Investment Objective. The Fund seeks 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.

Fees and Expenses of the Fund. This table describes the fees and expenses that you may pay if you buy and hold or redeem shares of the Fund. You may qualify for sales charge discounts if you (or you and your spouse) invest, or agree to invest in the future, at least $100,000 in certain funds in the Oppenheimer family of funds. More information about these and other discounts is available from your financial professional and in the section "About Your Account" beginning on page 13 of the prospectus and in the sections "How to Buy Shares" beginning on page 58 and "Appendix A" in the Fund's Statement of Additional Information.

* Class Y shares were first available March 30, 2011. The expenses for Class Y shares are estimated for the first full fiscal year that they are offered.

Example. The following Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in a class of shares of the Fund for the time periods indicated. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your expenses would be as follows:

Portfolio Turnover. The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 14% of the average value of its portfolio.

Principal Investment Strategies. Under normal market conditions, as a fundamental policy, the Fund invests at least 95% of its net assets (plus borrowings for investment purposes) in securities issued by:

These are referred to as "New York municipal securities" in this prospectus, which are securities that pay interest that, in the opinion of counsel to the issuer of each security, is exempt from federal, New York state and New York city personal income taxes. These securities primarily include municipal bonds, municipal notes and interests in municipal leases.

The Fund seeks to maintain a dollar-weighted effective portfolio maturity of five years or less, however, it can buy securities with maturities of more than five years. Because of events affecting the bond markets and interest rate changes, the maturity of the portfolio might not meet the target at all times.

The Fund can invest up to 5% of its total assets in below-investment-grade securities. Investment-grade securities are rated within one of the four highest rating categories of a nationally recognized statistical rating organization such as Standard & Poor's (AAA, AA, A or BBB). The Fund may also invest in unrated securities, in which case the Fund's investment adviser, OppenheimerFunds, Inc., internally assigns ratings to those securities, after assessing their credit quality and other factors, in categories similar to those of nationally recognized statistical rating organizations.

The Fund can invest substantial amounts of its assets in private activity municipal securities that pay interest that is tax-exempt but which may be a "tax-preference item" for investors subject to alternative minimum taxation. To the extent the Fund invests in securities that may pay interest subject to alternative minimum taxation, those securities will be counted towards the Fund's policy regarding minimum investments in New York municipal securities as described above. The Fund can also borrow for leverage and invest in "derivatives" to seek increased returns or for hedging purposes. Inverse floaters are the primary type of derivative the Fund uses but it may also invest in interest rate swaps, municipal bond swaps and other derivatives.

In selecting investments for the Fund, the portfolio managers generally look at a wide range of New York securities, including unrated bonds and securities of smaller issuers, from different issuers that provide high current income and that might be overlooked by other investors. The Fund may invest a substantial percentage of its assets in "callable" securities, which may be redeemed by the issuer before their maturity date.

The portfolio managers also focus on securities with coupon interest or accretion rates, current market interest rates, callability and call prices that might change the effective maturity of particular securities and the overall portfolio and securities with various maturities in an effort to reduce share price volatility and reinvestment risk.

These factors may change over time and may vary in particular cases. The portfolio managers may consider selling a security if any of these factors no longer applies to a security purchased for the Fund, but are not required to do so.

Principal Risks. The price of the Fund's shares can go up and down substantially. The value of the Fund's investments may change because of broad changes in the markets in which the Fund invests or from poor security selection, which could cause the Fund to underperform other funds with similar investment objectives. There is no assurance that the Fund will achieve its investment objective. When you redeem your shares, they may be worth more or less than what you paid for them. These risks mean that you can lose money by investing in the Fund.

Main Risks of Investing in Municipal Securities. Municipal securities may be subject to interest rate risk, credit risk, credit spread risk, extension risk and reinvestment risk. Interest rate risk is the risk that when prevailing interest rates fall, the values of already-issued debt securities generally rise; and when prevailing interest rates rise, the values of already-issued debt securities generally fall, and they may be worth less than the amount the Fund paid for them. When interest rates change, the values of longer-term debt securities usually change more than the values of shorter-term debt securities. Credit risk is the risk that the issuer of a security might not make interest and principal payments on the security as they become due. If an issuer fails to pay interest or repay principal, the Fund's income or share value might be reduced. Adverse news about an issuer or a downgrade in an issuer's credit rating, for any reason, can also reduce the market value of the issuer's securities. "Credit spread" is the difference in yield between securities that is due to differences in their credit quality. There is a risk that credit spreads may increase when the market expects lower-grade bonds to default more frequently. Widening credit spreads may quickly reduce the market values of the Fund's lower-rated and non-rated securities. Extension risk is the risk that an increase in interest rates could cause principal payments on a debt security to be repaid at a slower rate than expected. Extension risk is particularly prevalent for a callable security where an increase in interest rates could result in the issuer of that security choosing not to redeem the security as anticipated on the security's call date. Such a decision by the issuer could have the effect of lengthening the debt security's expected maturity, making it more vulnerable to interest rate risk and reducing its market value. Reinvestment risk is the risk that when interest rates fall the Fund may be required to reinvest the proceeds from a security's sale or redemption at a lower interest rate. Callable bonds are generally subject to greater reinvestment risk than non-callable bonds.

Special Risks of New York Municipal Securities. Because the Fund invests primarily in New York municipal securities, the value of its portfolio investments will be highly sensitive to events affecting the financial stability of the state of New York and its municipalities, agencies, authorities and other instrumentalities that issue those securities. Changes in legislation or policy, erosion of the tax base, the effects of terrorist acts or natural disasters, or other economic or credit problems may have a significant negative impact on the value of state or local securities.

These risks also apply to securities of issuers of U.S. territories, commonwealths or possessions located outside of New York such as Puerto Rico, Guam, the Northern Mariana Islands and the Virgin Islands.

Main Risks of Shorter-Term Securities. Normally, when interest rates change, the values of shorter-term debt securities change less than the values of securities with longer maturities. The Fund tries to reduce the volatility of its share prices by seeking to maintain a shorter average effective portfolio maturity. However, shorter-term securities may have lower yields than longer-term securities. Shorter-term securities are also subject to greater extension and reinvestment risk. The Fund is subject to extension risk when principal payments on a debt security occur at a slower rate than expected, potentially extending the average life of the security. For securities with a call date in the near future, there is the risk that an increase in interest rates could result in the issuer of that security choosing not to redeem the security as anticipated on the security's call date. Such a decision by the issuer may effectively change a short- or intermediate-term security into a longer term security, which could have the effect of locking in a below-market interest rate on the security, increasing the security's duration, making the security more vulnerable to interest rate risk, reducing the security's market value and increasing the Fund's average effective portfolio maturity. Under such circumstances, because the values of longer term securities generally fluctuate more widely in response to interest rate changes than shorter term securities, the Fund's volatility could increase. Reinvestment risk is the risk that if interest rates fall the Fund may need to invest the proceeds of redeemed securities in securities with lower interest rates.

Taxability Risk. The Fund's investments in municipal securities rely on the opinion of the issuer's bond counsel that the interest paid on those securities will not be subject to federal income tax. Tax opinions are generally provided at the time the municipal security is initially issued. However, after the Fund buys a security, the Internal Revenue Service may determine that a bond issued as tax-exempt should in fact be taxable and the Fund's dividends with respect to that bond might be subject to federal income tax.

Special Risks of Below-Investment-Grade Securities. Below-investment-grade debt securities may be subject to greater price fluctuations and have a greater risk that the issuer might not be able to pay interest and principal when due. The market for below-investment-grade securities may be less liquid and they may be harder to value or to sell at an acceptable price, especially during times of market volatility or decline.

Municipal Market Volatility and Illiquidity. The municipal bond market can be susceptible to unusual volatility, particularly for lower-rated and unrated securities. Liquidity can be reduced unpredictably in response to overall economic conditions or credit tightening. During times of reduced market liquidity, the Fund may not be able to readily sell bonds at the prices at which they are carried on the Fund's books. If the Fund needed to sell large blocks of bonds to meet shareholder redemption requests or to raise cash, those sales could further reduce the bonds' prices.

Municipal Sector Concentration. While the Fund does not invest more than 25% of its total assets in a single industry, certain types of municipal securities (such as general obligation, government appropriation, municipal leases, special assessment and special tax bonds) are not considered a part of any "industry" for purposes of this policy. Therefore, the Fund may invest more than 25% of its total assets in these types of municipal securities. These types of municipal securities may finance, or pay interest from the revenues of, projects that tend to be impacted in the same way by economic, business or political developments which would increase credit risk. For example, legislation on the financing of a project or a declining economic need for the project would likely affect all similar projects.

Risks of Tobacco Related Bonds. In 1998, the largest U.S. tobacco manufacturers reached an out of court agreement, known as the Master Settlement Agreement (the "MSA"), to settle claims against them by 46 states and six other U.S. jurisdictions. The tobacco manufacturers agreed to make annual payments to the government entities in exchange for the release of all litigation claims. A number of the states have sold bonds that are backed by those future payments. The Fund may invest in two types of those bonds: (i) bonds that make payments only from a state's interest in the MSA and (ii) bonds that make payments from both the MSA revenue and from an "appropriation pledge" by the state. An "appropriation pledge" requires the state to pass a specific periodic appropriation to make the payments and is generally not an unconditional guarantee of payment by a state.

The settlement payments are based on factors, including, but not limited to, annual domestic cigarette shipments, cigarette consumption, inflation and the financial capability of participating tobacco companies. Payments could be reduced if consumption decreases, if market share is lost to non-MSA manufacturers, or if there is a negative outcome in litigation regarding the MSA.

The Fund can invest up to 25% of its total assets in tobacco-related bonds without an appropriation pledge that makes payments only from a state's interest in the MSA.

Main Risks of Borrowing and Leverage. The Fund can borrow up to one-third of the value of its total assets (including the amount borrowed) from banks, as permitted by the Investment Company Act of 1940. It can use those borrowings for a number of purposes, including for purchasing securities, which can create "leverage." In that case, changes in the value of the Fund's investments will have a larger effect on its share price than if it did not borrow. Borrowing results in interest payments to the lenders and related expenses. Borrowing for investment purposes might reduce the Fund's return if the yield on the securities purchased is less than those borrowing costs. The Fund may also borrow to meet redemption obligations, for temporary and emergency purposes, or to unwind or contribute to trusts in connection with the Fund's investment in inverse floaters. The Fund currently participates in a line of credit with other Oppenheimer funds for its borrowing.

Reverse repurchase agreements that the Fund may engage in also create leverage. A reverse repurchase agreement is the sale by the Fund of a debt obligation to a party for a specified price, with the simultaneous agreement by the Fund to repurchase that debt obligation from that party on a future date at a higher price. Similar to a borrowing, reverse repurchase agreements provide the Fund with cash for investment and operational purposes. When the Fund engages in reverse repurchase agreements, changes in the value of the Fund's investments will have a larger effect on its share price than if it did not engage in these transactions due to the effect of leverage. Reverse repurchase agreements create fund expenses and require that the Fund have sufficient cash available to repurchase the debt obligation when required. Reverse repurchase agreements also involve the risk that the market value of the debt obligation that is the subject of the reverse repurchase agreement could decline significantly below the price at which the Fund is obligated to repurchase the security.

Risks of Derivatives. A "derivative" is an investment whose value depends on (or is derived from) the value of an underlying security, asset, interest rate, index or currency. Derivatives may be volatile and involve significant risks. Derivative transactions may require the payment of premiums and can increase portfolio turnover. Certain derivative investments may be illiquid. The underlying security or other reference on which a derivative is based, or the derivative itself, may not perform the way the Fund expects it to. The Fund could realize little or no income or lose principal from a derivative investment or a hedge might be unsuccessful. The Fund may also lose money if the issuer of a derivative fails to pay the amount due.

Inverse Floaters. The Fund invests in inverse floaters because, under ordinary circumstances, they offer higher yields and thus provide higher income than fixed-rate bonds of comparable maturity and credit quality. An inverse floater is a derivative instrument, typically created by a trust established by a counterparty, that divides a municipal security into two securities: a short-term floating rate security and a long-term floating rate security which is referred to as an "inverse floater." The inverse floater pays interest at rates that move in the opposite direction of those on the short-term floating rate security. Inverse floaters produce less income when short-term interest rates rise (and may pay no income) and more income when short-term interest rates fall. Thus, if short-term interest rates rise after the issuance of the floater, any yield advantage is reduced or eliminated. Under certain circumstances a trust may be collapsed and the Fund may be required to repay the principal amount due on the short-term securities or the difference between the liquidation value of the underlying municipal bond and the principal amount due on those securities. Inverse floaters can be more volatile than conventional fixed-rate bonds. They also entail a degree of leverage and certain inverse floaters may require the Fund to provide collateral for payments on the short-term securities or to "unwind" the transaction.

The Fund will not expose more than 5% of its total assets to the effects of leverage from its investments in inverse floaters.

Who Is the Fund Designed For? The Fund is designed for investors seeking income exempt from federal, New York State and New York City personal income taxes in a municipal bond Fund that invests primarily in investment-grade securities and seeks to maintain an intermediate effective average maturity. The Fund does not seek capital gains or growth. Investors should be willing to assume credit, interest rate and reinvestment risks. Because it invests in tax-exempt securities, the Fund is not appropriate for retirement plans or other tax-exempt or tax-deferred accounts or for investors whose primary goal is capital growth. The Fund is not a complete investment program. You should carefully consider your own investment goals and risk tolerance before investing in the Fund.

The Fund's Past Performance. The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for 1, 5 and 10 years compare with those of a broad measure of market performance. The Fund's past investment performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future. More recent performance information is available by calling the toll-free number on the back of this prospectus and on the Fund's website:
https://www.oppenheimerfunds.com/fund/LimitedTermNewYorkMunicipalFund

Sales charges and taxes are not included and the returns would be lower if they were. During the period shown, the highest return for a calendar quarter was 8.75% (3rd qtr 09) and the lowest return was -7.00% (4th qtr 08).

No performance information is included for Class Y shares because they were not offered prior to the date of this prospectus.

The following table shows the average annual total returns for each class of the Fund's shares. After-tax returns are calculated using the highest individual federal marginal income tax rates and do not reflect the impact of state or local taxes. Your actual after-tax returns, depending on your individual tax situation, may differ from those shown and after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for only one class and after-tax returns for other classes will vary.

Investment Adviser. OppenheimerFunds, Inc. is the Fund's investment adviser (the "Manager").

Portfolio Managers. Daniel G. Loughran is a Vice President of the Fund and has been a portfolio manager for the Fund since December 1999. Scott S. Cottier is a Vice President of the Fund and has been a portfolio manager for the Fund since September 2002. Troy E. Willis is a Vice President of the Fund and has been a portfolio manager for the Fund since June 2005. Mark R. DeMitry is a Vice President of the Fund and has been a portfolio manager for the Fund since September 2006. Marcus V. Franz has been a portfolio manager for the Fund since September 2006. Michael L. Camarella is a Vice President of the Fund and has been a portfolio manager for the Fund since January 2008. Charles S. Pulire has been a portfolio manager for the Fund since December 2010.

Purchase and Sale of Fund Shares. In most cases, you can buy Fund shares with a minimum initial investment of $1,000 and make additional investments with as little as $50. For certain investment plans and retirement accounts, the minimum initial investment is $500 and, for some, the minimum additional investment is $25. For certain fee based programs the minimum initial investment is $250.

Shares may be purchased through a financial intermediary or the Distributor and redeemed through a financial intermediary or the Transfer Agent on days the New York Stock Exchange is open for trading. Shareholders may purchase or redeem shares by mail, through the website at www.oppenheimerfunds.com or by calling 1.800.225.5677. Share transactions may be paid by check, by Federal Funds wire or directly from or into your bank account.

Taxes. Dividends paid from net investment income on tax-exempt municipal securities will be excludable from gross income for federal individual income tax purposes. Dividends that are derived from interest paid on certain "private activity bonds" may be an item of tax preference if you are subject to the federal alternative minimum tax. Certain distributions may be taxable as ordinary income or as capital gains. The tax treatment of dividends is the same whether they are taken in cash or reinvested.

Payments to Broker-Dealers and Other Financial Intermediaries. If you purchase Fund shares through a broker-dealer or other financial intermediary (such as a bank), the Fund, the Manager, or their related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

The allocation of the Fund's portfolio among different types of investments will vary over time and the Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks.

THE FUND'S PRINCIPAL INVESTMENT STRATEGIES AND RISKS. The strategies and types of investments discussed in the Fund Summary are the ones that the Fund considers to be the most important in seeking to achieve its investment objective. Additionally, the following strategies and risks are those the Fund expects its portfolio to be subject to as a whole.

The Fund focuses its investments in the state of New York. The Fund will therefore be vulnerable to the effects of economic, regulatory and political developments that affect New York's governmental issuers.

The Manager tries to reduce risks by selecting a wide variety of municipal investments and by carefully researching securities before they are purchased. However, changes in the overall market prices of municipal securities and the income they pay can occur at any time. The yield and share prices of the Fund will change daily based on changes in interest rates and market conditions and in response to other economic events.

Unless this prospectus or the Statement of Additional Information states that an investment percentage restriction applies on an ongoing basis, it applies only at the time the Fund makes an investment (except for borrowing and investments in illiquid securities).

MUNICIPAL SECURITIES. Municipal securities are issued to raise money for a variety of public or private purposes, including financing state or local governments, financing specific projects or financing public facilities. These debt obligations are issued by the state governments, as well as their political subdivisions (such as cities, towns, and counties) and their agencies and authorities. The Fund buys municipal bonds and notes, tax-exempt commercial paper, certificates of participation in municipal leases and other debt obligations. Municipal securities generally are classified as general or revenue obligations. General obligations are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue obligations are bonds whose interest is payable only from the revenues derived from a particular facility or class of facilities, or a specific excise tax or other revenue source. Some revenue obligations are private activity bonds that pay interest that may be a tax preference item for investors subject to the federal alternative minimum tax. The Fund selects investments without regard to this type of tax treatment.

Additionally, there are times when an issuer will pledge its taxing power to offer additional security to a revenue bond. These securities are sometimes called "double-barreled bonds." See, for example, tobacco bonds with an appropriation pledge as discussed in this prospectus.

The Fund can buy both long-term and short-term municipal securities. Long-term securities have a maturity of more than one year. The Fund generally focuses on longer-term securities to seek higher income.

New York municipal securities are municipal securities that are not subject (in the opinion of bond counsel to the issuer at the time they are issued) to federal and New York individual income tax. The term "New York municipal securities" also includes debt securities of the governments of certain possessions, territories and commonwealths of the United States if the interest is not subject to federal and New York individual income tax. Some debt securities, such as zero-coupon securities, do not pay current interest. Other securities may be subject to calls by the issuer (to redeem the debt) or to prepayment prior to their stated maturity.

Tax-Exempt Commercial Paper. The Fund can also invest in tax-exempt commercial paper which is a type of short-term obligation (usually having a maturity of 270 days or less) that is issued by a municipality to meet current working capital needs.

Municipal Lease Obligations. Municipal leases are used by state and local governments to obtain funds to acquire land, equipment or facilities. The Fund can invest in certificates of participation that represent a proportionate interest in payments made under municipal lease obligations. Most municipal leases, while secured by the leased property, are not general obligations of the issuing municipality. They often contain "non-appropriation" clauses under which the municipal government has no obligation to make lease or installment payments in future years unless money is appropriated on a yearly basis.

If the municipal government stops making payments or transfers its payment obligations to a private entity, the obligation could lose value or become taxable. Although the obligation may be secured by the leased equipment or facilities, the disposition of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and may result in a delay in recovering or the failure to recover the original investment. Some lease obligations may not have an active trading market, making it difficult for the Fund to sell them quickly at an acceptable price.

The Fund cannot invest more than 5% of its net assets in unrated or illiquid municipal leases.

Municipal Sector Concentration. While the Fund's fundamental policies do not allow it to concentrate its investments (that is, to invest more than 25% of its total assets) in a single industry, certain types of municipal securities are not considered a part of any "industry" under that policy. Examples of these types of municipal securities include: general obligation, government appropriation, municipal leases, special assessment and special tax bonds. Therefore, the Fund may invest more than 25% of its total assets in these types of municipal securities, which may finance similar types of projects or from which the interest is paid from revenues of similar types of projects. "Similar types of projects" are projects that are related in such a way that economic, business or political developments tend to have the same impact on each similar project. For example, a change that affects one project, such as proposed legislation on the financing of the project, a shortage of the materials needed for the project, or a declining economic need for the project, would likely affect all similar projects, thereby increasing market risk. Thus, market or economic changes that affect a security issued in connection with one project also would affect securities issued in connection with similar types of projects.

Although these types of municipal securities may be related to certain industries, because they are issued by governments or their political subdivisions, these types of municipal securities are not considered a part of any industry for purposes of the Fund's industry concentration policy.

U.S. Territories, Commonwealths and Possessions.The Fund also invests in obligations of the governments of the U.S. territories, commonwealths and possessions such as Puerto Rico, the Virgin Islands, Guam and the Northern Mariana Islands to the extent such obligations are exempt from state income taxes. Accordingly, the Fund may be adversely affected by local political and economic conditions and developments within these U.S. territories, commonwealths and possessions affecting the issuers of such obligations. A discussion of the special considerations relating to the Fund's municipal obligations and other factors or economic conditions in those territories, commonwealths or possessions is provided in an Appendix to the Statement of Additional Information.

Tobacco Related Bonds. The Fund may invest in two types of tobacco related bonds: (i) tobacco settlement revenue bonds, for which payments of interest and principal are made solely from a state's interest in the Master Settlement Agreement ("MSA") and (ii) tobacco bonds subject to a state's appropriation pledge, for which payments may come from both the MSA revenue and the applicable state's appropriation pledge.

A number of states have securitized the future flow of those payments by selling bonds, some through distinct governmental entities created for such purpose. The bonds are backed by the future revenue flows from the tobacco manufacturers. Annual payments on the bonds, and thus the risk to the Fund, are highly dependent on the receipt of future settlement payments. The amount of future settlement payments is dependent on many factors including, but not limited to, annual domestic cigarette shipments, cigarette consumption, inflation and the financial capability of participating tobacco companies. As a result, payments made by tobacco manufacturers could be reduced if the decrease in tobacco consumption is significantly greater than the forecasted decline. A market share loss by the MSA companies to non-MSA participating tobacco manufacturers could also cause a downward adjustment in the payment amounts. A participating manufacturer filing for bankruptcy also could cause delays or reductions in bond payments, which could affect the Fund's net asset value.

The MSA and tobacco manufacturers have been and continue to be subject to various legal claims and an adverse outcome could affect the payment streams associated with the MSA or cause delays or reductions in bond payments. The MSA itself has been subject to legal challenges and has, to date, withstood those challenges. The Statement of Additional Information contains more detailed information about the litigation related to the tobacco industry and the MSA.

Appropriation debt differs from a state's general obligation debt in that general obligation debt is backed by the state's full faith, credit and taxing power, while appropriation debt requires the state to pass a specific periodic appropriation to pay interest and/or principal on the bonds. The appropriation is usually made annually. While STA Tobacco Bonds offer an enhanced credit support feature, that feature is generally not an unconditional guarantee of payment by a state and states generally do not pledge the full faith, credit or taxing power of the state. The Fund considers STA Tobacco Bonds to be "municipal securities" for purposes of its concentration policies.

Ratings of Municipal Securities the Fund Buys. The Manager may rely to some extent on credit ratings by nationally recognized statistical rating organizations in evaluating the credit risk of securities selected for the Fund's portfolio. Credit ratings evaluate the expectation that scheduled interest and principal payments will be made in a timely manner. They do not reflect any judgment of market risk.

Rating organizations might not always change their credit rating of an issuer in a timely manner to reflect events that could affect the issuer's ability to make timely payments on its obligations. In selecting securities for its portfolio and evaluating their income potential and credit risk, the Manager does not rely solely on ratings agencies but evaluates business, economic and other factors affecting issuers as well. Many factors affect an issuer's ability to make timely payments, and the credit risks of a particular security may change over time. The Manager also may use its own research and analysis. If a bond is insured, it will usually be rated by the rating organizations based on the financial strength of the insurer. The rating categories are described in an Appendix to the Statement of Additional Information.

The Fund can invest up to 5% of its total assets in below-investment-grade securities (measured at the time of purchase). Therefore the Fund primarily buys municipal securities that are "investment-grade" at the time of purchase. "Investment-grade" securities are those rated within the four highest rating categories of Standard & Poor's, Moody's, Fitch or another nationally recognized statistical rating organization. While securities rated within the fourth highest category by Standard & Poor's (meaning BBB+, BBB or BBB-) or by Moody's (meaning Baa1, Baa2 or Baa3) are considered "investment-grade," they have some speculative characteristics.

Unrated Securities. Because the Fund may purchase securities that are not rated by any nationally recognized statistical rating organization, the Manager internally assigns ratings to those securities, after assessing their credit quality and other factors, in categories similar to those of nationally recognized statistical rating organizations. Unrated securities also are considered "investment-grade" or "below-investment-grade" if judged by the Manager to be comparable to rated investment-grade or below-investment-grade securities. However, the Manager's rating does not constitute a guarantee of the credit quality. Some unrated securities may not have an active trading market, which means that the Fund might have difficulty selling them promptly at an acceptable price.

In evaluating the credit quality of a particular security, whether rated or unrated, the Manager's analysis and research will normally consider a number of factors. Among others, these factors are the financial resources of the issuer, or the underlying source of funds for debt service on a security, the issuer's sensitivity to economic conditions and trends, any operating history of the facility financed by the obligation and the degree of community support for it, the capabilities of the issuer's management and regulatory factors affecting the issuer and particular facility.

A reduction in the rating of a security after the Fund buys it will not automatically require the Fund to dispose of the security. However, the Manager will evaluate such downgraded securities to determine whether to keep them in the Fund's portfolio.

Lower-rated below-investment-grade securities also have speculative characteristics. The Fund will not buy securities with a rating, at the time of investment, below "Ba" by Moody's or "BB" by S&P or Fitch (or unrated securities that the Manager has determined are similar to rated securities in those categories).

Determining the "Average Effective Maturity" of the Fund's Portfolio. In general, when interest rates change, debt securities having shorter maturities fluctuate in value less than securities with longer maturities. The Fund tries to reduce the volatility of its share prices by seeking to maintain an average effective portfolio maturity of five years or less. Because of events affecting the bond markets and interest rate changes, the maturity of the portfolio might not meet the target at all times. The average effective portfolio maturity rate measures the "average" maturity of all of its securities on a "dollar-weighted" basis, meaning that larger securities holdings have a greater effect on overall portfolio maturity than smaller holdings. The Fund can therefore hold securities with stated and effective maturities of more or less than five years. Generally, the Manager does not buy securities with stated maturities of more than five years if the Fund's average effective portfolio maturity is more than five years.

The "effective" maturity of a security is not always the same as the stated maturity date. A number of factors may cause the "effective" maturity to be shorter than the stated maturity. For example, a bond's effective maturity might be deemed to be shorter (for pricing and trading purposes) than its stated maturity as a result of differences between its coupon interest rate and current market interest rates, whether the bond is callable (that means the issuer can pay off the bond prior to its stated maturity), the rate of accretion of discounts on the bond, and other factors such as mandatory put provisions and scheduled sinking fund payments.

When interest rates change, securities that have an effective maturity that is shorter than their stated maturity tend to behave like securities having those shorter maturity dates. However, those securities might not behave as expected, and the Fund might not always be successful in maintaining its average effective portfolio maturity at five years or less or in reducing the volatility of its share prices.

Floating Rate/Variable Rate Obligations. Some municipal securities have variable or floating interest rates. Variable rates are adjustable at stated periodic intervals. Floating rates are automatically adjusted according to a specified market rate for those investments, such as, for example, the percentage of LIBOR, the SIFMA Municipal Swap Index or the percentage of the prime rate of a bank. These obligations may be secured by bank letters of credit or other credit support arrangements. Inverse floaters, discussed in this prospectus, are a type of variable rate obligation.

When-Issued and Delayed-Delivery Transactions. The Fund may purchase municipal securities on a "when-issued" basis and may purchase or sell such securities on a "delayed-delivery" 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. During the period between the purchase and the settlement dates, the buyer makes no payment for the security and receives no interest. When-issued or delayed-delivery securities the Fund buys are subject to changes in value as a result of market fluctuations during that period and the value of the security on the delivery date may be more or less than the Fund paid. The Fund may lose money if the value of the security has declined below the purchase price.

The Fund will not invest more than 10% of its total assets in "when-issued" and "delayed-delivery" transactions.

OTHER INVESTMENT STRATEGIES AND RISKS. The Fund can also use the investment techniques and strategies described below. The Fund might not use all of these techniques or strategies or might only use them from time to time.

Derivative Investments. The Fund can invest in different types of "derivative" instruments that are consistent with its investment strategies. A derivative is an instrument whose value depends on (or is derived from) the value of an underlying security, asset, interest rate, index or currency. Inverse floaters are the primary type of derivative the Fund can use.

The Fund may use derivatives to seek income or capital gain or to hedge against the risks of other investments. Derivatives may allow the Fund to increase or decrease its exposure to certain markets or risks. Examples include, but are not limited to, interest rate swaps or municipal bond swaps. While the Fund may use derivatives for hedging purposes, it typically does not use hedging instruments, such as options, to hedge investment risks.

Derivatives may be volatile and may involve significant risks. The underlying security or other instrument on which a derivative is based, or the derivative itself, may not perform the way the Manager expects it to. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund's initial investment. The Fund may also lose money on a derivative investment if the issuer fails to pay the amount due. Certain derivative investments held by the Fund may be illiquid, making it difficult to close out an unfavorable position. Derivative transactions may require the payment of premiums and can increase portfolio turnover. As a result of these risks, the Fund could realize little or no income or lose money from its investment, or a hedge might be unsuccessful.

Inverse Floaters. The Fund may invest in inverse floaters to seek greater income and total return. Inverse floaters, under ordinary circumstances, offer higher yields and thus provide higher income than fixed-rate bonds of comparable maturity and credit quality. An inverse floater is a derivative instrument, typically created by a trust, that divides a municipal security into two securities: a short-term tax-exempt floating rate security (sometimes referred to as a "tender option bond") and a long-term tax-exempt floating rate security (referred to as a "residual certificate" or "inverse floater") that pays interest at rates that move in the opposite direction of the yield on the short-term floating rate security. The purchaser of a "tender option bond" has the right to tender the security periodically for repayment of the principal value. As short-term interest rates rise, inverse floaters produce less current income (and, in extreme cases, may pay no income) and as short-term interest rates fall, inverse floaters produce more current income. Thus, if short-term interest rates rise after the issuance of the floater, any yield advantage is reduced or eliminated.

To facilitate the creation of inverse floaters, the Fund may purchase a municipal security and subsequently transfer it to a broker-dealer (the sponsor), which deposits the municipal security in a trust. The trust issues the residual certificates and short-term floating rate securities. The trust documents enable the Fund to withdraw the underlying bond to unwind or "collapse" the trust (upon tendering the residual certificate and paying the value of the short-term bonds and certain other costs). The Fund may also purchase inverse floaters created by municipal issuers directly or by other parties that have deposited municipal bonds into a sponsored trust.

The Fund's investments in inverse floaters involve certain risks. The market value of an inverse floater residual certificate can be more volatile than that of a conventional fixed-rate bond having similar credit quality, maturity and redemption provisions. Typically, inverse floater residual certificates tend to underperform fixed-rate bonds when long-term interest rates are rising but tend to outperform fixed-rate bonds when long-term interest rates are stable or falling. Inverse floater residual certificates entail a degree of leverage because the trust issues short-term securities in a ratio to the residual certificates with the underlying long-term bond providing collateral for the obligation to pay the principal value of the short-term securities if and when they are tendered. If the Fund has created the inverse floater by depositing a long-term bond into a trust, it may be required to provide additional collateral for the short-term securities if the value of the underlying bond deposited in the trust falls.

An inverse floater that has a higher degree of leverage is typically more volatile with respect to its price and income than an inverse floater having a lower degree of leverage. Under inverse floater arrangements, if the remarketing agent that offers the short-term securities for sale is unable to sell them, or if the holders tender (or put) them for repayment of principal and the remarketing agent is unable to remarket them, the remarketing agent may cause the trust to be collapsed, and in the case of floaters created by the Fund, the Fund will then be required to repay the principal amount of the tendered securities. During times of market volatility, illiquidity or uncertainty, the Fund could be required to sell other portfolio holdings at a disadvantageous time to raise cash to meet that obligation.

Some inverse floaters may have a "cap," so that if interest rates rise above the cap, the security pays additional interest income. If rates do not rise above the cap, the Fund will have paid an additional amount for that feature that has proved worthless.

The Fund may also enter into "shortfall and forbearance" agreements with respect to inverse floaters. Under those agreements, upon liquidation of the trust, the Fund is committed to pay the trust the difference between the liquidation value of the underlying municipal bond on which the inverse floater is based and the principal amount payable to the holders of the short-term floating rate security that is based on the same underlying municipal security. Although the Fund has the risk that it may be required to make such additional payment, these agreements may offer higher interest payments than a standard inverse floater.

Accounting Treatment of Inverse Floaters. Because of the accounting treatment for inverse floaters created by the Fund's transfer of a municipal bond to a trust, the Fund's financial statements will reflect these transactions as "secured borrowings," which affects the Fund's expense ratios, statements of income and assets and liabilities and causes the Fund's Statement of Investments to include the underlying municipal bond. The Fund's annual fund operating expenses, shown earlier in this prospectus, include certain expenses and fees related to the Fund's investments in inverse floaters. Some of those expenses are liabilities with respect to interest paid on short-term floating rate notes issued by the trusts whose inverse floater certificates are held by the Fund. Under accounting rules, the Fund also recognizes additional income in an amount that directly corresponds to these expenses and, as a result the Fund's net asset values per share and total returns have not been affected by these additional expenses.

Percentage of LIBOR Notes (PLNs). The Fund may invest in Percentage of LIBOR Notes ("PLNs") which are variable rate municipal securities based on the London Interbank Offered Rate ("LIBOR"), a widely used benchmark for short-term interest rates and used by banks for interbank loans with other banks. A PLN typically pays interest based on a percentage of a LIBOR rate for a specified time plus an established yield premium. Due to their variable rate features, PLNs will generally pay higher levels of income in a rising short-term interest rate environment and lower levels of income as short-term interest rates decline. In times of substantial market volatility, however, PLNs may not perform as anticipated. The value of a PLN also may decline due to other factors, such as changes in credit quality of the underlying bond.

Because the market for PLNs is relatively new and still developing, the Fund's ability to engage in transactions using such instruments may be limited. There is no assurance that a liquid secondary market will exist for any particular PLN or at any particular time, and so the Fund may not be able to close a position in a PLN when it is advantageous to do so. The Fund may also transfer a PLN to a sponsor to create an inverse floater, which may further increase the volatility of the market value of a PLN or the inverse floater.

Zero-Coupon Securities. The Fund can invest without limit in zero-coupon securities. These debt obligations do not pay interest prior to their maturity date or else they do not start to pay interest at a stated coupon rate until a future date. They are issued and traded at a discount from their face amount. The discount varies as the securities approach their maturity date (or the date interest payments are scheduled to begin). When interest rates change, zero-coupon securities are subject to greater fluctuations in their value than securities that pay current interest. The Fund accrues the discount on zero-coupon bonds as tax-free income on a current basis. The Fund may have to pay out the imputed income on zero-coupon securities without receiving actual cash payments currently.

Illiquid Securities. Investments may be illiquid because they do not have an active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings.

The Fund will not invest more than 15% of its net assets in illiquid securities.

Temporary Defensive and Interim Investments. For temporary defensive purposes in times of adverse or unstable market, economic or political conditions, the Fund can invest up to 100% of its total assets in investments that may be inconsistent with the Fund's principal investment strategies. Generally, the Fund would invest in short-term municipal securities, but could also invest in U.S. Government securities or highly-rated corporate debt securities. The Fund might also hold these types of securities as interim investments pending the investment of proceeds from the sale of Fund shares or the sale of Fund portfolio securities or to meet anticipated redemptions of Fund shares. The income from some temporary defensive investments may not be tax-exempt, and therefore to the extent the Fund invests in these securities, it might not achieve its investment objective.

Conflicts of Interest. The investment activities of the Manager and its affiliates in regard to other funds and accounts they manage may present conflicts of interest that could disadvantage the Fund and its shareholders. The Manager or its affiliates may provide investment advisory services to other funds and accounts that have investment objectives or strategies that differ from, or are contrary to, those of the Fund. That may result in another fund or account holding investment positions that are adverse to the Fund's investment strategies or activities. Other funds or accounts advised by the Manager or its affiliates may have conflicting interests arising from investment objectives that are similar to those of the Fund. Those funds and accounts may engage in, and compete for, the same types of securities or other investments as the Fund or invest in securities of the same issuers that have different, and possibly conflicting, characteristics. The trading and other investment activities of those other funds or accounts may be carried out without regard to the investment activities of the Fund and, as a result, the value of securities held by the Fund or the Fund's investment strategies may be adversely affected. The Fund's investment performance will usually differ from the performance of other accounts advised by the Manager or its affiliates and the Fund may experience losses during periods in which other accounts advised by the Manager or its affiliates achieve gains. The Manager has adopted policies and procedures designed to address potential conflicts of interest identified by the Manager; however, such policies and procedures may also limit the Fund's investment activities and affect its performance.

Portfolio Turnover. A change in the securities held by the Fund is known as "portfolio turnover." Increased portfolio turnover may result in higher brokerage fees or other transaction costs, which can reduce performance. If the Fund realizes capital gains when it sells investments, it generally must pay those gains to shareholders, increasing its taxable distributions. The Financial Highlights table at the end of this prospectus shows the Fund's portfolio turnover rates during past fiscal years.

CHANGES TO THE FUND'S INVESTMENT POLICIES. The Fund's fundamental investment policies cannot be changed without the approval of a majority of the Fund's outstanding voting shares, however, the Fund's Board can change non-fundamental policies without a shareholder vote. Significant policy changes will be described in supplements to this prospectus. The Fund's investment objective is not a fundamental policy but will not be changed by the Board without advance notice to shareholders. Investment restrictions that are fundamental policies are listed in the Fund's Statement of Additional Information. An investment policy is not fundamental unless this prospectus or the Statement of Additional Information states that it is.

PORTFOLIO HOLDINGS. The Fund's portfolio holdings are included in its semi-annual and annual reports that are distributed to its shareholders within 60 days after the close of the applicable reporting period. The Fund also discloses its portfolio holdings in its Statements of Investments on Form N-Q, which are public filings that are required to be made with the Securities and Exchange Commission within 60 days after the end of the Fund's first and third fiscal quarters. Therefore, the Fund's portfolio holdings are made publicly available no later than 60 days after the end of each of its fiscal quarters. In addition, the Fund's portfolio holdings information, as of the end of each calendar month, may be posted and available on the Fund's website no sooner than 30 days after the end of each calendar month.

A description of the Fund's policies and procedures with respect to the disclosure of its portfolio holdings is available in the Fund's Statement of Additional Information.

THE MANAGER. OppenheimerFunds, Inc., the Manager, chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Fund's Board of Trustees, under an investment advisory agreement that states the Manager's responsibilities. The agreement sets the fees the Fund pays to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business.

The Manager has been an investment adviser since 1960. The Manager is located at Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008.

Advisory Fees. Under the investment advisory agreement, the Fund pays the Manager an advisory fee, calculated on the daily net assets of the Fund, at an annual rate that declines for additional assets as the Fund's assets grow: 0.50% of the first $100 million of average annual net assets, 0.45% of the next $150 million, 0.40% of the next $1.75 billion, 0.39% of the next $3 billion and 0.38% of average annual net assets in excess of $5 billion. The Fund's advisory fee for its last fiscal year ended December 31, 2010, was 0.40% of average annual net assets for each class of shares.

The Transfer Agent has voluntarily agreed to limit its fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. The total annual operating expenses include certain interest and related expenses from the Fund's investment in inverse floaters. Under accounting rules the Fund recognized additional income in an amount that offsets those expenses. Therefore, the Fund's total returns and net asset values were not affected. If the interest and related expenses from the fund's investment in inverse floaters were excluded the expense ratios for the Fund would be 0.76% for Class A, 1.62% for Class B, and 1.52% for Class C. The Fund's management fee and other annual operating expenses may vary in future years.

A discussion regarding the basis for the Board's approval of the Fund's investment advisory contract is available in the Fund's Annual Report to shareholders for the year ended December 31, 2010.

Portfolio Managers. The Fund's portfolio is managed by a team of investment professionals, including Daniel G. Loughran, Scott S. Cottier, Troy E. Willis, Mark R. DeMitry, Marcus V. Franz, Michael L. Camarella and Charles S. Pulire, who are primarily responsible for the day-to-day management of the Fund's investments. Mr. Loughran has been a portfolio manager of the Fund since December 2001 and a Vice President of the Fund since October 2005. Mr. Cottier has been a portfolio manager of the Fund since September 2002 and Vice President of the Fund since October 2005. Mr. Willis has been a portfolio manager of the Fund since January 2006 and Vice President of the Fund since October 2005. Mr. DeMitry has been a portfolio manager and Vice President of the Fund since July 2009. Mr. Franz has been a portfolio manager of the Fund since September 2006. Mr. Camarella has been a portfolio manager of the Fund since February 2011 and Vice President of the Fund since July 2009. Mr. Pulire has been a portfolio manager for the Fund since December 2010.

Mr. Loughran has been a Senior Vice President of the Manager since July 2007 and a Senior Portfolio Manager of the Manager since December 2001. He was a Vice President of the Manager from April 2001 to June 2007. Mr. Loughran is a team leader, a portfolio manager, an officer, and a trader for the Fund and other Oppenheimer funds.

Mr. Cottier has been a Vice President and Senior Portfolio Manager of the Manager since September 2002. He is a portfolio manager, an officer, and a trader for the Fund and other Oppenheimer funds.

Mr. Willis has been a Vice President of the Manager since July 2009 and a Senior Portfolio Manager of the Manager since January 2006. He was an Assistant Vice President of the Manager from July 2005 to June 2009 and an Associate Portfolio Manager of the Manager from June 2003 to December 2005. Mr. Willis is a portfolio manager, an officer, and a trader for the Fund and other Oppenheimer funds.

Mr. DeMitry has been a Vice President and Senior Portfolio Manager of the Manager since July 2009. He was an Associate Portfolio Manager with the Manager from September 2006 to June 2009. He was a research analyst with the Manager from June 2003 to August 2006. He was a credit analyst with the Manager from June 2001 to May 2003. Mr. DeMitry is a portfolio manager, an officer and a trader for the Fund and other Oppenheimer funds.

Mr. Franz has been a Vice President and Senior Portfolio Manager of the Manager since July 2009. He was a Portfolio Manager with the Manager from October 2006 to June 2009. He was a research analyst with the Manager from June 2003 to September 2006. Mr. Franz is a portfolio manager and a trader for the Fund and other Oppenheimer funds.

Mr. Camarella has been a Vice President of the Manager since February 2011. He has been a Senior Portfolio Manager of the Manager since February 2011. He was a Portfolio Manager with the Manager since January 2008. He was a research analyst with the Manager from April 2006 to December 2007. He was a credit analyst with the Manager from June 2003 to March 2006. Mr. Camarella is a portfolio manager, an officer and a trader for the Fund and other Oppenheimer funds.

Mr. Pulire has been an Assistant Vice President and Portfolio Manager of the Manager since December 2010. He was a research analyst with the Manager from February 2008 to November 2010 and was a credit analyst with the Manager from May 2006 to January 2008. Mr. Pulire is a portfolio manager and trader for the Fund and other Oppenheimer funds.

