101,270,549)
(1,077,120) (20,203,175)
- ----------------------------------------------------------------
Net increase 13,876,948 $255,736,157
17,075,361 $320,057,221
================================================================
- ------------------------------------------------------------------------------------------------------------
CLASS C
Sold 7,558,824 $137,341,468
7,026,163 $131,632,053
Dividends and/or distributions reinvested 417,688 7,463,417
187,218 3,511,228
Redeemed (4,122,846) (72,497,744)
(594,948) (11,154,946)
- ---------------------------------------------------------------
Net increase 3,853,666 $72,307,141
6,618,433 $123,988,335
===============================================================
</TABLE>
40 ROCHESTER FUND MUNICIPALS
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
3. SECURITIES INFORMATION
As of December 31, 1999, net unrealized depreciation on securities of
$224,450,959 was composed of gross appreciation of $75,959,680, and gross
depreciation of $300,410,639.
As of December 31, 1999, unrealized appreciation (depreciation) based on
cost of securities for federal income tax purposes of $4,517,285,576 was:
Gross unrealized appreciation $ 75,852,676
Gross unrealized depreciation (300,618,463)
-------------
Net unrealized depreciation $(224,765,787)
=============
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. 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 average daily net assets, 0.52% on the next $150
million, 0.47% on the next $1.75 billion of average daily net assets, 0.46% on
the next $3 billion, and 0.45% of average daily net assets over $5 billion. The
Fund's management fee for the year ended December 31, 1999 was 0.47% of average
annual net assets for each class of shares.
- --------------------------------------------------------------------------------
ACCOUNTING FEES. 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, 1999, the Fund
paid $1,327,586 to the Manager for accounting and pricing services.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for other
Oppenheimer funds. 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, 1999, the Fund paid OFS $1,863,979.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C> <C>
Aggregate Class A
Commissions Commissions Commissions
Front-End Front-End on Class
A on Class B on Class C
Sales Charges Sales Charges
Shares Shares Shares
on Class A Retained by Advanced
by Advanced by Advanced by
Year Ended Shares Distributor Distributor(1)
Distributor(1) Distributor(1)
- ------------------------------------------------------------------------------------------------------------------
December 31, 1999 $15,666,528 $2,234,617
$2,064,409 $13,060,682 $1,290,419
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class
B Class C
Contingent Deferred Contingent Deferred
Contingent Deferred
Sales Charges Sales
Charges Sales Charges
Year Ended Retained by Distributor Retained by Distributor Retained
by Distributor
- --------------------------------------------------------------------------------------------------
December 31, 1999 $308,596 $2,142,722
$163,332
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
- --------------------------------------------------------------------------------
CLASS A SERVICE PLAN FEES. 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. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. Currently, the Board of Trustees has limited the rate to 0.15% per year
on Class A shares. The Distributor makes payments to plan recipients quarterly
at an annual rate not to exceed 0.15% of the average annual net assets
consisting of Class A shares of the Fund. For the fiscal year ended December 31,
1999, payments under the Class A Plan totaled $5,198,680, all of which was paid
by the Distributor to recipients. That included $34,603 paid to an affiliate of
the Manager. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
41 ROCHESTER FUND MUNICIPALS
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. 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 plan during the period for which the fee is paid.
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. The asset-based sales charges on Class B
and Class C shares allow 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 the contingent deferred sales charges
collected on redeemed shares and asset-based sales charges from the Fund under
the plans. If any 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 for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended December 31, 1999
were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
<C> <C>
Distributor's
Unreimbursed
Distributor's Expenses
Amount
Aggregate as %
Retained
Unreimburse of Net
Total Payments by
Expenses Assets
Under Plan Distributor Under
Plan of Class
- -------------------------------------------------------------------------------------------------
Class B Plan $6,346,313 $5,705,745
$29,900,996 4.44 %
Class C Plan 2,211,014 1,432,799
3,167,350 1.44
</TABLE>
================================================================================
5. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 1999, 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 or restricted
securities subject to this limitation as of December 31, 1999 was $350,968,358,
which represents 8.39% of the Fund's net assets.
================================================================================
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 certain other
Oppenheimer funds 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 0.09% per annum. The
commitment fee allocated to the Fund for the year ended December 31, 1999 was
$28,272.
The Fund had borrowings outstanding of $62,700,000 at December 31, 1999.
For the year ended December 31, 1999, the average monthly loan balance was
$31,014,339 at an average interest rate of 5.708%. The maximum amount of
borrowings outstanding at any month-end was $90,400,000.
42 ROCHESTER FUND MUNICIPALS
<PAGE>
A-6
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>
B-1
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-11
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.2 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.
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 plans3 (4)
Group Retirement Plans4 (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. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3. 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.
4. 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.
|_| Purchases of Class A shares aggregating $1 million or more. |_| 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.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(1) through a broker, dealer, bank or registered investment advisor that
has made special arrangements with the Distributor for 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.
|_| 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).
|_| 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):
|_| The Manager or its affiliates.
|_| 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.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| 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.
|_| 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).
|_| 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.
|_| 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.
|_| "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.
|_| 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.
|_| 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.
|_| 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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisors 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 advisor provides administration services.
|-|
<PAGE>
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.
|_| 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.
|_| 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): |_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions
and exchange offers, to which the Fund is a party.
|_| 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.
[_| 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.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| 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:
|_| To make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the account value adjusted annually.
|_| 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).
|_| 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)
<PAGE>
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.
|_| 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.
|_| 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: |_| Shares redeemed involuntarily,
as described in "Shareholder Account Rules and
Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| 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.
|_| 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.
|_| 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.
|-|
<PAGE>
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
5 This provision does not apply to loans from 403(b)(7) custodial plans.
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, adjusted annually.
(14) Redemptions of Class B shares under an Automatic Withdrawal Plan
for an account other than a Retirement Plan, if the aggregate
value of the redeemed shares does not exceed 10% of the
account's value, adjusted annually.
|_|Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
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: |_| Shares sold to the Manager or
its affiliates.
|_| 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.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in Section I.A.)
of the Fund, the Manager and its affiliates and retirement plans
established by hem for their employees.
<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:
<PAGE>
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap
Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value
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:
|_| 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
|_| 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
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
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:
|_| 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.
|_| 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:
|_| 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 value, adjusted annually, and
|_| 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:
|_| 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);
|_| 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 value; adjusted annually, and
|-|
<PAGE>
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 advisor 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.
|_| 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.
<PAGE>
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.
|_| 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) any purchaser, 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)
<PAGE>
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) 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:
|_| the Manager and its affiliates,
|_| 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,
|_| 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,
|_| 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,
|_| 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,
|_| 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
|_| 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.
<PAGE>
C-1
Rochester Fund Municipals
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 Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
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