The Statement of Additional Information provides additional information about the portfolio managers' compensation, other accounts they manage and their ownership of Fund shares.

Where Can You Buy Fund Shares? Oppenheimer funds may be purchased either directly or through a variety of "financial intermediaries" that offer Fund shares to their clients. Financial intermediaries include securities dealers, financial advisers, brokers, banks, trust companies, insurance companies and the sponsors of fund "supermarkets," fee-based advisory or wrap fee programs.

Certain sales charge waivers may apply to purchases or redemptions of Class A, Class B, or Class C shares. More information about those waivers is available in the Fund's Statement of Additional Information, or by clicking on the hyperlink "Sales Charge Waivers" under the heading "Fund Information" on the OppenheimerFunds website at "www.oppenheimerfunds.com."

WHAT IS THE MINIMUM INVESTMENT? In most cases, you can buy Fund shares with a minimum initial investment of $1,000 and make additional investments with as little as $50. The minimum additional investment requirement does not apply to reinvested dividends from the Fund or from other Oppenheimer funds or to omnibus account purchases. A $25 minimum applies to additional investments through an Asset Builder Plan, an Automatic Exchange Plan or a government allotment plan established before November 1, 2002. Reduced initial minimums are available in certain circumstances, including under the following investment plans:

Minimum Account Balance. A $12 annual "minimum balance fee" is assessed on Fund accounts with a value of less than $500. The fee is automatically deducted from each applicable Fund account annually in September. See the Statement of Additional Information for information about the circumstances under which this fee will not be assessed. Small accounts may be involuntarily redeemed by the Fund if the value has fallen below $500 for reasons other than a decline in the market value of the shares.

Once you decide that the Fund is an appropriate investment for you, deciding which class of shares is best suited to your needs depends on a number of factors that you should discuss with your financial advisor. The Fund's operating costs that apply to a share class and the effect of the different types of sales charges on your investment will affect your investment results over time. For example, the net asset value and the dividends of Class B and Class C shares will be reduced by additional expenses borne by those classes, such as the asset-based sales charge.

Two of the factors to consider are how much you plan to invest and, while future financial needs cannot be predicted with certainty, how long you plan to hold your investment. For example, with larger purchases that qualify for a reduced initial sales charge on Class A shares, the effect of paying an initial sales charge on purchases of Class A shares may be less over time than the effect of the asset-based sales charges on Class B or Class C shares. If your goals and objectives change over time and you plan to purchase additional shares, you should re-evaluate each of the factors to see if you should consider a different class of shares.

The discussion below is not intended to be investment advice or a recommendation, because each investor's financial considerations are different. The discussion below assumes that you will purchase only one class of shares and not a combination of shares of different classes. These examples are based on approximations of the effects of current sales charges and expenses projected over time, and do not detail all of the considerations in selecting a class of shares. You should analyze your options carefully with your financial adviser before making that choice.

The Distributor normally will not accept purchase orders from a single investor for more than $100,000 of Class B shares or for $250,000 or more of Class C shares. Dealers or other financial intermediaries are responsible for determining the suitability of a particular share class for an investor.

Are There Differences in Account Features That Matter to You? Some account features may not be available for all share classes. Other features may not be advisable because of the effect of the contingent deferred sales charge. Therefore, you should carefully review how you plan to use your investment account before deciding which class of shares to buy.

How Do Share Classes Affect Payments to Your Financial Intermediary? The Class B and Class C contingent deferred sales charges and asset-based sales charges have the same purpose as the front-end sales charge or contingent deferred sales charge on Class A shares: to compensate the Distributor for concessions and expenses it pays to brokers, dealers and other financial intermediaries for selling Fund shares. Those financial intermediaries may receive different compensation for selling different classes of shares. The Manager or Distributor may also pay dealers or other financial intermediaries additional amounts from their own resources based on the value of Fund shares held by the intermediary for its own account or held for its customers accounts. For more information about those payments, see "Payments to Financial Intermediaries and Service Providers" below.

ABOUT CLASS A SHARES. Class A shares are sold at their offering price, which is the net asset value of the shares (described below) plus, in most cases, an initial sales charge. The Fund receives the amount of your investment, minus the sales charge, to invest for your account. In some cases, Class A purchases may qualify for a reduced sales charge or a sales charge waiver, as described below and in the Statement of Additional Information.

The Class A sales charge rate varies depending on the amount of your purchase. A portion or all of the sales charge may be retained by the Distributor or paid to your broker, dealer or other financial intermediary as a concession. The current sales charge rates and concessions paid are shown in the table below. For purchases above $250,000, shares will be sold without an initial sales charge but they may continue to be subject to a contingent deferred sales charge of 0.50% if they are redeemed within 18 months of the date of purchase. The Distributor will pay concessions from its own resources on certain purchases of Class A shares of one or more of the Funds that, in the aggregate, total $250,000 or more. If purchases of a Fund's Class A shares are included in any such purchase, the Distributor will continue to pay the concession on those Fund shares at the rate of 0.50% of their net asset value.

Due to rounding, the actual sales charge for a particular transaction may be higher or lower than the rates listed above.

Reduced Class A Sales Charges. Under a "Right of Accumulation" or a "Letter of Intent" you may be eligible to buy Class A shares of the Fund at the reduced sales charge rates that would apply to a larger purchase. The Fund reserves the right to modify or to cease offering these programs at any time.

A fiduciary can apply rights of accumulation to all shares purchased for a trust, estate or other fiduciary account that has multiple accounts (including employee benefit plans for the same employer and Single K plans for the benefit of a sole proprietor).
If you are buying shares directly from the Fund, you must inform the Distributor of your eligibility and holdings at the time of your purchase in order to qualify for the Right of Accumulation. If you are buying shares through a financial intermediary you must notify the intermediary of your eligibility for the Right of Accumulation at the time of your purchase.

To count shares held in accounts at other firms, you may be requested to provide the Distributor or your current financial intermediary with a copy of account statements showing your current holdings of the Fund, other eligible Oppenheimer funds or qualifying 529 plans. Shares purchased under a Letter of Intent may also qualify as eligible holdings under a Right of Accumulation.

Purchases of Class N or Class Y shares, purchases made by reinvestment of dividends or capital gains distributions from other Oppenheimer funds, purchases of Class A shares with redemption proceeds under the "reinvestment privilege" described below, and purchases of Class A shares of Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves on which a sales charge has not been paid do not count as "qualified shares" for satisfying the terms of a Letter.

Submitting a Letter of Intent does not obligate you to purchase the specified amount of shares. If you do not complete the anticipated purchases, you will be charged the difference between the sales charge that you paid and the sales charge that would apply to the actual value of shares you purchased. A certain portion of your shares will be held in escrow by the Fund's Transfer Agent for this purpose. Please refer to "How to Buy Shares – Letters of Intent" in the Fund's Statement of Additional Information for more complete information. You may also be able to apply the Right of Accumulation to purchases you make under a Letter of Intent.

Class A Contingent Deferred Sales Charge. There is no initial sales charge on Class A share purchases totaling $250,000 or more of one or more of the Oppenheimer funds. However, those Class A shares may be subject to a 0.50% contingent deferred sales charge if they are redeemed within an 18-month "holding period" measured from the beginning of the calendar month in which they were purchased (except for shares in certain retirement plans). That sales charge will be calculated on the lesser of the original net asset value of the redeemed shares or the aggregate net asset value of the redeemed shares at the time of redemption.

The Class A contingent deferred sales charge does not apply to shares purchased by the reinvestment of dividends or capital gain distributions and will not exceed the aggregate amount of the concessions the Distributor pays on all of your purchases of Class A shares, of all Oppenheimer funds, that are subject to the contingent deferred sales charge.

The Distributor will pay concessions from its own resources on certain purchases of Class A shares of one or more of the Funds that, in the aggregate, total $250,000 (or $1 million for certain Oppenheimer funds) or more. If purchases of a Fund's Class A shares are included in any such purchase, the Distributor will pay the concession on those Fund shares at the rate of 0.50% of their net asset value. A concession will not be paid on shares purchased by exchange or shares that were previously subject to a front-end sales charge and dealer concession.

ABOUT CLASS B SHARES. Class B shares are sold at net asset value per share without an initial sales charge. However, if Class B shares are redeemed within five years from the beginning of the calendar month in which they were purchased, a contingent deferred sales charge will be deducted from the redemption proceeds. Class B shares are also subject to an asset-based sales charge that is calculated daily based on an annual rate of 0.75%. The Class B contingent deferred sales charge and asset-based sales charge are paid to compensate the Distributor for providing distribution-related services to the Fund in connection with the sale of Class B shares.

The amount of the Class B contingent deferred sales charge will depend on the number of years since you invested, according to the following schedule:

In the table, a "year" is a 12-month period. In applying the contingent deferred sales charge, all purchases are considered to have been made on the first regular business day of the month in which the purchase was made.

Automatic Conversion of Class B Shares. Class B shares automatically convert to Class A shares six years (72 months) after you purchase them. This conversion eliminates the Class B asset-based sales charge, however, the shares will be subject to the ongoing Class A fees and expenses. The conversion is based on the relative net asset value of the two classes, and no sales load or other charge is imposed. When any Class B shares that you hold convert to Class A shares, all other Class B shares that were acquired by reinvesting dividends and distributions on the converted shares will also convert. For further information on the conversion feature and its tax implications, see "Class B Conversion" in the Statement of Additional Information.

ABOUT CLASS C SHARES. Class C shares are sold at net asset value per share without an initial sales charge. However, if Class C shares are redeemed within a 12 month "holding period" from the beginning of the calendar month in which they were purchased, a contingent deferred sales charge of 1.00% may be deducted from the redemption proceeds. Class C shares are also subject to an asset-based sales charge that is calculated daily based on an annual rate of 0.75%. The Class C contingent deferred sales charge and asset-based sales charge are paid to compensate the Distributor for providing distribution-related services to the Fund in connection with the sale of Class C shares.

ABOUT CLASS Y SHARES. Class Y shares are sold at net asset value per share without a sales charge directly to institutional investors that have special agreements with the Distributor for that purpose. They may include insurance companies, registered investment companies, employee benefit plans and Section 529 plans, among others.

An institutional investor that buys Class Y shares for its customers' accounts may impose charges on those accounts. The procedures for buying, selling, exchanging and transferring the Fund's other classes of shares (other than the time those orders must be received by the Distributor or Transfer Agent at their Colorado office) and some of the special account features available to investors buying other classes of shares do not apply to Class Y shares. Instructions for buying, selling, exchanging or transferring Class Y shares must be submitted by the institutional investor, not by its customers for whose benefit the shares are held.

Present and former officers, directors, trustees and employees (and their eligible family members) of the Fund, the Manager, its affiliates, its parent company and the subsidiaries of its parent company, and retirement plans established for the benefit of such individuals, are also permitted to purchase Class Y shares of the Fund.

Shares may be purchased at their offering price which is the net asset value per share plus any initial sales charge that applies. Shares are redeemed at their net asset value per share less any contingent deferred sales charge that applies. The net asset value that applies to a purchase or redemption order is the next one calculated after the Distributor receives the order, in proper form as described in this prospectus, or after any agent appointed by the Distributor receives the order in proper form as described in this prospectus. Your financial intermediary can provide you with more information regarding the time you must submit your purchase order and whether the intermediary is an authorized agent for the receipt of purchase and redemption orders.

Net Asset Value. The Fund calculates the net asset value of each class of shares as of the close of the New York Stock Exchange (NYSE), on each day the NYSE is open for trading (referred to in this prospectus as a "regular business day"). The NYSE normally closes at 4:00 p.m., Eastern time, but may close earlier on some days. All references to time in this prospectus are to "Eastern time."

The net asset value per share for a class of shares on a "regular business day" is determined by dividing the value of the Fund's net assets attributable to that class by the number of shares of that class outstanding on that day. The Fund's assets generally trade in the over-the-counter market rather than on a securities exchange. Therefore, to determine net asset values, the Fund assets are generally valued at the mean between the bid and asked prices as determined by a pricing service. If the prices determined by the pricing service do not accurately reflect fair value for a security (in the Manager's judgment) or if a security's value has been materially affected by events occurring after the price is received from the pricing service and before the time as of which the Fund's net asset values are calculated that day, that security may be valued by another method that the Board of Trustees believes accurately reflects the fair value.

The Board has adopted valuation procedures for the Fund and has delegated the day-to-day responsibility for fair value determinations to the Manager's Valuation Committee. Fair value determinations by the Manager are subject to review, approval and ratification by the Board at its next scheduled meeting after the fair valuations are determined. In determining whether prices received from the pricing services are reliable, the Manager monitors the information it receives in the ordinary course of its investment management responsibilities for significant events that it believes in good faith will affect the prices of the securities of issuers held by the Fund. Those may include events affecting specific issuers or events affecting securities markets (for example, a securities market closes early because of a natural disaster). The Fund uses fair value pricing procedures to reflect what the Manager and the Board believe to be more accurate values for the Fund's portfolio securities, although it may not always be able to accurately determine such values. There can be no assurance that the Fund could obtain the fair value assigned to a security if it were to sell the security at the same time at which the Fund determines its net asset value per share.

Contingent Deferred Sales Charge. If you redeem shares during their applicable contingent deferred sales charge holding period, the contingent deferred sales charge generally will be deducted from the redemption proceeds. In some circumstances you may be eligible for one of the waivers described in "Sales Charge Waivers" below and in the "Special Sales Charge Arrangements and Waivers" Appendix to the Statement of Additional Information. You must advise the Transfer Agent or your financial intermediary of your eligibility for a waiver when you place your redemption request.

A contingent deferred sales charge will be based on the net asset value of the redeemed shares at the time of redemption or the original net asset value, whichever is lower. A contingent deferred sales charge is not imposed on:

You are not charged a contingent deferred sales charge when you exchange shares of the Fund for shares of other Oppenheimer funds. However, if you exchange your shares within the applicable holding period, your original holding period will carry over to the shares you acquire, even if the new fund has a different holding period.

SALES CHARGE WAIVERS. The Fund and the Distributor offer the following opportunities to purchase shares without front-end or contingent deferred sales charges. The Fund reserves the right to amend or discontinue these programs at any time without prior notice.

In addition, the "Special Sales Charge Arrangements and Waivers" Appendix to the Statement of Additional Information provides detailed information about certain other initial sales charge and contingent deferred sales charge waivers and arrangements. A description of those sales charge waivers and arrangements is available for viewing on the OppenheimerFunds website at www.oppenheimerfunds.com (follow the hyperlink "Sales Charges & Breakpoints," under the heading "Fund Information") and may also be ordered by calling 1.800.225.5677. You must advise the Distributor, the Transfer Agent or your financial intermediary that you qualify for one of those waivers at the time you submit your purchase order or redemption request.

BUYING SHARES. You can buy shares in several ways. The Distributor has appointed certain financial intermediaries, including brokers, dealers and others, as servicing agents to accept purchase and redemption orders. The Distributor or servicing agent must receive your order, in proper form, by the close of the NYSE for you to receive that day's offering price. If your order is received on a day when the NYSE is closed or after it has closed, the order will receive the next offering price that is determined. To be in proper form, your purchase order must comply with the procedures described below. The Distributor, in its sole discretion, may reject any purchase order for the Fund's shares.

Buying Shares Through a Financial Intermediary. You can buy shares through any servicing agent (a broker, dealer, or other financial intermediary) that has a sales agreement with the Distributor. Your servicing agent will place your order with the Distributor on your behalf. A servicing agent may charge a processing fee for that service. Your account information will be shared with the financial intermediary designated as the dealer of record for the account.

Buying Shares Through the Distributor. We recommend that you discuss your investment with a financial adviser before you make a purchase to be sure that the Fund is appropriate for you. If you want to purchase shares directly from the Distributor, complete an OppenheimerFunds new account application and mail it with a check payable in U.S. dollars to "OppenheimerFunds Distributor, Inc." to the address on the back cover. If you do not list a dealer on your application, the Distributor is designated as the broker-dealer of record, but solely for the purpose of acting as your agent to purchase the shares and Class A shares are your only purchase option. Class B or Class C shares may not be purchased by a new investor directly from the Distributor without the investor designating another registered broker-dealer. However, if a current investor no longer has a broker-dealer of record for an existing Class B or Class C account, the Distributor is automatically designated as the broker-dealer of record, but solely for the purpose of acting as your agent to purchase the shares. If you submit a purchase request to the Distributor without designating the fund you wish to invest in, your investment will be made in Class A shares of Oppenheimer Money Market Fund, Inc. This policy does not apply to purchases by or for certain retirement plans or accounts. For more information regarding undesignated investments, please call the Transfer Agent at the number on the back cover of this prospectus.

Identification Requirements. Federal regulations may require the Fund to obtain your name, your date of birth (for a natural person), your residential street address or principal place of business, and your Social Security Number, Employer Identification Number or other government-issued identification when you open an account. Additional information may be required to open a corporate account or in certain other circumstances. The Fund or the Transfer Agent may use this information to verify your identity. The Fund may not be able to establish an account if the necessary information is not received. The Fund may also place limits on account transactions while it is in the process of verifying your identity. Additionally, if the Fund is unable to verify your identity after your account is established, the Fund may be required to redeem your shares and close your account.

Suspension of Share Offering. The offering of Fund shares may be suspended during any period in which the determination of net asset value is suspended, and may be suspended by the Board at any time the Board believes it is in the Fund's best interest to do so.

SELLING SHARES. You can generally redeem (sell) some or all of your shares on any regular business day. You may redeem your shares by writing a letter, by wire, by telephone or on the Internet. You can also set up an Automatic Withdrawal Plan to redeem shares on a regular basis. The redemption of Fund shares may be suspended under certain circumstances described in the Statement of Additional Information. If you have questions about any of these procedures, and especially if you are redeeming shares in a special situation, such as due to the death of the owner or from a retirement plan account, please call your financial intermediary or the Transfer Agent for assistance.

Redemption Price. Your shares will be redeemed at net asset value less any applicable sales charge or other fees. The net asset value used will be the next one calculated after your order is received, in proper form, by the Transfer Agent or your authorized financial intermediary. To be in proper form, your redemption order must comply with the procedures described below. The redemption price for shares will change from day-to-day because the value of the securities in the Fund's portfolio and the Fund's expenses fluctuate. The redemption price will normally differ for each class of shares. The redemption price of your shares may be more or less than their original cost.

Redemptions "In-Kind." Shares may be "redeemed in-kind" under certain circumstances (such as a lack of liquidity in the Fund's portfolio to meet redemptions). That means that the redemption proceeds will be paid in securities from the Fund's portfolio on a pro-rata basis, possibly including illiquid securities. If the Fund redeems your shares in-kind, you may bear transaction costs and will bear market risks until such securities are converted into cash.

Checkwriting. Effective January 1, 2011, shareholders will no longer be able to establish checkwriting for a new or existing account, and will no longer be able to order additional checks for accounts with checkwriting privileges established before January 1, 2011. The following applies to shareholders that established checkwiting privileges before January 1, 2011.

Payment Delays. Payment for redeemed shares is usually made within seven days after the Transfer Agent receives redemption instructions in proper form. For accounts registered in the name of a broker-dealer, payment will normally be forwarded to the broker-dealer within three business days. The Transfer Agent may delay processing redemption payments for recently purchased shares until the purchase payment has cleared. That delay may be as much as five business days from the date the shares were purchased. That delay may be avoided if you purchase shares by Federal Funds wire or certified check. Under unusual circumstances, the right to redeem shares or the payment of redemption proceeds may be delayed or suspended as permitted under the Investment Company Act of 1940.

THE OPPENHEIMERFUNDS EXCHANGE PRIVILEGE. You can exchange all or part of your Fund shares for shares of the same class of other Oppenheimer funds that offer the exchange privilege. For example, you can exchange Class A shares of the Fund only for Class A shares of another fund. You can obtain a list of the Oppenheimer funds that are currently available for exchanges by calling a service representative at the telephone number on the back of this prospectus. The funds available for exchange can change from time to time. The Fund may amend, suspend or terminate the exchange privilege at any time. You will receive 60 days' notice of any material change in the exchange privilege unless applicable law allows otherwise.

The OppenheimerFunds exchange privilege affords investors the ability to switch their investments among Oppenheimer funds if their investment needs change. However, there are limits on that privilege. Frequent purchases, redemptions and exchanges of Fund shares may interfere with the Manager's ability to manage the Fund's investments efficiently, increase its transaction and administrative costs and/or affect its performance, depending on various factors, such as the size of the Fund, the nature of its investments, the amount of Fund assets a portfolio manager maintains in cash or cash equivalents, the aggregate dollar amount and the number and frequency of trades.

If large dollar amounts are involved in exchange or redemption transactions, the Fund might be required to sell portfolio securities at unfavorable times to meet those transaction requests, and the Fund's brokerage or administrative expenses might be increased. Therefore, the Manager and the Fund's Board have adopted the following policies and procedures to detect and prevent frequent and/or excessive exchanges or purchase and redemption activity, while addressing the needs of investors who seek liquidity in their investment and the ability to exchange shares as their investment needs change. There is no guarantee that those policies and procedures, described below, will be sufficient to identify and deter all excessive short-term trading.

30-Day Hold. If a direct shareholder exchanges shares of another Oppenheimer fund account for shares of the Fund, his or her Fund account will be "blocked" from exchanges into any other fund for a period of 30 calendar days from the date of the exchange, subject to certain exceptions described below. Likewise, if a Fund shareholder exchanges Fund shares for shares of another eligible Oppenheimer fund, that fund account will be "blocked" from further exchanges for 30 calendar days, subject to the exception described below. The block will apply to the full account balance and not just to the amount exchanged into the account. For example, if a shareholder exchanged $2,000 from one fund into another fund in which the shareholder already owned shares worth $10,000, then, following the exchange and assuming no exception applied, the full account balance ($12,000 in this example) would be blocked from exchanges into another fund for a period of 30 calendar days. A shareholder whose account is registered on the Fund's books showing the name, address and tax ID number of the beneficial owner is a "direct shareholder."

Limitations on Exchanges in Omnibus Accounts. If you hold your Fund shares through a financial advisor or other firm such as a broker-dealer, a bank, an insurance company separate account, an investment adviser, an administrator or a trustee of a retirement plan that holds your shares in an account under its name (these are sometimes referred to as "omnibus" or "street name" accounts), that financial intermediary may impose its own restrictions or limitations to discourage short-term or excessive trading. You should consult your financial intermediary to find out what trading restrictions, including limitations on exchanges, may apply. The Fund, the Distributor, the Manager and the Transfer Agent encourage those financial intermediaries to apply the Fund's policies to their customers who invest indirectly in the Fund. However, the Transfer Agent may not be able to detect excessive short-term trading activity in accounts maintained in "omnibus" or "street name" form where the underlying beneficial owners are not identified. The Transfer Agent will attempt to monitor overall purchase and redemption activity in those accounts to seek to identify patterns that may suggest excessive trading by the underlying owners. If evidence of possible excessive trading activity is observed by the Transfer Agent, the financial intermediary that is the registered owner will be asked to review the account activity, and to confirm to the Transfer Agent and the Fund that appropriate action has been taken to curtail any excessive trading activity.

Other Limitations on Exchanges. There are a number of other special conditions and limitations that apply to certain types of exchanges. Those conditions and circumstances are described in the section "How to Exchange Shares" in the Statement of Additional Information. For information about sales charges that may apply to exchanges of shares see the sections "Contingent Deferred Sales Charge" and "Sales Charge Waivers" in this prospectus.

Requirements for Exchanges of Shares. To exchange shares of the Fund, you must meet several conditions. The Fund may amend the following requirements at any time:

Timing of Exchange Transactions. Exchanged shares are normally redeemed from one fund and the proceeds are reinvested in the fund selected for exchange on the same regular business day on which the Transfer Agent or its agent (such as a financial intermediary holding the investor's shares in an "omnibus" or "street name" account) receives an exchange request that conforms to these policies. The request must be received by the close of the NYSE that day in order to receive that day's net asset value on the exchanged shares. For requests received after the close of the NYSE the shares being exchanged will be valued at the next net asset value calculated after the request is received. The Transfer Agent may delay transmitting the proceeds from an exchange for up to five business days, however, if it determines, in its discretion, that an earlier transmittal of the redemption proceeds would be detrimental to either the fund from which shares are being exchanged or the fund into which the exchange is being made. The exchange proceeds will be invested in the new fund at the next net asset value calculated after the proceeds are received. In the event that a delay in the reinvestment of proceeds occurs, the Transfer Agent will notify you or your financial intermediary.

Taxes on Exchanges. For tax purposes, an exchange of shares of the Fund is considered a sale of those shares and a purchase of the shares of the fund into which you are exchanging. Therefore, an exchange may result in a capital gain or loss for tax purposes.

OTHER LIMITS ON SHARE TRANSACTIONS. The Fund may impose other limits on transactions that it believes would be disruptive and may refuse any purchase or exchange order.

SUBMITTING SHARE TRANSACTION REQUESTS. Share transactions may be requested by telephone or internet, in writing, through your financial intermediary, or by establishing one of the Investor Services plans described below. Certain transactions may also be submitted by fax. If an account has more than one owner, the Fund and the Transfer Agent may rely on instructions from any one owner or from the financial intermediary's representative of record for the account, unless that authority has been revoked.

Internet and Telephone Transaction Requests. Purchase, redemption and exchange requests may be submitted on the OppenheimerFunds website, www.oppenheimerfunds.com. Those requests may also be made by calling the telephone number on the back cover and either speaking to a service representative or accessing PhoneLink, the OppenheimerFunds automated telephone system that enables shareholders to perform certain account transactions automatically using a touch-tone phone.

You will need to obtain a user I.D. and password to execute transactions through PhoneLink or on the internet. Some internet and telephone transactions require the Oppenheimer AccountLink feature, described below, that links your Fund account with an account at a U.S. bank or other financial institution. The Transfer Agent will record any telephone calls to verify data concerning transactions.

The Transfer Agent has adopted procedures to confirm that telephone and internet instructions are genuine. Callers are required to provide service representatives with tax identification numbers and other account data and PhoneLink and internet users are required to use PIN numbers. The Transfer Agent will also send you written confirmations of share transactions. The Transfer Agent and the Fund will not be liable for losses or expenses that occur from telephone or internet instructions reasonably believed to be genuine.

Telephone or internet transaction privileges may be modified, suspended or terminated by the Fund at any time. The Fund will provide you notice of such changes whenever it is required to do so by applicable law.

Purchases and Redemptions by Federal Funds Wire. Shares purchased through the Distributor may be paid for by Federal Funds wire. Redemption proceeds may also be transmitted by wire. The minimum wire purchase or redemption is $2,500. There is a $10 fee for each wire redemption request. Before sending a wire purchase, call the Distributor's Wire Department at 1.800.225.5677 to notify the Distributor of the wire and to receive further instructions. To set up wire redemptions on your account or to arrange for a wire redemption, call the Transfer Agent at the telephone number on the back of this prospectus for information.

Written Transaction Requests. You can send purchase, exchange or redemption requests to the Transfer Agent at the address on the back cover. Your request must include:

Certain Requests Require a Signature Guarantee. To protect you and the Fund from fraud, certain redemption requests must be in writing and must include a signature guarantee. A notary public seal will not be accepted for these requests (other situations might also require a signature guarantee):

Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a signature guarantee from a number of financial institutions, including:

Fax Requests. You may send requests for certain types of account transactions to the Transfer Agent by fax. Please call the number on the back of this prospectus for information about which transactions may be handled this way. Transaction requests submitted by fax are subject to the same rules and restrictions as the written, telephone and internet requests described in this prospectus. However, requests that require a signature guarantee may not be submitted by fax.

Submitting Transaction Requests Through Your Financial Intermediary. You can submit purchase, redemption or exchange requests through any broker, dealer or other financial intermediary that has a special agreement with the Distributor. The broker, dealer or other intermediary will place the order with the Distributor on your behalf. A broker or dealer may charge a processing fee for that service. If your shares are held in the name of your financial intermediary, you must redeem them through that intermediary.

Intermediaries that perform account transactions for their clients by participating in "Networking" through the National Securities Clearing Corporation are responsible for obtaining their clients' permission to perform those transactions, and are responsible to their clients who are shareholders of the Fund if the intermediary performs any transaction erroneously or improperly.

Client Account Exchanges by Financial Intermediaries. The Fund and the Transfer Agent permit brokers, dealers and other financial intermediaries to submit exchange requests on behalf of their customers, unless that authority has been revoked. The Fund or the Transfer Agent may limit or refuse exchange requests submitted by such financial intermediaries if, in the Transfer Agent's judgment, exercised in its discretion, the exchanges would be disruptive to any of the funds involved in the transaction.

AccountLink. You can use our AccountLink feature to link your Fund account with an account at a U.S. bank or other financial institution that is an Automated Clearing House (ACH) member. AccountLink lets you:

AccountLink privileges should be requested on your account application or on your broker-dealer's settlement instructions if you buy your shares through a broker-dealer. For an established account, you can request AccountLink privileges by sending signature-guaranteed instructions and proper documentation to the Transfer Agent. AccountLink privileges will apply to each shareholder listed in the registration on the account as well as to the financial intermediary's representative of record unless and until the Transfer Agent terminates or receives written instructions terminating or changing those privileges. After you establish AccountLink for your account, any change you make to your bank account information must be made by signature-guaranteed instructions to the Transfer Agent signed by all shareholders on the account. Please call the Transfer Agent for more information.

Asset Builder Plan. Under an Asset Builder Plan, you may purchase shares of the Fund automatically. An Asset Builder Plan is available only if you have established AccountLink with a bank or other financial institution. Payments to purchase Fund shares will be debited from your linked account.

To establish an Asset Builder Plan at the time you initially purchase Fund shares, complete the "Asset Builder Plan" information on the account application. To add an Asset Builder Plan to an existing account, use the Asset Builder Enrollment Form. You may change the amount of your Asset Builder payment or you can terminate your 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 the requested changes. For more details, see the account application, the Asset Builder Enrollment Form and the Statement of Additional Information. Those documents are available by contacting the Distributor or may be downloaded from our website at www.oppenheimerfunds.com. The Fund reserves the right to amend, suspend or discontinue offering Asset Builder Plans at any time without prior notice.

Automatic Redemption and Exchange Plans. The Fund has several plans that enable you to redeem shares automatically or exchange them for shares of another Oppenheimer fund on a regular basis. Please call the Transfer Agent or consult the Statement of Additional Information for details.

Less Paper, Less Waste. To avoid sending duplicate copies of Fund materials to households, the Fund will mail only one copy of each prospectus, annual and semi-annual report and annual notice of the Fund's privacy policy to shareholders having the same last name and address on the Fund's records. The consolidation of these mailings, called "householding," benefits the Fund through lower printing costs and reduced mailing expense.

If you prefer to receive multiple copies of these materials, you may call the Transfer Agent at the number on the back of this prospectus or you may notify the Transfer Agent in writing. Multiple copies of prospectuses, reports and privacy notices will be sent to you commencing within 30 days after the Transfer Agent receives your request to stop householding.

You may also choose to receive your account documents electronically via eDocs Direct. Visit our website at www.oppenheimerfunds.com and click the hyperlink "Sign Up for Electronic Document Delivery" under the heading "I want to..." in the left hand column, or call 1.888.470.0862 for information and instructions.

Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares that reimburses the Distributor for a portion of the costs of maintaining accounts and providing services to Class A shareholders. Reimbursement is made periodically at an annual rate of up to 0.25% of the Class A shares daily net assets. The Distributor currently uses all of those fees to pay brokers, dealers, banks and other financial intermediaries for providing personal service and maintaining the accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent periods. Because the service fee is paid out of the Fund's assets on an ongoing basis, over time it will increase the cost of your investment.

Distribution and Service Plans for Class B and Class C Shares. The Fund has adopted Distribution and Service Plans for Class B and Class C shares to pay the Distributor for distributing those share classes, maintaining accounts and providing shareholder services. Under the plans, the Fund pays the Distributor an asset-based sales charge for Class B and Class C shares calculated at an annual rate of 0.75% of the daily net assets of those classes. The Fund also pays a service fee under the plans at an annual rate of 0.25% of the daily net assets of Class B and Class C. Altogether, these fees increase the Class B and Class C annual expenses by 1.00%, calculated on the daily net assets of the applicable class. Because these fees are paid out of the Fund's assets on an on going basis, over time they will increase the cost of your investment and may cost you more than other types of sales charges.

Use of Plan Fees: The Distributor uses the service fees to compensate brokers, dealers, banks and other financial intermediaries for maintaining accounts and providing personal services to Class B and Class C shareholders in the applicable share class. The Distributor normally pays intermediaries the 0.25% service fee in advance for the first year after shares are purchased and then pays that fee periodically.

Class B Shares: The Distributor currently pays a sales concession of 2.75% of the purchase price of Class B shares to dealers from its own resources at the time of sale. Including the advance of the service fee, the total amount paid by the Distributor to the dealer at the time of sale of Class B shares is therefore 3.00% of the purchase price. The Distributor normally retains the Class B asset-based sales charge. For ongoing purchases of Class B shares by certain retirement plans, the Distributor may pay the intermediary the asset-based sales charge and service fee during the first year after purchase instead of paying a sales concession and the first year's service fees at the time of purchase. See the Statement of Additional Information for exceptions.

Class C Shares: At the time of a Class C share purchase, the Distributor generally pays financial intermediaries a sales concession of 0.75% of the purchase price from its own resources. Therefore, the total amount, including the advance of the service fee, that the Distributor pays the intermediary at the time of a Class C share purchase is 1.00% of the purchase price. The Distributor normally retains the asset-based sales charge on Class C share purchases during the first year and then pays that fee to the intermediary as an ongoing concession. See the Statement of Additional Information for exceptions to these arrangements.

PAYMENTS TO FINANCIAL INTERMEDIARIES AND SERVICE PROVIDERS. The Manager and the Distributor, in their discretion, may also make payments to brokers, dealers and other financial intermediaries or to service providers for distribution and/or shareholder servicing activities. Those payments are made out of the Manager's and/or the Distributor's own resources and/or assets, including from the revenues or profits derived from the advisory fees the Manager receives from the Fund. Those cash payments, which may be substantial, are paid to many firms having business relationships with the Manager and Distributor and are in addition to any distribution fees, servicing fees, or transfer agency fees paid directly or indirectly by the Fund to these financial intermediaries and any commissions the Distributor pays to these firms out of the sales charges paid by investors. Payments by the Manager or Distributor from their own resources are not reflected in the tables in the "Fees and Expenses of the Fund" section of this prospectus because they are not paid by the Fund.

The financial intermediaries that may receive those payments include firms that offer and sell Fund shares to their clients, or provide shareholder services to the Fund, or both, and receive compensation for those activities. The financial intermediaries that may receive payments include your securities broker, dealer or financial advisor, sponsors of fund "supermarkets," sponsors of fee-based advisory or wrap fee programs, sponsors of college and retirement savings programs, banks, trust companies and other intermediaries offering products that hold Fund shares, and insurance companies that offer variable annuity or variable life insurance products.

In general, these payments to financial intermediaries can be categorized as "distribution-related" or "servicing" payments. Payments for distribution-related expenses, such as marketing or promotional expenses, are often referred to as "revenue sharing." Revenue sharing payments may be made on the basis of the sales of shares attributable to that intermediary, the average net assets of the Fund and other Oppenheimer funds attributable to the accounts of that intermediary and its clients, negotiated lump sum payments for distribution services provided, or similar fees. In some circumstances, revenue sharing payments may create an incentive for a financial intermediary or its representatives to recommend or offer shares of the Fund or other Oppenheimer funds to its customers. These payments also may give an intermediary an incentive to cooperate with the Distributor's marketing efforts. A revenue sharing payment may, for example, qualify the Fund for preferred status with the intermediary receiving the payment or provide representatives of the Distributor with access to representatives of the intermediary's sales force, in some cases on a preferential basis over funds of competitors. Additionally, as firm support, the Manager or Distributor may reimburse expenses related to educational seminars and "due diligence" or training meetings (to the extent permitted by applicable laws or the rules of the Financial Industry Regulatory Authority ("FINRA")) designed to increase sales representatives' awareness about Oppenheimer funds, including travel and lodging expenditures. However, the Manager does not consider a financial intermediary's sale of shares of the Fund or other Oppenheimer funds when selecting brokers or dealers to effect portfolio transactions for the funds.

Various factors are used to determine whether to make revenue sharing payments. Possible considerations include, without limitation, the types of services provided by the intermediary, sales of Fund shares, the redemption rates on accounts of clients of the intermediary or overall asset levels of Oppenheimer funds held for or by clients of the intermediary, the willingness of the intermediary to allow the Distributor to provide educational and training support for the intermediary's sales personnel relating to the Oppenheimer funds, the availability of the Oppenheimer funds on the intermediary's sales system, as well as the overall quality of the services provided by the intermediary and the Manager or Distributor's relationship with the intermediary. The Manager and Distributor have adopted guidelines for assessing and implementing each prospective revenue sharing arrangement. To the extent that financial intermediaries receiving distribution-related payments from the Manager or Distributor sell more shares of the Oppenheimer funds or retain more shares of the funds in their client accounts, the Manager and Distributor benefit from the incremental management and other fees they receive with respect to those assets.

Payments may also be made by the Manager, the Distributor or the Transfer Agent to financial intermediaries to compensate or reimburse them for administrative or other client services provided such as sub-transfer agency services for shareholders or retirement plan participants, omnibus accounting or sub-accounting, participation in networking arrangements, account set-up, recordkeeping and other shareholder services. Payments may also be made for administrative services related to the distribution of Fund shares through the intermediary. Firms that may receive servicing fees include retirement plan administrators, qualified tuition program sponsors, banks and trust companies, and others. These fees may be used by the service provider to offset or reduce fees that would otherwise be paid directly to them by certain account holders, such as retirement plans.

The Statement of Additional Information contains more information about revenue sharing and service payments made by the Manager or the Distributor. Your broker, dealer or other financial intermediary may charge you fees or commissions in addition to those disclosed in this prospectus. You should ask your financial intermediary for details about any such payments it receives from the Manager or the Distributor and their affiliates, or any other fees or expenses it charges.

DIVIDENDS. The Fund intends to declare dividends separately for each class of shares from net tax-exempt income and/or net taxable investment income each regular business day and to pay those dividends monthly. Daily dividends will not be declared or paid on newly-purchased shares until Federal Funds are available to the Fund from the purchase payment for such shares.

The Fund attempts to pay dividends on Class A shares at a constant level. There is no assurance that it will be able to do so. The Board of Trustees may change the targeted dividend level at any time, without prior notice to shareholders. The amount of those dividends and any other distributions paid on other classes of shares may vary over time, depending on market conditions, the composition of the Fund's portfolio, and expenses borne by the particular class of shares. Dividends and other distributions paid on Class A and Class Y shares will generally be higher than dividends for Class B and Class C shares, which normally have higher expenses than Class A or Class Y. The Fund cannot guarantee that it will pay any dividends or other distributions.

CAPITAL GAINS. Although the Fund does not seek capital gains, it may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains annually. The Fund may also make supplemental distributions of ordinary income and exempt-interest dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. Long-term capital gains will be separately identified in the tax information the Fund sends you after the end of the calendar year.

Options for Receiving Dividends and Distributions. When you open your Fund account, you can specify on your application how you want to receive distributions of dividends and capital gains. To change that option, you must notify the Transfer Agent. There are four payment options available:

TAXES. Dividends paid from net investment income earned by the Fund on tax-exempt municipal securities will be excludable from gross income for federal income tax purposes. All or a portion of the dividends paid by the Fund that are derived from interest paid on certain "private activity bonds" may be an item of tax preference if you are subject to the federal alternative minimum tax. The portion of the Fund's exempt-interest dividends that was a tax preference item for the most recent calendar year is available on the OppenheimerFunds website at www.oppenheimerfunds.com/redir/tax_table_amt.jsp. The tax preference amount will vary from year to year.

Dividends and capital gains distributions may be subject to federal, state or local taxes. Any short-term capital gain distributions are taxable to you as ordinary income. Any long-term capital gain distributions are taxable to you as long-term capital gains, no matter how long you have owned shares in the Fund. The Fund may derive gains in part from municipal obligations the Fund purchased below their principal or face values. All, or a portion of these gains may be taxable to you as ordinary income rather than capital gains. Whether you reinvest your distributions in additional shares or take them in cash, the tax treatment is the same.

After the end of each calendar year the Fund will send you and the Internal Revenue Service statements showing the amount of any taxable distributions you received in the previous year and will separately identify any portion of these distributions that qualify for taxation as long-term capital gains or for any other special tax treatment.

If you are neither a lawful permanent resident nor a citizen of the United States, or if you are a foreign entity, the Fund's ordinary income dividends (which include distributions of net short-term capital gain) generally will be subject to a 30% U.S. withholding tax, unless a lower rate applies under an income tax treaty. For taxable years of the Fund beginning before 2012, certain distributions that may be reported by the Fund as arising from Qualified Interest Income and Qualified Short-term Capital Gains (if applicable) and paid to a foreign shareholder may be eligible for an exemption from U.S. withholding tax. To the extent the Fund's distributions are derived from dividends, they will not be eligible for this exemption.

By law, your dividends and redemption proceeds will be subject to a backup withholding tax if you are not a corporation and have not provided a taxpayer identification number or social security number or if the number you have provided is incorrect.

Avoid "Buying a Distribution." If you buy shares on or just before the ex-dividend date, or just before the Fund declares a capital gains distribution, you will pay the full price for the shares, and then receive a portion of the price back as a taxable dividend or capital gain.

Remember, There May be Taxes on Transactions. Because the Fund's share prices fluctuate, you may have a capital gain or loss when you sell or exchange your shares. A capital gain or loss is the difference between the price you paid for the shares and the price you receive when you sell or exchange them. Any capital gain is subject to capital gains tax.

Returns of Capital Can Occur. In certain cases, distributions made by the Fund may be considered a non-taxable return of capital to shareholders, resulting in a reduction in the basis in their shares. If this occurs, the Fund will notify you.

This information is only a summary of certain federal income tax information about your investment. You are encouraged to consult your tax adviser about the effect of an investment in the Fund on your particular tax situation and about any changes to the Internal Revenue Code that may occur from time to time. Additional information about the tax effects of investing in the Fund is contained in the Statement of Additional Information.

Qualification as a Regulated Investment Company. The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code, by satisfying certain income, asset diversification and income distribution requirements, but it reserves the right not to qualify. The Fund qualified during its most recent fiscal year. The Fund, as a regulated investment company, will not be subject to federal income taxes on any of its income, provided that it satisfies certain income, diversification and distribution requirements.

Other Taxability Risk Considerations. It is possible that, because of events occurring after the date of its issuance, a municipal security owned by the Fund will be determined to pay interest that is includable in gross income for purposes of the federal income tax, and that determination could be retroactive to the date of issuance. Such a determination may cause a portion of prior distributions to shareholders to be taxable to shareholders in the year of receipt.

Legislation affecting tax-exempt municipal securities is often considered by the United States Congress and legislation affecting the exemption of interest or other income thereon for purposes of taxation by a state may be considered by the state's legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of a state's municipal securities. There can be no assurance that legislation enacted or proposed, or actions by a court, after the date of issuance of a municipal security will not have an adverse effect on the tax status of interest or other income or the market value of that municipal security. Please consult your tax adviser regarding pending or proposed federal and state tax legislation, court proceedings and other tax considerations.

The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past five fiscal years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available upon request.

STATEMENT OF ADDITIONAL INFORMATION. This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this prospectus (it is legally part of this prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS. The Fund's Annual and Semi-Annual Reports provide additional information about the Fund's investments and performance. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year.

You can request the above documents, the notice explaining the Fund's privacy policy, and other information about the Fund, without charge, by:

Information about the Fund including the Statement of Additional Information can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1.202.551.8090. Reports and other information about the Fund are available on the EDGAR database on the SEC's website at www.sec.gov. Copies may be obtained after payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-1520.

No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this prospectus. This prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer.

The investment objective, the principal investment policies and the principal risks of the Fund are described in the Prospectus. This SAI contains supplemental information about those policies and risks and the types of securities that the Fund's investment adviser, OppenheimerFunds, Inc. (the "Manager"), can select for the Fund. Additional information is also provided about the strategies that the Fund may use to try to achieve its investment objective.

The composition of the Fund's portfolio and the techniques and strategies that the Fund uses in selecting portfolio securities may vary over time. The Fund is not required to use all of the investment techniques and strategies described below in seeking its investment objective. It may use some of the investment techniques and strategies only at some times or it may not use them at all.

The municipal securities that the Fund holds to maturity are redeemable by the security's issuer at their full principal value plus any accrued interest. During the time they are held in the Fund's portfolio, however, the values of those securities may be affected by changes in general interest rates and other factors. The current values of debt securities vary inversely with changes in prevailing interest rates, meaning that after a security is purchased if interest rates increase, the security will normally decline in value and if interest rates decrease, normally its value would increase. Those changes in value generally will not result in realized gains or losses unless the Fund sells a security prior to its maturity. However, if the Fund disposes of a security prior to its maturity, 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 category and between categories. These variations depend on numerous factors. The factors affecting the yields of municipal securities include: general conditions in the municipal securities market, the size of a particular offering, the maturity of the obligation and the rating of the issue (if any).

Unless the Prospectus or SAI states that an investment percentage restriction applies on an ongoing basis, it applies only at the time the Fund makes an investment (except for borrowing and investments in illiquid securities). That means the Fund does not have to buy or sell securities solely to meet percentage limits if those limits were exceeded because the value of the investment changed in proportion to the size of the Fund.

Municipal Securities. The types of municipal securities in which the Fund may invest are described in the Prospectus under "Principal Investment Strategies" and "About the Fund's Investments." The Fund may from time to time invest in municipal securities other than New York municipal securities. For example, to seek a higher yield, the Fund may invest in municipal securities issued by other states and their respective political subdivisions. Although any interest from these securities generally would be exempt from federal income tax, any such interest may be subject to New York State and New York City personal income tax. Nonetheless, the Fund does not expect to invest a significant portion of its assets in securities other than New York municipal securities.

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.

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" bonds and "revenue" bonds (including "private activity" bonds). They may have fixed, variable or floating rates of interest 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 investments that pay a lower rate of return, which could reduce the Fund's yield.

General Obligation Bonds. The basic security behind general obligation bonds is the issuer's pledge of its full faith and credit and taxing power, if any, 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 on the rate or amount of special assessments that can be levied to meet these obligations.

Revenue Bonds. The principal security for a revenue bond is generally the net revenues derived from a particular facility, group of facilities, or, in some cases, the proceeds of a special excise tax or other specific revenue source, such as a state's or local government's proportionate share of the tobacco Master Settlement Agreement ("MSA") (as described in the section titled "Tobacco Related Bonds"). 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 revenue 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.

Private Activity Bonds. The Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), includes rules governing tax-exemption for interest paid on certain types of municipal securities known as "private activity bonds" (referred to as "industrial development bonds" under pre-1986 law). The proceeds from private activity bonds are used to finance various non-governmental privately owned and/or operated facilities. Under the Internal Revenue Code, interest on private activity bonds can be excluded from gross income for federal income tax purposes if (i) the financed activities fall into one of seven categories of "qualified private activity bonds," consisting of mortgage bonds, veterans mortgage bonds, small issue bonds, student loan bonds, redevelopment bonds, "exempt facility bonds" and "501(c)(3) bonds," and (ii) certain tests are met. The types of facilities that may be financed with exempt facility bonds include airports, docks and wharves, water furnishing facilities, sewage facilities, solid waste disposal facilities, qualified residential rental projects, hazardous waste facilities and high speed intercity rail facilities. The types of facilities that may be financed with 501(c)(3) bonds include hospitals and educational facilities that are owned by 501(c)(3) tax-exempt organizations. The payment of the principal and interest on such qualified private activity bonds is dependant solely on the ability of the facility's user to meet its financial obligations, generally from the revenues derived from the operation of the financed facility, and the pledge, if any, of real and personal property financed by the bond as security for those payments.

Whether a municipal security is a private activity bond (the interest on which is taxable unless it is a qualified private activity bond) depends on whether (i) more than a certain percentage (generally 10%) of (a) the proceeds of the security are used in a trade or business carried on by a non-governmental person and (b) the payment of principal or interest on the security is directly or indirectly derived from such private use, or is secured by privately used property or payments in respect of such property, or (ii) more than the lesser of 5% of the issue or $5 million is used to make or finance loans to non-governmental persons.

Under Internal Revenue Code Section 147(a), certain types of private activity bonds that would otherwise be qualified tax-exempt private activity bonds will not be qualified for any period during which the bond is held by a person who is a "substantial user" of the facilities financed by the bond, or a "related person" of such a substantial user. Generally a "substantial user" is a non-exempt person who regularly uses part of a facility in a trade or business.

Therefore, certain municipal securities could lose their tax-exempt status retroactively if the issuer or user fails to meet certain continuing requirements regarding the use and operation of the bond-financed facilities and the use and expenditure of the proceeds of such securities for the entire period during which the securities are outstanding. The Fund makes no independent investigation into the use of such facilities or the expenditure of such proceeds. 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.

Tax-exempt interest on certain qualified private activity bonds may nonetheless be treated as a "tax preference" item subject to the alternative minimum tax (the "AMT"). If such qualified private activity bonds are held by the Fund, a proportionate share of the exempt-interest dividends paid by the Fund would constitute an item of tax preference to shareholders that are subject to the AMT.

Limitations on the amount of private activity bonds that each state may issue may reduce the supply of such bonds. The value of the Fund's portfolio could be affected by these limitations if they reduce the availability of such bonds.

Municipal Notes. Municipal securities that have a maturity of less than one year (when the security is issued) are generally known as "municipal notes." Municipal notes generally are used to provide for short-term working capital needs. Some of the types of municipal notes the Fund can invest in are described below.

Tax Anticipation Notes. These are issued to finance working capital needs of municipalities. Generally, they are issued in anticipation of various seasonal tax revenue, such as income, sales, use or other business taxes, and are payable from these specific future taxes.

Revenue Anticipation Notes. These are notes issued in expectation of receipt of other types of revenue, such as federal revenues available under federal revenue-sharing programs.

Bond Anticipation Notes. Bond anticipation notes are issued to provide interim financing until long-term financing can be arranged. The long-term bonds that are issued typically also provide the money for the repayment of the notes.

Construction Loan Notes. These are sold to provide project construction financing until permanent financing can be secured. After successful completion and acceptance of the project, it may receive permanent financing through public agencies, such as the Federal Housing Administration.

Tax-Exempt Commercial Paper. This type of short-term obligation (usually having a maturity of 270 days or less) is issued by a municipality to meet current working capital needs.

Auction Rate Securities. Auction rate securities are municipal debt instruments with long-term nominal maturities for which the interest rate is reset at specific shorter frequencies (typically every 7-35 days) through a "dutch" auction process. A dutch auction is a competitive bidding process used to determine rates on each auction date. In a dutch auction, a broker-dealer submits bids, on behalf of current and prospective investors, to the auction agent. The winning bid rate is the rate at which the auction "clears," meaning the lowest possible interest rate at which all the securities can be sold at par. This "clearing rate" is paid on the entire issue for the upcoming period and includes current holders of the auction rate securities. Investors who bid a minimum rate above the clearing rate receive no securities, while those whose minimum bid rates were at or below the clearing rate receive the clearing rate for the next period.

While the auction rate process is designed to permit the holder to sell the auction rate securities in an auction at par value at specified intervals, there is the risk that an auction will fail due to insufficient demand for the securities. Auction rate securities may be subject to changes in interest rates, including decreased interest rates. Failed auctions may impair the liquidity of auction rate securities.

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. The Manager may determine that certain municipal leases are liquid under specific guidelines that require the Manager to evaluate:

While the Fund holds such securities, the Manager will also evaluate the likelihood of a continuing market for these securities and their credit quality.

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.

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.

Municipal leases may also be subject to "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 to or destruction of the leased property interferes with the lessee's use of the property. However, 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 monies for lease payments.

In addition to the risk of "non-appropriation," 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.

TOBACCO RELATED BONDS. The Fund may invest in two types of tobacco related bonds: (i) tobacco settlement revenue bonds, for which payments of interest and principal are made solely from a state's interest in the MSA described below, and (ii) tobacco bonds subject to a state's appropriation pledge, for which payments may come from both the MSA revenue and the applicable state's appropriation pledge.

Tobacco Settlement Revenue Bonds. The Fund may invest up to 25% (measured at the time of purchase) of its total assets in tobacco settlement revenue bonds. Tobacco settlement revenue bonds are secured by an issuing state's proportionate share in the MSA. The MSA is an agreement reached out of court in November 1998 between 46 states and six other U.S. jurisdictions (including Puerto Rico and Guam) and the four largest (now three) U.S. tobacco manufacturers (Philip Morris, RJ Reynolds, Brown & Williamson (merged with RJ Reynolds in 2004), and Lorillard). Subsequently, a number of smaller tobacco manufacturers signed on to the MSA. The MSA provides for payments annually by the manufacturers to the states and jurisdictions in perpetuity, in exchange for releasing all claims against the manufacturers and a pledge of no further litigation. The MSA established a base payment schedule and a formula for adjusting payments each year. Tobacco manufacturers pay into a master escrow trust based on their market share and each state receives a fixed percentage of the payment as set forth in the MSA.

A number of states have securitized the future flow of those payments by selling bonds pursuant to indentures, some through distinct governmental entities created for such purpose. The bonds are backed by the future revenue flow that is used for principal and interest payments on the bonds. Annual payments on the bonds, and thus the risk to the Fund, are highly dependent on the receipt of future settlement payments by the state or its governmental entity, as well as other factors. The actual amount of future settlement payments is dependent on many factors including, but not limited to, annual domestic cigarette shipments, cigarette consumption, inflation and the financial capability of participating tobacco companies. As a result, payments made by tobacco manufacturers could be reduced if the decrease in tobacco consumption is significantly greater than the forecasted decline.

On June 22, 2009, President Obama signed into law the "Family Smoking Prevention and Tobacco Control Act" which extends the authority of the U.S. Food and Drug Administration to encompass the regulation of tobacco products. Among other things, the legislation authorizes the FDA to adopt product standards for tobacco products, restrict advertising of tobacco products, and impose stricter warning labels. FDA regulation of tobacco products could result in greater decreases in tobacco consumption than originally forecasted. On August 31, 2009, a number of tobacco manufacturers filed suit in federal court in Kentucky alleging that certain of the provisions of the FDA Tobacco Act restricting the advertising and marketing of tobacco products are inconsistent with the freedom of speech guarantees of the First Amendment of the United States Constitution. The suit does not challenge Congress' decision to give the FDA regulatory authority over tobacco products or the vast majority of the provisions of the law.

Because tobacco settlement bonds are backed by payments from the tobacco manufacturers, and generally not by the credit of the state or local government issuing the bonds, their creditworthiness depends on the ability of tobacco manufacturers to meet their obligations. A market share loss by the MSA companies to non-MSA participating tobacco manufacturers could also cause a downward adjustment in the payment amounts. A participating manufacturer filing for bankruptcy also could cause delays or reductions in bond payments, which could affect the Fund's net asset value.

The MSA and tobacco manufacturers have been and continue to be subject to various legal claims. An adverse outcome to any litigation matters relating to the MSA or affecting tobacco manufacturers could adversely affect the payment streams associated with the MSA or cause delays or reductions in bond payments by tobacco manufacturers. The MSA itself has been subject to legal challenges and has, to date, withstood those challenges.

Tobacco Subject to Appropriation (STA) Bonds. In addition to the tobacco settlement bonds discussed above, the Fund also may invest in tobacco related bonds that are subject to a state's appropriation pledge ("STA Tobacco Bonds"). STA Tobacco Bonds rely on both the revenue source from the MSA and a state appropriation pledge.

These STA Tobacco Bonds are part of a larger category of municipal bonds that are subject to state appropriation. Although specific provisions may vary among states, "subject to appropriation bonds" (also referred to as "appropriation debt") are typically payable from two distinct sources: (i) a dedicated revenue source such as a municipal enterprise, a special tax or, in the case of tobacco bonds, the MSA funds, and (ii) the issuer's general funds. Appropriation debt differs from a state's general obligation debt in that general obligation debt is backed by the state's full faith, credit and taxing power, while appropriation debt requires the state to pass a specific periodic appropriation to pay interest and/or principal on the bonds as the payments come due. The appropriation is usually made annually. While STA Tobacco Bonds offer an enhanced credit support feature, that feature is generally not an unconditional guarantee of payment by a state and states generally do not pledge the full faith, credit or taxing power of the state. The Fund considers the STA Tobacco Bonds to be "municipal securities" for purposes of its concentration policies.

Litigation Challenging the MSA. The participating manufacturers and states in the MSA are subject to several pending lawsuits challenging the MSA and/or related state legislation or statutes adopted by the states to implement the MSA (referred to herein as the "MSA-related legislation"). One or more of the lawsuits allege, among other things, that the MSA and/or the states' MSA-related legislation are void or unenforceable under the Commerce Clause and certain other provisions of the U.S. Constitution, the federal antitrust laws, federal civil rights laws, state constitutions, consumer protection laws and unfair competition laws.

To date, challenges to the MSA or the states' MSA-related legislation have not been ultimately successful, although several such challenges have survived initial appellate review of motions to dismiss or have proceeded to a stage of litigation where the ultimate outcome may be determined by, among other things, findings of fact based on extrinsic evidence as to the operation and impact of the MSA and the states' MSA-related legislation.

The MSA and states' MSA-related legislation may also continue to be challenged in the future. A determination that the MSA or states' MSA-related legislation is void or unenforceable would have a material adverse effect on the payments made by the participating manufacturers under the MSA.

Litigation Seeking Monetary Relief from Tobacco Industry Participants. The tobacco industry has been the target of litigation for many years. Both individual and class action lawsuits have been brought by or on behalf of smokers alleging that smoking has been injurious to their health, and by non-smokers alleging harm from environmental tobacco smoke, also known as "secondhand smoke." Plaintiffs seek various forms of relief, including compensatory and punitive damages aggregating billions of dollars, treble/multiple damages and other statutory damages and penalties, creation of medical monitoring and smoking cessation funds, disgorgement of profits, legal fees, and injunctive and equitable relief.

The MSA does not release participating manufacturers from liability in either individual or class action cases. Healthcare cost recovery cases have also been brought by governmental and non-governmental healthcare providers seeking, among other things, reimbursement for healthcare expenditures incurred in connection with the treatment of medical conditions allegedly caused by smoking. The participating manufacturers are also exposed to liability in these cases, because the MSA only settled healthcare cost recovery claims of the participating states. Litigation has also been brought against certain participating manufacturers and their affiliates in foreign countries.

The ultimate outcome of any pending or future lawsuit is uncertain. Verdicts of substantial magnitude that are enforceable as to one or more participating manufacturers, if they occur, could encourage commencement of additional litigation, or could negatively affect perceptions of potential triers of fact with respect to the tobacco industry, possibly to the detriment of pending litigation. An unfavorable outcome or settlement or one or more adverse judgments could result in a decision by the affected participating manufacturers to substantially increase cigarette prices, thereby reducing cigarette consumption beyond the forecasts under the MSA. In addition, the financial condition of any or all of the participating manufacturer defendants could be materially and adversely affected by the ultimate outcome of pending litigation, including bonding and litigation costs or a verdict or verdicts awarding substantial compensatory or punitive damages. Depending upon the magnitude of any such negative financial impact (and irrespective of whether the participating manufacturer is thereby rendered insolvent), an adverse outcome in one or more of the lawsuits could substantially impair the affected participating manufacturer's ability to make payments under the MSA.

Credit Ratings of Municipal Securities. Ratings by ratings organizations such as Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Services ("S&P"), and Fitch, Inc. ("Fitch") 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. 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.

Below-investment-grade securities (also referred to as "junk bonds") may have a higher yield than securities rated in the higher 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 harder to sell at an acceptable price. The additional risks mean that the Fund may not receive the anticipated level of income from these securities, and the Fund's net asset value may be affected by declines in the value of lower-grade securities.

After the Fund buys a municipal security, the security may cease to be rated or its rating may be reduced. Neither event requires the Fund to sell the security, but the Manager will consider such events in determining whether the Fund should continue to hold the security. To the extent that ratings given by Moody's, S&P, or Fitch change as a result of changes in those rating organizations or their rating systems, the Fund will attempt to use similar 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.

A list of the rating categories of Moody's, S&P and Fitch for municipal securities is contained in an Appendix to this SAI. Because the Fund may purchase securities that are unrated by nationally recognized rating organizations, the Manager will make its own assessment of the credit quality of those unrated issues. The Manager will use criteria similar to those used by the rating agencies and assign a rating category to a security that is similar 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.

In evaluating the credit quality of a particular security, whether it is rated or unrated, the Manager will normally take into consideration a number of factors. Among them are the financial resources of the issuer, or the underlying source of funds for debt service on a security, the issuer's sensitivity to economic conditions and trends, any operating history of the facility financed by the obligation and the degree of community support for it, the capabilities of the issuer's management and regulatory factors affecting the issuer and particular facility.

Special Risks of Below-Investment-Grade Securities. The Fund may invest in municipal securities rated below-investment-grade up to the limits described in the Prospectus. Lower-grade securities may have a higher yield than securities rated in the higher 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 harder to sell at an acceptable price. The additional risks mean that the Fund may not receive the anticipated level of income from these securities, and the Fund's net asset value may be affected by declines in the value of lower-grade securities.

While securities rated "Baa" by Moody's or "BBB" by S&P are investment-grade, they may be subject to special risks and have some speculative characteristics.

Special Risks of the Fund's Investments in New York and U.S. Territories, Commonwealths and Possessions. A discussion of the special considerations relating to the Fund's municipal obligations and other economic conditions in New York is provided in Appendix B to this SAI.

The Fund also invests in municipal securities issued by certain territories, commonwealths and possessions of the United States that pay interest that is exempt (in the opinion of the issuer's legal counsel when the security is issued) from federal income tax and New York personal income tax. Therefore, the Fund's investments could be affected by the fiscal stability of, for example, Puerto Rico, the Virgin Islands, Guam or the Mariana Islands. Additionally, the Fund's investments could be affected by economic, legislative, regulatory or political developments affecting issuers in those territories, commonwealths or possessions. A discussion of these special considerations also is provided in Appendix B.

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" 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 will 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. Their 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 for its portfolio 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. In a purchase transaction the Fund will identify on its books liquid securities of any type with a value at least equal to the 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.

The Fund may also use the following types of investments and investment strategies.

Floating Rate and Variable Rate Obligations. Floating or variable rate 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 market rate, such as the percentage of LIBOR, the SIFMA Municipal Swap index or a bank's prime rate and is adjusted automatically each time such rate is adjusted. The interest rate on a variable rate demand note is also based on a specified market rate but is adjusted automatically at specified intervals of not less than one year. Generally, the changes in the interest rates 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 demand obligation meets the Fund's quality standards by reason of being backed 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. Floating rate or variable rate obligations that do not provide for the recovery of principal and interest within seven days are subject to the Fund's limitations on investments in illiquid securities.

Inverse Floaters. The Fund invests in "inverse floaters" which are derivative instruments that pay interest at rates that move in the opposite direction of yields on short term securities. As short term interest rates rise, the interest rate on inverse floaters falls and they produce less current income. As short term interest rates fall, the interest rates on the inverse floaters increase and they pay more current income. Their market value can be more volatile than that of a conventional fixed rate security having similar credit quality, redemption provisions and maturity. The Fund can expose up to 5% of its total assets to the effects of leverage from its investments in inverse floaters.

An inverse floater is typically created by a trust that divides a municipal security into two securities: a short term tax free floating rate security (sometimes referred to as a "tender option bond") and a long-term tax-exempt floating rate security (referred to as a residual certificate" or "inverse floater") that pays interest at rates that move in the opposite direction of the yield on the short term floating rate security. The purchaser of a "tender option bond" has the right to tender the security periodically for repayment of the principal value. As short-term interest rates rise, inverse floaters produce less current income (and, in extreme cases, may pay no income) and as short-term interest rates fall, inverse floaters produce more current income.

The Fund may also purchase inverse floaters created when another party transfers a municipal security to a trust. The trust then issues short term floating rate notes to third parties and sells the inverse floater to the Fund. Under some circumstances, 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.

Additionally, the Fund may be able to purchase inverse floaters created by municipal issuers directly. To provide investment leverage, a municipal issuer might issue two variable rate obligations instead of a single long term, fixed rate security. For example, the interest rate on one obligation reflecting short term interest rates and the interest rate on the other instrument, the inverse floater, reflecting the approximate rate the issuer would have paid on a fixed rate security, multiplied by a factor of two, minus the rate paid on the short term instrument.

Inverse floaters may offer relatively high current income, reflecting the spread between long term and short term tax-exempt interest rates. As long as the municipal yield curve remains positively sloped, and short term rates remain low relative to long term rates, owners of inverse floaters will have the opportunity to earn interest at above market rates. If the yield curve flattens and shifts upward, an inverse floater will lose value more quickly than a conventional long term security having similar credit quality, redemption provisions and maturity.

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. 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.

The Fund may enter into a "shortfall and forbearance" agreement with the sponsor of an inverse floater held by the Fund. Under such an agreement, on liquidation of the trust, the Fund would be committed to pay the trust the difference between the liquidation value of the underlying security on which the inverse floater is based and the principal amount payable to the holders of the short-term floating rate security that is based on the same underlying security. The Fund would not be required to make such a payment under the standard terms of a more typical inverse floater. Although entering into a "shortfall and forbearance" agreement would expose the Fund to the risk that it may be required to make the payment described above, the Fund may receive higher interest payments than under a typical inverse floater.

An investment in inverse floaters may involve greater risk than an investment in a fixed rate municipal security. All inverse floaters entail some degree of leverage. The interest rate on inverse floaters varies inversely at a pre-set multiple of the change in short term rates. An inverse floater that has a higher multiple, and therefore more leverage, will be more volatile with respect to both price and income than an inverse floater with a lower degree of leverage or than the underlying security.

Because of the accounting treatment for inverse floaters created by the Fund's transfer of a municipal bond to a trust, the Fund's financial statements will reflect these transactions as "secured borrowings," which affects the Fund's expense ratios, statements of income and assets and liabilities and causes the Fund's Statement of Investments to include the underlying municipal bond.

Percentage of LIBOR Notes (PLNs). The Fund may invest in Percentage of LIBOR Notes ("PLNs") which are variable rate municipal securities based on the London Interbank Offered Rate ("LIBOR"), a widely used benchmark for short-term interest rates and used by banks for interbank loans with other banks. The PLN typically pays interest based on a percentage of a LIBOR rate for a specified time plus an established yield premium. Due to their variable rate features, PLNs will generally pay higher levels of income in a rising short-term interest rate environment and lower levels of income as short-term interest rates decline. In times of substantial market volatility, however, the PLNs may not perform as anticipated. The value of a PLN also may decline due to other factors, such as changes in credit quality of the underlying bond.

The Fund also may invest in PLNs that are created when a broker-dealer/sponsor deposits a municipal bond into a trust created by the sponsor. The trust issues a percentage of LIBOR floating rate certificate (i.e., the PLN) to the Fund and a residual interest certificate to third parties who receive the remaining interest on the bond after payment of the interest distribution to the PLN holder and other fees.

Zero-Coupon Securities. The Fund may buy 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 be required to 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.

Puts and Standby Commitments. The Fund may acquire "stand-by commitments" or "puts" with respect to municipal securities to enhance portfolio liquidity and to try to reduce the average effective portfolio maturity. 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.

Repurchase Agreements. The Fund may acquire securities subject to repurchase agreements. Repurchase agreements may be acquired for temporary defensive purposes, to maintain liquidity to meet anticipated share redemptions, pending the investment of the proceeds from sales of shares, or pending the settlement of portfolio securities transactions. In a repurchase transaction, the purchaser buys 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 as primary dealers in government securities. Vendors must meet credit requirements set by the Manager from time to time.

The majority of repurchase transactions run from day to day and delivery pursuant to the resale typically occurs within one to five days of the purchase. Repurchase agreements that have a maturity beyond seven days are subject to limits on illiquid investments. There is no limit on the amount of assets that may be subject to repurchase agreements having maturities of seven days or less.

Repurchase agreements are considered "loans" under the Investment Company Act and are collateralized by the underlying security. 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 repurchase price on the delivery date, there may be costs incurred in disposing of the collateral and losses if there is a delay in the ability to do so. The Manager will monitor the vendor's creditworthiness to confirm that the vendor is financially sound and will continuously monitor the collateral's value.

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the "SEC"), the Fund, along with the affiliated entities managed by the Manager, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements secured by U.S. Government securities. Securities that are pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each joint repurchase arrangement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention or sale of the collateral may be subject to legal proceedings.

Reverse Repurchase Agreements. The Fund may engage in reverse repurchase agreements. A reverse repurchase agreement is the sale of an underlying debt obligation and the simultaneous agreement to repurchase it at an agreed-upon price and date. These transactions involve the risk that the market value of the securities sold under a reverse repurchase agreement could decline below the cost of the obligation to repurchase them. The Fund will identify liquid assets on its books to cover its obligations under reverse repurchase agreements, including interest, until payment is made to the seller.

Borrowing and Leverage. The Fund can borrow from banks, as permitted by the Investment Company Act. It can use those borrowings for investment-related purposes such as purchasing securities believed to be desirable by the Manager. The Fund also can borrow from banks and other lenders to meet redemption obligations or for temporary and emergency purposes. When the Fund borrows money, it is using a speculative investment technique known as "leverage," and changes in the value of the Fund's investments will have a larger effect on its share price than if it did not borrow. Under the Fund's investment policies, the Fund may not borrow money, except to the extent permitted under the Investment Company Act, the rules or regulations thereunder or any exemption from that Act that applies to the Fund. Currently, under the Investment Company Act, a mutual fund may borrow only from banks (other than for emergency purposes) and the maximum amount it may borrow is up to one-third of its total assets (including the amount borrowed), less all liabilities and indebtedness other than borrowings, meaning that the value of those assets must be at least equal to 300% of the amount borrowed. If the value of the Fund's assets fails to meet this 300% asset coverage requirement, the Fund will reduce the amount of its borrowings within three days to meet the requirement. To do so, the Fund might have to sell a portion of its investments at a disadvantageous time and for a disadvantageous price.

The Fund may also borrow up to 5% of its total assets for temporary or emergency purposes from any lender. Under the Investment Company Act, there is a rebuttable presumption that a loan is temporary if it is repaid within 60 days and not extended or renewed.

The Fund will pay interest and may pay other fees in connection with loans. Interest expense and the amount of any other fees incurred by the Fund in connection with loans will raise the overall expenses of the Fund and may reduce its returns. If the Fund does borrow, its expenses will usually be greater than comparable funds that do not borrow. The interest and fees paid on a loan might be more or less than the yield on any securities purchased with the loan proceeds. If those costs are more than the yield on the securities purchased, the Fund's return will be reduced. Additionally, on the maturity date for any loan, the Fund must have sufficient cash available to pay back the lender the amount borrowed.

Loans are typically secured by assets of the Fund, meaning that the Fund will grant the lender a security interest in some or all of its assets to secure its performance under the related loan. If the Fund were to default in the payment of interest or other fees in connection with a secured loan or fail to repay the principal amount of that loan on maturity or fail to satisfy other obligations it may owe to the lender in connection with that loan, the lender would have certain rights to foreclose on, take, and liquidate those assets of the Fund in which the lender was granted a security interest in order to satisfy any outstanding amounts the Fund owed in connection with the loan.

The Fund participates in a secured line of credit (the "Line of Credit") with certain commercial paper conduits, as lenders, Citibank, N.A. as a secondary lender and administrator, and other banks, each as lenders from time to time. The Line of Credit enables the Fund to participate with certain other Oppenheimer funds, as borrowers, in a committed, secured borrowing facility that permits borrowings by the participants of up to a maximum aggregate amount, as negotiated from time to time. Borrowings by the Fund under the Line of Credit can be used to purchase securities for investment or for other purposes. The Fund's Board determined that the Fund's participation in the Line of Credit is consistent with the Fund's investment objective and policies and is in the best interests of the Fund and its shareholders.

Under the Line of Credit, in the event that that the commercial paper conduit lenders are unable or unwilling to make loans, Citibank, N.A. and the other bank lenders, if any, would then be required to make those loans. Under the Line of Credit, interest is charged to the Fund, based on its borrowings, at current commercial rates. Additionally, the Fund will pay its pro rata portion of a loan commitment fee for the Line of Credit, and pays additional fees annually to the lenders on its outstanding borrowings for management and administration of the facility. The Fund can prepay loans and terminate its participation in the Line of Credit at any time upon prior notice to Citibank, N.A. As a borrower under the Line of Credit, the Fund has certain rights and remedies under state and federal law comparable to those it would have with respect to a loan from a bank.

Illiquid and Restricted Securities. Generally, an illiquid asset is an asset that cannot be sold or disposed of in the ordinary course of business within seven days at approximately the price at which it has been valued. Under the policies and procedures established by the Board, the Manager determines the liquidity of portfolio investments. The Manager monitors holdings of illiquid and restricted securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. Among the types of illiquid securities are repurchase agreements maturing in more than seven days.

Restricted securities acquired through private placements have contractual restrictions on their public resale that might limit the ability to value or to dispose of the securities and might lower the price that could be realized on a sale. To sell a restricted security that is not registered under applicable securities laws, the securities might need to be registered. The expense of registering restricted securities may be negotiated with the issuer at the time of purchase. If the securities must be registered in order to be sold, a significant period may elapse between the time the decision is made to sell the security and the time the security is registered. There is a risk of downward price fluctuation during that period.

Limitations that apply to purchases of restricted securities do not limit purchases of restricted securities that are eligible for sale to qualified institutional buyers 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 the 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, holdings of that security may be considered to be illiquid.

Liquidity Facility. The Fund can participate in a program offered by ReFlow, LLC ("ReFlow") which provides additional liquidity to help the Fund meet shareholder redemptions without having to liquidate portfolio securities or borrow money, each of which imposes certain costs on the Fund. ReFlow is designed to provide an alternative source of funding to help meet shareholder redemptions while minimizing the Fund's costs and cash flow disruptions (compared to selling portfolio securities or other liquidity facilities such as a line of credit) and allowing the Fund to remain more fully invested. ReFlow provides this liquidity by being prepared to purchase Fund shares, at the Fund's closing net asset value, equal to the amount of the Fund's net redemptions on any given day. On subsequent days when the Fund experiences net subscriptions, ReFlow redeems its holdings at the Fund's net asset value on that day. When the Fund participates in the ReFlow program, it pays ReFlow a fee at a rate determined by a daily auction with other participating mutual funds in the ReFlow program. There is no assurance that ReFlow will have sufficient funds available to meet the Fund's liquidity needs on a particular day and ReFlow is prohibited from acquiring more than 3% of the outstanding shares of the Fund.

Loans of Portfolio Securities. Securities lending pursuant to a Securities Lending Agency Agreement (the "Securities Lending Agreement") with Goldman Sachs Bank USA, doing business as Goldman Sachs Agency Lending ("Goldman Sachs"), may be used to attempt to increase income. Loans of portfolio securities must comply with all applicable regulations and with the Fund's Securities Lending Procedures adopted by the Board. The terms of any loans must also meet applicable tests under the Internal Revenue Code.

There are certain risks in connection with securities lending, including possible delays in receiving additional collateral to secure a loan, or a delay or expenses in recovery of the loaned securities. Goldman Sachs has agreed, in general, to guarantee the obligations of borrowers to return loaned securities and to be responsible for certain expenses relating to securities lending. Under the Securities Lending Agreement, the Fund's securities lending procedures and applicable regulatory requirements (which are subject to change), the Fund must receive collateral from the borrower consisting of cash, bank letters of credit or securities of the U.S. Government (or its agencies or instrumentalities). On each business day, the amount of collateral that the Fund has received must at least equal the value of the loaned securities. If the Fund receives cash collateral from the borrower, the Manager, in its capacity as the Fund's collateral administrator, may invest that cash in certain high quality, short-term investments, including in money market funds advised by the Manager. The Fund will be subject to its proportional share of the expenses of such money market funds, including the advisory fee payable to the Manager or its affiliate as adviser to such funds. The Manager may charge a collateral administration fee of 0.08% on the value of cash collateral invested in other securities. All of the Fund's collateral investments must comply with its securities lending procedures. The Fund will be responsible for the risks associated with the investment of cash collateral, including the risk that the Fund may lose money on the investment or may fail to earn sufficient income to meet its obligations to the borrower.

The terms of the loans must permit the Fund to recall loaned securities on five business days' notice and the Fund will seek to recall loaned securities in time to vote on any matters that the Manager determines would have a material effect on the Fund's investment. The Securities Lending Agreement may be terminated by either Goldman Sachs or the Fund on 30 days' written notice.

The Fund limits loans of portfolio securities to not more than 25% of its net assets.

Other Derivative Investments. 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 Funds 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.

Hedging. The Fund may use hedging to attempt to protect against declines in the market value of its portfolio, to permit the Funds to retain unrealized gains in the value of portfolio securities that have appreciated, or to facilitate selling securities for investment reasons. To do so, the Fund may:

Covered calls may also be written on debt securities to attempt to increase the Fund's income, but that income would not be tax-exempt. Therefore it is unlikely that the Fund would write covered calls for that purpose.

The Fund may also use hedging to establish a position in the debt securities market as a temporary substitute for purchasing individual debt securities. In that case the Fund will normally seek to purchase the securities, and then terminate that hedging position. For this type of hedging, the Fund may:

The Fund is not obligated to use hedging instruments, even though it is permitted to use them in the Manager's discretion, as described below. The Fund's strategy of hedging with futures and options on futures will be incidental to the Fund's investment activities in the underlying cash market. The particular hedging instruments the Fund can use are described below. The Fund may employ new hedging instruments and strategies when they are developed, if those investment methods are consistent with the Fund's investment objective and are permissible under applicable regulations governing the Fund.

Futures. The Fund may buy and sell futures contracts relating to debt securities (these are called "interest rate futures"), and municipal bond indices (these are referred to as "municipal bond index futures").

An interest rate future obligates the seller to deliver (and the purchaser to take) cash or a specific type of debt security to settle the futures transaction. Either party could also enter into an offsetting contract to close out the futures position.

A "municipal bond index" assigns relative values to the municipal bonds in the index, and is used as the basis for trading long-term municipal bond futures contracts. Municipal bond index futures are similar to interest rate futures except that settlement is made only in cash. The obligation under the contract may also be satisfied by entering into an offsetting contract. The strategies which the Fund employs in using municipal bond index futures are similar to those with regard to interest rate futures.

No money is paid by or received by the Fund on the purchase or sale of a futures contract. Upon entering into a futures transaction, the Fund will be required to deposit an initial margin payment in cash or U.S. Government securities with the futures commission merchant (the "futures broker"). Initial margin payments will be deposited with the Fund's custodian bank in an account registered in the futures broker's name. However, the futures broker can gain access to that account only under certain specified conditions. As the future is marked to market (that is, its value on the Fund's books is changed) to reflect changes in its market value, subsequent margin payments, called variation margin, will be paid to or by the futures broker daily.

At any time prior to the expiration of the future, the Fund may elect to close out its position by taking an opposite position at which time a final determination of variation margin is made and additional cash is required to be paid by or released to the Fund. Any gain or loss is then realized by the Fund on the future for tax purposes. Although interest rate futures by their terms call for settlement by the delivery of debt securities, in most cases the obligation is fulfilled without such delivery by entering into an offsetting transaction. All futures transactions are effected through a clearing house associated with the exchange on which the contracts are traded.

The Fund may concurrently buy and sell futures contracts in a strategy anticipating that the future the Fund purchased will perform better than the future the Fund sold. For example, the Fund might buy municipal bond futures and concurrently sell U.S. Treasury Bond futures (a type of interest rate future). The Fund would benefit if municipal bonds outperform U.S. Treasury Bonds on a duration-adjusted basis.

Duration is a volatility measure that refers to the expected percentage change in the value of a bond resulting from a change in general interest rates (measured by each 1% change in the rates on U.S. Treasury securities). For example, if a bond has an effective duration of three years, a 1% increase in general interest rates would be expected to cause the value of the bond to decline about 3%. There are risks that this type of futures strategy will not be successful. U.S. Treasury bonds might perform better on a duration-adjusted basis than municipal bonds, and the assumptions about duration that were used might be incorrect (in this case, the duration of municipal bonds relative to U.S. Treasury Bonds might have been greater than anticipated).

Put and Call Options. Put options (sometimes referred to as "puts") give the holder the right to sell an asset for an agreed-upon price. Call options (sometimes referred to as "calls") give the holder the right to buy an asset at an agreed-upon price.

Writing Covered Call Options. The Fund may write (that is, sell) call options. The Fund's call writing is subject to a number of restrictions:

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.

When the Fund writes a call on an index, it receives cash (a premium). If the buyer of the call exercises it, the Fund will pay an amount of cash equal to the difference between the closing price of the call and the exercise price, multiplied by the specified multiple that determines the total value of the call for each point of difference. If the value of the underlying 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.

The Fund's custodian bank, or a securities depository acting for the custodian bank, 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.

When the Fund writes an over-the-counter ("OTC") option, it will enter into an arrangement with a primary U.S. Government securities dealer which will establish a formula price at which the Fund will have the absolute right to repurchase that OTC option. The formula price would generally be based on a multiple of the premium received for the option, plus the amount by which the option is exercisable below the market price of the underlying security (that is, the option is "in-the-money"). When the Fund writes an OTC option, it will treat as illiquid (for purposes of its restriction on illiquid securities) the mark-to-market value of any OTC option held by it, unless the option is subject to a buy-back agreement by the executing broker.

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 Funds they are taxable as ordinary income.

The Fund will not write puts if, as a result, more than 20% of the Fund's total assets would be required to be segregated to cover such put options.

Purchasing Puts and Calls. The Fund may buy calls only on securities, broadly-based municipal bond indices, municipal bond index futures and interest rate futures. It may also buy calls to close out a call it has written, as discussed above. Calls the Fund buys must be listed on a securities or commodities exchange, or quoted on NASDAQ®, or traded in the over-the-counter market. 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.

When the Fund purchases a call (other than in a closing purchase transaction), it pays a premium. For calls on securities that the Fund buys, it has the right to buy the underlying investment from a seller of a corresponding call on the same investment during the call period at a fixed exercise price. The Fund benefits only if (1) the call is sold at a profit or (2) the call is exercised when the market price of the underlying investment is above the sum of the exercise price plus the transaction costs and premium paid for the call. If the call is not exercised nor sold (whether or not at a profit), it will become worthless at its expiration date. In that case the Fund will lose its premium payment and the right to purchase the underlying investment.

Calls on municipal bond indices, interest rate futures and municipal bond index futures are settled in cash rather than by delivering the underlying investment. Gain or loss depends on changes in the securities included in the index in question (and thus on price movements in the debt securities market generally) rather than on changes in price of the individual futures contract.

The Fund may buy only those puts that relate to securities that it owns, broadly-based municipal bond indices, municipal bond index futures or interest rate futures (whether or not the Fund owns the futures).

When the Fund purchases a put, it pays a premium. The Fund then has the right to sell the underlying investment to a seller of a corresponding put on the same investment during the put period at a fixed exercise price. Puts on municipal bond indices are settled in cash. Buying a put on a debt security, interest rate future or municipal bond index future the Fund owns enables it to protect itself during the put period against a decline in the value of the underlying investment below the exercise price. If the market price of the underlying investment is equal to or above the exercise price and as a result the put is not exercised or resold, the put will become worthless at its expiration date. In that case the Fund will lose its premium payment and the right to sell the underlying investment. A put may be sold prior to expiration (whether or not at a profit).

Risks of Hedging with Options and Futures. The use of hedging instruments requires special skills and knowledge of investment techniques that are different than those required for normal portfolio management. These risks of using options and futures include the following:

Selection Risk. If the Manager uses an option at the wrong time or judges market conditions incorrectly, or if the prices of its options positions are not correlated with its other investments, a hedging strategy may reduce returns or cause losses. If a covered call option is sold on an investment that increases in value, if the call is exercised, no gain will be realized on the increase in the investment's value above the call price. A put option on a security that does not decline in value will cost the amount of the purchase price and without providing any benefit if it cannot be resold.

Liquidity Risk. Losses might also be realized if a position could not be closed out because of illiquidity in the market for an option. An option position may be closed out only on a market that provides secondary trading for options of the same series, and there is no assurance that a liquid secondary market will exist for any particular option.

Leverage Risk. Premiums paid for options are small compared to the market value of the underlying investments. Consequently, options may involve large amounts of leverage, which could result in the Fund's net asset value being more sensitive to changes in the value of the underlying investments.

Correlation Risk. If the Fund sells futures or purchases puts on broadly-based indices or futures to attempt to protect against declines in the value of its portfolio securities, it may be subject to the risk that the prices of the futures or the applicable index will not correlate with the prices of those portfolio securities. For example, the market or the index might rise but the value of the hedged portfolio securities might decline. In that case, the Fund would lose money on the hedging instruments and also experience a decline in the value of the portfolio securities. Over time, however, the value of a diversified portfolio of securities will tend to move in the same direction as the indices upon which related hedging instruments are based.

The risk of imperfect correlation increases as the composition of the portfolio diverges from the securities included in the applicable index. To compensate for the imperfect correlation of movements in the price of the portfolio securities being hedged and movements in the price of the hedging instruments, the Fund might use a greater dollar amount of hedging instruments than the dollar amount of portfolio securities being hedged, particularly if the historical price volatility of the portfolio securities being hedged is more than the historical volatility of the applicable index.

Transaction Costs. Option activities might also affect portfolio turnover rates and brokerage commissions. The portfolio turnover rate might increase if the Fund is required to sell portfolio securities that are subject to call options it has sold or if it exercises put options it has bought. Although the decision to exercise a put it holds is within the Fund's control, holding a put might create an additional reason to purchase a security. There may also be a brokerage commission on each purchase or sale of a put or call option. Those commissions may be higher on a relative basis than the commissions for direct purchases or sales of the underlying investments. A brokerage commission may also be paid for each purchase or sale of an underlying investment in connection with the exercise of a put or call.

Interest Rate Swaps. In an interest rate swap, the Fund and another party exchange their rights to receive interest payments on a security or payments based on a reference rate. For example, they might swap the right to receive floating rate payments based on a reference rate such as "LIBOR" for the right to receive fixed rate payments.

Interest rate swaps entail both interest rate risk and credit risk. There is a risk that based on movements of interest rates, the payments made by the Fund under a swap agreement will be greater than the payments it receives. Credit risk is the risk that the counterparty might default. If the counterparty defaults, the Fund may lose the net amount of contractual interest payments that it has not yet received.

The Fund may not enter into swaps with respect to more than 25% of its total assets.

Regulatory Aspects of Derivatives and Hedging Instruments. The Commodity Futures Trading Commission has eliminated limitations on futures trading by certain regulated entities, including registered investment companies. Consequently, registered investment companies may engage in unlimited futures transactions and options thereon by claiming an exclusion from regulation as a commodity pool operator under the Commodity Exchange Act.

Options transactions 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 purchased, sold or held through one or more different exchanges or are held in one or more accounts or through one or more brokers. Thus, the number of options that can be sold by an investment company advised by the Manager may be affected by options written or held by other investment companies advised by the Manager or affiliated entities. The exchanges also impose position limits on futures transactions. An exchange may order the liquidation of positions found to be in violation of those limits and may impose certain other sanctions.

Under SEC staff interpretations regarding applicable provisions of the Investment Company Act, when a registered investment company purchases a future, it must identify cash or other liquid assets at its custodian bank in an amount equal to the purchase price of the future, less the margin deposit applicable to it.

Asset Coverage for Certain Investments and Trading Practices. Typically, the Fund's investments in fixed-income securities do not involve any future financial obligations. However, the Fund may make investments or employ trading practices that obligate the Fund, on a fixed or contingent basis, to deliver an asset or make a cash payment to another party in the future. The Fund will comply with guidance from the U.S. Securities and Exchange Commission (the "SEC") and other applicable regulatory bodies with respect to coverage of certain investments and trading practices. This guidance may require earmarking or segregation by the Fund of cash or liquid securities with its custodian or a designated sub-custodian to the extent the Fund's obligations with respect to these strategies are not otherwise "covered" through ownership of the underlying security or financial instrument or by other portfolio positions, or by other means consistent with applicable regulatory policies. In some cases, SEC guidance permits the Fund to cover its obligation by entering into an offsetting transaction.

Inasmuch as the Fund covers its obligations under these transactions, the Manager and the Fund believe such obligations do not constitute senior securities and, accordingly, will not treat them as being subject to its borrowing restrictions. Earmarking or otherwise segregating a large percentage of the Fund's assets could impede the Manager's ability to manage the Fund's portfolio.

Temporary Defensive and Interim Investments. The securities the Fund may invest in for temporary defensive purposes include the following:

The Fund also might hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of Fund shares. The income from some of the temporary defensive or interim investments may not be tax-exempt. Therefore, when making those investments, the Fund might not achieve its objective.

Taxable Investments. While the Fund can invest up to 20% of its net assets (plus borrowings for investment purposes) in investments that generate income subject to income taxes, it 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. Taxable investments include, for example, hedging instruments, repurchase agreements, and many of the types of securities the Fund would buy for temporary defensive purposes.

At times, in connection with the restructuring of a municipal bond issuer either outside of bankruptcy court in a negotiated workout or in the context of bankruptcy proceedings, the Fund may determine or be required to accept equity or taxable debt securities, or the underlying collateral (which may include real estate) from the issuer in exchange for all or a portion of the Fund's holdings in the municipal security. Although the Manager will attempt to sell those assets as soon as reasonably practicable in most cases, depending upon, among other things, the Manager's valuation of the potential value of such assets in relation to the price that could be obtained by the Fund at any given time upon sale thereof, the Fund may determine to hold such securities or assets in its portfolio for limited period of time in order to liquidate the assets in a manner that maximizes their value to the Fund.

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 short-term capital gains, because such gains would not be tax-exempt income. To a limited degree, the Fund may engage in active and frequent 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 it 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 100%. The Financial Highlights table at the end of the Prospectus shows the Fund's portfolio turnover rates during the past five fiscal years.

Investments in Other Investment Companies. On a temporary basis, the Fund can invest up to 5% of its total assets in shares of other investment companies that have an investment objective of seeking income exempt from federal, New York State and New York City personal income taxes. It can invest up to 5% of its total assets in any one investment company (but cannot own more than 3% of the outstanding voting stock of that company). These limits do not apply to shares acquired in a merger, consolidation, reorganization or acquisition of another investment company. Because the Fund would be subject to its ratable share of the other investment company's expenses in addition to its own expenses, the Fund will not make these investments unless the Manager believes that the potential investment benefits justify the added costs and expenses.

Fundamental Policies. The Fund has adopted policies and restrictions to govern its investments. Under the Investment Company Act, fundamental policies are those policies that can be changed only by the vote of a "majority" of the Fund's outstanding voting securities, which is defined as the vote of the holders of the lesser of:

The Fund's investment objective is a fundamental policy. Other policies described in the Prospectus or this SAI 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 SAI, as appropriate. The Fund's most significant investment policies are described in the Prospectus.

Other Fundamental Investment Restrictions. The following investment restrictions are fundamental policies of the Fund.

Non-Fundamental Restrictions. The Fund has the following additional operating policies that are not "fundamental" and can be changed by the Board without shareholder approval.

Unless the Prospectus or this SAI states that a percentage restriction applies on an ongoing basis, it applies only at the time the Fund makes an investment. That means the Fund is not required to sell securities to meet the percentage limits if the value of the investment increases in proportion to the size of the Fund. Percentage limits on borrowing and investments in illiquid securities apply on an ongoing basis.

Diversification. The Fund intends to be "diversified" as defined in the Investment Company Act and to satisfy the restrictions against investing too much of its assets in any "issuer" as set forth in the restrictions above. 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 such government or other entity.

Applying the Restriction Against Concentration. In implementing the Fund's policy not to concentrate its investments, the Manager will consider a non-governmental user of facilities financed by private activity 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. The Manager categorizes tobacco industry related municipal bonds as either tobacco settlement revenue bonds or tobacco bonds that are subject to appropriation ("STA Bonds"). For purposes of the Funds' industry concentration policies, STA Bonds are considered to be "municipal" bonds, as distinguished from "tobacco" bonds. As municipal bonds, STA Bonds are not within any industry and are not subject to the Funds' industry concentration policies.

Other types of municipal securities that are not considered a part of any "industry" under the Fund's industry concentration policy include: general obligation, government appropriation, municipal leases, special assessment and special tax bonds. Although these types of municipal securities may be related to certain industries, because they are issued by governments or their political subdivisions rather than non-governmental users, these types of municipal securities are not considered a part of an industry for purposes of the Fund's industry concentration policy.

Therefore, the Fund may invest more than 25% of its total assets in these types of municipal securities, which may finance similar types of projects or from which the interest is paid from revenues of similar types of projects. "Similar types of projects" are projects that are related in such a way that economic, business or political developments tend to have the same impact on each similar project. For example, a change that affects one project, such as proposed legislation on the financing of the project, a shortage of the materials needed for the project, or a declining economic need for the project, would likely affect all similar projects, thereby increasing market risk. Thus, market changes that affect a security issued in connection with one project also would affect securities issued in connection with similar types of projects.

For purposes of the Fund's policy not to concentrate its investments as described above, the Fund has adopted classifications of industries and groups of related industries. These classifications are not fundamental polices.

While recognizing the importance of providing Fund shareholders with information about their Fund's investments and providing portfolio information to a variety of third parties to assist with the management, distribution and administrative processes, the need for transparency must be balanced against the risk that third parties who gain access to the Fund's portfolio holdings information could attempt to use that information to trade ahead of or against the Fund, which could negatively affect the prices the Fund is able to obtain in portfolio transactions or the availability of the securities that a portfolio manager is trading on the Fund's behalf.

The Fund, the Manager, the Distributor and the Transfer Agent have therefore adopted policies and procedures regarding the dissemination of information about the Fund's portfolio holdings by employees, officers and directors or trustees of the Fund, the Manager, the Distributor and the Transfer Agent. These policies are designed to assure that non-public information about the Fund's portfolio securities holdings is distributed only for a legitimate business purpose, and is done in a manner that (a) conforms to applicable laws and regulations and (b) is designed to prevent that information from being used in a way that could negatively affect the Fund's investment program or enable third parties to use that information in a manner that is harmful to the Fund. It is a violation of the Code of Ethics for any covered person to release holdings in contravention of the portfolio holdings disclosure policies and procedures adopted by the Fund.

Portfolio Holdings Disclosure Policies. The Fund, the Manager, the Distributor and the Transfer Agent and their affiliates and subsidiaries, employees, officers, and directors or trustees, shall neither solicit nor accept any compensation or other consideration (including any agreement to maintain assets in the Fund or in other investment companies or accounts managed by the Manager or any affiliated person of the Manager) in connection with the disclosure of the Fund's non-public portfolio holdings. The receipt of investment advisory fees or other fees and compensation paid to the Manager and its subsidiaries pursuant to agreements approved by the Fund's Board shall not be deemed to be "compensation" or "consideration" for these purposes. Until publicly disclosed, the Fund's portfolio holdings are proprietary, confidential business information. After they are publicly disclosed, the Fund's portfolio holdings may be released in any appropriate manner.

The Fund's portfolio holdings information (which may include information on the Fund's entire portfolio of individual securities therein) positions may be released to the following categories of individuals or entities on an ongoing basis, provided that such individual or entity either (1) has signed an agreement to keep such information confidential and not trade on the basis of such information, or (2) as a member of the Fund's Board, or as an employee, officer or director of the Manager, the Distributor, or the Transfer Agent, or of their legal counsel, is subject to fiduciary obligations (a) not to disclose such information except in compliance with the Fund's policies and procedures and (b) not to trade for his or her personal account on the basis of such information.

Month-end lists of the Fund's complete portfolio holdings may be disclosed for legitimate business reasons, no sooner than 5 days after the relevant month end, pursuant to special requests and under limited circumstances discussed below, provided that:

Portfolio holdings information (which may include information on the Fund's entire portfolio or individual securities therein) may be provided by senior officers of the Manager or attorneys on the legal staff of the Manager, Distributor, or Transfer Agent, in the following circumstances:

Portfolio managers and analysts may, subject to the Manager's policies on communications with the press and other media, discuss portfolio information in interviews with members of the media, or in due diligence or similar meetings with clients or prospective purchasers of Fund shares or their financial representatives.

The Fund's shareholders may, under unusual circumstances (such as a lack of liquidity in the Fund's portfolio to meet redemptions), receive redemption proceeds of their Fund shares paid as pro rata shares of securities held in the Fund's portfolio. In such circumstances, disclosure of the Fund's portfolio holdings may be made to such shareholders.

Any permitted release of otherwise non-public portfolio holdings information must be in accordance with the then-current policy on approved methods for communicating confidential information.

The Chief Compliance Officer (the "CCO") of the Fund and the Manager, Distributor, and Transfer Agent shall oversee the compliance by the Manager, Distributor, Transfer Agent, and their personnel with these policies and procedures. At least annually the CCO reports to the Fund's Board any material violation of these policies and procedures during the previous period and makes recommendations to the Board as to any amendments that the CCO believes are necessary and desirable to carry out or improve these policies and procedures.

The Manager and the Fund have entered into ongoing arrangements to make available information about the Fund's portfolio holdings. One or more of the Oppenheimer funds may currently disclose portfolio holdings information based on ongoing arrangements to the following parties:

Organization and History. The Fund, a series of Rochester Portfolio Series (the "Trust"), is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest. The Fund (as a series of the Trust) was organized as a Massachusetts business trust in June 1991. The Fund is currently the only series of the Trust.

Classes of Shares. The Fund's Board of Trustees (the "Board") is authorized, without shareholder approval, to:

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. Only certain institutional investors may purchase Class Y shares. Each class of shares:

Shareholder Meetings. As a Massachusetts business trust, the Fund is not required to hold regular annual meetings of shareholders and does not plan to do so. The Fund may hold shareholder meetings from time to time, however, on important matters or when required to do so by the Investment Company Act, or other applicable law.

Shareholders have the right, upon a vote or declaration in writing of two-thirds of the outstanding shares of the Fund, to remove a Trustee or to take other action described in the Fund's Declaration of Trust. 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. The Trustees may also take other action as permitted by the Investment Company Act.

Shareholder and Trustee Liability. The Fund's Declaration of Trust contains an express disclaimer of shareholder and 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. 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. Although Massachusetts law permits a shareholder of a business trust (such as the Fund) to be held personally liable as a "partner" under certain circumstances, the risk 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 is governed by a Board of Trustees, which is responsible for protecting the interests of shareholders under Massachusetts and Federal law. The Board is led by Brian F. Wruble, an independent trustee, who is not an "interested person" of the Fund, as that term is defined in the Investment Company Act of 1940. The Board meets periodically throughout the year to oversee the Fund's activities, review its performance, oversee the potential conflicts that could affect the Fund, and review the actions of the Manager. The Board has an Audit Committee, a Regulatory & Oversight Committee and a Governance Committee. Each Committee is comprised solely of Trustees who are not "interested persons" under the Investment Company Act (the "Independent Trustees"). Mr. Wruble's practice is to attend all meetings of each of the three Committees of the Board where he participates in deliberation but does not have a vote.

During the Fund's fiscal year ended December 31, 2010, the Audit Committee held 4 meetings, the Regulatory & Oversight Committee held 5 meetings and the Governance Committee held 4 meetings.

The members of the Audit Committee are David K. Downes (Chairman), Phillip A. Griffiths, Mary F. Miller, Joseph M. Wikler and Peter I. Wold. The Audit Committee selects an independent registered public accounting firm (also referred to as the "independent Auditors"). Other main functions of the Audit Committee outlined in the Audit Committee Charter, include, but are not limited to: (i) reviewing the scope and results of financial statement audits and the audit fees charged; (ii) reviewing reports from the Fund's independent Auditors regarding the Fund's internal accounting procedures and controls; (iii) reviewing reports from the Manager's Internal Audit Department; (iv) maintaining a separate line of communication between the Fund's independent Auditors and the Independent Trustees/Directors; (v) reviewing the independence of the Fund's independent Auditors; and (vi) approving in advance the provision of any audit or non-audit services by the Fund's independent Auditors, including tax services, that are not prohibited by the Sarbanes-Oxley Act, to the Fund, the Manager and certain affiliates of the Manager. The Audit Committee also reviews reports concerning the valuation of certain investments.

The members of the Regulatory & Oversight Committee are Matthew P. Fink (Chairman), David K. Downes, Phillip A. Griffiths, Joel W. Motley, Mary Ann Tynan and Joseph M. Wikler. The Regulatory & Oversight Committee evaluates and reports to the Board on the Fund's contractual arrangements, including the Investment Advisory and Distribution Agreements, Transfer Agency and Shareholder Service Agreements and custodian agreements as well as the policies and procedures adopted by the Fund to comply with the Investment Company Act and other applicable law. The Regulatory & Oversight Committee also reviews reports from the Manager's Risk Management Department and Chief Compliance Officer among other duties as set forth in the Regulatory & Oversight Committee's Charter. These reports, and others concerning investment, operational and other risks to the Funds are shared with, and discussed by, the full Board.

The members of the Governance Committee are Joel W. Motley (Chairman), Matthew P. Fink, Mary F. Miller, Mary Ann Tynan and Peter I. Wold. The Governance Committee reviews the Fund's governance guidelines, the adequacy of the Fund's Codes of Ethics, and develops qualification criteria for Board members consistent with the Fund's governance guidelines, provides the Board with recommendations for voting portfolio securities held by the Fund, monitors the Fund's proxy voting, and coordinates with organizations representing the independent directors of mutual funds among other duties set forth in the Governance Committee's Charter.

The Governance Committee's functions also include the nomination of Trustees/Directors, including Independent Trustees/Directors, for election to the Board. The full Board elects new Trustees/Directors except for those instances when a shareholder vote is required.

The Governance Committee will consider nominees recommended by Independent Trustees/Directors or recommended by any other Board members including Board members affiliated with the Fund's Manager. The Governance Committee may consider the advice and recommendation of the Manager and its affiliates in selecting nominees, but need not do so. Upon Board approval, the Governance Committee may retain an executive search firm to assist in screening potential candidates and may also use the services of legal, financial, or other external counsel that it deems necessary or desirable in the screening process. To date, the Governance Committee has been able to identify from its own resources an ample number of qualified candidates. However, under the current policy of the Board, if the Board determines that a vacancy exists or is likely to exist, the Governance Committee will include candidates recommended by the Fund's shareholders in its consideration of nominees.

Shareholders wishing to submit a nominee for election to the Board may do so by mailing their submission to the offices of OppenheimerFunds, Inc., Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008, to the attention of the Board of Trustees/Directors of the applicable Fund, c/o the Secretary of the Fund. Submissions should, at a minimum, be accompanied by the following: (1) the name, address, and business, educational, and/or other pertinent background of the person being recommended; (2) a statement concerning whether the person is an "interested person" as defined in the Investment Company Act; (3) any other information that the Fund would be required to include in a proxy statement concerning the person if he or she was nominated; and (4) the name and address of the person submitting the recommendation and, if that person is a shareholder, the period for which that person held Fund shares. Shareholders should note that a person who owns securities issued by Massachusetts Mutual Life Insurance Company (the parent company of the Manager) would be deemed an "interested person" under the Investment Company Act. In addition, certain other relationships with Massachusetts Mutual Life Insurance Company or its subsidiaries, with registered broker-dealers, or with the Funds' outside legal counsel may cause a person to be deemed an "interested person."

The Governance Committee has not established specific qualifications that it believes must be met by a nominee. In evaluating nominees, the Governance Committee considers, among other things, an individual's background, skills, and experience; whether the individual is an "interested person" as defined in the Investment Company Act; and whether the individual would be deemed an "audit committee financial expert" within the meaning of applicable SEC rules. The Governance Committee also considers whether the individual's background, skills, and experience will complement, and add to the diversity of, the background, skills, and experience of other Trustees/Directors, and will contribute to the Board's deliberations. There is no difference in the manner in which the Governance Committee evaluates a nominee based on whether the nominee is recommended by a shareholder. Candidates are expected to provide a mix of attributes, experience, perspective and skills necessary to effectively advance the interests of shareholders.

Below is a brief discussion of the specific experience, qualifications, attributes or skills of each Board member that led the Board to conclude that he or she should serve as a Trustee/Director of the Fund.

Each independent trustee/director has served on the Board for the number of years listed below, during the course of which he or she has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Board's deliberations. Each Trustee's/Director's outside professional experience is outlined in the table of Biographical Information, below.

Except for Mr. Glavin, each of the Trustees is an Independent Trustee. All of the Trustees are also Trustees of the following Oppenheimer funds (referred to as "New York Board Funds"):

Messrs. Loughran, Cottier, Willis, DeMitry, Camarella, Stein, Gabinet, Glavin, Keffer, Petersen, Vandehey, Wixted, Zack, Legg and Edwards and Mss. Bloomberg, Ives, Ruffle and Bullington, who are officers of the Fund, hold the same offices with one or more of the other New York Board Funds.

Present or former officers, directors, trustees and employees (and their immediate family members) of the Fund, the Manager and its affiliates, and retirement plans established by them for their employees are permitted to purchase Class A shares of the Fund and the other Oppenheimer funds at net asset value without sales charge. The sales charge on Class A shares is waived for that group because of the reduced sales efforts realized by the Distributor. Present or former officers, directors, trustees and employees (and their eligible family members) of the Fund, the Manager and its affiliates, its parent company and the subsidiaries of its parent company, and retirement plans established for the benefit of such individuals, are also permitted to purchase Class Y shares of the Fund and other Oppenheimer funds that offer Class Y shares.

As of March 11, 2011 the Trustees/Directors and officers of the Fund, as a group, owned less than 1% of any class of shares of the Fund beneficially or of record.

The foregoing statement does not reflect ownership of shares held of record by an employee benefit plan for employees of the Manager, other than the shares beneficially owned under that plan by the officers of the Fund. In addition, none of the Independent Trustees/Directors (nor any of their immediate family members) owns securities of either the Manager or the Distributor or of any entity directly or indirectly controlling, controlled by or under common control with the Manager or the Distributor.

Biographical Information. The Trustees and officers, their positions with the Fund, length of service in such position(s) and principal occupations and business affiliations during at least the past five years are listed in the charts below. The address of each Independent Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or until his or her resignation, retirement, death or removal.

Mr. Glavin has served as an Interested Trustee of the Fund since December 2009. Mr. Glavin is an "Interested Trustee" because he is affiliated with the Manager by virtue of his positions as an officer and director of the Manager, and as a shareholder of its parent company. Both as a Trustee and as an officer, he serves for an indefinite term, or until his resignation, retirement, death or removal. Mr. Glavin's address is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008.

The addresses of the officers in the chart below are as follows: for Messrs. Loughran, Cottier, Willis, Camarella, DeMitry, Stein, Gabinet, Glavin, Zack, Keffer and Edwards and Mss. Bloomberg and Ruffle, Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008; for Messrs. Petersen, Vandehey, Legg and Wixted and Mss. Bullington and Ives, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each officer serves for an annual term or until his or her resignation, retirement, death or removal.

Trustees Share Ownership. The chart below shows information about each Trustee's beneficial share ownership in the Fund and in all of the registered investment companies that the Trustee oversees in the Oppenheimer family of funds ("Supervised Funds").

Remuneration of the Officers and Trustees. The officers of the Fund, who are affiliated with the Manager, receive no salary or fee from the Fund. The Independent Trustees' total compensation from the Fund and fund complex represents compensation for serving as a Trustee and member of a committee (if applicable) of the Boards of the Fund and other funds in the OppenheimerFunds complex during the calendar year ended December 31, 2010.

1. "Aggregate Compensation From the Fund" includes fees and amounts deferred under the "Compensation Deferral Plan" (described below), if any.
2. Includes $9,082 deferred by Mr. Griffiths under the Compensation Deferral Plan.
3. Includes $3,823 deferred by Ms. Miller under the Compensation Deferral Plan.
4. Includes $818 deferred by Mr. Motley under the Compensation Deferral Plan.
5. Includes $3,832 deferred by Mr. Wikler under the Compensation Deferral Plan.
6. Includes $7,665 deferred by Mr. Wold under the Compensation Deferral Plan.

Retirement Plan for Trustees. The New York Board Funds adopted a retirement plan that provided for payments to retired Independent Trustees of 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 needed to serve as director or trustee for any of the New York Board Funds for at least seven years to be eligible for retirement plan benefits and to serve for at least 15 years to be eligible for the maximum benefit. The Board discontinued the retirement plan with respect to new accruals as of December 31, 2006 (the "Freeze Date"). Each Trustee that continued to serve on the Board of any of the New York Board Funds after the Freeze Date (each such Trustee a "Continuing Board Member") was able to elect to have his accrued benefit as of that date (i.e., an amount equivalent to the actuarial present value of his benefit under the retirement plan as of the Freeze Date) (i) paid at once or over time, (ii) rolled into the Compensation Deferral Plan described below, or (iii) in the case of Continuing Board Members having at least seven years of service as of the Freeze Date paid in the form of an annual benefit or joint and survivor annual benefit. The Board determined to freeze the retirement plan after considering a recent trend among corporate boards of directors to forego retirement plan payments in favor of current compensation.

Compensation Deferral Plan. The Board of Trustees has adopted a Compensation Deferral Plan for Independent Trustees that enables them to elect to defer receipt of all or a portion of the annual fees they are entitled to receive from certain Funds. 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 on the amount of compensation deferred and the performance of the selected funds.

Deferral of the Trustees' fees under the plan will not materially affect a Fund's assets, liabilities or net income per share. The plan will not obligate a 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 SEC, a 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 compensation account.

Major Shareholders. As of March 11, 2011 the only persons or entities who owned of record, or who were known by the Fund to own beneficially, 5% or more of any class of the Fund's outstanding shares were:

The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding company primarily owned by Massachusetts Mutual Life Insurance Company, a global, diversified insurance and financial services company.

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 portfolio managers and certain other employees ("covered persons") that could 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/or 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 and the Distributor.

The Code of Ethics is an exhibit to the Fund's registration statement filed with the SEC. It can be viewed as part of the Fund's registration statement on the SEC's EDGAR database at the SEC's website at www.sec.gov and can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.

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. The portfolio managers of the Fund are employed by the Manager and are principally responsible for the day-to-day management of the Fund's portfolio. Other members of the Manager's investment teams provide the portfolio managers with counsel and support in managing the Fund's portfolio.

The advisory 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 administration for the Fund. Those responsibilities include the compilation and maintenance of records with respect to its operations, the preparation and filing of specified reports, and 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 investment advisory agreement. The investment advisory agreement lists examples of expenses paid by the Fund. The major categories relate to interest, taxes, brokerage commissions, fees to certain Board members, legal and audit expenses, custodian and transfer agent expenses, share issuance costs, certain printing and registration costs and non-recurring expenses, including litigation costs. 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 were:

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 of its obligations and duties under the investment advisory agreement, the Manager is not liable for any loss the Fund sustains in connection with matters to which the agreement relates.

The agreement permits the Manager to act as an investment adviser for any other person, firm or corporation and to use the name "Oppenheimer" in connection with other investment companies for which it may act as investment adviser or general distributor. If the Manager shall no longer act as investment adviser to the Fund, the Manager may withdraw the right of the Fund to use the name "Oppenheimer" as part of its name.

Pending Litigation. Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds ("Defendant Funds") advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund's investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys' fees and litigation expenses.

In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys' fees and litigation expenses.

Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm ("Madoff"). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys' fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff. On February 28, 2011, a Stipulation of Partial Settlement of certain of those lawsuits was filed in the U.S. District Court for the Southern District of New York. That proposed settlement is subject to the preliminary and final approval of the Court and the determination by the settling defendants that class members representing a sufficient proportion of the losses allegedly suffered by class members had elected to participate in the settlement. The proposed settlement does not settle any of the other outstanding lawsuits pending in other courts relating to these matters.

The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds' Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

Portfolio Managers. The Fund's portfolio is managed by a team of investment professionals, including, Daniel G. Loughran, Scott S. Cottier, Troy E. Willis, Mark R. DeMitry, Michael L. Camarella, Marcus V. Franz and Charles S. Pulire (each is referred to as a "Portfolio Manager" and collectively they are referred to as the "Portfolio Managers") who are responsible for the day-to-day management of the Fund's investments.

1. In billions.
2. Does not include personal accounts of portfolio manager and his family, which are subject to the Code of Ethics.

As indicated above, the Portfolio Managers may also manage other funds and accounts. At different times, the Fund's Portfolio Managers may manage other funds or accounts with investment objectives and strategies similar to those of the Fund, or they may manage funds or accounts with different investment objectives and strategies. At times, those responsibilities could potentially conflict with the interests of the Fund. That may occur whether the investment objectives and strategies of the other funds and accounts are the same as, or different from, the Fund's investment objectives and strategies. For example, the Portfolio Managers may need to allocate investment opportunities between the Fund and another fund or account having similar objectives or strategies, or they may need to execute transactions for another fund or account that could have a negative impact on the value of securities held by the Fund. Not all funds and accounts advised by the Manager have the same management fee. If the management fee structure of another fund or account is more advantageous to the Manager than the fee structure of the Fund, the Manager could have an incentive to favor the other fund or account. However, the Manager's compliance procedures and Code of Ethics recognize the Manager's obligation to treat all of its clients, including the Fund, fairly and equitably, and are designed to preclude the Portfolio Managers from favoring one client over another. It is possible, of course, that those compliance procedures and the Code of Ethics may not always be adequate to do so.

Compensation of the Portfolio Managers. The Fund's Portfolio Managers are employed and compensated by the Manager, not the Fund. Under the Manager's compensation program for its portfolio managers and portfolio analysts, Fund performance is the most important element of compensation with at least half of annual cash compensation based on relative investment performance results of the funds or accounts they manage, rather than on the financial success of the Manager. This is intended to align the portfolio managers and analysts' interests with the success of the funds and accounts and their shareholders. The Manager's compensation structure is designed to attract and retain highly qualified investment management professionals and to reward individual and team contributions toward creating shareholder value. As of the Fund's most recently completed year-end, the Portfolio Managers' compensation consisted of three elements: a base salary, an annual discretionary bonus and eligibility to participate in long-term awards of options and stock appreciation rights in regard to the common stock of the Manager's holding company parent, as well as restricted shares of such common stock. Senior portfolio managers may be eligible to participate in the Manager's deferred compensation plan.

The base pay component of each portfolio manager is reviewed regularly to ensure that it reflects the performance of the individual, is commensurate with the requirements of the particular portfolio, reflects any specific competence or specialty of the individual manager, and is competitive with other comparable positions. The annual discretionary bonus is determined by senior management of the Manager and is based on a number of factors, including a fund's pre-tax performance for periods of up to five years, measured against an appropriate Lipper benchmark selected by management. The majority is based on three and five year data, with longer periods weighted more heavily. Below median performance in all three periods' results in an extremely low, and in some cases no, performance based bonus. Other factors considered include management quality (such as style consistency, risk management, sector coverage, team leadership and coaching) and organizational development. The Portfolio Managers' compensation is not based on the total value of the Fund's portfolio assets, although the Fund's investment performance may increase those assets. The compensation structure is also intended to be internally equitable and serve to reduce potential conflicts of interest between the Fund and other funds and accounts managed by the Portfolio Managers.

The Lipper benchmark for the Portfolio Managers with respect to the Fund is Lipper Other State Short - Intermediate Municipal. The compensation structure of the other funds and accounts managed by the Portfolio Managers are generally the same as the compensation structure of the Fund, described above.

Brokerage Provisions of the Investment Advisory Agreement. One of the duties of the Manager under the investment advisory agreement is to arrange the portfolio transactions for the Fund. The advisory agreement contains provisions relating to the employment of broker-dealers for that purpose. The advisory agreement authorizes the Manager to employ broker-dealers, including "affiliated brokers," as that term is defined in the Investment Company Act, that the Manager thinks, in its best judgment based on all relevant factors, will implement the policy of the Fund to obtain the "best execution" of the Fund's portfolio transactions. "Best execution" means executing trades in a manner such that the total costs or proceeds are the most favorable under the circumstances. Some of the circumstances that may influence this decision are: cost (brokerage commission or dealer spread), size of order, difficulty of order, and the firm's ability to provide prompt and reliable execution.

The Manager need not seek competitive commission bidding. However, the Manager is expected to be aware of the current rates of eligible brokers and to minimize the commissions paid to the extent consistent with the interests and policies of the Fund as established by its Board. The Fund is not required to pay the lowest available commission. Under the investment advisory agreement, in choosing brokers to execute portfolio transactions for the Fund, the Manager may select brokers (other than affiliates) that provide both brokerage and research services to the Fund. The commissions paid to those 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.

Brokerage Practices Followed by the Manager. The Manager allocates brokerage for the Fund subject to the provisions of the investment advisory agreement and other applicable rules and procedures described below.

The Manager's portfolio managers directly place trades and allocate brokerage based upon their judgment as to the execution capability of the broker or dealer. The Manager's executive officers supervise the allocation of brokerage.

Most securities purchases made by the Fund are in principal transactions at net prices. (i.e., without commissions). 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. 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. Therefore, the Fund generally does not incur substantial brokerage costs. On occasion, however, the Manager may determine that a better price or execution may be obtained by using the services of a broker on an agency basis. In that situation, the Fund would incur a brokerage commission.

Other funds advised by the Manager have investment 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 funds managed by the Manager or its affiliates. The transactions under those combined orders are generally allocated on a pro rata basis based on the fund's respective net asset sizes and other factors, including the fund's cash flow requirements, investment policies and guidelines and capacity.

Rule 12b-1 under the Investment Company Act prohibits any fund from compensating a broker or dealer for promoting or selling the fund's shares by (1) directing to that broker or dealer any of the fund's portfolio transactions, or (2) directing any other remuneration to that broker or dealer, such as commissions, mark-ups, mark downs or other fees from the fund's portfolio transactions, that were effected by another broker or dealer (these latter arrangements are considered to be a type of "step-out" transaction). In other words, a fund and its investment adviser cannot use the fund's brokerage for the purpose of rewarding broker-dealers for selling a fund's shares.

However, the Rule permits funds to effect brokerage transactions through firms that also sell fund shares, provided that certain procedures are adopted to prevent a quid pro quo with respect to portfolio brokerage allocations. As permitted by the Rule, the Manager has adopted procedures (and the Fund's Board of Trustees has approved those procedures) that permit the Fund to execute portfolio securities transactions through brokers or dealers that also promote or sell shares of the Fund, subject to the "best execution" considerations discussed above. Those procedures are designed to prevent: (1) the Manager's personnel who effect the Fund's portfolio transactions from taking into account a broker's or dealer's promotion or sales of the Fund shares when allocating the Fund's portfolio transactions, and (2) the Fund, the Manager and the Distributor from entering into agreements or understandings under which the Manager directs or is expected to direct the Fund's brokerage directly, or through a "step-out" arrangement, to any broker or dealer in consideration of that broker's or dealer's promotion or sale of the Fund's shares or the shares of any of the other Oppenheimer funds.

The investment advisory agreement permits the Manager to allocate brokerage for research services. The research services provided by a particular broker may be useful both to the Fund and to one or more of the other accounts advised by the Manager or its affiliates. Investment research may be supplied to the Manager by a broker through which trades are placed or by a third party at the instance of the broker.

Investment research services include information and analysis on particular companies and industries as well as market or economic trends and portfolio strategy, market quotations for portfolio evaluations, analytical software 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.

Although the Manager currently does not do so, the Board of Trustees may permit the Manager to use stated commissions on secondary fixed-income agency trades to obtain research if the broker represents to the Manager that: (i) the trade is not from or for the broker's own inventory, (ii) the trade was executed by the broker on an agency basis at the stated commission, and (iii) the trade is not a riskless principal transaction. The Board may also permit the Manager to use commissions on fixed-price offerings to obtain research in the same manner as is permitted for agency transactions.

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 about the commissions paid to brokers furnishing such services, together with the Manager's representation that the amount of such commissions was reasonably related to the value or benefit of such services.

During the fiscal years ended December 31, 2008, 2009 and 2010, the Fund did not pay any brokerage commissions. During the fiscal year ended December 31, 2010, the Fund did not execute any transactions through or pay any commissions to firms that provide research services.

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 Fund's shares. The Distributor bears the expenses normally attributable to sales, including advertising and the cost of printing and mailing prospectuses, other than those furnished to existing shareholders. The Distributor is not obligated to sell a specific number of shares.

The sales charges and concessions paid to, or retained by, the Distributor from the sale of shares and the contingent deferred sales charges ("CDSCs") retained by the Distributor on the redemption of shares during the Fund's three most recent fiscal years are shown in the tables below.

1. Includes amounts retained by a broker-dealer that is an affiliate or a parent of the Distributor.
2. The Distributor advances concession payments to financial intermediaries 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.

Distribution and Service (12b-1) 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, including a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on that plan. The Independent Trustees are not "interested persons" of the Fund and do not have any direct or indirect financial interest in the operation of the distribution plan or any agreement under the plan, in accordance with Rule 12b-1 of the Investment Company Act.

Under the plans, the Manager and the Distributor may make payments to affiliates. In their sole discretion, they may also from time to time make substantial payments from their own resources, which include the profits the Manager derives from the advisory fees it receives from the Fund, to compensate brokers, dealers, financial institutions and other intermediaries for providing distribution assistance and/or administrative services or that otherwise promote sales of the Fund's shares. These payments, some of which may be referred to as "revenue sharing," may relate to the Fund's inclusion on a financial intermediary's preferred list of funds offered to its clients.

A plan continues in effect from year to year only if the Fund's Board and its Independent Trustees/Directors vote annually to approve its continuance at an in person meeting called for that purpose. A plan may be terminated at any time by the vote of a majority of the Independent Trustees/Directors or by the vote of the holders of a "majority" (as defined in the Investment Company Act) of the outstanding shares of the Class of shares to which it applies.

The Board and the Independent Trustees/Directors must approve all material amendments to a plan. An amendment to materially increase the amount of payments to be made under a plan must also be approved by shareholders of any affected class. Because Class B shares of the Fund automatically convert into Class A shares 72 months after purchase, the shareholders of both Class A and Class B, voting separately by class, must approve a proposed amendment to the Class A plan that would materially increase payments under that plan.

At least quarterly while the plans are in effect, the Treasurer of the Fund will provide the Board with separate written reports on the plans for its review. The reports will 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/Directors.

While each plan is in effect, the Independent Trustees/Directors of the Fund will select and nominate any other Independent Trustees/Directors. This does not prevent the involvement of others in the selection and nomination process as long as the final decision is made by a majority of the Independent Trustees/Directors.

No payment will be made to any recipient for any share class unless, during the applicable period, the aggregate net asset value of Fund shares of the class held by the recipient (for itself and its customers) exceeds a minimum amount that may be set by a majority of the Independent Trustees/Directors from time to time.

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 (referred to as "recipients") for personal and account maintenance services they provide for their customers who hold Class A shares. Those services may include answering customer inquiries about the Fund, assisting in establishing and maintaining Fund accounts, making the Fund's investment plans available and providing other services at the request of the Fund or the Distributor. The Class A service plan permits the Fund to reimburse the Distributor at an annual rate of up to 0.25% of the Class A average net assets. The Distributor makes payments to recipients periodically at an annual rate of not more than 0.25% of the Class A average net assets held in the accounts of the recipient or it customers.

The Distributor does not receive or retain the service fee for Class A share accounts for which the Distributor is listed as the broker-dealer of record. While the plan permits the Board to authorize payments to the Distributor to reimburse itself for those services, the Board has not yet done so, except with respect to shares purchased prior to March 1, 2007 by certain group retirement plans that were established prior to March 1, 2001 ("grandfathered retirement plans").

Prior to March 1, 2007, the Distributor paid the 0.25% first year service fee for grandfathered retirement plans in advance and retained the service fee paid by the Fund with respect to those shares for the first year. After those shares are held for a year, the Distributor pays the ongoing service fees to recipients on a periodic basis. If those shares were redeemed within the first year after their purchase, the recipient of the service fees on those shares was obligated to repay the Distributor a pro rata portion of the advance payment of the fees. If those shares were redeemed within 18 months, they were subject to a CDSC. For Class A shares purchased in grandfathered retirement plans on or after March 1, 2007, the Distributor does not make any payment in advance and does not retain the service fee for the first year and the shares are not subject to a CDSC.

For the fiscal year ended December 31, 2010, payments under the Class A service plan totaled $7,386,165, of which $0 was retained by the Distributor under the arrangement described above regarding grandfathered retirement accounts, including $76,898 paid to an affiliate of the Distributor's parent company. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot 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, or other financial costs, or allocation of overhead.

Class B and Class C Distribution and Service Plans. Under the Class B and Class C Distribution and Service Plans (each a "Plan" and together the "Plans"), the Fund pays the asset-based sales charge (the "distribution fee") to the Distributor for its services in distributing Class B and Class C shares. The distribution fee allows investors to buy Class B and Class C shares without a front-end sales charge, while allowing the Distributor to compensate dealers that sell those shares. The Distributor may use the service fees it receives under the Plans to pay recipients for providing services similar to the services provided under the Class A service plan, described above.

Distribution fees on Class B shares are generally retained by the Distributor. If a dealer has a special agreement with the Distributor, the Distributor may pay the Class B distribution fees to recipients periodically in lieu of paying the sales concession in advance at the time of purchase. The Distributor retains the distribution fee on Class C shares during the first year and then pays it as an ongoing concession to recipients.

Service fees for the first year after Class B and Class C shares are purchased, are generally paid to recipients in advance. After the first year, the Distributor pays the service fees to recipients periodically. Under the Plans, the Distributor is permitted to retain the service fees or to pay recipients the service fee on a periodic basis, without payment in advance. If a recipient has a special agreement with the Distributor, the Distributor may pay the Class B service fees to recipients periodically in lieu of paying the first year fee in advance. If Class B and Class C shares are redeemed during the first year after their purchase, a recipient of service fees on those shares will be obligated to repay a pro rata portion of the advance payment to the Distributor. Shares purchased by exchange do not qualify for the advance service fee payment.

Class B and Class C shares may not be purchased by a new investor directly from the Distributor without the investor designating another registered broker-dealer. If a current investor no longer has another broker-dealer of record for an existing account, the Distributor is automatically designated as the broker-dealer of record, but solely for the purpose of acting as the investor's agent to purchase the shares. In those cases, the Distributor retains the distribution fees paid on Class B and Class C shares, but does not retain any service fees as to the assets represented by that account.

Each Plan provides for the Distributor to be compensated at a flat rate, whether the Distributor's distribution expenses for a period are more or less than the amounts paid by the Fund under the relevant Plan. During a calendar year, the Distributor's actual expenses in selling Class B and Class C shares may be more than the distribution fees paid to the Distributor under the Plans and the CDSC's collected on redeemed shares. Those excess expenses are carried over on the Distributor's books and may be recouped from distribution fees paid by the Fund in future years. However, the Distributor has voluntarily agreed to cap the amount that may be carried over from year to year and recouped for certain categories of expenses at 0.70% of annual gross sales of shares of the Fund. The capped expenses under the Plans are (i) expenses the Distributor has incurred that represent compensation and expenses of its sales personnel and (ii) other direct distribution costs it has incurred, such as sales literature, state registration fees, advertising and prospectuses used to offer Fund shares. If those categories of expenses exceed the capped amount, the Distributor would bear the excess costs. If a Plan were to be terminated by the Fund, the Fund's Board may allow the Fund to continue payments of the distribution fees to the Distributor for its services in distributing shares before the Plan was terminated.

The distribution and service fees under each Plan 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. The distribution and service fees increase the annual Class B and Class C expenses by 1.00% of net assets.

All payments under the Plans are subject to the limitations imposed by the Conduct Rules of FINRA on payments of distribution and service fees.

Financial intermediaries may receive various forms of compensation or reimbursement from the Fund in the form of distribution and service (12b-1) plan payments as described above. They may also receive payments or concessions from the Distributor, derived from sales charges paid by the financial intermediary's clients, also as described in this SAI. In addition, the Manager and the Distributor (including their affiliates) may make payments to financial intermediaries in connection with the intermediaries' offering and sales of Fund shares and shares of other Oppenheimer funds, or their provision of marketing or promotional support, transaction processing or administrative services. Among the financial intermediaries that may receive these payments are brokers or dealers who sell or hold shares of the Fund, banks (including bank trust departments), registered investment advisers, insurance companies, retirement plan or qualified tuition program administrators, third party administrators, recordkeepers or other institutions that have selling, servicing or similar arrangements with the Manager or the Distributor. The payments to financial intermediaries vary by the types of product sold, the features of the Fund share class and the role played by the intermediary.

Types of payments to financial intermediaries may include, and the Fund or an investor buying or selling Fund shares may pay, without limitation, all or portions of the following:

In addition, the Manager or Distributor may, at their discretion, make the following types of payments from their own respective resources, which may include profits the Manager derives from investment advisory fees paid by the Fund. Payments are made based on the guidelines established by the Manager and Distributor, subject to applicable law. These payments are often referred to as "revenue sharing" payments, and may include:

Although a broker or dealer that sells Fund shares may also act as a broker or dealer in connection with the purchase or sale of portfolio securities by the Fund or other Oppenheimer funds, the Manager does not consider a financial intermediary's sales of shares of the Fund or other Oppenheimer funds when choosing brokers or dealers to effect portfolio transactions for the Fund or other Oppenheimer funds.

Revenue sharing payments can pay for distribution-related or asset retention items including, without limitation:

These payments may provide an incentive to financial intermediaries to actively market or promote the sale of shares of the Fund or other Oppenheimer funds, or to support the marketing or promotional efforts of the Distributor in offering shares of the Fund or other Oppenheimer funds. In addition, some types of payments may provide a financial intermediary with an incentive to recommend the Fund or a particular share class. Financial intermediaries may earn profits on these payments, since the amount of the payments may exceed the cost of providing the services. Certain of these payments are subject to limitations under applicable law. Financial intermediaries may categorize and disclose these arrangements to their clients and to members of the public in a manner different from the disclosures in the Fund's Prospectus and this SAI. You should ask your financial intermediary for information about any payments it receives from the Fund, the Manager or the Distributor and any services it provides, as well as the fees and commissions it charges.

For the year ended December 31, 2010, the following financial intermediaries and/or their affiliates (which in some cases are broker-dealers) offered shares of the Oppenheimer funds and received revenue sharing or similar distribution-related payments (of at least $5,000) from the Manager or the Distributor for marketing or program support:

For the year ended December 31, 2010, the following firms (which in some cases are broker-dealers) received payments from the Manager or Distributor (of at least $2,500) for administrative or other services provided (other than revenue sharing arrangements), as described above:

Explanation of Performance Calculations. The use of standardized performance calculations enables an investor to compare the Fund's performance to the performance of other funds for the same periods. The Fund's performance data in advertisements must comply with rules of the SEC, which 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. The Fund may use a variety of performance calculations, including "cumulative total return," "average annual total return," "average annual total return at net asset value," and "total return at net asset value." How these types of returns are calculated are described below.

A number of factors should be considered before using the Fund's performance information as a basis for comparison with other investments:

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 debt investments, the types of investments the Fund holds, and its operating expenses that are allocated to the particular class.

Yields. The Fund uses a variety of different yields to illustrate its current returns. Each class of shares calculates its yield separately because of the different expenses that affect each class.

Standardized yield is calculated using the following formula set forth in rules adopted by the SEC, designed to assure uniformity in the way that all funds calculate their yields:

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.

The maximum offering price for Class A shares includes the current maximum initial sales charge. The maximum offering price for Class B and Class C shares is the net asset value per share, without considering the effect of contingent deferred sales charges. The Class A dividend yield may also be quoted without deducting the maximum initial sales charge.

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 and state taxable income (the net amount subject to federal and state income tax after deductions and exemptions).

Total Return Information. "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 will differ and are measured separately.

There are different types of "total returns." "Cumulative total return" measures the change in value over the entire period (for example, ten years). "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 the methodology prescribed by the SEC to calculate its standardized total returns.

In calculating the Fund's total returns, the following sales charges are applied unless the returns are shown at "net asset value" as described below:

The Fund's returns are calculated based on the change in value of a hypothetical initial investment of $1,000 ("P" in the formulas below) held for a number of years ("n" in the formulas).

A number of factors should be considered before using the Fund's performance information as a basis for comparison with other investments:

Performance Data. The charts below show the Fund's performance as of its most recent fiscal year end. You can obtain current performance information by visiting the OppenheimerFunds website at www.oppenheimerfunds.com or by calling the Fund's Transfer Agent at the telephone number shown on the cover of this SAI.

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 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.

Total returns for any given past period represent historical performance information and are not, and should not be considered, a prediction of future returns.

1. Inception of Class A: 9/18/91
2. Inception of Class B: 5/01/97
3. Inception of Class C: 5/01/97

Other Performance Comparisons. In its Annual Report to shareholders, the Fund compares its performance to that of one or more appropriate market indices. You can obtain that information by visiting the OppenheimerFunds website at www.oppenheimerfunds.com or by calling the Fund's Transfer Agent at the telephone number shown on the cover of this SAI. 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. The following are examples of some of those comparisons.

Lipper Rankings. From time to time the Fund may publish the ranking of the performance of its share classes by Lipper, Inc. ("Lipper"), a widely-recognized independent mutual fund monitoring service. Lipper monitors and ranks the performance of regulated investment companies for various periods in categories based on investment styles. Lipper also publishes "peer-group" indices and averages of the performance of all mutual funds in particular categories.

Morningstar Ratings. From time to time the Fund may publish the "star ratings" of its classes of shares by Morningstar, Inc. ("Morningstar"), an independent mutual fund monitoring service that rates and ranks mutual funds within their specialized market sectors. Morningstar proprietary star ratings reflect risk-adjusted historical total investment returns for funds with at least a three-year performance history. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star.

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 other similar publications. That information may include performance quotations from other sources, including Lipper and Morningstar or the Fund's performance may be compared to the performance of various market indices, other investments, or averages, performance rankings or other benchmarks prepared by recognized mutual fund statistical services. The Fund's advertisements and sales literature may also include, for illustrative or comparative purposes, statistical data or other information about general or specific market and economic conditions, for example:

From time to time, the Fund may publish rankings or ratings of the Manager or Transfer Agent by third parties, including comparisons of investor services provided to shareholders of the Oppenheimer funds to those provided by other mutual fund families selected by the rating or ranking services. Those comparisons may be based on the opinions of the rating or ranking service itself, using its research or judgment, or may be based on surveys of investors, brokers, shareholders or others.

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, including certificates of deposit, ordinary interest-paying checking and savings accounts, and other forms of fixed or variable time deposits or 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.

The Fund's Prospectus describes how to buy, sell and exchange shares of the Fund and certain other Oppenheimer funds. The information below provides further details about the Fund's policies regarding those share transactions. It should be read in conjunction with the information in the Prospectus. Appendix A of this SAI provides 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 investors and certain types of purchases or redemptions.

Determination of Net Asset Value Per Share. The net asset value ("NAV") per share for each class of shares of the Fund is determined 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 NAV is determined as of the close of business on the New York Stock Exchange ("NYSE") on each day that the NYSE is open. The NYSE normally closes at 4:00 p.m., Eastern time, but may close earlier on some other days (for example, in case of weather emergencies or on days falling before a U.S. holiday). All references to time in this SAI mean "Eastern time." The NYSE's most recent annual announcement (which is subject to change) states that it will close on New Year's Day, Martin Luther King, Jr. Day, Washington's Birthday (Presidents Day), Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may also close on other days.

Dealers other than NYSE members may conduct trading in municipal securities on days that the NYSE is closed (including weekends and holidays) or after 4:00 p.m. on a regular business day. Because the Fund's net asset values will not be calculated on those days, the Fund's net asset values per share may be significantly affected on days when shareholders may not purchase or redeem shares.

Securities Valuation. The Fund's Board has established procedures for the valuation of the Fund's securities. In general those procedures are as follows:

In the case of municipal securities the Manager uses pricing services approved by the Board. 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 valuations. That monitoring may include comparing prices used for portfolio valuation to the actual sale prices of selected securities.

Puts, calls, futures and municipal bond index futures are valued at the last sale price on the principal exchange on which they are traded, as determined by a pricing service approved by the Board or by the Manager.

Allocation of Expenses. The Fund pays expenses related to its daily operations, such as custodian fees, Board fees, transfer agency fees, legal fees and auditing costs. Those expenses are paid out of the Fund's assets, not directly by shareholders. However, those expenses reduce the net asset value of Fund shares, and therefore are borne indirectly by shareholders.

For calculating the Fund's net asset value, dividends and distributions, the Fund differentiates between 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. Those expenses are first allocated based on the percentage of the Fund's total assets that is represented by the assets of each share class. Such general expenses include management fees, legal, bookkeeping and audit fees, Board compensation, custodian expenses, share issuance costs, interest, taxes, brokerage commissions, and non-recurring expenses, such as litigation costs. Then the expenses allocated to a share class are allotted equally to each outstanding share within a given class.

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.

The Oppenheimer Funds. The "Oppenheimer funds" are those mutual funds for which the Distributor acts as distributor and currently include the following:

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 shares are subject.

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 a purchase order of more than $100,000 for Class B shares or a purchase order of $1 million or more to purchase Class C shares on behalf of a single investor (not including dealer "street name" or omnibus accounts).

Class B or Class C shares may not be purchased by a new investor directly from the Distributor without the investor designating another registered broker-dealer.

Class A Sales Charges Reductions and Waivers. There is an initial sales charge on the purchase of Class A shares of each of the Oppenheimer funds except for the money market funds (under certain circumstances described in this SAI, redemption proceeds of certain money market fund shares may be subject to a CDSC). As discussed in the Prospectus, a reduced initial sales charge rate may be obtained for certain share purchases because of the reduced sales efforts and reduction in expenses realized by the Distributor, dealers or brokers in making such sales. Sales charge waivers may apply in certain other circumstances because the Distributor or dealer or broker incurs little or no selling expenses. Appendix A to this SAI includes additional information regarding certain of these sales charge reductions and waivers.

A reduced sales charge rate may be obtained for Class A shares under a Right of Accumulation or Letter of Intent because of the reduction in sales effort and expenses to the Distributor, dealers or brokers for those sales.

Class B Conversion. Under current interpretations of applicable federal income tax law by the Internal Revenue Service (the "IRS"), the conversion of Class B shares to Class A shares 72 months after purchase 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.

Letter of Intent. Under a Letter of Intent (a "Letter"), you may be able to reduce the initial sales charge rate that applies to your Class A share purchases of the Fund if you purchase Class A, Class B or Class C shares of the Fund or other Oppenheimer funds or Class A, Class B, Class C, Class G and Class H units of advisor sold Section 529 plans, for which the Manager or the Distributor serves as the Program Manager or Program Distributor.

A Letter is an investor's statement in writing to the Distributor of his or her intention to purchase a specified value of those shares or units during a 13 month period (the "Letter period"), which begins on the date of the investor's first share purchase following the establishment of the Letter. The sales charge on each purchase of Class A shares during the Letter period will be at the rate that would apply to a single lump-sum purchase of shares in the amount intended to be purchased. In submitting a Letter, the investor makes no commitment to purchase shares. However, if the investor does not fulfill the terms of the Letter within the Letter period, he or she agrees to pay the additional sales charges that would have been applicable to any purchases that are made. The investor agrees that shares equal in value to 2% of the intended purchase amount will be held in escrow by the Transfer Agent for that purpose, as described in "Terms of Escrow" below. It is the responsibility of the dealer of record and/or the investor to advise the Distributor about the Letter when placing purchase orders during the Letter period. The investor must also notify the Distributor or his or her financial intermediary of any qualifying 529 plan holdings.

To determine whether an investor has fulfilled the terms of a Letter, the Transfer Agent will count purchases of "qualified" Class A, Class B and Class C shares and Class A, Class B, Class C, Class G and Class H units during the Letter period. Purchases of Class N or Class Y shares, purchases made by reinvestment of dividends or capital gains distributions from the Fund or other Oppenheimer funds, purchases of Class A shares with redemption proceeds under the Reinvestment Privilege, and purchases of Class A shares of Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves on which a sales charge has not been paid do not count as "qualified" shares for satisfying the terms of a Letter. An investor will also be considered to have fulfilled the Letter if the value of the investor's total holdings of qualified shares on the last day of the Letter period equals or exceeds the intended purchase amount.

If the terms of the Letter are not fulfilled within the Letter period, the concessions previously paid to the dealer of record for the account and the amount of sales charge retained by the Distributor will be adjusted on the first business day following the expiration of the Letter period to reflect the sales charge rates that are applicable to the actual total purchases.

If total eligible purchases during the Letter period exceed the intended purchase amount and also exceed the amount needed to qualify for the next sales charge rate reduction (stated in the Prospectus), the sales charges paid may be adjusted to that lower rate. That adjustment will only be made if and when the dealer returns to the Distributor the amount of the excess concessions allowed or paid to the dealer over the amount of concessions that are applicable to the actual amount of purchases. The reduced sales charge adjustment will be made by adding to the investors account the number of additional shares that would have been purchased if the lower sales charge rate had been used. Those additional shares will be determined using the net asset value per share in effect on the date of such adjustment.

By establishing a Letter, the investor agrees to be bound by the terms of the Prospectus, this SAI and the application used for a Letter, and if those terms are amended to be bound by the amended terms and that any amendments by the Fund will apply automatically to existing Letters. Group retirement plans qualified under section 401(a) of the Internal Revenue Code may not establish a Letter, however defined benefit plans and Single K sole proprietor plans may do so.

1. Out of the initial purchase, or out of subsequent purchases if necessary, the Transfer Agent will hold in escrow Fund shares equal to 2% of the intended purchase amount specified in the Letter. For example, if the intended purchase amount is $50,000, the escrow amount would be shares valued at $1,000 (computed at the offering price for a $50,000 share purchase). Any dividends and capital gains distributions on the escrowed shares will be credited to the investor's account.

2. If the Letter applies to more than one fund account, the investor can designate the fund from which shares will be escrowed. If no fund is selected, the Transfer Agent will escrow shares in the fund account that has the highest dollar balance on the date of the first purchase under the Letter. If there are not sufficient shares to cover the escrow amount, the Transfer Agent will escrow shares in the fund account(s) with the next highest balance(s). If there are not sufficient shares in the accounts to which the Letter applies, the Transfer Agent may escrow shares in other accounts that are linked for Right of Accumulation purposes. Additionally, if there are not sufficient shares available for escrow at the time of the first purchase under the Letter, the Transfer Agent will escrow future purchases until the escrow amount is met.

3. If, during the Letter period, an investor exchanges shares of the Fund for shares of another fund (as described in the Prospectus section titled "The OppenheimerFunds Exchange Privilege"), the Fund shares held in escrow will automatically be exchanged for shares of the other fund and the escrow obligations will also be transferred to that fund.

4. If the total purchases under the Letter are less than the intended purchases specified, on the first business day after the end of the Letter period, the Distributor will redeem escrowed shares equal in value to the difference between the dollar amount of the sales charges actually paid and the amount of the sales charges that would have been paid if the total purchases had been made at a single time. Any shares remaining after such redemption will be released from escrow.

5. If the terms of the Letter are fulfilled, the escrowed shares will be promptly released to the investor at the end of the Letter period.

6. 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.

Share Certificates. When you purchase shares of the Fund, your ownership interest in the shares of the Fund will be recorded as a book entry on the records of the Fund. The Fund will not issue or re-register physical share certificates.

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 values 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.

AccountLink. Shares purchased through AccountLink will be purchased at the net asset value calculated on the same regular business day if the Distributor is instructed to initiate the Automated Clearing House ("ACH") transfer to buy the shares before the close of the NYSE. The NYSE normally closes at 4:00 p.m., but may close earlier on certain days. If the Distributor is instructed to initiate the ACH transfer after the close of the NYSE, the shares will be purchased on the next regular business day.

Dividends will begin to accrue on the shares purchased through the ACH system on the business day the Fund receives Federal Funds before the close of the NYSE. The proceeds of ACH transfers are normally received by the Fund three days after a transfer is initiated. If Federal Funds are received on a business day after the close of the NYSE, dividends will begin to accrue on the next regular business day. If the proceeds of an ACH transfer are not received on a timely basis, the Distributor reserves the right to cancel the purchase order. The Distributor and the Fund are not responsible for any delays in purchasing shares resulting from delays in ACH transmissions.

The minimum purchase through AccountLink is generally $50, however for accounts established prior to November 1, 2002 the minimum purchase is $25.

Asset Builder Plans. As indicated in the Prospectus, you normally must establish your Fund account with $1,000 or more. However, you can open a Fund account for as little as $500 if you establish an Asset Builder Plan at the time of your initial share purchase to automatically purchase additional shares directly from a bank account.

An Asset Builder Plan is available only if your bank is an ACH member and you establish AccountLink. Under an Asset Builder Plan, payments to purchase shares of the Fund will be debited from your bank account automatically. Normally the debit will be made two business days prior to the investment dates you select on your application. Neither the Distributor, the Transfer Agent nor the Fund will be responsible for any delays in purchasing shares that result from delays in ACH transmissions.

To establish an Asset Builder Plan at the time you initially purchase Fund shares, complete the "Asset Builder Plan" information on the Account Application. To establish an Asset Builder Plan for an existing account, use the Asset Builder Enrollment Form. The Account Application and the Asset Builder Enrollment Form are available by contacting the Distributor or may be downloaded from our website at www.oppenheimerfunds.com. Before you establish a new Fund account under the Asset Builder Plan, you should obtain a prospectus of the selected Fund and read it carefully.

You may change the amount of your Asset Builder payment or you can terminate your 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 minimum additional purchase under an Asset Builder Plan is $50, except that for Asset Builder Plans established prior to November 1, 2002, the minimum additional purchase is $25. Shares purchased by Asset Builder Plan payments are subject to the redemption restrictions for recent purchases described in the Prospectus. An Asset Builder Plan may not be used to buy shares for OppenheimerFunds employer-sponsored qualified retirement accounts. The Fund reserves the right to amend, suspend or discontinue offering Asset Builder Plans at any time without prior notice.

Electronic Document Delivery. To access your account documents electronically via eDocs Direct, please visit our website at www.oppenheimerfunds.com and click the hyperlink "Sign Up for Electronic Document Delivery (eDocs Direct)" under the heading "I want to..." in the left hand column, or call 1.888.470.0862 for instructions.

Checkwriting. Effective January 1, 2011, shareholders will no longer be able to establish checkwriting for a new or existing account and will no longer be able to order additional checks for accounts with checkwriting privileges established before January 1, 2011. For shareholders that established checkwriting privileges before January 1, 2011, beginning June 1, 2011 the Transfer Agent will no longer accept check drafts to redeem shares from your account. Check drafts received on or after this date will be returned without payment. The following also applies to shareholders that established checkwriting privileges before January 1, 2011.

When a check is presented to United Missouri Bank (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 bank. 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 further amend, suspend or discontinue offering checkwriting privileges at any time. The Fund will provide you notice whenever it is required to do so by applicable law. In choosing to take advantage of the Checkwriting privilege, each shareholder that signed the account application or completed a Checkwriting card:

(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) 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.

Receiving Redemption Proceeds by Federal Funds Wire. The Fund would normally authorize a Federal Funds wire of redemption proceeds to be made on its next regular business day following the redemption. A Federal Funds wire may be delayed if the Fund's custodian bank is not open for business on that day. In that case, the wire will not be transmitted until the next business day on which the bank and the Fund are both open for business. No dividends will be paid on the proceeds of redeemed shares awaiting transfer by Federal Funds wire.

Redeeming Shares Through Brokers or Dealers. The Distributor is the Fund's agent to repurchase its shares from authorized brokers or dealers 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 next net asset value computed after the Distributor or the broker or dealer receives the order. A repurchase will be processed at that day's net asset value if the order was received by the broker or dealer from its customer prior to the time the close of the NYSE. Normally, the NYSE closes at 4:00 p.m., but may do so earlier on some days.

For accounts redeemed through a broker-dealer, payment will ordinarily be made within three business days after the shares are redeemed. However, the Distributor must receive the required redemption documents in proper form, with the signature(s) of the registered shareholder(s) guaranteed as described in the Prospectus.

Payments "In Kind." As stated in the Prospectus, payment for redeemed shares is ordinarily made in cash. Under certain circumstances, however, the Board may determine that it would be detrimental to the best interests of the remaining shareholders for the Fund to pay for the redeemed shares 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 Fund's portfolio. The Fund will value securities used to pay a redemption in kind using the same method described above under "Determination of Net Asset Value Per Share." That valuation will be made as of the time the redemption price is determined. If shares are redeemed in kind, the redeeming shareholder might incur brokerage or other costs in selling the securities for cash.

The Fund has elected to be governed by Rule 18f-1 under the Investment Company Act. Under that rule, redemptions by a shareholder, of up to the lesser of $250,000 or 1% of the net assets of the Fund during any 90-day period, must be redeemed solely in cash.

Automatic Withdrawal Plans. Under an Automatic Withdrawal Plan, investors who own Fund shares can authorize the Transfer Agent to redeem shares automatically on a monthly, quarterly, semi-annual or annual basis. The minimum periodic redemption amount under an Automatic Withdrawal Plan is $50. Shareholders having AccountLink privileges may have Automatic Withdrawal Plan payments deposited to their designated bank account. Payments may also be made by check, payable to all shareholders of record and sent to the address of record for the account. Automatic withdrawals may be requested by telephone for amounts up to $1,500 per month if the payments are to be made by checks sent to the address of record for the account. Telephone requests are not available if the address on the account has been changed within the prior 15 days.

Fund shares will be redeemed as necessary to meet the requested withdrawal payments. Shares will be redeemed at the net asset value per share determined on the redemption date, which is normally three business days prior to the payment receipt date requested by the shareholder. The Fund cannot guarantee receipt of a payment on the date requested, however. 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 on 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.

Because of the sales charge assessed on Class A share purchases, shareholders should usually not make additional Class A share purchases while participating in an Automatic Withdrawal Plan. A shareholder whose Class B, Class C or Class N account is subject to a CDSC should usually not establish an automatic withdrawal plan because of the imposition of the CDSC on the withdrawals. If a CDSC does apply to a redemption, the amount of the check or payment will be reduced accordingly. Distributions of capital gains from accounts subject to an Automatic Withdrawal Plan must be reinvested in Fund shares. Dividends on shares held in the account may be paid in cash or reinvested. Required minimum distributions from OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.

The shareholder may change the amount, the payment interval, the address to which checks are to be mailed, the designated bank account for AccountLink payments or may terminate a plan at any time by writing to the Transfer Agent. A signature guarantee may be required for certain changes. The requested change will usually be put into effect approximately two weeks after such notification is received. The shareholder may redeem all or any part of the shares in the account by written notice to the Transfer Agent. That notice must be in proper form in accordance with the requirements in the then-current Fund Prospectus.

The Transfer Agent will administer the Automatic Withdrawal Plan as agent for the shareholder(s) who executed the plan authorization and application submitted to the Transfer Agent. Neither the Fund nor the Transfer Agent shall incur any liability for any action taken or not taken by the Transfer Agent in good faith to administer the plan. Any share certificates must be surrendered unendorsed to the Transfer Agent with the plan application to be eligible for automatic withdrawal payments. If the Transfer Agent ceases to act as transfer agent for the Fund, the shareholder will be deemed to have appointed any successor transfer agent to act as agent in administering the plan.

The Transfer Agent will terminate a plan upon its receipt of evidence, satisfactory to it, that the shareholder has died or is legally incapacitated. The Fund may also give directions to the Transfer Agent to terminate a plan. Shares that have not been redeemed at the time a plan is terminated will be held in an account in the name of the shareholder. Share certificates will not be issued for any such shares and all dividends will be reinvested in the account unless and until different instructions are received, in proper form, from the shareholder, his or her executor or guardian, or another authorized person.

The Fund reserves the right to amend, suspend or discontinue offering these plans at any time without prior notice. By requesting an Automatic Withdrawal Plan, the shareholder agrees to the terms and conditions that apply to such plans. 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.

Transfers of Shares. A shareholder will not be required to pay a CDSC when Fund shares are transferred to registration in the name of another person or entity. The transfer may occur 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 CDSC are transferred, the CDSC will continue to apply to the transferred shares and will be calculated as if the transferee had acquired the shares in the same manner and at the same time as the transferring shareholder.

If less than all of the shares held in an account are transferred, and some but not all shares in the account would be subject to a CDSC if redeemed at that time, the priorities for the imposition of the CDSC described in the Prospectus will be followed in determining the order in which the shares are transferred.

Minimum Balance Fee. As stated in the Prospectus, a $12 annual "Minimum Balance Fee" is assessed on each Fund account with a share balance of less than $500. The Minimum Balance Fee is automatically deducted from each such Fund account in September.

Listed below are certain cases in which the Fund has elected, in its discretion, not to assess the Minimum Balance Fee. These exceptions are subject to change:

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 good faith compliance with those laws.

The Fund reserves the authority to modify the Minimum Balance Fee in its discretion.

Involuntary Redemptions. The Fund's Board has the right to involuntarily redeem shares held in any account with an aggregate net asset value of less than $200. The Board may change the amount of the aggregate net asset value to which an involuntary redemption may apply. The Board 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 determine the requirements for any notice to be given to the shareholders (but not less than 30 days). Alternatively, the Board may set requirements for the shareholder to increase the investment, or set other terms and conditions so that the shares would not be involuntarily redeemed.

Reinvestment Privilege. Within six months after redeeming Class A or Class B shares, a shareholder may reinvest all or part of the redemption proceeds without a sales charge if:

The reinvestment may only be made in Class A shares of the Fund or other Oppenheimer funds into which shares of the Fund are exchangeable, as described in "How to Exchange Shares" below. This privilege does not apply to Class C shares or Class Y shares or to purchases made through automatic investment options. The Fund may amend, suspend or cease offering this reinvestment privilege at any time for shares redeemed after the date of the amendment, suspension or cessation. The shareholder must request the reinvestment privilege from the Transfer Agent or his or her financial intermediary at the time of purchase.

Reinvestment will be at the next net asset value computed after the Transfer Agent receives the reinvestment order. 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 was 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 after the payment of the sales charge, in certain circumstances, 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, the sales charge would be added to the basis of the shares acquired with the redemption proceeds.

Shares of the Fund (including shares acquired by reinvestment of dividends or distributions from other Oppenheimer funds) may be exchanged for shares of certain other Oppenheimer funds at net asset value without the imposition of a sales charge, however a CDSC may apply to the acquired shares as described below. Shares of certain money market funds purchased without a sales charge may be exchanged for shares of other Oppenheimer funds offered with a sales charge upon payment of the sales charge. Exchanges into another Oppenheimer fund must meet any applicable minimum investment requirements of that fund.

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. The prospectus of each of the Oppenheimer funds indicates which share class or classes that fund offers and provides information about limitations on the purchase of particular share classes, as applicable for the particular fund. Shareholders that own more than one class of shares of the Fund must specify which class of shares they wish to exchange.

You can obtain a current list of the share classes offered by the funds by calling the toll-free phone number on the first page of this SAI.

The different Oppenheimer funds that are available for exchange have different investment objectives, policies and risks. A shareholder should determine whether the fund selected is appropriate for his or her investment goals 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. Some of the tax consequences of reinvesting redemption proceeds are discussed in "Reinvestment Privilege," above. 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.

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 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, however that notice is not required in extraordinary circumstances.

How Exchanges Affect Contingent Deferred Sales Charges. A CDSC is imposed on exchanges of shares in the following cases:

When Class B or Class C shares are exchanged, the priorities for the imposition of the CDSC described in "How To Buy Shares" in the Prospectus will be followed in determining the order in which the shares are exchanged. Before exchanging shares, shareholders should consider how the exchange may affect any CDSC that might be imposed on the subsequent redemption of remaining shares.

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.

Automatic Exchange Plans. Under an Automatic Exchange Plan, shareholders can authorize the Transfer Agent to exchange shares of the Fund for shares of other Oppenheimer funds automatically on a monthly, quarterly, semi-annual or annual basis. The minimum amount that may be exchanged to each other fund account is $50. Instructions regarding the exchange amount, the selected fund(s) and the exchange interval should be provided on the OppenheimerFunds account application or by signature-guaranteed instructions. Any requested changes will usually be put into effect approximately two weeks after notification of a change is received. Exchanges made under these plans are subject to the restrictions that apply to exchanges as set forth in this SAI and in "The OppenheimerFunds Exchange Privilege" section in the Prospectus.

The Transfer Agent will administer the Automatic Exchange Plan as agent for the shareholder(s). Neither the Fund nor the Transfer Agent shall incur any liability for any action taken or not taken by the Transfer Agent in good faith to administer the plan. Any share certificates must be surrendered unendorsed to the Transfer Agent with the plan application to be eligible for automatic exchanges. If the Transfer Agent ceases to act as transfer agent for the Fund, the shareholder will be deemed to have appointed any successor transfer agent to act as agent in administering the plan.

The Fund reserves the right to amend, suspend or discontinue offering automatic exchanges at any time without prior notice. By requesting an Automatic Exchange Plan, the shareholder agrees to the terms and conditions that apply to such plans. These provisions may be amended from time to time and any amendments will automatically apply to existing Plans.

Processing Exchange Requests. Shares to be exchanged are redeemed at the net asset value calculated on the regular business day the Transfer Agent receives an exchange request in proper form before the close of the NYSE (the "Redemption Date"). Normally, shares of the fund to be acquired are purchased on the Redemption Date, but such purchases may be delayed by up to five business days if it is determined that either fund 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, any special features of your account that are available in the new fund (such as an Asset Builder Plan or Automatic Withdrawal Plan) will be applied to the new fund account unless you tell the Transfer Agent not to do so.

Shares that are subject to a restriction cited in the Prospectus or this SAI and shares covered by a share certificate that is not tendered will not be exchanged. If an exchange request includes such shares, only the shares available without restrictions will be exchanged.

Dividends and Other 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.

The distributions made by the Fund will vary depending on market conditions, the composition of the Fund's portfolio and Fund expenses. Distributions are calculated in the same manner, at the same time, and on the same day for each class of shares but will normally differ in amount. Distributions on Class B and Class C shares are expected to be lower than distributions on Class A shares and Class Y shares (if applicable) because of the effect of the asset-based sales charge on Class B and Class C shares. Whether they are reinvested in Fund shares or received in cash, distributions are taxable to shareholders, as discussed below, regardless of whether the distributions are paid in cash or reinvested in additional shares of the Fund (or of another fund). Shareholders receiving a distribution in the form of additional shares will be treated as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.

Returned checks for the proceeds of redemptions are invested in shares of Oppenheimer Money Market Fund, Inc. If a dividend check or a check representing an automatic withdrawal payment is returned to the Transfer Agent by the Postal Service as undeliverable, it will be reinvested in shares of the Fund. Reinvestments will be made as promptly as possible after the return of such checks to the Transfer Agent. 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.

Taxes. The federal tax treatment of the Fund and distributions to shareholders is briefly highlighted in the Prospectus. The following is only a summary of certain additional tax considerations generally affecting the Fund and its shareholders. The tax discussion in the Prospectus and this SAI is based on tax laws in effect on the date of the Prospectus and SAI. Those laws and regulations may be changed by legislative, judicial, or administrative action, sometimes with retroactive effect. State and local tax treatment may differ from the treatment under the Internal Revenue Code as described below.

Before purchasing Fund shares, investors are urged to consult their tax advisers with reference to their own particular tax circumstances as well as the consequences of federal, state, local and any other jurisdiction's tax rules affecting an investment in the Fund.

Qualification and Taxation as a Regulated Investment Company. The Fund has elected to be taxed as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code. As long as the Fund qualifies as a RIC, the Fund is not subject to federal income tax on the portion of its net investment income (that is, taxable interest, dividends, and other taxable ordinary income, net of expenses) and capital gain net income (that is, the excess of capital gains over capital losses) that it distributed to shareholders.

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. One or more Funds might not meet those tests in a particular year. If the Fund does not qualify, the Fund would (unless certain cure provisions apply) be treated for tax purposes as an ordinary corporation and would 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.

Qualifying as a RIC . To qualify as a RIC, the Fund must be a domestic corporation that is either registered under the Investment Company Act as a management company or unit investment trust or is otherwise described in the Internal Revenue Code as having a specific status under the Investment Company Act. The Fund must also satisfy certain tests with respect to (i) the composition of its gross income, (ii) the composition of its assets and (iii) the amount of its dividend distributions.

Gross Income Test. To qualify as a RIC, the Fund must derive at least 90% of its gross income from dividends, interest, certain payments with respect to loans of securities, gains from the sale or other disposition of securities or foreign currencies, and certain other income derived with respect to its business of investing in such securities or currencies (including, but not limited to, gains from options, futures or forward contracts), and net income derived from interests in certain "qualified publicly traded partnerships."

Asset Test. In addition, at the close of each quarter of its taxable year, the Fund must satisfy two asset tests. First, at least 50% of the value of the Fund's assets must consist of U.S. Government securities, securities of other RIC's, securities of other issuers ("Other Issuers") and cash or cash items (including receivables). The securities of an Other Issuer are not counted towards satisfying the 50% test if the Fund either invests more than 5% of the value of the Fund's assets in the securities of that Other Issuer or holds more than 10% of the outstanding voting securities of that Other Issuer. Second, no more than 25% of the value of the Fund's total assets may be invested in (1) the securities of any one issuer (other than U.S. Government securities and the securities of other RIC's), (2) the securities of two or more issuers (other than the securities of other RIC's) that the Fund controls and that are engaged in the same or similar trades or businesses, or (3) the securities of one or more qualified publicly traded partnerships. For purposes of these tests, obligations issued or guaranteed by certain agencies or instrumentalities of the U.S. Government are treated as U.S. Government securities.

Dividend Distributions Test. During the taxable year or, under specified circumstances, within 12 months after the close of the taxable year, the Fund must distribute at least 90% of its investment company taxable income and at least 90% of its net tax-exempt income for the taxable year, which is generally its net investment income and the excess of its net short-term capital gain minus its net long-term capital loss.

Failure to Qualify. If the Fund failed to qualify as a RIC, it would (unless certain cure provisions apply) then be unable to deduct from its taxable income the dividend distributions made to its shareholders and therefore those amounts would be subject to a Fund-level corporate income tax. In addition, the Fund would not be able to characterize the distributions made to its shareholders as anything other than ordinary corporate distributions. To the extent the Fund had "earnings and profits" (as determined for tax purposes), distributions to its shareholders would be taxable as ordinary dividend income. In the case of individuals, those distributions may qualify for the maximum 15% tax rate on dividend income (for taxable years beginning before 2013) and, in the case of corporations, they may qualify for the dividends-received deduction.

Excise Tax on Regulated Investment Companies. Under the Internal Revenue Code, the Fund must pay an annual, non-deductible excise tax unless, by December 31st each year, it distributes (1) 98% of its taxable investment income earned from January 1 through December 31, (2) 98.2% of its capital gain net income realized in the period from November 1 of the prior year through October 31 of the current year and (3) undistributed amounts from prior years. It is presently anticipated that the Fund will meet these distribution requirements, although to do so the Fund might be required to liquidate portfolio investments in certain circumstances. In some years, the Board and the Manager may determine that it would be in the shareholders' best interests for the Fund to pay the excise tax on undistributed amounts rather than making the required level of distributions. In that event, the tax may reduce shareholder total returns from the Fund.

Taxation of Fund Distributions. Distributions by the Fund will be treated in the manner described below regardless of whether the distributions are paid in cash or reinvested in additional shares of the Fund (or of another fund). The Fund's distributions will be treated as dividends to the extent paid from the Fund's earnings and profits (as determined under the Internal Revenue Code). Distributions in excess of the Fund's earnings and profits will first reduce the adjusted tax basis of a shareholder's shares and, after such tax basis is reduced to zero, will constitute capital gain to the shareholder (assuming the shares are held as a capital asset). The Fund's dividends will not be eligible for the dividends-received deduction for corporations. Shareholders reinvesting a distribution in shares of the distributing Fund, or one of the other Oppenheimre funds, will be treated as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.

Exempt-Interest Dividends. The Fund intends to satisfy the requirements under the Internal Revenue Code during each fiscal year to pay "exempt-interest dividends" to its shareholders. To qualify, at the end of each quarter of its taxable year, at least 50% of the value of the Fund's total assets must consist of obligations described in Section 103(a) of the Internal Revenue Code, as amended. Dividends that are derived from net interest income earned by the Fund on tax-exempt municipal securities and reported as "exempt-interest dividends" in a written notice sent by the Fund to its shareholders after the close of the Fund's taxable year will be excludable from gross income of shareholders for federal income tax purposes. To the extent any Fund fails to qualify to pay exempt-interest dividends in any given taxable year, such dividends would be included in the gross income of shareholders for federal income tax purposes.

The Fund will allocate interest from tax-exempt municipal securities (as well as ordinary income, capital gains, and tax preference items discussed below) among its shares according to a method that is based on the gross income allocable to each class of shareholders during the taxable year (or under another method, if prescribed by the IRS and SEC). The percentage of each distribution with respect to a taxable year of the Fund that is an exempt-interest dividend will be the same, even though that percentage may differ substantially from the percentage of the Fund's income that was tax-exempt during a particular portion of the year. This percentage normally will be determined after the close of the taxable year.

Exempt-interest dividends are excludable from a shareholder's gross income for federal income tax purposes. Interest on indebtedness incurred or continued to purchase or carry shares of a regulated investment company paying exempt-interest dividends, such as the Fund, will not be deductible by the investor for federal income tax purposes to the extent attributable to exempt-interest dividends. Shareholders receiving Social Security or railroad retirement benefits should be aware that exempt-interest dividends are a factor in determining whether, and to what extent, such benefits are subject to federal income tax.

A portion of the exempt-interest dividends paid by the Fund may give rise to liability under the federal alternative minimum tax for individual or corporate shareholders. Income on certain private activity bonds issued after August 7, 1986, while excludable from gross income for purposes of the federal income tax, is an item of "tax preference" that must be included in income for purposes of the federal alternative minimum tax for individuals and corporations. "Private activity bonds" are bonds that are used for purposes not generally performed by governmental entities and that benefit non-governmental entities. The amount of any exempt-interest dividends that is attributable to tax preference items for purposes of the alternative minimum tax will be identified when tax information is distributed by the Fund.

In addition, corporate taxpayers are subject to the federal alternative minimum tax based in part on certain differences between taxable income as adjusted for other tax preferences and the corporation's "adjusted current earnings," which more closely reflect a corporation's economic income. Because an exempt-interest dividend paid by the Fund will be included in adjusted current earnings, a corporate shareholder may be required to pay alternative minimum tax on exempt-interest dividends paid by the Fund.

Shareholders are advised to consult their tax advisers with respect to their liability for federal alternative minimum tax, and for advice concerning the loss of exclusion from gross income for exempt-interest dividends paid to a shareholder who would be treated as a "substantial user" or "related person" under Section 147(a) of the Internal Revenue Code with respect to property financed with the proceeds of an issue of private activity bonds held by the Fund.

Ordinary Income Dividends. Distributions from income earned by the Fund from one or more of the following sources will be treated as ordinary income to the shareholder:

Capital Gain Distributions. The Fund may either retain or distribute to shareholders its net capital gain (the excess of net long-term capital gain over net short-term capital loss). Currently, the Fund intends to distribute these gains. Distributed net capital gain that is properly reported will be taxable to the Fund's shareholders as long-term capital gain. The amount of distributions reported as net capital gain will be reported to shareholders shortly after the end of each year. Such treatment will apply no matter how long the shareholder has held Fund shares and even if the gain was recognized by the Fund before the shareholder acquired Fund shares.

If the Fund elects to retain all or a portion of its net capital gain for a taxable year, the Fund will be subject to tax on such gain at the highest corporate tax rate. If the Fund so elects, each shareholder of record on the last day of such taxable year will be informed of his or her portion of both the gain and the tax paid, will be required to report the gain as long-term capital gain, will be able to claim the tax paid as a refundable credit, and will increase the basis of his or her shares by the amount of the capital gain reported minus the tax credit.

For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax will be imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

Tax Consequences of Share Redemptions. If all or a portion of a shareholder's investment in the Fund is redeemed, the shareholder will generally recognize a gain or loss on the redeemed shares equal to the difference between the proceeds of the redeemed shares and the shareholder's adjusted tax basis in the shares. In general, any gain or loss from the redemption of shares of the Fund will be considered capital gain or loss if the shares were held as a capital asset and will be long-term capital gain or loss if the shares were held for more than one year. Any capital loss arising from the redemption of shares held for six months or less, however, will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received on those shares. Special holding period rules under the Internal Revenue Code apply in this case to determine the holding period of shares. There are limits on the deductibility of capital losses in any year.

All or a portion of any loss on redeemed shares may be disallowed if the shareholder purchases other shares of the Fund within 30 days before or after the redemption (including purchases through the reinvestment of dividends). In that case, the basis of the acquired shares will be adjusted to reflect the disallowed loss. For shares acquired on or before December 22, 2010, losses realized by a shareholder 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. For shares acquired after December 22, 2010, this disallowance rule will not apply to any exempt-interest regular dividend paid by the Fund, provided that the Fund declares exempt-interest dividends daily in an amount equal to at least 90% of its net tax-exempt interest and pays such dividends at least monthly. If a shareholder exercises the exchange privilege within 90 days after acquiring Fund shares, in certain circumstances, any loss that the shareholder recognizes on the exchange will be reduced, or any gain will be increased, to the extent that sales charge paid on the exchanged shares reduces any charges the shareholder would have incurred on the purchase of the new shares in the absence of the exchange privilege. Such sales charge will be treated as an amount paid for the new shares.

Backup Withholding. The Fund will be required in certain cases to withhold 28% (currently scheduled to increase to 31% after 2012) of ordinary income dividends, capital gain distributions and the proceeds of the redemption of shares, paid to any shareholder (1) who has failed to provide a correct taxpayer identification number or to properly certify that number when required, (2) who is subject to backup withholding for failure to report properly the receipt of interest or dividend income, or (3) who has failed to certify to the Fund that the shareholder is not subject to backup withholding or is an "exempt recipient" (such as a corporation). Any tax withheld by the Fund is remitted by the Fund to the U.S. Treasury and is identified in reports mailed to shareholders in January of each year with a copy sent to the IRS. Backup withholding is not an additional tax. Any amount withheld generally may be allowed as a refund or a credit against a shareholder's federal income tax liability, provided the required information is timely provided to the IRS.

Taxation of Foreign Shareholders. Taxation of a foreign shareholder depends primarily on whether the foreign shareholder's income from the Fund is effectively connected with the conduct of a U.S. trade or business. "Foreign shareholders" include, but are not limited to, a nonresident alien individual, a foreign trust, a foreign estate, a foreign corporation, or a foreign partnership.

If a foreign shareholder fails to provide a properly completed and signed Certificate of Foreign Status, the Fund will be required to withhold U.S. tax on ordinary income dividends, capital gains distributions and the proceeds of the redemption of shares. Provided the Fund obtains a proper certification of foreign status, ordinary income dividends that are paid by the Fund to foreign shareholders and that are not "effectively connected income," will be subject to a U.S. withholding tax. The tax rate may be reduced if the foreign person's country of residence has an income tax treaty with the United States allowing for a reduced tax rate on ordinary income dividends paid by the Fund. If the ordinary income dividends from the Fund are effectively connected with the conduct of a U.S. trade or business, then the foreign shareholder may claim an exemption from the U.S. withholding tax described above provided the Fund obtains a properly completed and signed Certificate of Foreign Status. Any tax withheld by the Fund is remitted to the U.S. Treasury and all income and any tax withheld is identified in reports mailed to shareholders in the early part of each year with a copy sent to the IRS. Capital gain dividends are not subject to U.S. withholding tax unless the recipient is a nonresident alien who is present in the United States for 183 days or more during the taxable year in which the dividends are received. A foreign individual who is present in the United States for 183 days or more generally loses his or her status as a nonresident alien.

For taxable years of the Fund beginning before January 1, 2012, properly reported dividends are generally exempt from U.S. federal withholding tax on foreign persons provided such dividends (i) are derived from the Fund's "qualified net interest income" (generally, the Fund's U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which the Fund is a 10% or greater shareholder, reduced by expenses that are allocable to such income) or (ii) are derived from the Fund's "qualified short-term capital gains" (generally, the excess of the Fund's net short-term capital gain over the Fund's net long-term capital loss for such taxable year). In order to qualify for this exemption from withholding, a shareholder that is a foreign person must comply with applicable certification requirements relating to its non-U.S. status. However, depending on its circumstances, the Fund may report some, all, or none of its potentially eligible dividends as interest-related dividends or as short-term capital gain dividends, and/or treat such dividends, in whole or in part, as ineligible for this exemption from withholding on foreign persons. In the case of shares held through an intermediary, the intermediary may withhold even if the Fund reports the payment as qualified net interest income or qualified short-term capital gain. Shareholders that are foreign persons should contact their intermediaries with respect to the application of these rules to their accounts.

The tax consequences to foreign persons entitled to claim the benefits of an applicable income tax treaty may be different from those described in this SAI. Foreign shareholders are urged to consult their tax advisers with respect to the particular tax consequences of an investment in the Fund, including the applicability of the U.S. withholding taxes described above and the possible applicability of U.S. estate tax.

Under recently-enacted legislation, payments after 2012 of dividends on, and gross proceeds from the redemption of, shares of the Fund made to "foreign financial institutions" and certain other foreign entities will be subject to U.S. withholding tax at a rate of 30% unless various certification, information reporting, due diligence and other applicable requirements (different from, and in addition to, those described above) are satisfied. Payments that are taken into account as effectively connected income are not subject to these withholding rules. Foreign shareholders should consult their own tax advisors as to the applicability and consequences of this new legislation to them.

Recently-enacted legislation imposes information reporting requirements on individuals that hold any interest in a "specified foreign financial asset" if the aggregate value of all such assets held by such individual exceeds $50,000. Significant penalties can apply upon a failure to make the required disclosure and in respect to understatements of tax attributable to undisclosed foreign financial assets. This information reporting requirement is generally applicable for taxable years beginning after March 18, 2010. The scope of this reporting requirement is not entirely clear and all shareholders should consult their own tax advisors as to whether reporting may be required in respect of their indirect interests in the Fund's investments.

Tax Shelter and Other Reporting Requirements. If a shareholder realizes a loss on the disposition of Fund shares of at least $2 million in any single taxable year or $4 million in any combination of taxable years (for an individual shareholder); or at least $10 million in any single taxable year or $20 million in any combination of taxable years (for a corporate shareholder), the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Shareholders should consult their tax advisers to determine the applicability of this requirement in light of their individual circumstances.

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.

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 serves as the Transfer Agent for an annual per account fee. 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. Citibank, N.A. is the custodian of the Fund's assets. The custodian's responsibilities include safeguarding and controlling the Fund's portfolio securities and handling the delivery of such securities to and from the Fund. It is the practice of the Fund to deal with the custodian in a manner uninfluenced by any banking relationship the custodian may have with the Manager and its affiliates. The Fund's cash balances with the custodian in excess of $250,000 are not protected by the federal deposit insurance corporation ("FDIC").

Independent Registered Public Accounting Firm . KPMG LLP serves as the independent registered public accounting firm for the Fund. KPMG LLP audits the Fund's financial statements and performs other related audit and tax services. KPMG LLP also acts as the independent registered public accounting firm for the Manager and certain other funds advised by the Manager and its affiliates. Audit and non-audit services provided by KPMG LLP to the Fund must be pre-approved by the Audit Committee.

In certain cases, the initial sales charge that applies to purchases of Class A shares of the Oppenheimer funds or the contingent deferred sales charge ("CDSC") that may apply to Class A, Class B, Class C or Class N shares may be waived. That is because of the economies of sales efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as the "Distributor"), or by dealers or other financial institutions that offer those shares to certain classes of investors. Not all waivers apply to all funds.

For 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:

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.

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 CDSC if redeemed within 18 months (24 months in the case of shares of Oppenheimer Rochester National Municipals and Rochester Fund Municipals shares purchased prior to 10/22/07) of the beginning 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 CDSC, the Distributor will pay the applicable concession described in the Prospectus under "Class A Contingent Deferred Sales Charge."³ This waiver provision applies to:

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 concessions are paid by the Distributor on such purchases):

B. Waivers of the Class A Initial and Contingent Deferred Sales Charges in Certain Transactions.

1. Class A shares issued or purchased in the following transactions are not subject to sales charges (and no concessions are paid by the Distributor on such purchases):

2. Class A shares issued and purchased in the following transactions are not subject to sales charges (a dealer concession at the annual rate of 0.25% is paid by the Distributor on purchases made within the first 6 months of plan establishment):

C. Waivers of the Class A Contingent Deferred Sales Charge for Certain Redemptions.

The Class A CDSC is also waived if shares that would otherwise be subject to the CDSC are redeemed in the following cases:

III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds

The Class B, Class C and Class N CDSCs will not be applied to shares purchased in certain types of transactions or redeemed in certain circumstances described below.

The Class B, Class C and Class N CDSCs will be waived for redemptions of shares in the following cases:

The CDSC is also waived on Class B, Class C and Class N shares sold or issued in the following cases:

IV. Special Sales Charge Arrangements for Former Shareholders of Quest for Value Funds

For shareholders of the Quest for Value Funds who acquired shares prior to November 24, 1995 and still hold those shares (or shares of an Oppenheimer fund into which any Quest for Value Fund was reorganized), any initial and contingent deferred sales charges will be waived if requested by the shareholder.

V. Special Sales Charge Arrangements for Former Shareholders of Connecticut Mutual Investment Accounts, Inc.

For shareholders of the Connecticut Mutual Investment Accounts who acquired shares prior to March 1, 1996 and still hold those shares (or shares of an Oppenheimer fund into which any Connecticut Mutual Investment Account was reorganized), any initial and contingent deferred sales charges will be waived if requested by the shareholder.

VI. Special Sales Charge Arrangements for Former Shareholders of Advance America Funds, Inc.

For shareholders of the Advanced America Funds who acquired shares prior to October 18, 1991 and still hold those shares (or shares of an Oppenheimer fund into which any Advanced American Fund was reorganized), any initial and contingent deferred sales charges will be waived if requested by the shareholder.

1. An "employee benefit plan" means any plan or arrangement, whether or not it is "qualified" under the Internal Revenue Code, under which Class N 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.

2. 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 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 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.

3. However, that concession 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.

5. This provision only applies to qualified retirement plans and 403(b)(7) custodial plans after your separation from service in or after the year you reached age 55.

6. The distribution must be requested prior to Plan termination or the elimination of the Oppenheimer funds as an investment option under the Plan.

7. This provision does not apply to loans from 403(b)(7) custodial plans and loans from the OppenheimerFunds-sponsored Single K retirement plan.

8. This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.

Because the Fund invests in securities issued by New York or entities within New York, an investment in the Fund may involve greater risk than investments in certain other types of municipal bond funds. You should consider carefully the special risks inherent in the Fund's investment in New York municipal securities.

The Fund also invests in municipal securities issued by certain territories, commonwealths and possessions of the United States that pay interest that is exempt (in the opinion of the issuer's legal counsel when the security is issued) from federal income tax and the Fund's state personal income tax. Therefore, the Fund's investments could be affected by the fiscal stability of, for example, Puerto Rico, the Virgin Islands, Guam or the Mariana Islands. Additionally, the Fund's investments could be affected by economic, legislative, regulatory or political developments affecting issuers in those territories, commonwealths or possessions.

Following is a discussion of special considerations relating to the Fund's investments in municipal securities issues by New York, Puerto Rico, the Virgin Islands, Guam and the Mariana Islands.

New York

The following section provides only a summary of the complex factors affecting the financial situation in New York State (as used in this section, the "State") and is not intended to be a complete description. It is primarily derived from the Annual Information Statement of the State of New York and updates and supplements thereto (collectively, the "AIS") that were available prior to the date of this SAI. The accuracy and completeness of the information contained in the AIS have not been independently verified. The information provided below is subject to change without notice, and the inclusion of such information herein shall not under any circumstances create any implication that there has been no change in the affairs of the State since the date hereof.
Financial Disclosure for the State of New York
The State of New York's most recently completed fiscal year began on April 1, 2009 and ended on March 31, 2010. The State enacted the budget for the fiscal year, which began on April 1, 2010 and ends on March 31, 2011, on August 20, 2010 (the "Enacted Budget"). The disclosure below is based on the Annual Information Statement of the State ("AIS") which was released on September 7, 2010 and the Quarterly Update released on November 9, 2010. The State's audited financial statements for the fiscal year ended March 31, 2010 were released on September 1, 2010.
Special Considerations
Complex political, social, environmental and economic forces influence the State's economy and finances, many of which are outside the ability of the State to control. These include, but are not limited to, the performance of the national and State economies; the impact of continuing write-downs and other costs affecting the profitability of the financial services sector, and the concomitant effect on bonus income and capital gains realizations; access to the capital markets in light of the disruption in the municipal bond market; litigation against the State, including challenges to certain tax actions and other actions authorized in the Enacted Budget; and actions taken by the Federal government, including audits, disallowances, and changes in aid levels. Such forces may affect the State Financial Plan unpredictably from fiscal year to fiscal year.

For example, the State Financial Plan is based upon forecasts of national and State economic activity developed through both internal analysis and review of national and State economic forecasts prepared by commercial forecasting services and other public and private forecasters. Economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. Many uncertainties exist in forecasts of both the national and State economies, including consumer attitudes toward spending, the extent of corporate and governmental restructuring, the condition of the financial sector, federal fiscal and monetary policies, the level of interest rates, and the condition of the world economy, which could have an adverse effect on the State. There can be no assurance that the State economy will not experience results in the current fiscal year that are materially worse than predicted, with corresponding material and adverse effects on the State's projections of receipts and disbursements. For more information, see the section entitled "Economics and Demographics" in the AIS.

Projections of total State receipts in the Financial Plan are based on the State tax structure in effect during the fiscal year and on assumptions relating to basic economic factors and their historical relationships to State tax receipts. 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 from its estimated tax base.

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 the use of State services.

An additional risk to the State Financial Plan arises from the potential impact of certain litigation and of federal disallowances now pending against the State, which could adversely affect the State's projections of receipts and disbursements. The State Financial Plan assumes no significant litigation or Federal disallowances or other federal actions that could affect State finances. For more information on litigation pending against the State, see the section entitled "Litigation and Arbitration" in the AIS.

DOB believes that its projections of receipts and disbursements relating to the Updated Financial Plan, and the assumptions on which they are based, are reasonable. Actual results, however, could differ materially and adversely from the projections set forth in the AIS. In the past, the State has taken management actions to address potential Financial Plan shortfalls, and DOB believes it could take similar actions should variances occur in its projections for the current fiscal year.

Actions affecting the level of receipts and disbursements, the relative strength of the State and regional economy, and actions by the Federal government have helped to create projected structural budget gaps for the State. These gaps result in 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.

In any year, the Financial Plan is subject to risks that, if they were to materialize, could affect operating results. Other risks and special considerations include the following:

State Cash Flow Projections
State Finance Law authorizes the General Fund to borrow resources temporarily from other available funds in the State's STIP for a period not to exceed four months or to the end of the fiscal year, whichever occurs first. The amount of resources that can be borrowed by the General Fund is limited to the available balances in STIP, as determined by the State Comptroller (available balances include money in the State's governmental funds, as well as certain other money).

Through the first four months of 2010-11, the General Fund used this authorization to meet payment obligations in May, June and July. It is expected that the General Fund will rely on this borrowing authority at times during the remainder of the fiscal year.

To date, the State has taken actions to maintain adequate operating margins, and expects to continue to do so as events warrant. The State continues to reserve money to make the debt service payments scheduled for each upcoming quarter that are financed with General Fund resources. Money to pay debt service on bonds secured by dedicated receipts, including PIT bonds, continues to be set aside as required by law and bond covenants.

With cash management actions, the General Fund ended June 2010 with a negative balance of $87 million. The funds on hand in All Governmental Funds at the end of the month totaled $3.6 billion. The cash-flow projections for receipts and disbursements take into account statutory payment dates, historical receipts and disbursement patterns, and other information. DOB believes the projections are based on reasonable and prudent assumptions, and the State's current cash position is sufficient to meet current liquidity needs. Cash balances are expected to continue to be relatively low, especially in September, November, and December 2010. It is expected that the General Fund on certain days will continue to borrow from STIP. DOB will continue to closely monitor and manage the General Fund cash flow during the fiscal year in an effort to maintain adequate operating balances.

In enacting the budget, the State faced the risk that the Federal government would not approve an extension of enhanced FMAP funding, as counted on in the Financial Pan. Accordingly, it enacted a statute that provided for automatic reductions to most local assistance payments to cover any difference between the $1.1 billion in savings counted on in the Financial Plan from enhanced FMAP and the actual amount, if any, approved by the Federal government. After enactment of the statute, the Federal government approved an extension of enhanced FMAP, but at a level less than assumed in the Financial Plan. Accordingly, the payment reductions to local assistance spending will take effect, as provided by law.

The Financial Plan may be adversely affected by actions taken by the Federal government, including audits, disallowances, changes in aid levels, and changes to Medicaid rules. For example, all Medicaid claims are subject to audit and review by the Federal government. Most recently, the Federal CMS requested additional information pertaining to claims for services provided to individuals in developmental centers operated by the Office for People with Developmental Disabilities. Among other information, CMS requested that the State provide a detailed description of how these daily rates are developed as well as the current upper payment limit demonstration. Although no official audit has commenced and the State believes that the rates paid for these services are done in accordance with the approved state plan and all applicable Federal regulations, any adverse action by CMS relative to these claims could jeopardize a significant amount of Federal Medicaid participation in this program.

An additional risk is the cost of potential collective bargaining agreements and salary increases for judges (and possibly other elected officials) that may occur in 2010-11 and beyond for the period covering 2007-08 through 2010-11. The Financial Plan includes the costs of a pattern settlement for all unsettled unions, the largest of which represents costs for fiscal years 2009-10 and 2010-11 for NYSCOPBA. There can be no assurance that actual settlements will not exceed the amounts included in the Financial Plan. Furthermore, the current round of collective bargaining agreements expires at the end of 2010-11. The Financial Plan does not include any costs for potential wage increases beyond that point.

The OIG of the United States Department of Health and Human Services released a June 2009 final audit with regard to Medicaid reimbursement for personal care services in New York City, and released a March 2010 draft audit with regard to Medicaid reimbursement for personal care services in upstate New York. The audits reviewed claims for the period of July 1, 2004 through December 31, 2006. Based upon its review, the OIG is calling for the State to repay an estimated $395 million in Federal Medicaid because payments were not supported with required medical exams and social and nursing assessments. The New York State Department of Health responded to audit findings on October 8, 2009 challenging the audit findings and the appropriateness of recouping Federal funding. The State's 2010-11 Enacted Budget also included a provision to mitigate the potential financial impact on the State by requiring local governments to contribute towards any repayment of such audits.

The Updated Financial Plan forecast also contains specific transaction risks and other uncertainties including, but not limited to, the receipt of certain payments from public authorities; the receipt of miscellaneous revenues at the levels expected in the Financial Plan; and the achievement of cost-saving measures including, but not limited to, administrative savings in State agencies, including workforce management initiatives, and the transfer of available fund balances to the General Fund at the levels currently projected. Such risks and uncertainties, if they were to materialize, could have an adverse impact on the Updated Financial Plan.

Finally, there can be no assurance that (1) receipts will not fall below current projections, requiring additional budget-balancing actions in the current year, and (2) the gaps projected for future years will not increase materially from the projections set forth in the AIS.

The U.S. Economy With the nation's recovery from the longest and most severe recession since the 1930s losing momentum, the DOB outlook for the national economy reflects uncertainty. Although the national labor market has added private sector jobs every month through July 2010, the 153,000 jobs added in May, June and July combined were well below the 461,000 jobs added during the prior three months. As private sector job growth began to stall, hundreds of thousands of temporary Census workers were leaving the workforce. The recent period also revealed grave debt problems among a number of euro-zone countries. The specter of default by a sovereign nation appeared to send shock waves through the international financial system, resulting in the benchmark ten-year Treasury yield falling below 3 percent and a 200 point decline in the S&P 500. Increased risk aversion and heightened market volatility add a significant degree of uncertainty to an environment already dominated by a historically weak labor market, tight credit, and ongoing deleveraging. The national economy, as measured by real U.S. gross domestic product ("GDP"), is now projected to grow 2.9 percent in 2010, followed by growth of 3.1 percent in 2011.

Despite fiscal and monetary policy actions of historic proportion, the nation's housing market remains weak. Although home prices are stabilizing and the rate at which homes are entering foreclosure appears to have peaked, the level of foreclosure activity continues to depress new home construction. The extension of the Federal home buyer's credit through April 2010 resulted in a brief spike in real estate activity during the second quarter, but appeared to do little more than spin up future sales, despite record low mortgage interest rates. After two consecutive months of growth, the first since January 2007, construction employment fell again in May, June and July 2010. DOB estimates growth in private residential fixed investment at 1.6 percent for 2010, followed by growth of 9.9 percent for 2011. The housing market represents a critical economic sector due not only to the direct demand for labor and other building supplies, but also to the indirect demand it generates for autos and other consumer durables.

A weakening labor market implies a weaker outlook for income growth as well. DOB projects U.S. personal income growth of 3.4 percent for 2010, followed by growth of 4.1 percent for 2011. This forecast reflects wage growth of 2.3 percent projected for 2010 and 4.0 percent for 2011. Consistent with slow job and income growth, as well as depressed equity and real estate markets, consumer demand appears weakened. Correspondingly, the Consumer Price Index fell during all three months of the second quarter, with some components below their year-ago levels in June. DOB projects inflation for both this year and next to be 1.5 percent. The disinflation that is currently being witnessed, combined with a weaker outlook for the second half of 2010, is likely to induce the Federal Reserve to further delay a shift in its policy stance. The central bank's interest rate policy target is likely to remain between zero and 0.25 percent until the first quarter of 2011.

While the current outlook calls for a further loss of momentum during the second half of 2010, DOB does not foresee the economy falling back into recession. However, there are significant risks to this forecast. Although credit markets have improved substantially since a year ago, households and small businesses continue to have difficulty borrowing and credit continues to contract. Revelations related to the international volume of sovereign debt continues to feed the uncertainty surrounding the global financial system. If the labor market recovery should come to a halt, household spending growth could be even lower. If Federal stimulus spending should proceed more slowly than expected or be reduced or eliminated, already struggling state and local governments would be adversely affected. On the positive side, global growth could be stronger than anticipated, resulting in greater export and earnings growth than anticipated.

DOB estimates State wages to have fallen 7.2 percent for 2009. However, there are indications that the State economy picked up substantial momentum during the first quarter of 2010. The State labor market added private sector jobs month-over-month on a seasonally adjusted basis during the first four months of the year. DOB now projects an employment decline of 0.3 percent on an annual average basis for 2010, followed by growth of 1.0 percent for 2011. Private sector jobs are projected to fall 0.5 percent for 2010 and grow 1.2 percent in 2011. Wage growth of 5.1 percent is projected for 2010.

The loss of momentum witnessed nationally, appears to be affecting New York as well. Due to the importance of financial markets to the State economy, the 15 percent equity market correction recently observed is likely to disproportionately affect New York. The most recent data indicate that the State lost over 30,000 private sector jobs in May and June combined. The State's private sector added jobs in July, but did not fully recover the jobs lost during the prior two months.

All of the risks to the U.S. forecast apply to the State forecast as well, although as the nation's financial capital, credit and equity market volatility pose a particularly large degree of uncertainty for New York. The Federal government has recently passed the long-awaited financial reform package. This program's impact on the profitability of the State's finance industry is as yet unknown and consequently represents a major risk to the DOB forecast for bonuses and income going forward. Lower bonuses than projected reduce the level of economic activity generated by the spending of those wages. Similarly, should equity markets fail to recover as anticipated, both financial sector income and taxable capital gains realizations could be negatively affected. These effects would ripple through the State economy, depressing both employment and wage growth. An even weaker labor market than projected could also result in lower wages, which in turn could result in weaker household consumption. In contrast, stronger national and world economic growth, or a stronger upturn in stock prices, along with even stronger activity in mergers and acquisitions and other Wall Street activities, could result in higher wage and bonuses growth than projected.

New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse, with a comparatively large share of the nation's financial activities, information, education, and health services employment, and a very small share of the nation's farming and mining activity. The State's location and its air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries. In 2003, Federal and state governments began reporting employment and wage statistics in accordance with the North American Industry Classification System ("NAICS").

Manufacturing: Manufacturing employment continues to decline in New York, as in most other states, and New York's economy is less reliant on this sector than in the past. However, it remains an important sector of the State economy, particularly for the upstate region, which hosts high concentrations of manufacturers of transportation and other types of equipment.

Trade, Transportation, and Utilities: As defined under NAICS, the trade, transportation, and utilities supersector accounts for the third largest component of State nonagricultural employment, but only the fifth largest when measured by wage share. This sector accounts for less employment and wages for the State than for the nation.

Financial Activities: New York City is the nation's leading center of banking and finance and, as a result, this is a far more important sector in the State than in the nation as a whole. Although this sector accounts for under one-tenth of all nonagricultural jobs in the State, it contributes more than one-fifth of total wages.

Other Service Sectors: The remaining service-producing sectors include information, professional and business services, private education and healthcare, leisure and hospitality services, and other services. These industries combined account for more than four of every ten nonagricultural jobs in New York and, except for leisure and hospitality, each accounts for a higher proportion of total State employment than for the nation as a whole.

Agriculture: Farming is an important part of the economy in rural areas, although it constitutes only about 0.2 percent of total State output. Principal agricultural products of the State include milk and dairy products, greenhouse and nursery products, fruits, and vegetables. New York ranks among the nation's leaders in the production of these commodities.
Government: Federal, State and local governments together comprise the second largest sector in terms of nonagricultural jobs, with the bulk of the employment accounted for by local governments. Public education is the source of nearly one-half of total State and local government employment.

Government: Federal, State and local governments together comprise the second largest sector in terms of nonagricultural jobs, with the bulk of the employment accounted for by local governments. Public education is the source of nearly one-half of total State and local government employment. Manufacturing and construction account for smaller shares of employment for the State than for the nation, while service industries account for a larger share. The financial activities sector share of total wages is particularly large for the State relative to the nation. Thus, the State is likely to be less affected than the nation as a whole during an economic recession that is concentrated in manufacturing and construction, but likely to be more affected by any economic downturn that is concentrated in the services sector.

2010-11 Financial Plan and OutYear Projections This section presents the State's multi-year projections for receipts and disbursements based on the 2010-11 Enacted Budget. State Law requires the Governor to submit a balanced plan of receipts and disbursements on a cash-basis for the General Fund. However, approximately 40 percent of total State spending for operating purposes is accounted for outside of the General Fund and is primarily concentrated in the areas of health care, school aid, higher education, transportation and mental hygiene. Thus, the multi-year projections and growth rates are presented on both a General Fund and State Operating Funds basis.

The multi-year forecast reflects the impact of the 2010-11 Enacted Budget and updated assumptions concerning economic performance, revenue collections, spending patterns, and projections for the current-services costs of program activities.

In evaluating the State's outyear operating forecast, it should be noted that the reliability of the estimates as a predictor of the State's future fiscal condition is likely to diminish as one moves further from the current year and budget year estimates. Accordingly, in terms of the outyear projections, 2011-12 is the most relevant from a planning perspective, since any gap in that year must be closed with the next budget and the variability of the estimates is likely to be less than in later years. DOB will provide quarterly revisions to its multi-year estimates, as required pursuant to State Finance Law.

Budget Gaps In the General Fund, the projected budget gaps total approximately $8.2 billion in 2011-12, $13.5 billion in 2012-13, and $15.6 billion in 2013-14. The net operating deficits in State Operating Funds are projected at $8.2 billion in 2011-12, $13.1 billion in 2012-13, and $15.1 billion in 2013-14.

The imbalances projected for the General Fund and State Operating Funds in future years tend to be very similar. This is because the General Fund is typically the financing source of last resort for many State programs, and any imbalance in other funds that cannot be rectified by the use of existing balances is typically paid for by the General Fund.

The growth in the gaps between 2010-11 and 2011-12 is caused in large part by the expiration of Federal stimulus funding for Medicaid and education, which is expected to result in approximately $5.1 billion in costs reverting to the General Fund, starting in 2011-12. The annual growth in the gap is also affected by the sunset, at the end of calendar year 2011, of the temporary PIT increase enacted in 2009-10, which is expected to reduce 2011-12 receipts by approximately $1 billion from 2010-11 levels.

Spending
General Fund spending is projected to grow at an average annual rate of 9.0 percent from 2009-10 through 2013-14 (as adjusted). Spending growth in the General Fund is projected to increase sharply in 2011-12, reflecting an expected return to a lower Federal matching rate for Medicaid expenditures after June 30, 2011 which will increase the share of Medicaid costs that must be financed by State resources, and the expected loss of temporary Federal aid for education. Excluding these stimulus-related effects, which temporarily suppress General Fund costs in 2010-11 and the first quarter of 2011-12, General Fund spending grows at approximately 6.8 percent on a compound annual basis.

State Operating Funds spending is projected to grow at an average annual rate of 7.0 percent through 2013-14 (as adjusted). For both the General Fund and State Operating Funds, spending growth is driven by Medicaid, education, pension costs, employee and retiree health benefits, and child welfare programs.

Outyear spending projections do not incorporate any estimate of potential new actions to control spending in future years; any potential continuation of Federal stimulus aid beyond the first quarter of 2011-12; and any costs for future collective bargaining agreements beyond the April 1, 2011 expiration of the current four-year contracts for most unions. In addition, the forecast does not include any additional health care costs or savings that may materialize from the implementation of national health care reform at the Federal level of government.

Receipts
General Fund receipts are projected to grow at an average annual rate of 3.8 percent from 2009-10 through 2013-14. Overall, State tax receipts growth in the three fiscal years following 2010-11 is expected to range from 1.7 percent to 6.2 percent. This is consistent with a projected return to modest economic growth in the New York economy in the second half of 2010. Receipts growth is affected by the tax changes approved in the Enacted Budget, as well as, in prior fiscal years, and tax compliance and anti-fraud efforts. These factors are expected to continue to enhance expected receipt growth through 2013-14.

2010-11 All Funds Financial Plan Forecast This section describes the State's Financial Plan projections for receipts and disbursements based on the 2010-11 Enacted Budget. The receipts forecast describes estimates for the State's principal taxes, miscellaneous receipts, and transfers from other funds. The Updated Financial Plan spending projections summarize the annual growth in current-services spending and the impact of the 2010-11 Enacted Budget on the State's major areas of spending. Financial Plan projections are presented on an All Funds basis, which encompasses activity in the General Fund, State Operating Funds, Capital Projects Funds, and Federal Operating Funds, thus providing the most comprehensive view of the financial operations of the State.

2010-11 Receipts Forecast Financial Plan receipts comprise a variety of taxes, fees, charges for State-provided services, Federal grants, and other miscellaneous receipts. The receipts estimates and projections have been prepared by DOB on a multi-year basis with the assistance of the Department of Taxation and Finance and other agencies responsible for the collection of State receipts.

Overview of the Revenue Situation The unsteady recovery of the national and New York State economies is expected to translate into receipts growth for the first time in two years. DOB anticipates that the wage growth that began early in 2010 coupled with positive corporate earnings and a projected rebound in employment later in the year should lead to positive receipts growth in 2010-11.

After five consecutive years of growth averaging 9.5 percent per year, base receipts slipped by 3 percent in 2008-09 and plunged another 12.3 percent in 2009-10, as the result of the recession which began in 2008.

The nascent recovery is expected to result in base receipts growth of 2.2 percent in 2010-11 and further improvement in 2011-12 after employment growth returns in earnest. The 2007-08 base receipts All Funds tax receipts peak is not expected to be reached again until 2011-12.

The return of corporate profits in general, and the financial sector profits so vital to New York's economy in particular, are expected to result in both increases in finance and insurance sector bonuses and stepped up business tax receipts growth in 2010-11 and 2011-12.

The forecast assumes a shift in taxable capital gains realizations from tax year 2011 into tax year 2010 (resulting in increased 2010-11 receipts) as a result of the expected sunset of preferential Federal tax rates on capital gains on December 31, 2010. If Federal action results in complete or partial continuation of lower rates for all or a portion of taxpayers, these gains will be realized over the long run, not in 2010-11.

Absent the impact of high income provisions enacted in 2009 and 2010, estimated PIT liability plunged 16.6 percent in 2009 and is projected to increase 11.8 in 2010. The 2009 fall was the result of the continuing overall impact of the recession, and in particular, the impact on the real estate and financial sectors. The high growth rate in 2010 is due, in part, to the expected movement of wages and capital gains realizations from 2011 or later into 2010 to take advantage of expiring lower Federal tax rates. Positive wage and income growth that began in early 2010 and the employment growth anticipated to follow later in the year will also play a role.

After a vigorous retreat during 2008-09 and 2009-10, consumer spending on taxable goods and services should improve somewhat during 2010-11, driven by increasing disposable income, employment, and a pickup in vehicle sales after a long drought. Despite this improvement, the pre-recession sales tax collections peak will not be reached until 2011-12.

The bulk of the $4.1 billion (7.2 percent) increase in All Funds tax receipts from 2009-10 to 2010-11 is the result of the full-year impact of the 2009 and 2010 high income personal income tax provisions ($2.1 billion) and other actions taken in the 2010-11 Enacted Budget ($1.3 billion).
Base growth in tax receipts of 2.2 percent is estimated for fiscal year 2010-11, after adjusting for law changes, and should improve further in 2011-12. These projected increases in overall base growth in tax receipts are dependent on many factors:

All Funds PIT receipts, which reflect gross payments minus refunds, are estimated at $36.9 billion for 2010-11, a $2.1 billion or 6.2 percent increase from the prior year. This is primarily attributable to increases in withholding of $1.9 billion and current estimated payments of $1.3 billion. These increases are due to the gradual improvement in the economy and full-year compliance with the temporary rate increase enacted in 2009. The growth in the estimated tax is also partly driven by an expected "spin up" in capital gain realizations in 2010 in anticipation of higher Federal capital gains tax rates after tax year 2010. Receipts from delinquencies are projected to increase $61 million (5.5 percent) over the prior year and final returns are projected to increase by $151 million (8.3 percent). The increase in gross receipts is partially offset by higher refunds of $1.5 billion. This increase reflects the shift of $500 million in tax year 2009 refunds from the first calendar quarter of 2010 to April 2010 for cash management purposes, plus a one-time decline in 2009-10 refunds associated with an accounting adjustment to the State-city offset. Prior year refunds received in 2010-11 for tax year 2009, which increased by $516 million to $5,502 million as a result of the recent economic downturn, also contributed to higher refunds.

All Funds user taxes and fees receipts for 2010-11 are estimated to be approximately $14.3 billion, an increase of $1.4 billion or 11.2 percent from 2009-10. Sales tax receipts are expected to increase by $946 million from the prior year due to a base growth increase of 6.7 percent. Due to law changes, sales tax receipts are estimated to increase by $366 million. The vast majority of the revenue ($330 million) will come from the elimination of the clothing and footwear tax exemption in 2010-11. Non-sales tax user taxes and fees are estimated to increase by $487 million from 2009-10, mainly due to an increase in the cigarette tax by $1.60 and the full enactment of the taxicab surcharge.

General Fund user taxes and fees receipts are expected to total $8.8 billion in 2010-11, an increase of $723 million or 8.9 percent from 2009-10. The increase largely reflects an increase in sales tax receipts ($678 million) and cigarette tax collections ($43 million).

All Funds user taxes and fees receipts for 2011-12 are projected to be $14.6 billion, an increase of $282 million, or 2.0 percent from 2010-11. This increase largely reflects cigarette tax law changes. General Fund user taxes and fees receipts are projected to total $9.0 billion in 2011-12, an increase of $165 million, or 1.9 percent from 2010-11.

All Funds business tax receipts for 2010-11 are estimated at $7.7 billion, an increase of $233 million, or 3.1 percent from the prior year. The estimates reflect an increase of $109 million resulting from tax law changes. The deferral of certain tax credits ($100 million) and conforming the State bank tax's bad debt provisions to the Federal provisions ($15 million) are the major tax law changes. Absent these provisions, All Funds business tax receipts are expected to increase by $124 million or 1.7 percent.

The annual increase in the corporate franchise tax of $796 million is partially offset by year-to-year decreases in the other business taxes. U.S. corporate profits are expected to increase 24.5 percent in calendar year 2010, contributing to growth of 27.9 percent in year-over-year corporate franchise tax receipts, adjusted for tax law changes. Corporation and utilities and insurance tax receipts are expected to decline modestly as trend liability growth rates in these relatively stable taxes do not surpass the acceleration of cash payments on 2010 liability into the 2009-10 fiscal year that resulted from the increase in the mandatory pre-payment from 30 percent to 40 percent.

All Funds business tax receipts for 2011-12 of $8.4 billion are projected to increase $722 million, or 9.4 percent over the prior year reflecting rebound-induced growth rates of 9.6 percent and 24.0 percent in corporate franchise tax and bank tax receipts, respectively. Fiscal Year 2011-12 receipts include $423 million in tax law changes, virtually all attributable to the tax credit deferral provisions included in the Enacted Budget. Growth adjusted for tax law changes is estimated to be 5.4 percent.

General Fund business tax receipts for 2010-11 of $5.7 billion are estimated to increase by $343 million, or 6.4 percent above 2009-10 results. Business tax receipts deposited to the General Fund reflect the All Funds trends discussed above.

General Fund business tax receipts for 2011-12 of $6.3 billion are projected to increase $621 million, or 10.9 percent from the prior year. Corporate franchise tax and bank tax receipts are projected to increase 9.9 percent and 25.4 percent, respectively, as the income-based taxes continue to recover.

All Funds other tax receipts for 2010-11 are estimated to be approximately $1.6 billion, up $176 million or 12.8 percent from 2009-10 receipts, reflecting growth of 5.5 percent in the real estate transfer tax receipts and 17.5 percent in the estate tax as a result of improved conditions in the equities, real estate and credit markets, combined with strong year-to-date payments from the settlement of large estates.

General Fund other tax receipts are expected to be slightly over $1.0 billion in fiscal year 2010-11, an increase of $149 million or 16.8 percent from 2009-10, due to the growth in the estate tax, partially offset by a 5.3 percent decline in the pari-mutuel tax due to the impact of reduced handle.
All Funds other tax receipts for 2011-12 are projected to be nearly $1.6 billion, up $16 million or 1.0 percent from 2010-11, reflecting modest growth in the real estate transfer tax, partially offset by a decline in estate tax receipts. General Fund other tax receipts are expected to total $989 million in fiscal year 2011-12, the result of a decrease of $45 million in estate tax receipts as increases in household net worth are more than offset by a return to a more normal level of settlements of large estates.

All Funds miscellaneous receipts include monies received from HCRA financing sources, SUNY tuition and patient income, lottery receipts for education, assessments on regulated industries, and a variety of fees and licenses. All Funds miscellaneous receipts are projected to total $23 billion in 2010-11, a decrease of $543 million from 2009-10 results, largely reflecting the impact of non-recurring and accelerated receipts to the State during 2009-10. Sources of receipts during 2009-10, which will not recur or will recur in lesser amounts, include 18-A public utility assessments ($653 million), New York Power Authority contributions ($158 million), Regional Greenhouse Gas Initiative proceeds ($90 million), and Battery Park City Authority resources ($68 million). The total annual decline in miscellaneous receipts also reflects lower bond proceeds available for mental hygiene facility capital improvement ($101 million), lower HCRA receipts ($123 million) and lower receipts from refunds, credits and reimbursements ($101 million). These annual declines were partly offset by growth in other areas, primarily to SUNY revenue growth from expansions at the three SUNY teaching hospitals, enrollment growth, and greater bond proceeds available for SUNY capital projects ($530 million), and increased lottery fund receipts ($380 million) which reflect the one-time receipt of the franchise fee for rights to develop a VLT facility at Aqueduct.

Federal grants help pay for State spending on Medicaid, temporary and disability assistance, mental hygiene, school aid, public health, and other activities. Annual changes to Federal grants generally correspond to changes in federally-reimbursed spending. Accordingly, DOB typically plans that Federal reimbursement will be received in the State fiscal year in which spending occurs, but timing is often unpredictable. All Funds Federal grants are projected to total $49.5 billion in 2010-11, an increase of $4.0 billion from 2009-10 results driven by receipt of Federal ARRA monies.

General Fund miscellaneous receipts collections are estimated to be nearly $3.0 billion, down just over $1.0 billion from 2009-10 results. This decrease is primarily due to the loss of a one-time payment from the Power for Jobs Program received in 2009-10 and the timing of an 18-A assessment payment.

All Funds miscellaneous receipts are projected to total $23.2 billion in 2011-12, an increase of $215 million from the current year, largely driven by growth in HCRA receipts ($296 million), growth in bond proceeds generated for mental hygiene facility capital improvements ($151 million) and growth in SUNY income from tuition, fees, patient revenues and other income ($88 million). The projected annual growth in these sources of miscellaneous receipts is partly offset by the non-recurrence of revenues received during 2010-11 for the VLT franchise fee payment ($380 million).

All Funds Federal grants are projected to total $44.9 billion in 2011-12, a decrease of $4.6 billion from the current year, reflecting a decrease in Federal ARRA funding.

General Fund miscellaneous receipts for 2011-12 are projected to decline by $38 million from the current year, and primarily reflect the loss of certain one-time sweeps and payments expected in 2010-11. These reductions are partially offset by an upward revision to abandoned property receipts.

Enacted Budget Revenue Actions To preserve essential services while closing an $8.2 billion budget gap for the 2010-11 fiscal year, the Enacted Budget and separately enacted legislation authorize a number of revenue actions.

On a General Fund basis, actions in the Enacted Budget and separately enacted legislation will together increase tax or other revenue by a total of $937 million ($1.4 billion All Funds) in 2010-11.

Increased Taxes or Fee Liability (General Fund: $562 million, All Funds: $835.1 million in 2010-11)

Cash-Basis Results for Prior Fiscal Years The State reports its financial results on two bases of accounting: the cash basis, showing receipts and disbursements; and the modified accrual basis, prescribed by the Generally Accepted Accounting Principles ("GAAP"), showing revenues and expenditures. With the exception of 2009-10 results, the State's financial results set forth in this section have been audited.

General Fund 2007-08 through 2009-10 The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required by law to be accounted for in another fund. It is the State's largest single fund and receives most State taxes and other resources not dedicated to particular purposes. General Fund moneys are also transferred to other funds, primarily to support certain State share Medicaid payments, capital projects and debt service payments in other fund types. In some cases, the fiscal year results provided below may exclude certain timing-related transactions which have no net impact on operations.

In the cash-basis of accounting, the State defines a balanced budget in the General Fund as (a) the ability to make all planned payments anticipated in the Financial Plan, including tax refunds, without the issuance of deficit bonds or notes or extraordinary cash management actions, (b) the restoration of the balances in the tax stabilization reserve and rainy day reserve (together, the "rainy day reserves") to a level equal to or greater than the level at the start of the fiscal year, and (c) maintenance of other designated balances, as provided by law.

Recent Trends The economic downturn has had a severe impact on State finances. Actual receipts have fallen consistently below projected levels, fixed costs for debt service and fringe benefits have risen steadily, and demand for State services has grown. Over the last two years, the State has been required to take extraordinary actions to maintain balanced operations and sufficient liquidity, including enacting mid-year reductions to programs, instituting several rounds of agency spending reductions and deferring payments to local aid recipients and taxpayers. To avoid using its rainy day reserves, which are relied on during the fiscal year to provide liquidity, the State has managed the timing of payments across fiscal years, including deferring payments not yet legally due from one fiscal year to the next fiscal year.

2009-10 Fiscal Year Receipts during the fiscal year fell substantially below projections. General Fund receipts, including transfers from other funds, totaled $52.6 billion, or $1.78 billion lower than the State's initial projections for 2009-10. General Fund disbursements, including transfers to other funds, totaled $52.2 billion, a decrease of $2.71 billion from initial projections. However, actual disbursements were affected by $2.1 billion in payment deferrals (described below) taken by the State to end the fiscal year without the use of its rainy day reserves and other designated balances. Without the deferrals, disbursements for the fiscal year would have been approximately $665 million below initial projections.

In the final quarter of the fiscal year, in order to avoid depleting its reserves, the State deferred a planned payment to school districts ($2.1 billion), which reduced spending from planned levels, and certain tax refunds, which increased available receipts from planned levels ($500 million). Both the school aid payment and the tax refunds were scheduled to be paid in 2009-10 but, by statute, were not due until June 1, 2010. The combined value of the deferrals had the effect of increasing the closing balance in the General Fund for 2009-10 to $2.3 billion, or approximately $900 million above the level required to restore the rainy day reserves and other balances to their anticipated levels. The higher closing balance was due exclusively to the cash management actions described above and did not represent an improvement in the State's financial operations. In early April 2010, the State paid the $500 million in tax refunds that had been deferred from 2009-10 to 2010-11. On June 1, 2010, the State paid the $2.1 billion in school aid deferred from 2009-10.

General Fund receipts, including transfers from other funds were $1.2 billion below 2008-09 results. Tax receipts decreased by $1.2 billion and transfers decreased by $750 million, partly offset by increased miscellaneous receipts of $744 million. The $1.2 billion annual decline in tax receipts included a $541 million decline in personal income taxes and a $302 million decline in sales and use tax receipts.

General Fund disbursements, including transfers to other funds, were $2.4 billion below 2008-09 results. The annual decline reflects the deferral of $2.1 billion in school aid, the impact of mid-year spending reductions, and the use of Federal American Recovery and Reinvestment Act of 2009 ("ARRA") funds in place of General Fund spending.

The General Fund closing balance consisted of $1.2 billion in the State's rainy day reserves, $21 million in the contingency reserve fund (to guard against litigation risks), $96 million in the Community Projects Fund, and $978 million in the Refund Reserve Account, of which approximately $900 million was attributable to the deferrals described above.

2008-09 Fiscal Year General Fund receipts, including transfers from other funds and the impact of the tax refund reserve transaction, totaled $53.8 billion in 2008-09, an increase of $705 million from 2007-08 results. While tax receipts decreased by $93 million, miscellaneous receipts increased by $621 million and transfers increased by $178 million. The decline in tax receipts was primarily attributable to a decline in business taxes. General Fund spending, including transfers to other funds, totaled $54.6 billion in 2008-09, an increase of $1.2 billion from 2007-08. The main source of annual growth was School Aid.

Similar to 2009-10, receipts fell substantially below projected levels. General Fund receipts, including transfers from other funds, were $1.84 billion lower than the State's initial projections for 2008-09. Disbursements for the year, including transfers to other funds, finished at $1.75 billion lower than initially expected. This resulted in $83 million less available in cash reserves than was planned when the budget was enacted.

The General Fund ended the 2008-09 fiscal year with a balance of $1.9 billion, which included the dedicated balance of $1.2 billion in the State's rainy day reserves, $21 million in the contingency reserve fund, $145 million in the Community Projects Fund, and $577 million in general reserves, part of which the Division of the Budget ("DOB") used for payments initially planned for 2008-09 that were delayed until 2009-10. The year-end balance was substantially improved by the receipt of $1.3 billion in unplanned General Fund relief from the temporary increase in the Federal matching rate for Medicaid expenditures under ARRA.

2007-08 Fiscal Year General Fund receipts, including transfers from other funds and the impact of the tax refund reserve transaction, totaled $53.1 billion in 2007-08, an increase of $1.7 billion from 2006-07 results. While tax receipts decreased by $273 million, transfers increased by $1.9 billion and miscellaneous receipts increased by $191 million. The decline in tax receipts was primarily attributable to a decline in business taxes and in personal income taxes. General Fund spending, including transfers to other funds, totaled $53.4 billion in 2007-08, an increase of $1.8 billion from 2006-07. The main sources of annual growth were School Aid, Children and Family Services, and public assistance.

Receipts in 2007-08 were $578 million lower than the State's initial projections while disbursements for the year finished at $299 million lower than expectations. The result was a $279 million decrease in cash reserves. The reserves were used to finance the costs of labor settlements ($138 million), debt management actions, including defeasing certain auction rate bonds ($128 million), and to finance discretionary grants from the Community Projects Fund ($13 million).

The General Fund ended the 2007-08 fiscal year with a balance of $2.8 billion, which included dedicated balances of $1.2 billion in the State's rainy day reserve funds that can only be used for unforeseen mid-year shortfalls (after a $175 million deposit to the Rainy Day Reserve Fund at the close of 2007-08), the Contingency Reserve Fund ($21 million), the Community Projects Fund ($340 million) and $1.2 billion in general reserves.

State Operating Funds 2007-08 through 2009-10 State Operating Funds is comprised of the General Fund, State Special Revenue Funds (as defined by DOB), and debt service funds. The State Operating Funds perspective is primarily intended as a measure of State-financed spending.

Recent Trends Since 2007-08, State Operating Funds spending has been nearly level, declining by approximately $130 million over the three-year period. The spending levels in State Operating Funds have been substantially affected by Federal ARRA funds and the deferral of payments in 2009-10 (see above). ARRA funding has temporarily reduced the State's share of expenses for Medicaid, education, and other governmental services. This has temporarily lowered State Operating Funds spending in 2008-09 and 2009-10, and resulted in a corresponding increase in spending from Federal funds (see the discussion of All Funds below). In addition, payment deferrals in 2009-10 also resulted in a temporary reduction in State Operating Funds spending. Together, ARRA funding and payment deferrals reduced 2009-10 State Operating Funds spending by approximately $6.3 billion.

2009-10 Fiscal Year State Operating Funds receipts totaled $75.8 billion in 2009-10, an increase of $611 million over the 2008-09 results. Disbursements totaled $76.9 billion in 2009-10, a decrease of $1.3 billion from the 2008-09 results. The State ended the 2009-10 fiscal year with a State Operating Funds cash balance of $4.7 billion. In addition to the $2.3 billion General Fund balance described above, the State's special revenue funds had a closing balance of approximately $2.0 billion and the debt service funds had a closing balance of $411 million. The fund balance in the special revenue funds largely reflects the timing of receipts and disbursements (e.g. dedicated monies received for a specified purpose prior to disbursement). A large fund balance is dedicated to finance the operations and activities of the State University of New York ("SUNY") campuses and hospitals ($774 million). The remaining special revenue fund balances are held in numerous funds and accounts that support a variety of programs including industry regulation, public health, and public safety. The fund balance in the debt service funds reflects the timing of bond sales.

2008-09 Fiscal Year State Operating Funds receipts totaled $75.2 billion in 2008-09, a decrease of $371 million from the 2007-08 results. Disbursements totaled $78.2 billion, an increase of $1.2 billion from the 2007-08 results. School aid was the largest source of annual program growth.

The State ended 2008-09 with a State Operating Funds cash balance of $4.7 billion. In addition to the $1.9 billion General Fund balance described above, the State's special revenue funds had a closing balance of $2.5 billion and the debt service funds had a closing balance of $298 million. The fund balance in the special revenue funds largely reflects the timing of receipts and disbursements (e.g. dedicated monies received for a specified purpose prior to disbursement). The largest fund balances are dedicated to finance the operations and activities of SUNY campuses and hospitals ($742 million) and ongoing Health Care Reform Act ("HCRA") programs ($240 million). The remaining special revenue fund balances are held in numerous funds and accounts that support a variety of programs including industry regulation, public health, and public safety. The fund balance in the debt service funds reflects the timing of bond sales.

2007-08 Fiscal Year State Operating Funds receipts totaled $75.6 billion in 2007-08, an increase of $3.0 billion from the 2006-07 results. In addition to the growth in General Fund receipts described above, tax receipts to other State Operating Funds also increased. Disbursements totaled $77.0 billion, an increase of $3.5 billion from the 2006-07 results. School Aid, School Tax Relief ("STAR"), and transportation aid were the main sources of annual program growth.
The State ended the 2007-08 fiscal year with a State Operating Funds cash balance of $6.6 billion. In addition to the $2.8 billion General Fund balance described above, the State's special revenue funds had a closing balance of $3.5 billion and the debt service funds had a closing balance of $286 million. The fund balance in the special revenue funds largely reflects the timing of receipts and disbursements (e.g. dedicated monies received for a specified purpose prior to disbursement). The largest fund balances are dedicated to finance the operations and activities of SUNY campuses and hospitals ($838 million) and ongoing HCRA programs ($597 million). The remaining special revenue fund balances are held in numerous funds and accounts that support a variety of programs including industry regulation, public health, and public safety. The fund balance in the debt service funds reflects the timing of bond sales.

All Funds 2007-08 through 2009-10 The All Funds Financial Plan records the operations of the four governmental fund types: the General Fund, Special Revenue Funds, Capital Project Funds, and Debt Service Funds. It is the broadest measure of State governmental activity, and includes spending from Federal Funds and Capital Projects Funds.

Recent Trends The All Funds Financial Plan has grown faster than State Operating funds in recent years. Since 2007-08, All Funds spending has increased by $10.8 billion. The growth includes nearly $2.3 billion in ARRA "pass-through" spending, which is Federal stimulus money that is accounted for in the State's fund structure but does not provide a direct fiscal benefit to the State (i.e., resources to help balance the General Fund budget).

2009-10 Fiscal Year All Funds receipts for 2009-10 totaled $126.7 billion, an increase of $7.5 billion over 2008-09 results. Annual growth in Federal grants and miscellaneous receipts was partially offset by a decline in tax receipts. All Funds disbursements for 2009-10 totaled $126.9 billion, an increase of $5.3 billion over 2008-09 results. The annual change reflects growth due to ARRA "pass-through" and growth in School Aid, Medicaid, transportation aid, economic development aid and other State programs.

The State ended the 2009-10 fiscal year with an All Funds cash balance of $4.9 billion. Along with the $4.7 billion State Operating Funds balance described above, Federal operating funds had a closing balance of $456 million, partly offset by a negative capital project funds closing balance of roughly $253 million. The fund balance in the Federal operating funds partly reflects the timing of receipts and disbursements (e.g. dedicated monies received for a specified purpose prior to disbursement). The negative balance in the capital projects fund results from outstanding intra-year loans from the Short-Term Investment Pool ("STIP") used to finance capital projects costs prior to the receipt of bond proceeds.

2008-09 Fiscal Year All Funds receipts for 2008-09 totaled $119.2 billion, an increase of $3.8 billion over 2007-08 results. Annual growth in Federal grants ($3.9 billion) and miscellaneous receipts ($421 million) was partially offset by a decline in tax receipts ($534 million), largely attributable to business tax declines. All Funds disbursements for 2008-09 totaled $121.6 billion, an increase of $5.5 billion over 2007-08 results. The annual change reflects growth in School Aid, Medicaid, transportation aid, economic development aid and other State programs.

The State ended the 2008-09 fiscal year with an All Funds cash balance of $4.6 billion. Along with the $4.7 billion State Operating Funds balance described above, Federal operating funds had a closing balance of $376 million, offset by a negative capital project funds closing balance of $507 million. The fund balance in the Federal operating funds partly reflects the timing of receipts and disbursements (e.g. dedicated monies received for a specified purpose prior to disbursement). The negative balance in the capital projects fund results from outstanding intra-year loans from STIP used to finance capital projects costs prior to the receipt of bond proceeds.

2007-08 Fiscal Year All Funds receipts for 2007-08 totaled $115.4 billion, an increase of $3.0 billion over 2006-07 results. Moderate growth in tax collections and miscellaneous receipts were partially offset by a decline in Federal grants. All Funds disbursements for 2007-08 totaled $116.1 billion, an increase of $3.3 billion over 2006-07 results. The annual change reflects growth in School Aid, STAR, transportation aid and other State programs.

The State ended the 2007-08 fiscal year with an All Funds cash balance of $6.5 billion. Along with the $6.6 billion State Operating Funds balance described above, Federal operating funds had a closing balance of $359 million, offset by a negative capital project funds closing balance of $433 million. The fund balance in the Federal operating funds partly reflects the timing of receipts and disbursements (e.g. dedicated monies received for a specified purpose prior to disbursement). The negative balance in the capital projects fund results from outstanding intra-year loans from STIP used to finance capital projects costs prior to the receipt of bond proceeds.

The Comptroller is responsible for the investment of substantially all State moneys. By law, such moneys may be invested only in obligations issued or guaranteed by the Federal government or the State, obligations of certain Federal agencies that are not guaranteed by the Federal government, certain general obligations of other states, direct obligations of the State's municipalities and obligations of certain public authorities, certain short-term corporate obligations, certain bankers' acceptances, and certificates of deposit secured by legally qualified governmental securities. All securities in which the State invests moneys held by funds administered within the State Treasury must mature within twelve years of the date they are purchased. Money impounded by the Comptroller for payment of TRANs may only be invested, subject to the provisions of the State Finance Law, in (i) obligations of the Federal government, (ii) certificates of deposit secured by such obligations, or (iii) obligations of or obligations guaranteed by agencies of the Federal government as to which the payment of principal and interest is guaranteed by the Federal government.

The Comptroller invests General Fund moneys, bond proceeds, and other funds not immediately required to make payments through STIP, which is comprised of joint custody funds (Governmental Funds, Internal Service Funds, Enterprise Funds and Private Purpose Trust Funds), as well as several sole custody funds including the Tobacco Settlement Fund. The interest earnings accrued are allocated and deposited to the credit of those funds with positive balances that contribute to the overall invested STIP pool.

The Comptroller is authorized to make temporary loans from STIP to cover temporary cash shortfalls in certain funds and accounts resulting from the timing of receipts and disbursements. The Legislature authorizes the funds and accounts that may receive loans each year, based on legislation submitted with the Executive Budget. Loans may be granted only for amounts that the Director of the Budget certifies are "receivable on account" or can be repaid from the current operating receipts of the fund (i.e., loans cannot be granted in expectation of future revenue enhancements). The General Fund is authorized to receive temporary loans from STIP for a period not to exceed four months or the end of the fiscal year, whichever is shorter.
The State Comptroller repays loans from the first cash receipts into the borrowing fund or account. Fund balances outside the General Fund are presented on a net basis, i.e., they are reduced by the amount of outstanding temporary loans from STIP. The primary sources of the State's temporary loans include timing-related delays in the receipt from Federal Funds and the sale of bonds used to finance capital projects, a delinquent SUNY hospital loan, and unreimbursed costs related to the Office for Technology Internal Service funds. The total outstanding balance of loans from STIP at March 31, 2010 was $1.486 billion, a decrease of $70 million from the outstanding loan balance of $1.556 billion at March 31, 2009.

State Law requires the Governor to submit the Five-Year Capital Program and Financing Plan ("the Plan") with the Executive Budget and to submit an update to the Plan ("the Enacted Plan") within 30 days of the enactment of the State Budget. The Plan outlines the anticipated capital spending over the five-year period, the means by which it will be financed, the impact on debt measures, and the anticipated debt issuances required to support the planned capital spending. A copy of the Executive Budget and, when available, the Enacted Budget Capital Program and Financing Plan can be obtained by contacting the Division of the Budget, State Capitol, Albany, NY 12224, (518) 474-8282, or at www.budget.state.ny.us.

State Debt and Other Financings New York State is one of the largest issuers of municipal debt, ranking second among the states, behind California, in the amount of debt outstanding. The State ranks fifth in the U.S. in debt per capita, behind Connecticut, Massachusetts, Hawaii, and New Jersey. At the end of the 2009-10 fiscal year, total State-related debt outstanding was $55 billion. Debt measures continue to remain stable with debt outstanding as a percentage of personal income at about 6.0 percent.

DOB measures its debt burden using two categories: State-supported debt and State-related debt. State-supported debt represents obligations of the State that are paid from traditional State resources (i.e., tax revenue) and have a budgetary impact. It includes general obligation debt, to which the full faith and credit of the State has been pledged, and lease purchase and contractual obligations of public authorities and municipalities, where the State's legal obligation to make payments to those public authorities and municipalities is subject to and paid from annual appropriations made by the Legislature. These include the State Personal Income Tax ("PIT") Revenue Bond program and the New York Local Government Assistance Corporation (LGAC). Since 2002, the State has financed most of its capital program with PIT Revenue Bonds, a revenue bond program that has reduced its cost of borrowing and created efficiencies by permitting the consolidation of bond sales. Prior to 2002, the State had financed its capital spending with lower-rated lease purchase and service contractual obligations of public authorities.

State-related debt is a broader measure of State debt which includes all debt that is reported in the State's GAAP basis financial statements, except for unamortized premiums and accumulated accretion on capital appreciation bonds. These financial statements are audited by external independent auditors and published by the Office of the State Comptroller ("OSC") on an annual basis. The debt reported in the GAAP basis financial statements includes general obligation voter approved debt, other State-supported debt as defined in the State Finance Law, debt issued by the Tobacco Securitization Finance Corporation, certain debt of the Municipal Bond Bank Agency issued to finance prior year school aid claims and capital leases and mortgage loan commitments. In addition, State-related debt reported by DOB includes State-guaranteed debt, moral obligation financings and certain contingent-contractual obligation financings, where debt service is paid from non-State sources in the first instance, but State appropriations are available, to make payments. These numbers are not included in the State's GAAP-basis financial statements.

The State's debt does not encompass, and does not include, debt that is issued by, or on behalf of, local governments and secured (in whole or in part) by State local assistance aid payments. For example, certain State aid to public schools paid to local districts or New York City has been pledged by those local entities to help finance debt service for locally-sponsored and locally-determined financings. This debt, however, is not treated by DOB as either State-supported debt or State-related debt because it (1) is not issued by the State (nor on behalf of the State), and (2) does not result in a State obligation to pay debt service. Instead, this debt is accounted for in the respective financial statements of the local governments or other entity responsible for the issuance of such debt and is similarly treated.

The issuance of General Obligation debt and debt of the New York Local Government Assistance Corporation is undertaken by OSC. All other State-supported and State-related debt is issued by the State's financing authorities (known as "Authorized Issuers" in connection with the issuance of PIT Bonds) under the direction of DOB. The Authorized Issuers include the New York State Thruway Authority ("NYSTA"), the Dormitory Authority of the State of New York ("DASNY"), the Empire State Development Corporation ("ESDC"), the Environmental Facilities Corporation ("EFC"), and the Housing Finance Agency ("HFA"). Prior to any issuance of State-supported debt and State-related debt , approval is required by DOB, the issuer's board, and in certain instances, the Public Authorities Control Board ("PACB") and OSC.

The State has never defaulted on any of its general obligation indebtedness or its obligations under lease purchase or contractual obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.

State-Supported Debt Outstanding State-supported debt represents obligations of the State that are paid from traditional State resources and have a budgetary impact. It includes General Obligation debt, State PIT Revenue Bonds, Local Government Assistance Corporation ("LGAC") revenue bonds and lease purchase and service contract obligations of public authorities and municipalities. Payment of all obligations, except for general obligation debt, is subject to annual appropriations by the State Legislature, but the State's credits have different security features, as described in this section.

General Obligation Financings Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake a long-term general obligation borrowing (i.e., borrowing for more than one year) unless it is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no constitutional limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State. However, the Debt Reform Act of 2000 (Debt Reform Act) imposed statutory limitations on new State-supported debt issued on and after April 1, 2000. The State Constitution provides that general obligation bonds, which can be paid without an appropriation, must be paid in equal annual principal installments or installments that result in substantially level or declining debt service payments, mature within 40 years after issuance, and begin to amortize not more than one year after the issuance of such bonds. However, general obligation housing bonds must be paid within 50 years after issuance, with principal commencing no more than three years after issuance. The Debt Reform Act limits the maximum term of State-supported bonds, including general obligation bonds, to 30 years, and the State currently has no bonds outstanding with a remaining final maturity that is more than 30 years.

General obligation debt is currently authorized for transportation, environment and housing purposes. Transportation-related bonds are issued for State and local highway and bridge improvements, aviation, mass transportation, rail, canal, port and waterway programs and projects. Environmental bonds are issued to fund environmentally sensitive land acquisitions, air and water quality improvements; municipal non-hazardous waste landfill closures and hazardous waste site cleanup projects.

Most general obligation debt financed spending is authorized under eight previously approved bond acts (three for transportation and five for environmental and recreational programs). The majority of projected general obligation bond financed spending supports authorizations for the 2005 Rebuild and Renew New York Bond Act. The Division of the Budget projects that spending authorizations from the remaining seven bond acts will be virtually depleted by 2013. The following table sets forth information regarding the levels of authorized, unissued and outstanding State general obligation debt by purpose as of March 31, 2010.

Short Term Borrowings - Under the State Constitution, the State may undertake short-term general obligation borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing general obligation tax and revenue anticipation notes ("TRANs"), and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes ("BANs"). General obligation TRANs must mature within one year from their date of issuance and cannot be refunded or refinanced beyond such period. However, since 1990, the State's ability to issue general obligation TRANs that mature in the same State fiscal year in which they were issued has been limited due to the enactment of the fiscal reform program which created LGAC. BANs may only be issued for the purposes and within the amounts for which bonds may be issued pursuant to voter authorizations, and must be paid from the proceeds of the sale of bonds in anticipation of which they were issued or from other sources within two years of the date of issuance or, in the case of BANs for housing purposes, within five years of the date of issuance. In order to provide flexibility within these maximum term limits, the State had previously utilized the BANs authorization to conduct a commercial paper program to fund disbursements eligible for general obligation bond financing.

State Personal Income Tax Revenue Bond Program Since 2002, the PIT Revenue Bond Program has been the primary financing vehicle used to fund the State's capital program, replacing lower rated service contract bonds. Legislation enacted in 2001 provided for the issuance of State PIT Revenue Bonds by the State's Authorized Issuers. The legislation requires 25 percent of State PIT receipts (excluding refunds owed to taxpayers) to be deposited into the Revenue Bond Tax Fund (RBTF) for purposes of making debt service payments on these bonds, with the excess amounts returned to the General Fund. The first State PIT Revenue Bonds were issued on May 9, 2002, and since that time, all of the Authorized Issuers have issued State PIT Revenue Bonds.

Legislation enacted in 2007 increased the amount of PIT receipts to be deposited into the Revenue Bond Tax Fund by removing an exclusion for PIT amounts deposited to the STAR Fund. In the event that (a) the State Legislature fails to appropriate amounts required to make all debt service payments on the State PIT Revenue Bonds or (b) having been appropriated and set aside pursuant to a certificate of the Director of the Budget, financing agreement payments have not been made when due on the State PIT Revenue Bonds, the legislation requires that PIT receipts continue to be deposited to the Revenue Bond Tax Fund until amounts on deposit in the Fund equal the greater of (i) 25 percent of annual PIT receipts or (ii) $6 billion. Debt service on State PIT Revenue Bonds is subject to legislative appropriation, as part of the annual debt service bill.

As of March 31, 2010, approximately $18 billion of State PIT Revenue Bonds were outstanding. State PIT Revenue Bonds have been issued to support programs related to six general purposes: Education, Economic Development and Housing, Environment, State Facilities and Equipment, Transportation and Health and Mental Hygiene. In 2009, pursuant to State law, State PIT Revenue Bonds began to be issued under new General Purpose resolutions that permitted the issuance of bonds on a consolidated basis for all purposes. This enhanced flexibility has improved the marketability of the State PIT Revenue Bonds, particularly in the taxable market where State PIT Revenue Bonds have been issued as Build America Bonds. The State expects to continue to use the General Purpose approach for future issuances of State PIT Revenue Bonds, except for Transportation.

Legislation enacted in fiscal year 2009-10 and extended for fiscal year 2010-11 permits the DASNY and the Urban Development Corporation to issue State PIT Revenue Bonds for any authorized purpose. Prior to this time, State law required that State PIT Revenue Bonds sold for capital purposes had to be sold through specific issuers, creating coordination difficulties in scheduling sales and reimbursing capital disbursements on a timely basis. This has enabled the State to improve the scheduling and sizing of State PIT Revenue Bond sales, produced savings through efficiencies in bond pricing, and lowered overall administrative costs.

In addition, legislation that temporarily authorizes the use of State PIT Revenue Bonds to finance the State's Mental Health Facilities Improvement Revenue bond program has been extended for an additional year through fiscal year 2010-11. This has enabled the State to take advantage of the lower interest rates typically paid on State PIT Revenue Bonds as compared to the State's Mental Health Facilities Improvement Revenue Bonds.

2010-11 Personal Income Tax Revenue Bond Borrowing Plan The State expects to continue to use State PIT Revenue Bonds as the financing vehicle for the vast majority of new bond-financed spending for non-transportation programs. Authority bond-financed spending across all non-transportation programs decreases from approximately $4.9 billion in 2010-11 to about $3.6 billion in 2014-15.

State PIT Revenue Bonds are expected to be issued to support multiple capital program areas, as summarized below:
Education: supports SUNY and CUNY, EXCEL, NYSTAR, and the Higher Education Capital Matching Grant Program (2010-11 issuances of $1.9 billion).
Environment: supports the State Revolving Fund, the State Superfund Program, EPF, State Parks, West Valley and other environmental projects (2010-11 issuance of $169 million).
Transportation: supports local transportation projects under the CHIPs program (2010-11 issuances of $415 million).
Economic Development and Housing: supports Housing, SIP, economic development projects for the Buffalo area, AMD, CEFAP, the Regional Economic Growth Program, the New York State Economic Development Program, high technology and other business investment programs, and recent economic development initiatives (2010-11 issuances of $720 million).
Healthcare: supports the program for capital and equipment grants to healthcare providers (2010-11 issuances of $127 million).
State Facilities and Equipment: supports correctional facilities, youth facilities, State office buildings, a new State Police headquarters, capital projects for DMNA and equipment for State agencies; including software development (2010-11 issuances of $623 million).
The PIT revenue coverage ratios for upcoming years are based on assumptions of future capital spending contained in the Enacted Budget Capital Plan. Traditionally, these estimates change substantially as new multi-year capital plans are authorized. The projected PIT revenue bond coverage ratios, noted below, are based upon estimates of PIT receipts deposited into the RBTF and include new PIT debt issuances.

New York Local Government Assistance Corporation In 1990, as part of a State fiscal reform program, legislation was enacted creating LGAC, a public benefit corporation empowered to issue long-term obligations to fund certain payments to local governments that had been traditionally funded through the State's annual seasonal borrowing. The legislation also dedicated revenues equal to one cent of the State's four cent sales and use tax to pay debt service on these bonds. As of June 1995, LGAC had issued State-supported bonds and notes to provide net proceeds of $4.7 billion, completing the program. The issuance of these long-term obligations will be amortized over a period of no more than 30 years from the dates of their original issuance.

The legislation eliminated the annual issuance of general obligation TRANs that mature in the same fiscal year of the State that they are issued ("seasonal borrowing") except in cases where the Governor and the legislative leaders have certified the need for additional seasonal borrowing, based on emergency or extraordinary factors, or factors unanticipated at the time of adoption of the budget, and provided a schedule for eliminating it over time. Any seasonal borrowing is required by law to be eliminated by the fourth fiscal year after the limit was first exceeded (i.e., no general obligation seasonal borrowing in the fifth year). This provision limiting the State's seasonal borrowing practices was included as a covenant with LGAC's bondholders in the General Bond Resolution and General Subordinate Lien Bond Resolution authorizing such bonds. No restrictions were placed upon the State's ability to issue deficit TRANs (issued in one year and maturing in the following year).

The impact of the LGAC changes, 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 seasonal borrowings. However, the State has taken extraordinary measures in recent years to manage its cash flow, including payment deferrals and permitting the State to borrow from other funds of the State (i.e., non-general fund) for a limited period.

Legislation enacted in 2003 requires LGAC to certify, in addition to its own cash needs, $170 million annually to provide an incentive for the State to seek an annual appropriation to provide local assistance payments to New York City or its assignee. In May 2004, LGAC amended its General Bond Resolution and General Subordinate Lien Bond Resolution to make clear that any failure to certify or make payments to the City or its assignee has no impact on LGAC's own bondholders; and that if any such act or omission were to occur with respect to any bonds issued by The City of New York or its assignee, that act or omission would not constitute an Event of Default with respect to LGAC bonds. The 2010-11 Enacted Budget includes a local assistance appropriation of $170 million from the Local Government Assistance Tax Fund to the City.

State-Supported Lease-Purchase and Other Contractual-Obligation Financings Prior to the commencement of State PIT Revenue Bond issuances in 2002, the State routinely issued other long-term, lease-purchase and contractual-obligation debt, that were issued by public authorities or municipalities with the debt service being payable from monies received from the State pursuant to lease-purchase or contractual service contract or financing contract payments to be made by the State, subject to annual state appropriation, and, therefore, not general obligations of the State. Under this financing structure bonds were issued to finance various capital programs, including those which finance certain of the State's highway and bridge projects, SUNY and City University of New York ("CUNY") educational facilities, health and mental hygiene facilities, prison construction and rehabilitation, economic development projects, State buildings and housing programs, and equipment acquisitions.

Debt service payable to certain public authorities from State appropriations for such lease-purchase and contractual obligation financings may be paid from general resources of the State or from dedicated tax and other sources (i.e., personal income taxes, motor vehicle and motor fuel related-taxes, dormitory facility rentals, and patient charges). Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments.

Under legislation enacted for the 2010-11 fiscal year, the State is authorized to set aside monies in reserve for debt service on general obligation, lease-purchase, and service contract bonds. Pursuant to a certificate filed by the Director of the Budget with the State Comptroller, the Comptroller is required to transfer from the General Fund such reserved amounts on a quarterly basis in advance of required debt service payment dates.

Other New York State Revenue Bond Programs
Dedicated Highway and Bridge Trust Fund Bonds
Dedicated Highway and Bridge Trust Fund (DHBTF) bonds are issued by NYSTA for State transportation purposes and are backed by dedicated motor fuel, gas and other transportation taxes and fees. DHBTF Bonds, which are issued by the NYSTA and supported by transportation-related taxes and fees, is expected to total $495 million in 2010-11.

SUNY Dormitory Facilities Bonds
SUNY Dormitory Facilities Bonds, which are issued by DASNY, are supported by dormitory fees and rents charged to students residing in housing facilities on campus. These bonds support the expansion and renovation of SUNY Dormitory Facilities under the SUNY multi-year capital investment programs enacted in 2009-10. The projected bond issuance of $78 million in 2010-11 will support the expansion and renovation of SUNY Dormitory Facilities under the SUNY multi-year capital investment programs enacted in 2009-10.

Mental Health Facilities Improvement Bonds
Mental Health Facilities Improvement bonds are issued by DASNY and supported by patient revenues. These support capital projects to preserve and maintain both State and community-based facilities operated and/or licensed by Office of Mental Health ("OMH"), the Office for People With Developmental Disabilities ("OPWDD"), and Office of Alcoholism and Substance Abuse Services ("OASAS"). The projected issuance of $230 million in 2010-11 will support capital projects to preserve and maintain both State and community-based facilities operated and/or licensed by OMH, OPWDD, and OASAS. Under legislation authorized with the Enacted Budget, these program needs may be financed with PIT bonds in 2010-11.

State-Related Debt Outstanding
State-related debt is a broader measure of debt that includes State-supported debt, as discussed above, and contingent-contractual obligations, moral obligations, State-guaranteed debt and other debt. As of March 31, 2010, the State has never been required to make an unanticipated debt service payment on contingent contractual, moral obligation, or State-guaranteed obligations.

Contingent Contractual Obligation Financing
Contingent contractual debt, included in State-related debt, is debt where the State enters into a statutorily authorized contingent contractual obligation, directly via a service contract to pay debt service in the event there are shortfalls in revenues from other non-State resources pledged or otherwise available, to pay the debt service. As with State-supported debt, except for General Obligation, all payments are subject to annual appropriation. The State has never been required to make any payments under this financing arrangement, but the bankruptcy of certain hospitals in the secured hospitals program (described below) may require the State to make payments in the future.

Secured Hospital Program
Pursuant to legislation enacted in 1985, the State entered into service contracts establishing a contingent-contractual obligation with respect to financings related to the Secured Hospital Program for the purpose of enabling certain financially distressed not-for-profit hospitals to gain access to the capital markets. The State service contracts obligate the State to pay debt service, subject to annual appropriations, on bonds issued by the New York State Medical Care Facilities Finance Agency and by DASNY (all now included as debt of DASNY), in the event there are shortfalls of revenues from other sources, which include hospital payments made under loan agreements between DASNY and the hospitals, and certain reserve funds held by the applicable trustees for the bonds. As of March 31, 2010, there were nine secured hospital borrowers and a total of $637 million in bonds outstanding with annual debt service payments of $81.5 million due during State fiscal year 2010-11.

As of March 31, 2010, three of the nine secured hospital borrowers (including North General Hospital) were not current in making the monthly debt service payments required by their loan agreements. The State anticipates that the annual bond debt service payments due during the State's 2010-11 fiscal year on all outstanding Secured Hospital Program bonds will be paid pursuant to the loan agreements between the hospitals and DASNY or from other sources, other than payments by the State pursuant to the service contracts.

In July 2010, North General Hospital, a not-for-profit hospital located in Harlem, ceased operations and filed for bankruptcy. Regarding the indebtedness of the hospital, DASNY expects to retire a portion of the bonds from an asset sale and will continue to pay debt service on the remaining bonds from expected lease rental payments on the facility. These revenues are not expected to be sufficient to meet on-going debt service payments. Consequently, the State expects designated reserve funds to be used for these payments, initially. When the reserve funds are depleted, the State will be responsible for making the debt service payments. As of July 2010, there were approximately $117 million of outstanding bonds.

Tobacco Settlement Financing Corporation Legislation enacted in 2003 authorized the State to securitize all of its tobacco settlement payments to the Tobacco Settlement Financing Corporation ("TSFC"), a corporation created under the legislation that is a subsidiary of the Municipal Bond Bank Agency, through an asset-backed securitization transaction. To lower costs, the legislation authorized the State to enter into contingency contracts obligating the State to pay debt service, subject to annual appropriations, on the TSFC bonds in the event that tobacco receipts and bond reserves are insufficient. To reduce the chance that the State's contractual payments will be required in the event that tobacco receipts and bond reserves are not sufficient to pay debt service, the TSFC bonds were structured to meet or exceed all rating agency tobacco bonds stress tests. The $4.2 billion of upfront payments received by the State from the securitization were used to help restore State budget balance in 2003-04 ($3.8 billion) and 2004-05 ($400 million). As of March 31, 2010, approximately $3.257 billion in TSFC bonds were outstanding.

The bonds carry a final nominal maturity of 19 years and have an expected final maturity of 13 years, based on optional redemptions (i.e., an expected final maturity in calendar year 2018). The expected final maturity may deviate due to the optional nature of the redemptions and adjustments to tobacco settlement payments due from participating manufacturers. Various manufacturers, including the original participating manufacturers, have adjusted payments downward or indicated that they plan on adjusting subsequent payments downward to states and territories, or otherwise have deposited or will deposit payments into a special disputed payments account awaiting determination of entitlement to adjustments.

Moral Obligation Financings
Moral obligation financing generally involves the issuance of debt by a public authority to finance a revenue producing project or other activity. The debt is secured, in the first instance, by project revenues, but includes statutory provisions requiring the State, subject to appropriation by the Legislature, to make up any deficiencies which may occur in the issuer's debt service reserve fund. There has never been a payment default on any moral obligation debt of any public authority. DOB does not expect the State to increase statutory authorizations for moral obligation bond programs. From 1976 through 1987, the State was called upon to appropriate and make payments totaling $162.8 million to make up deficiencies in the debt service reserve funds of HFA pursuant to moral obligation provisions. In the same period, the State also expended additional funds to assist the Project Finance Agency, Urban Development Corporation and other public authorities which had moral obligation debt outstanding. The State has not been called upon to make any payments pursuant to any moral obligations since the 1986-87 fiscal year and no such requirements are anticipated during the 2010-11 fiscal year.

State-Guaranteed Financings
Pursuant to specific constitutional authorization, the State may also directly guarantee certain public authority obligations. Payments of debt service on State-guaranteed bonds and notes are legally enforceable obligations of the State. The only current authorization provides for the State guarantee of the repayment of certain borrowings for designated projects of the New York State Job Development Authority ("JDA"). The State has never been called upon to make any direct payments pursuant to any such guarantees.

Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities were suspended in 1995. JDA resumed its lending activities in 1997 under a revised set of lending programs and underwriting guidelines. In April 2004, JDA issued approximately $42.4 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital finances. As of March 31, 2010, JDA had approximately $28 million of bonds outstanding. DOB does not anticipate that the State will be called upon to make any payments pursuant to the State guarantee in the 2010-11 fiscal year.

Other State Financings
Other State financings relate to the issuance of debt by a public authority on behalf of a municipality which receives proceeds of the sale. These include Capital Leases, Mortgage Loan Commitments and Municipal Bond Bank Agency ("MBBA") prior year school aid claims. To ensure that debt service payments are made, the municipality assigns specified State and local assistance payments it receives to the issuer or the bond trustee. The State has no legal obligation to make any debt service payments or to continue to appropriate local assistance payments that are subject to the assignment.

Litigation The legal proceedings listed in the AIS involve State finances and programs and miscellaneous civil rights, real property, contract and other tort claims in which the State is a defendant and the potential monetary claims against the State are deemed to be material, generally in excess of $100 million. As explained below, these proceedings could adversely affect the State's finances in the 2010-11 fiscal year or thereafter. The State intends to describe newly initiated proceedings which the State deems to be material and existing proceedings which the State subsequently deems to be material, as well as any material and adverse developments in the listed proceedings, in quarterly updates and/or supplements to the AIS.

For the purpose of this Litigation and Arbitration section of the AIS, the State defines "material and adverse developments" as rulings or decisions on or directly affecting the merits of a proceeding that have a significant adverse impact upon the State's ultimate legal position, and reversals of rulings or decisions on or directly affecting the merits of a proceeding in a significant manner, whether in favor of or adverse to the State's ultimate legal position. The State intends to discontinue disclosure with respect to any individual case after a final determination on the merits or upon a determination by the State that the case does not meet the materiality threshold described above.

As of the date of the AIS, except as described therein, there is no current material litigation involving the State's constitutional or statutory authority to contract indebtedness, issue its obligations, or pay such indebtedness when due, or affects the State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.

The State is party to other claims and litigation, which either its legal counsel has advised that it is not probable that the State will suffer adverse court decisions or the State has determined do not meet the materiality threshold described in the first paragraph of this section. Although the amounts of potential losses, if any, resulting from this litigation are not presently determinable, it is the State's opinion that its ultimate liability in any of these cases is not expected to have a material and adverse effect on the State's financial position in the 2010-11 fiscal year or thereafter. The Basic Financial Statements for fiscal year 2009-10, which OSC issued in July 2010, will report possible and probable awarded and anticipated unfavorable judgments against the State.

Adverse developments in the proceedings described below, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced 2010-11 Financial Plan. The State believes that the 2010-11 Enacted Budget Financial Plan includes sufficient reserves to offset the costs associated with the payment of judgments that may be required during the 2010-11 fiscal year. These reserves include (but are not limited to) amounts appropriated for Court of Claims payments and projected fund balances in the General Fund. In addition, any amounts ultimately required to be paid by the State may be subject to settlement or may be paid over a multi-year period. There can be no assurance, however, that adverse decisions in legal proceedings against the State would not exceed the amount of all potential 2010-11 Enacted Budget Financial Plan resources available for the payment of judgments, and could therefore adversely affect the ability of the State to maintain a balanced 2010-11 Enacted Budget Financial Plan.

Update to Annual Information Statement (AIS) State of New York (November 9, 2010) The State completed action on the 2010-11 budget on August 3, 2010. In accordance with State law, DOB issued the Enacted Budget Financial Plan on August 20, 2010, which reflected the impact of the 2010-11 budget on the multi-year operating forecast. Overall, the slowdown in economic growth has been more pronounced than expected and has contributed to lower than expected tax collections and higher than expected Medicaid costs to date. Through September 30, 2010, General Fund tax receipts were approximately $510 million below planned levels. Medicaid spending over the same period exceeded estimates by over $110 million. In addition, litigation against the State has constrained the State's ability to collect certain taxes on Native American reservations at the levels budgeted in the Enacted Budget Financial Plan.

In light of results to date and updated program information, DOB has lowered the annual estimate for General Fund tax receipts by approximately $278 million in 2010-11, which is less than the year-to-date variance due to changes in the timing of when certain receipts are expected to be received. At the same time, DOB has increased estimated Medicaid spending by $368 million for 2010-11, and by an average of approximately $800 million annually thereafter. Lower than anticipated spending in other areas of the budget, including child welfare services and labor settlements, and the availability of resources that have materialized since the time of budget enactment, are expected to offset, in part, the tax receipts shortfall and Medicaid overruns in 2010-11.

The Enacted Budget Financial Plan included $500 million in savings from across-the-board reductions to State agency operations. In the current year, savings are expected to fall approximately $150 million below planned levels, due to implementation constraints, but to exceed budgeted savings in 2011-12 by an equivalent amount, as the full annual benefit of measures is realized.

Due to these and other revisions, DOB now estimates that the General Fund has a budget gap of $315 million in the current fiscal year. The projected budget gaps for 2011-12 and beyond have also grown compared to the Enacted Budget Financial Plan forecast summarized in the AIS. The Updated Financial Plan projects a budget gap for 2011-12, which a new gubernatorial administration must address in the Executive Budget that is due on February 1, 2011, of $9.0 billion, an increase of $850 million from the Enacted Budget Financial Plan forecast.

The Updated Financial Plan projects gaps in future years, which will be materially affected by the level of recurring actions ultimately approved to balance the 2011-12 fiscal year, of $14.6 billion in 2012-13 (an increase of $1.2 billion from the Enacted Budget Financial Plan forecast) and $17.2 billion in 2013-14 (an increase of $1.7 billion). The following table summarizes the revisions to the receipts and disbursements forecasts and the impact on General Fund operating projections reflected in the Updated Financial Plan.

The Commonwealth of Puerto Rico is the fourth largest island in the Caribbean and an estimated 3.9 million people call it home. Puerto Rico's economy has traditionally tracked that of the U.S. mainland. However, Puerto Rico entered its own recession about two years prior to the mainland entering its recession. Tourism, an important component of the Puerto Rican economy, had improved in late 2007 and early 2008. However, with the U.S. in recession, tourism has slowed down and had a negative effect on the economy and tax revenues. Hotel occupancy rates dropped from 64% in December 2007 to 59% in December 2008, but they rose to 64.7% in November 2009. Since 2002, the Commonwealth reports its economy has been expanding at a moderate annual rate of 2.3%, but over the past several years, several key economic indicators have begun to indicate a significant slowing of activity. In 2009, the Planning Board twice lowered its real gross national product forecast. It is possible this will be further revised downward despite the receipt of fiscal stimulus moneys.

The island's unemployment rate dropped from 13.6% in 1998 down to an average of 10.6% as of 2005 after which it rose annually to 15.8% as of February 2010. The largest employment sectors include government (31%), services (31%), trade (17%) and manufacturing (10%). The manufacturing sector has undergone some major changes as pharmaceuticals, biotechnology and technology became growth areas in the 1990s. However, this trend has reversed in the last several years. Pharmaceutical manufacturing employment declined 18% from fiscal years 2006 to 2008. The Commonwealth has had deficit financial results for ten years. Its financial situation reached a critical point in May 2006, when the government disclosed a significant budget gap of $738 million for that fiscal year. After a political impasse, the Governor ordered the closing of certain non-essential government offices and schools due to the lack of money available for operations. A four-person commission of non-elected citizens was charged with resolving the fiscal crisis, the largest resolution of which was implementation of a sales tax. A new administration took over in January 2009, with the challenge of dealing with a $3.2 billion deficit for fiscal year 2009. The Governor announced and has begun implementing a Fiscal Stabilization and Economic Reconstruction Plan which is a comprehensive overhaul of the government, both financially and organizationally. The main components of the fiscal year 2010 plan included the elimination of 30,000 government jobs (only 17,000 so far), several temporary tax increases, increased tax enforcement, a reorganization of the government and a combination of the federal and a local stimulus plan. To date, the government has implemented about 60% of the expected cost savings and raised about $126 million from tax increases.

Tax compliance has also improved and the government has been distributing both federal and local stimulus money. A goal of the plan is a structurally balanced budget by 2013 which may not happen on schedule. While Puerto Rico's debt per capita levels are at the higher end of the spectrum compared to U.S. states, this is partly explained by the fact that Puerto Rico generally centralizes the majority of its debt issuance at the territory level. These debt levels have increased as Puerto Rico financed significant capital and infrastructure improvements. Puerto Rico continues to maintain a large unfunded pension liability of almost $10 billion that risks running out of money as early as 2014. The Commonwealth issued pension obligation bonds in early 2008, which helped, but will not solve the pension issues. The bonds are secured by future employer contributions. Future pension related debt is expected. S&P® rates Puerto Rico's general obligation debt at BBB-, with a stable outlook. Moody's rates the island's general obligation debt A3, and it maintains a stable outlook.

Puerto Rico will continue to face challenges from the 1996 passage of a bill eliminating Section 936 of the Internal Revenue Code. This section had given certain U.S. corporations operating in Puerto Rico significant tax advantages. These incentives had helped drive Puerto Rico's economic growth, especially with the development of its manufacturing sector. U.S. firms that had benefited from these incentives provided a significant portion of Puerto Rico's revenues, employment and deposits in local financial institutions. The Section 936 incentives were phased out over a 10-year period ending in 2006. In fiscal year 2008, manufacturing provided 42% of Puerto Rico's gross domestic product and 11% of non-farm payroll employment. Outstanding issues relating to the potential for a transition to statehood may also have broad implications for Puerto Rico and its financial and credit position. The U.S. House of Representatives has considered legislation that would allow the residents of Puerto Rico to vote on its political status. If approved by Congress, Puerto Ricans would first hold a referendum asking residents if they prefer to be a self-governing commonwealth or to change the island's status. If a majority votes for a different status, the island would then hold a second election to decide what status they want. One of these options is statehood.

The island of Guam has an estimated population of 173,000. Its economy is driven by tourism and U.S. military activity. The government of Guam also receives significant support from the U.S. Treasury. Japan accounts for a substantial amount of Guam's tourism (78% of visitors), which makes the island's economy very sensitive to fluctuations in the Japanese economy. Economic weakness in Japan and other parts of Asia has had a negative impact on Guam tourism. Combined with a typhoon in 1997, a super-typhoon in 2002, the September 11, 2001 terrorist attacks ("9/11"), Severe Acute Respiratory Syndrome (SARS) and the war in Iraq, tourism declined in the early to mid-part of this decade. However, tourism has seen improvement in recent years, helped by favorable weather and a steadying Japanese economy. In August 2007, visitor arrivals hit the highest mark since 9/11 and calendar year 2007 arrivals increased 1.1% from 2006. However, since then, arrivals have dropped off which Guam attributes to the global recession. In 2008, visitors declined 6.8% and in 2009, visitors declined 7.8%. Guam is seeing some improvement in early 2010 with year-over-year growth of 1.1% as of January 2010.

Employment has been quite volatile on Guam since 1998. Total employment reached a peak of 62,350 in March of 1999. Small increases followed in 2000 and 2001, but then employment fell by nearly 10% in early 2002. Employment slowly increased, reaching 58,310 in June 2008. Job growth declined 2% in 2009, which Guam attributes to losses in the tourism sector. However Guam saw job growth of about 1,000 jobs from October through December 2009. Guam believes job growth will be up for 2010 as tourism has picked up since August 2009 which combined with construction increases should result in improvement. The unemployment rate remains high and was 8.3% in September 2007, the last time it was calculated by the U.S. Bureau of Labor Statistics.

The U.S. military presence on Guam has always been a positive contributor to the economy. Its strategic location close to Asia has increased its importance in the overall military strategy of the U.S. As a result, the U.S. government is in the process of a significant buildup of personnel and facilities on Guam. The Marines are planning to relocate some 8,000 Marines and their 9,000 dependents to Guam from Okinawa, Japan by 2014, and the U.S. Navy has stationed several submarines and carrier strike forces on the island. This planned growth would require a substantial amount of new facilities, upgrades to existing facilities and infrastructure improvements, possibly totalling as much as $10 billion. The short- and long-term implications of this growth are expected to be positive.

Guam's overall financial condition has deteriorated due to a slew of misfortunes and mismanagement. Natural disasters, the economic crisis in Japan, and the events of 9/11 have all contributed to Guam's financial hardship. Guam has seen negative financial results for most of the past decade. As a result, its fiscal year 2007 accumulated deficit had grown to almost $523 million. Guam has seen some recent improvement in its financial condition. Guam was able to post a small surplus in fiscal year 2007 and another was projected for fiscal year 2008 and 2009. This is a step in the right direction for Guam, but its accumulated deficit is still huge. For fiscal year 2010, Guam's budget calls for increased spending of about $36 million or about 7%. Revenue growth is expected to come from income and business privilege taxes primarily. The fiscal year 2010 budget also includes various measures to strengthen its financial management. Through the first quarter of fiscal year 2010 (12/31/09), revenues were underperforming their fiscal year 2009 levels as well as budgeted levels. Overall general fund revenues are down about 6.5% with income taxes down 7.7% and 6.7%. Licenses, rentals, Section 30 and department charges are all ahead of fiscal year 2009.

Guam believes that revenues will begin to rebound and if not, it intends to make mid-year adjustments as necessary. It has a large unfunded liability in its pension fund and a large liability to its residents for unpaid tax refunds. The government issued debt in 2007 to fund some of these liabilities, restructure debt and pay debt service on current obligations for which cash was not available. Guam has identified several steps that can be taken to improve its financial condition, but successful implementation is uncertain. The expected economic boost from the military buildup could also improve the territory's financial picture, but it is unclear whether Guam will be able to erase this deficit in the foreseeable future.

As of April 2010, S&P has assigned a rating of B+ to Guam's general obligation debt with a stable outlook.

Approximately 112,000 people reside in the U.S. Virgin Islands, which include 70 small islands. While the unemployment rates climbed across the U.S. in 2008, the U.S. Virgin Islands maintained a fairly steady unemployment rate. At the end of 2008, U.S. Virgin Islands reported an unemployment rate of 6%. Wealth levels remain significantly below those realized in the United States, although per capita income has been increasing steadily. The economy of the U.S. Virgin Islands is driven by tourism, which typically accounts for about 80% of gross domestic product and a significant share of employment. The local tourism industry was hit hard after the events of 9/11, but tourism activity experienced a modest recovery beginning in 2004. The majority of the islands' visitors arrive via cruise ships, and total cruise ship arrivals increased 11.9% in 2004. Total cruise ship arrivals decreased slightly in 2005 and 2006 and increased marginally in 2007. Air arrivals reached an all-time high in 2005 before decreasing slightly in 2006. Total air arrivals increased 3.4% in 2007. Taking both air and cruise arrivals into account, tourism activity increased 1.4% in 2007. Hotel occupancy rates have been above 60% since 2004, including average rates of 60.6% in 2006 and 64.6% in 2007. In the five years prior to 2004, hotel occupancy had ranged between 55% and 58%. Private sector jobs comprise 72.4% of all non-farm jobs, led by leisure & hospitality services and trade. Manufacturing represents approximately 5.0% of employment, and construction represents about 7.5%.

The U.S. Virgin Islands government carries a large public sector payroll and taxes continue to account for a huge share of general fund revenues. In fiscal year 2006, taxes represented 91.9% of revenues. Recent financial performance has improved significantly following numerous years of budget imbalances. The U.S. Virgin Islands government faced a cash-flow crisis at the end of fiscal year 2002 due to the slumping economy and lower tax receipts. In fiscal year 2003, the government reduced its operating deficit from $164.4 million to $109.8 million, and used transfers and bond anticipation notes to increase the general fund balance by $68.3 million. Financial results continued to be positive in fiscal year 2004 and fiscal year 2005. In fiscal year 2004, the general fund balance increased by more than $30 million, and an additional increase of $52.4 million was achieved in fiscal year 2005. By the end of fiscal year 2005, the general fund balance had reached $180.1 million. The government nearly eliminated its operating deficit in fiscal year 2006, and the surplus after transfers reached $110.8 million. By the end of fiscal year 2006, the general fund balance had reached $228 million, which equals 32.2% of expenditures. Expenditures remain extremely high, and the government payroll continues to grow. Securitized tax revenues have been sufficient to cover debt service and supplement the general fund, and the fund balance should remain strong under these conditions. Financial results for fiscal year 2007 are not available at this time.

In October 1999, the government and the U.S. Department of Interior entered into a Memorandum of Understanding stipulating that federal grants will be awarded contingent on several financial performance and accountability standards being met that will demonstrate improvement in the economic and financial condition of the islands. In recent years, the government has tried to improve its financial profile by implementing several cost-cutting measures, including renegotiating debt obligations, consolidating departments, cutting health care costs, hiring freezes, and a reduction in overtime.
As of November 2009, Moody's has assigned a rating of Baa3 to Virgin Islands' general obligation debt and Fitch has assigned a rating of BBB-.

The Mariana Islands became a U.S. territory in 1975. At that time, the U.S. Government agreed to exempt the islands from federal minimum wage and immigration laws in an effort to help stimulate industry and the economy. As a result, the islands were able to build a large garment industry which at one time encompassed 40% of the economy, and its rapid growth from 1980-1995 helped put the Commonwealth of the Northern Mariana Islands (CNMI) at the top of the list of economic growth worldwide. Critical to this growth was duty-free access to U.S. markets and local authority over immigration and the minimum wage. However, in 2005 when the World Trade Organization (WTO) eliminated quotas on apparel imports from other textile producing countries, the CNMI lost their main competitive advantage. In 2007, the CNMI's immigration and minimum wage laws were federalized. The CNMI must now follow all U.S. immigration and minimum wage laws. The minimum wage which was $3.05 will be increased by $0.50 each year until 2015 when it reaches the current U.S. minimum wage. This has raised the production costs to a level that renders the garment industry uncompetitive. Also, under new immigration laws, all non-U.S. born residents must leave the CNMI by 2012 unless they qualify for a working visa. As a result of these changes, the garment industry started a rapid decline which has affected jobs, population, income and government revenues.

Tourism, now the main economic driver other than government, continues to weaken. The CNMI continues its heavy dependence on Asian markets for tourism. In 2008, 51% of visitors were from Japan, 26% from Korea and 12% from Russia and China. Tourism hit its high in 2004 with 589,000 visitors. However, arrivals dropped by 30% by 2008 to 408,000 largely due to the loss of direct flights from Japan. To diversify its visitor base, the CNMI has been targeting Russia and China. Arrivals as of June 2009 decreased by 5.22% year-over-year. In fiscal year 2009, 375,808 people visited the CNMI compared to 396,497 in fiscal year 2008.

The CNMI financials have been in a deficit position since 1994. At the end of fiscal year 2008, the commonwealth had an accumulated deficit of $236 million. The deficit was created from years of deficit operations resulting from both incorrect revenue and expenditure assumptions and the consequences from not adopting a budget. Because the CNMI didn't adopt a budget, it could spend at the prior budget's levels, which in some cases was four years old. As a result it was spending more than it collected in revenue. The deficit has historically been funded by eliminating payments to the retirement fund, which makes up about $215.6 million of the deficit. The elimination of retirement funding has also left the pension fund grossly underfunded.

The population of all the islands combined was estimated at 59,220 in 2007, a 16% decrease from the 2004 high. As of April 2010, Moody's rates the Commonwealth B2 and S&P rates it B+.

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 long-term obligation ratings are opinions of the relative credit risk of fixed-income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Such ratings reflect both the likelihood of default and any financial loss suffered in the event of default.

Aaa: Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.

Aa: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

A: Obligations rated A are considered upper-medium grade and are subject to low credit risk.

Baa: Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

Ba: Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.

B: Obligations rated B are considered speculative and are subject to high credit risk.

Caa: Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.

Ca: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

C: Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

Moody's appends numerical modifiers "1", "2" and "3" to each generic rating classification from "Aa" through "Caa." The modifier "1" indicates that the obligation ranks in the higher end of its generic rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a ranking in the lower end of that generic rating category.

US MUNICIPAL SHORT-TERM DEBT AND DEMAND OBLIGATION RATINGS

SHORT-TERM OBLIGATION RATINGS

There are three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (MIG) and are divided into three levels - MIG 1 through MIG 3. In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. MIG ratings expire at the maturity of the obligation.

MIG 1: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

MIG 2: This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

MIG 3: This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

SG: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

In the case of variable rate demand obligations ("VRDOs"), a two-component rating is assigned; a long or short-term debt rating and a demand obligation rating. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the ability to receive purchase price upon demand ("demand feature"), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or VMIG rating.
When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1. VMIG rating expirations are a function of each issue's specific structural or credit features.

VMIG 1: This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

VMIG 2: This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

VMIG 3: This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

SG: This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

Standard & Poor's Ratings Services ("Standard & Poor's"), a division of The McGraw-Hill Companies, Inc.

LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based in varying degrees, on the following considerations:

The issue ratings definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above.

AAA: An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.

AA: An obligation rated 'AA' differs 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: An obligation rated 'A' is somewhat more susceptible to the 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: An obligation rated 'BBB' 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.

BB, B, CCC, CC, and C: Obligations 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: An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing 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: An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

CCC: An obligation rated 'CCC' is currently vulnerable to nonpayment and are 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.

C: The 'C' rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued.

D: An obligation rated 'D' is in payment default. The 'D' rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

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.

c: The 'c' subscript is used to provide additional information to investors that the bank may terminate its obligation to purchase tendered bonds if the long-term credit rating of the issuer is below an investment-grade level and/or the issuer's bonds are deemed taxable.

p: The letter 'p' indicates that the rating is provisional. A provisional rating assumes the successful completion of the project financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful, timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of or the risk of default upon failure of such completion. The investor should exercise his own judgment with respect to such likelihood and risk.

Continuance of the ratings is contingent upon Standard & Poor's receipt of an executed copy of the escrow agreement or closing documentation confirming investments and cash flows.

r: The 'r' highlights derivative, hybrid, and certain other obligations that Standard & Poor's believes may experience high volatility or high variability in expected returns as a result of noncredit risks. Examples of such obligations are securities with principal or interest return indexed to equities, commodities, or currencies; certain swaps and options; and interest-only and principal-only mortgage securities. The absence of an 'r' symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return.

Debt obligations of issuers outside the United States and its territories are rated on the same basis as domestic corporate and municipal issues. The ratings measure the creditworthiness of the obligor but do not take into account currency exchange and related uncertainties.

Under present commercial bank regulations issued by the Comptroller of the Currency, bonds rated in the top four categories ('AAA', 'AA', 'A', and 'BBB', commonly known as investment-grade ratings) generally are regarded as eligible for bank investment. Also, the laws of various states governing legal investments impose certain rating or other standards for obligations eligible for investment by savings banks, trust companies, insurance companies, and fiduciaries in general.

SHORT-TERM ISSUE CREDIT RATINGS
Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days-including commercial paper.

A-1: A short-term obligation rated "A-1" is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.

A-2: A short-term obligation rated "A-2" 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: A short-term obligation rated "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: A short-term obligation rated "B" is 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: A short-term obligation rated "C" 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.

D: A short-term obligation rated "D" is in payment default. The "D" rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

Notes. A Standard & Poor's note rating reflects the liquidity factors and market access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment:

SP-1: Strong capacity to pay principal and interest. An issue with a very strong capacity to pay debt service is given a (+) designation.

SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

Fitch, Inc.
International credit ratings assess the capacity to meet foreign currency or local currency commitments. Both "foreign currency" and "local currency" ratings are internationally comparable assessments. The local currency rating measures the probability of payment within the relevant sovereign state's currency and jurisdiction and therefore, unlike the foreign currency rating, does not take account of the possibility of foreign exchange controls limiting transfer into foreign currency.

INTERNATIONAL LONG-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency 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.

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. Securities rated in this category are not investment grade.

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, and 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. The ratings of obligations in this category are based on their prospects for achieving partial or full recovery in a reorganization or liquidation of the obligor. While expected recovery values are highly speculative and cannot be estimated with any precision, the following serve as general guidelines. "DDD" obligations have the highest potential for recovery, around 90%-100% of outstanding amounts and accrued interest. "DD" indicates potential recoveries in the range of 50%-90%, and "D" the lowest recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their obligations. Entities rated "DDD" have the highest prospect for resumption of performance or continued operation with or without a formal reorganization process. Entities rated "DD" and "D" are generally undergoing a formal reorganization or liquidation process; those rated "DD" are likely to satisfy a higher portion of their outstanding obligations, while entities rated "D" have a poor prospect for repaying all obligations.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote relative status within the major rating categories. Plus and minus signs are not added to the "AAA" category or to categories below "CCC," nor to short-term ratings other than "F1" (see below).

INTERNATIONAL SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency ratings. A short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments in a timely manner.

F1: Highest credit quality. Strongest capacity for timely payment of financial commitments. May have an added "+" to denote any exceptionally strong credit feature.

F2: Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of higher ratings.

F3: Fair credit quality. Capacity for timely payment of financial commitments is adequate. However, near-term adverse changes could result in a reduction to non-investment grade.

B: Speculative. Minimal capacity for timely payment of financial commitments, 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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Rochester Portfolio Series

We have audited the accompanying statement of assets and liabilities of Limited Term New York Municipal Fund (one of the Funds constituting the Rochester Portfolio Series), including the statement of investments, as of December 31, 2010, the related statement of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Limited Term New York Municipal Fund as of December 31, 2010, the results of its operations and cash flows for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

KPMG llp

Denver, Colorado
February 16, 2011

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS December 31, 2010


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

Municipal Bonds and Notes—101.9%
New York—73.6%
$	2,100,000	Albany County, NY IDA (Albany College of Pharmacy)¹		5.250	%		12/01/2019			12/01/2014	^A	$	2,121,336
	110,000	Albany, NY Hsg. Authority¹		6.250			10/01/2012	²		04/01/2011	^A		110,458
	125,000	Albany, NY Hsg. Authority (Lark Drive)¹		5.200			12/01/2013			01/05/2012	^B		126,481
	260,000	Albany, NY Hsg. Authority (Lark Drive)		5.400			12/01/2018			12/01/2012	^A		262,777
	1,365,000	Albany, NY IDA (Brighter Choice Charter School for Girls)¹		4.500			04/01/2018			04/11/2017	^C		1,286,526
	1,370,000	Albany, NY IDA (Brighter Choice Charter School for Girls)¹		4.550			04/01/2015			01/01/2014	^C		1,370,438
	1,875,000	Albany, NY IDA (Charitable Leadership)		5.500			07/01/2011			07/01/2011			1,864,106
	8,810,000	Albany, NY IDA (Charitable Leadership)		6.000			07/01/2019			04/20/2016	^C		7,439,076
	2,660,000	Albany, NY IDA (Daughters of Sarah Nursing Home)¹		5.250			10/20/2021			04/20/2014	^A		2,762,357
	25,000	Albany, NY IDA (Daughters of Sarah Nursing Home)¹		5.375			10/20/2030			04/20/2012	^A		25,475
	1,065,000	Albany, NY IDA (H. Johnson Office Park)¹		5.750			03/01/2018			07/16/2014	^C		982,505
	1,845,000	Albany, NY IDA (Hampton Plaza)¹		6.250			03/15/2018			03/15/2011	^A		1,862,583
	3,000,000	Albany, NY IDA (St. Peter’s Hospital)¹		5.750			11/15/2022			11/15/2017	^A		3,080,700
	100,000	Albany, NY Municipal Water Finance Authority¹		5.000			12/01/2011			06/01/2011	^A		100,294
	1,985,000	Albany, NY Municipal Water Finance Authority¹		5.250			12/01/2017			06/01/2011	^A		1,991,074
	1,335,000	Albany, NY Municipal Water Finance Authority¹		5.250			12/01/2018			06/01/2011	^A		1,338,711
	200,000	Albany, NY Municipal Water Finance Authority¹		5.250			12/01/2019			06/01/2011	^A		200,556
	2,915,000	Albany, NY Municipal Water Finance Authority¹		5.250			12/01/2020			06/01/2011	^A		2,923,104
	440,000	Albany, NY Municipal Water Finance Authority¹		5.250			12/01/2021			06/01/2011	^A		441,223
	3,235,000	Albany, NY Municipal Water Finance Authority¹		5.250			12/01/2022			06/01/2011	^A		3,242,732
	2,590,000	Albany, NY Municipal Water Finance Authority¹		5.250			12/01/2023			06/01/2011	^A		2,596,190
	2,010,000	Albany, NY Parking Authority¹		5.625			07/15/2020	²		07/15/2012	^A		2,042,281
	445,000	Albany, NY Parking Authority¹		5.625			07/15/2025	²		07/15/2012	^A		447,132
	90,000	Allegany County, NY IDA (Alfred University)¹		5.000			08/01/2028			02/07/2024	^C		83,671
	4,380,000	Allegany County, NY IDA (Houghton College)¹		5.250			01/15/2018			01/15/2011	^A		4,383,986
	5,730,000	Allegany County, NY IDA (Houghton College)¹		5.250			01/15/2024			01/15/2011	^A		5,730,172
	355,000	Amherst, NY IDA (Beechwood Health Care Center)		4.875			01/01/2013			01/21/2011	^C		354,453
	490,000	Amherst, NY IDA (Faculty-Student Assoc. of SUNY at Buffalo)		5.750			04/01/2016			04/01/2012	^A		502,358
	720,000	Amherst, NY IDA (Faculty-Student Assoc. of SUNY at Buffalo)		5.750			04/01/2017	²		04/01/2012	^A		735,545
	100,000	Amherst, NY IDA (UBF Faculty-Student Hsg. Corp.)¹		5.125			08/01/2020			08/01/2020			100,907
	810,000	Bethlehem, NY Water System¹		5.250			03/01/2018			03/01/2013	^A		831,206
	905,000	Bethlehem, NY Water System¹		5.375			03/01/2020			03/01/2013	^A		918,557

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	500,000	Bethlehem, NY Water System¹		5.500	%		03/01/2022			03/01/2013	^A	$	504,730
	355,000	Brookhaven, NY IDA (Alternatives for Children)		7.000			02/01/2013			03/22/2011	^C		358,096
	425,000	Brookhaven, NY IDA (Dowling College)¹		6.500			11/01/2012			11/01/2012			438,932
	725,000	Brookhaven, NY IDA (Enecon Corp.)		5.800			11/01/2018			10/15/2014	^C		666,986
	2,325,000	Brooklyn, NY Local Devel. Corp. (Barclays Center Arena)¹		5.750			07/15/2017			07/15/2017			2,492,075
	1,400,000	Brooklyn, NY Local Devel. Corp. (Barclays Center Arena)¹		5.750			07/15/2018			07/15/2018			1,487,822
	1,355,000	Brooklyn, NY Local Devel. Corp. (Barclays Center Arena)¹		5.750			07/15/2019			07/15/2019			1,425,853
	1,500,000	Brooklyn, NY Local Devel. Corp. (Barclays Center Arena)¹		5.750			07/15/2020			07/15/2020			1,543,605
	820,000	Broome County, NY COP¹		5.250			04/01/2022	²		04/01/2011	^A		822,435
	10,000	Broome County, NY GO¹		5.400			04/15/2011			04/01/2011	^A		10,142
	625,000	Bushnell Basin, NY Fire Assoc. (Volunteer Fire Dept.)		5.250			11/01/2015			12/14/2013	^C		600,725
	50,000	Cattaraugus County, NY IDA (St. Bonaventure University)		5.000			09/15/2013			03/15/2011	^A		50,065
	500,000	Cattaraugus County, NY IDA (St. Bonaventure University)¹		5.000			05/01/2023			07/10/2020	^C		476,495
	3,525,000	Cayuga County, NY COP (Auburn Memorial Hospital)¹		6.000			01/01/2021			05/15/2016	^C		3,514,531
	515,000	Chautauqua County, NY Tobacco Asset Securitization Corp.		6.000			07/01/2012			01/01/2011	^A		513,656
	1,075,000	Chautauqua County, NY Tobacco Asset Securitization Corp.¹		6.250			07/01/2016			01/11/2015	^C		1,064,250
	3,795,000	Chautauqua County, NY Tobacco Asset Securitization Corp.¹		6.500			07/01/2024			06/07/2021	^C		3,791,622
	18,160,000	Chautauqua County, NY Tobacco Asset Securitization Corp.¹		6.750			07/01/2040			05/28/2034	^C		17,357,510
	2,375,000	Clarence, NY IDA (Bristol Village)¹		6.000			01/20/2044			01/20/2015	^A		2,412,786
	4,475,000	Cortland County, NY IDA (Cortland Memorial Hospital)¹		5.625			07/01/2024			08/23/2019	^C		4,456,160
	10,000	Deerfield, NY GO		5.250			06/15/2011			06/15/2011			10,139
	10,000	Deerfield, NY GO		5.250			06/15/2012			06/15/2012			10,419
	10,000	Deerfield, NY GO		5.250			06/15/2013			06/15/2013			10,605
	10,000	Deerfield, NY GO		5.500			06/15/2014			06/15/2014			10,782
	10,000	Deerfield, NY GO		5.500			06/15/2015			06/15/2015			10,870
	10,000	Deerfield, NY GO		5.500			06/15/2016			06/15/2016			10,892
	10,000	Deerfield, NY GO		5.500			06/15/2017			06/15/2016	^A		10,725
	10,000	Deerfield, NY GO		5.500			06/15/2018			06/15/2016	^A		10,577
	15,000	Deerfield, NY GO		5.500			06/15/2019			06/15/2016	^A		15,568
	15,000	Deerfield, NY GO		5.500			06/15/2020			06/15/2016	^A		15,414

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	5,205,000	Dutchess County, NY IDA (Marist College)¹		5.150	%		07/01/2017			07/01/2013	^A	$	5,409,140
	2,500,000	East Rochester, NY Hsg. Authority (St. John’s Health Care)¹		5.000			04/20/2027			06/12/2024	^A		2,503,650
	3,960,000	East Rochester, NY Hsg. Authority (St. John’s Meadows)¹		5.950			08/01/2027			12/06/2020	^C		3,959,564
	3,155,000	East Rochester, NY Hsg. Authority (Woodland Village)¹		5.150			08/01/2016			05/02/2013	^C		3,016,212
	195,000	East Syracuse, NY Hsg. Authority (Bennett Manor Associates)¹		6.700			04/01/2021			04/01/2011	^A		199,173
	58,670,000	Erie County, NY IDA (Buffalo City School District)¹		5.625			05/01/2028			05/01/2014	^A		60,267,584
	20,335,000	Erie County, NY IDA (Buffalo City School District)¹		5.750			05/01/2024			06/01/2011	^A		20,409,019
	1,300,000	Erie County, NY IDA (Buffalo City School District)¹		5.750			05/01/2025			05/01/2014	^A		1,331,733
	6,500,000	Erie County, NY IDA (Buffalo City School District)¹		5.750			05/01/2026			05/01/2014	^A		6,674,330
	850,000	Erie County, NY IDA (Medaille College)		6.875			10/01/2013			03/17/2011	^C		891,055
	385,000	Erie County, NY Public Improvement District¹		5.250			03/15/2020			03/15/2013	^A		406,910
	29,615,000	Erie County, NY Tobacco Asset Securitization Corp.¹		5.000			06/01/2031			03/22/2017	^C		22,673,244
	9,750,000	Erie County, NY Tobacco Asset Securitization Corp.¹		5.000			06/01/2038			08/15/2020	^C		7,098,683
	250,000	Essex County, NY IDA (International Paper Company)¹		6.450			11/15/2023			11/15/2011	^A		251,358
	690,000	Essex County, NY IDA (North Country Community College Foundation)¹		4.600			06/01/2015			06/01/2015			735,278
	540,000	Franklin County, NY IDA (North Country Community College Foundation)¹		4.600			06/01/2015			12/24/2013	^C		575,435
	50,000	Gloversville, NY GO¹		5.800			03/15/2015			03/15/2011	^A		50,482
	425,000	Hamilton County, NY IDA (Adirondack Historical Assoc.)¹		5.250			11/01/2018			06/01/2011	^A		425,421
	75,000	Hempstead Village, NY GO¹		5.000			09/15/2017			09/15/2016	^A		80,312
	500,000	Hempstead Village, NY GO¹		5.000			07/01/2018			07/01/2014	^A		518,330
	75,000	Hempstead Village, NY GO¹		5.000			09/15/2018			09/15/2016	^A		79,175
	1,195,000	Hempstead Village, NY GO¹		5.000			07/01/2019			07/01/2014	^A		1,224,445
	75,000	Hempstead Village, NY GO¹		5.000			09/15/2019			09/15/2016	^A		77,795
	75,000	Hempstead Village, NY GO¹		5.000			09/15/2020			09/15/2016	^A		77,008
	75,000	Hempstead Village, NY GO¹		5.000			09/15/2021			09/15/2016	^A		76,712
	75,000	Hempstead Village, NY GO¹		5.000			09/15/2022			09/15/2016	^A		75,863
	75,000	Hempstead Village, NY GO¹		5.000			09/15/2023			09/15/2016	^A		75,268
	1,700,000	Hempstead, NY IDA (Adelphi University)¹		5.750			06/01/2022	²		06/01/2012	^A		1,736,482
	2,350,000	Hempstead, NY IDA (Lynbrook Facilities)¹		6.000			11/01/2017			08/10/2013	^C		2,056,697

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	620,000	Hempstead, NY IDA (Peninsula Counseling Center)		5.750	%		11/01/2018			09/03/2015	^C	$	567,492
	60,000	Herkimer County, NY GO¹		5.000			09/15/2012			04/01/2011	^A		63,320
	40,000	Herkimer County, NY GO¹		5.000			09/15/2012			03/15/2011	^A		40,337
	480,000	Herkimer, NY Hsg. Authority¹		7.150			03/01/2011			03/01/2011			482,136
	30,000	Highland Falls, NY Sewer System¹		5.100			12/01/2011			06/01/2011	^A		30,542
	20,000	Hudson Falls, NY Central School District		4.750			06/15/2019			06/15/2019			20,674
	2,520,000	Islip, NY IDA (United Cerebral Palsy Assoc.)¹		5.500			12/01/2016			01/17/2013	^C		2,339,719
	295,000	Islip, NY IDA (United Cerebral Palsy Assoc.)		5.500			12/01/2016			01/17/2013	^C		273,896
	2,990,000	Islip, NY Res Rec, Series E¹		5.625			07/01/2017			07/01/2015	^A		3,209,346
	1,175,000	Islip, NY Res Rec, Series E¹		5.750			07/01/2019			07/01/2015	^A		1,242,492
	1,100,000	Islip, NY Res Rec, Series E¹		5.750			07/01/2020			07/01/2014	^A		1,153,306
	1,315,000	Islip, NY Res Rec, Series E¹		5.750			07/01/2021			07/01/2014	^A		1,368,797
	1,000,000	Islip, NY Res Rec, Series E¹		5.750			07/01/2023			07/01/2014	^A		1,027,870
	250,000	Jamestown, NY GO		5.000			08/01/2024			08/01/2014	^A		255,013
	250,000	Jamestown, NY GO		5.000			08/01/2025			08/01/2014	^A		254,003
	10,000,000	L.I., NY Power Authority, Series A¹		5.000			12/01/2026			06/01/2016	^A		10,089,300
	480,000	L.I., NY Power Authority, Series A¹		6.250			04/01/2033			04/01/2019	^A		519,437
	2,210,000	Livingston County, NY IDA (Nicholas H. Noyes Memorial Hospital)¹		5.875			07/01/2022			05/25/2019	^C		2,026,106
	1,010,000	Livingston County, NY IDA (Nicholas H. Noyes Memorial Hospital)¹		6.000			07/01/2030			04/22/2027	^C		885,952
	70,000	Livonia, NY GO¹		5.000			06/15/2020			06/15/2017	^A		73,618
	75,000	Livonia, NY GO¹		5.000			06/15/2021			06/15/2017	^A		78,244
	80,000	Livonia, NY GO¹		5.000			06/15/2022			06/15/2017	^A		82,403
	85,000	Livonia, NY GO¹		5.000			06/15/2023			06/15/2017	^A		86,884
	90,000	Livonia, NY GO¹		5.000			06/15/2024			06/15/2017	^A		91,612
	75,000	Livonia, NY GO¹		5.000			06/15/2025			06/15/2017	^A		75,781
	35,000	Lyncourt, NY Fire District¹		6.000			10/15/2016			06/01/2011	^A		35,311
	235,000	Madison County, NY IDA (Morrisville State College Foundation)¹		5.000			06/01/2015			01/18/2013	^C		234,290
	2,065,000	Madison County, NY IDA (Morrisville State College Foundation)¹		5.000			06/01/2022			08/11/2019	^C		1,964,765
	2,260,000	Madison County, NY IDA (Oneida Healthcare Center)¹		5.500			02/01/2016			02/01/2013	^A		2,284,001
	60,000	Monroe County, NY Airport Authority (Greater Rochester International)¹		5.750			01/01/2012			01/01/2012			62,050
	5,000	Monroe County, NY GO¹		5.000			06/01/2017			06/01/2011	^A		5,007
	105,000	Monroe County, NY GO¹		5.350			03/01/2012			03/01/2011	^A		105,371
	25,000	Monroe County, NY GO¹		5.750			06/01/2015			06/01/2011	^A		25,059
	770,000	Monroe County, NY IDA (Canal Ponds)		7.000			06/15/2013	²		06/15/2011	^A		780,641

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	580,000	Monroe County, NY IDA (Highland Hospital of Rochester)¹		5.000	%		08/01/2012			08/01/2012		$	604,430
	1,375,000	Monroe County, NY IDA (Nazareth College of Rochester)¹		5.250			10/01/2021			10/01/2012	^A		1,396,230
	795,000	Monroe County, NY IDA (Southview Towers)¹		6.125			02/01/2020			02/01/2012	^A		803,825
	45,000	Monroe County, NY IDA (St. John Fisher College)		5.200			06/01/2019			06/01/2013	^A		45,160
	245,000	Monroe County, NY IDA (Summit at Brighton)		5.000			07/01/2016			10/26/2012	^C		213,547
	1,180,000	Monroe County, NY IDA (West End Business Center)¹		5.125			12/01/2014			05/29/2011	^C		1,060,383
	9,000,000	Monroe County, NY Industrial Devel. Corp. (Unity Hospital Rochester)¹		5.500			08/15/2023			08/15/2015	^A		9,235,350
	17,500,000	Monroe County, NY Industrial Devel. Corp. (Unity Hospital Rochester)¹		5.750			08/15/2030			02/15/2021	^A		19,496,925
	15,000	Monroe County, NY Water Authority		5.250			08/01/2011			02/15/2011	^A		15,056
	145,000	Monroe, NY Newpower Corp.¹		4.500			01/01/2011			01/01/2011			145,000
	155,000	Monroe, NY Newpower Corp.¹		4.700			01/01/2012			10/01/2011	^C		156,524
	410,000	Monroe, NY Newpower Corp.¹		4.800			01/01/2013			10/01/2012	^C		418,397
	7,800,000	Monroe, NY Newpower Corp.¹		6.375			01/01/2024			07/01/2011	^A		7,810,998
	280,000	Mount Vernon, NY IDA (Kings Court)¹		5.125			12/01/2023			12/01/2015	^A		283,212
	975,000	Mount Vernon, NY IDA (Macedonia Towers)¹		5.125			12/01/2023			12/01/2015	^A		977,730
	3,795,000	Mount Vernon, NY IDA (Section 8), Series A¹		5.250			12/01/2014	²		06/01/2011	^A		3,871,280
	50,000	Municipal Assistance Corp. for Troy, NY¹		5.000			01/15/2016			01/15/2011	^A		50,092
	335,000	Municipal Assistance Corp. for Troy, NY¹		5.200			01/15/2017			01/15/2011	^A		335,640
	300,000	Nassau County, NY IDA (ACDS)		5.950			11/01/2022			09/14/2016	^C		267,378
	480,000	Nassau County, NY IDA (ACDS)		6.000			12/01/2019			04/02/2017	^C		444,595
	325,000	Nassau County, NY IDA (ALIA-ACDS)		7.000			11/01/2016			09/16/2013	^B		325,793
	185,000	Nassau County, NY IDA (ALIA-ACLD)		5.750			09/01/2011			09/01/2011			184,876
	475,000	Nassau County, NY IDA (ALIA-CMA)		7.000			11/01/2016			09/07/2013	^B		476,159
	370,000	Nassau County, NY IDA (ALIA-CRR)		7.000			11/01/2016			09/06/2013	^B		370,903
	80,000	Nassau County, NY IDA (ALIA-FREE)		7.000			11/01/2016			09/25/2013	^B		80,195
	370,000	Nassau County, NY IDA (ALIA-HKSB)		7.000			11/01/2016			09/09/2013	^B		370,903
	1,800,000	Nassau County, NY IDA (CSMR)¹		5.950			11/01/2022			09/14/2016	^C		1,604,268
	1,325,000	Nassau County, NY IDA (CSMR)¹		6.000			12/01/2019			12/27/2016	^C		1,227,268
	200,000	Nassau County, NY IDA (Epilepsy Foundation of L.I.)		5.950			11/01/2022			08/23/2016	^C		178,252
	575,000	Nassau County, NY IDA (Epilepsy Foundation of L.I.)		6.000			12/01/2019			11/17/2016	^C		536,176
	255,000	Nassau County, NY IDA (Hispanic Counseling Center)		6.000			11/01/2017			08/21/2013	^C		239,751
	145,000	Nassau County, NY IDA (Hofstra University)¹		5.000			07/01/2023			07/01/2011	^A		145,016

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	13,250,000	Nassau County, NY IDA (Keyspan-Glenwood Energy Center)¹		5.250	%		06/01/2027			06/01/2027		$	13,041,843
	210,000	Nassau County, NY IDA (Life’s WORCA)		5.950			11/01/2022			09/04/2016	^C		187,165
	500,000	Nassau County, NY IDA (New York Institute of Technology)¹		5.000			03/01/2021			03/01/2020	^A		507,645
	500,000	Nassau County, NY IDA (PLUS Group Home)		6.150			11/01/2022			09/23/2016	^C		453,420
	100,000	Nassau County, NY IDA (United Veteran’s Beacon House)		6.000			11/01/2017			08/08/2013	^C		94,020
	395,000	Nassau County, NY IDA (WORCA)		6.000			12/01/2019			12/23/2016	^C		365,671
	110,000	Nassau County, NY IDA, Series C		6.000			12/01/2019			12/22/2016	^C		101,833
	21,000,000	Nassau County, NY Tobacco Settlement Corp.¹		5.250			06/01/2026			12/03/2017	^C		18,522,630
	145,000	Nassau, NY IDA (EBS North Hills LLC)		7.000			11/01/2013			07/22/2011	^B		158,244
	90,000	Nassau, NY IDA (EBS North Hills LLC)		7.000			11/01/2013			07/26/2011	^B		98,095
	95,000	Nassau, NY IDA (EBS North Hills LLC)		7.000			11/01/2013			06/24/2011	^B		103,643
	95,000	Nassau, NY IDA (EBS North Hills LLC)		7.000			11/01/2013			06/24/2011	^B		103,643
	6,075,000	New Rochelle, NY IDA (College of New Rochelle)¹		5.500			07/01/2019			07/01/2011	^A		6,108,291
	1,085,000	Newburgh, NY IDA (Bourne & Kenney Redevel. Company)¹		5.650			08/01/2020	²		02/01/2011	^A		1,086,584
	2,535,000	Newburgh, NY IDA (Bourne & Kenney Redevel. Company)¹		5.750			02/01/2032			03/15/2027	^C		2,527,192
	150,000	Niagara County, NY IDA (American Ref-Fuel Company)¹		5.550			11/15/2024			11/15/2015	^D		152,412
	12,690,000	Niagara County, NY IDA (Niagara Falls Memorial Medical Center)¹		5.500			11/01/2035			01/03/2025	^C		10,526,482
	1,040,000	Niagara County, NY IDA (Niagara Falls Memorial Medical Center)		5.750			06/01/2018			04/03/2016	^C		992,732
	7,750,000	Niagara County, NY IDA (Solid Waste Disposal)¹		5.450			11/15/2026			11/15/2012	^D		7,900,738
	9,510,000	Niagara County, NY IDA (Solid Waste Disposal)¹		5.550			11/15/2024			02/01/2015	^A		9,664,062
	12,450,000	Niagara County, NY IDA (Solid Waste Disposal)¹		5.625			11/15/2024			11/15/2014	^D		12,677,960
	175,000	Niagara County, NY Tobacco Asset Securitization Corp.¹		5.500			05/15/2019			05/15/2011	^C		163,821
	90,000	Niagara County, NY Tobacco Asset Securitization Corp.¹		5.500			05/15/2020			05/15/2011	^C		85,504
	1,175,000	Niagara County, NY Tobacco Asset Securitization Corp.¹		5.875			05/15/2022			05/15/2015	^C		1,133,863
	1,105,000	Niagara County, NY Tobacco Asset Securitization Corp.¹		6.250			05/15/2034			11/15/2023	^C		1,009,616
	945,000	Niagara County, NY Tobacco Asset Securitization Corp.¹		6.250			05/15/2040			06/04/2028	^C		845,284

LIMITED TERM NEW YORK MUNICIPAL FUND


								Effective
Principal								Maturity
Amount			Coupon			Maturity		(Unaudited)*			Value

New York Continued
$	11,995,000	Niagara County, NY Tobacco Asset Securitization Corp.¹		6.750	%		05/15/2029		05/15/2021	^C	$	11,789,526
	20,000	Niagara County, NY Tobacco Asset Securitization Corp. (TASC)¹		5.750			05/15/2021		05/15/2011	^A		19,302
	1,000,000	Niagara Falls, NY Public Water Authority¹		5.500			07/15/2034		07/15/2015	^A		959,850
	115,000	Niagara, NY Frontier Transportation Authority (Buffalo Niagara International Airport)¹		5.000			04/01/2013		04/01/2011	^A		115,217
	10,210,000	Niagara, NY Frontier Transportation Authority (Buffalo Niagara International Airport)¹		5.625			04/01/2029		03/13/2025	^C		9,848,056
	20,000	Niagara, NY Frontier Transportation Authority (Buffalo Niagara International Airport)¹		5.750			04/01/2012		04/01/2011	^A		20,163
	210,000	Niagara, NY Frontier Transportation Authority (Buffalo Niagara International Airport)¹		5.750			04/01/2019		04/01/2011	^A		210,701
	50,000	Niagara, NY Frontier Transportation Authority International Airport¹		5.000			04/01/2018		04/01/2011	^A		50,029
	1,140,000	North Babylon, NY Volunteer Fire Company¹		5.750			08/01/2022		09/23/2017	^C		1,125,545
	835,000	NY Capital District Youth Center¹		6.000			02/01/2017		02/01/2011	^A		837,121
	300,000	NY Carnegie Redevel. Corp.		6.500			09/01/2011		05/17/2011	^C		294,030
	65,000	NY Counties Tobacco Trust I¹		5.875			06/01/2014		06/01/2011	^A		64,178
	4,670,000	NY Counties Tobacco Trust I¹		6.300			06/01/2019		04/05/2018	^C		4,666,684
	4,360,000	NY Counties Tobacco Trust I¹		6.500			06/01/2035		05/19/2032	^C		4,082,181
	3,295,000	NY Counties Tobacco Trust I¹		6.625			06/01/2042		08/02/2039	^C		3,089,128
	14,160,000	NY Counties Tobacco Trust II (TASC)¹		5.250			06/01/2025		12/17/2011	^C		12,839,014
	150,000	NY Counties Tobacco Trust II (TASC)¹		5.500			06/01/2011		06/01/2011			149,571
	865,000	NY Counties Tobacco Trust II (TASC)¹		5.625			06/01/2035		06/04/2018	^C		718,391
	1,055,000	NY Counties Tobacco Trust II (TASC)¹		5.750			06/01/2013		06/01/2013			1,044,640
	1,925,000	NY Counties Tobacco Trust II (TASC)		5.750			06/01/2014		06/01/2014			1,892,737
	750,000	NY Counties Tobacco Trust II (TASC)¹		5.750			06/01/2043		09/02/2025	^C		620,175
	2,120,000	NY Counties Tobacco Trust II (TASC)¹		6.000			06/01/2015		06/01/2015			2,090,002
	2,330,000	NY Counties Tobacco Trust II (TASC)¹		6.000			06/01/2016		06/01/2016			2,280,371
	3,010,000	NY Counties Tobacco Trust II^I		5.000			06/01/2027		12/01/2011	^C		2,914,884
	4,980,000	NY Counties Tobacco Trust III¹		5.750			06/01/2033		09/26/2012	^C		4,509,440
	16,575,000	NY Counties Tobacco Trust III¹		6.000			06/01/2043		04/03/2018	^C		14,227,151
	3,095,000	NY Counties Tobacco Trust IV¹		4.250			06/01/2021		03/14/2012	^C		2,938,826
	4,520,000	NY Counties Tobacco Trust IV (TASC)¹		4.750			06/01/2026		05/18/2014	^C		3,851,040
	38,400,000	NY Counties Tobacco Trust IV (TASC)¹		6.250			06/01/2041		08/03/2019	^C		34,456,704
	500,000	NY Grand Central BID (Grand Central District Management)¹		5.000			01/01/2022		01/01/2014	^A		525,040
	25,000	NY MTA Commuter Facilities (Grand Central Terminal)¹		5.400			07/01/2011		04/01/2011	^A		25,082
	85,000	NY MTA Commuter Facilities (Grand Central Terminal)¹		5.500			07/01/2012		04/01/2011	^A		85,278

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	25,000	NY MTA Commuter Facilities, Series 7¹		5.625	%		07/01/2016	²		04/01/2011	^A	$	26,090
	5,000	NY MTA Commuter Facilities, Series B¹		5.000			07/01/2017			01/01/2011	^A		5,018
	50,000	NY MTA Commuter Facilities, Series B¹		5.125			07/01/2024			04/01/2011	^A		50,126
	5,000	NY MTA Commuter Facilities, Series D¹		5.000			07/01/2016			04/01/2011	^A		5,187
	20,795,000	NY MTA Service Contract, Series A¹		5.125			01/01/2029			07/20/2027	^C		20,758,609
	35,460,000	NY MTA Service Contract, Series A¹		5.750			07/01/2031			07/01/2012	^A		36,735,142
	33,290,000	NY MTA Service Contract, Series B¹		5.250			01/01/2031			07/01/2012	^A		33,323,290
	300,000	NY MTA, Series 2008C¹		6.250			11/15/2023			11/15/2018	^A		338,145
	53,800,000	NY MTA, Series A¹		5.000			11/15/2025			11/15/2012	^A		53,834,970
	270,000	NY MTA, Series A¹		5.000			11/15/2030			11/15/2012	^A		270,127
	5,395,000	NY MTA, Series A¹		5.000			11/15/2030			10/27/2028	^C		5,351,085
	4,180,000	NY MTA, Series A¹		5.125			11/15/2021			11/15/2012	^A		4,321,159
	24,255,000	NY MTA, Series A¹		5.125			11/15/2031			02/28/2030	^C		24,191,937
	34,000,000	NY MTA, Series A¹		5.250			01/01/2023			07/01/2012	^A		34,898,620
	225,000	NY MTA, Series A¹		5.250			11/15/2031			11/15/2012	^A		225,128
	8,800,000	NY MTA, Series A¹		5.250			11/15/2036			09/13/2035	^C		8,658,760
	50,000	NY MTA, Series A¹		5.625			01/01/2012			01/01/2011	^A		50,169
	10,175,000	NY MTA, Series B¹		5.000			11/15/2033			06/07/2032	^C		9,753,043
	16,500,000	NY MTA, Series B¹		5.250			11/15/2025			11/15/2013	^A		16,782,315
	6,500,000	NY MTA, Series B¹		5.250			11/15/2027			11/15/2019	^A		6,713,655
	100,000	NY MTA, Series E¹		5.250			11/15/2031			11/15/2012	^A		100,057
	50,000	NY MTA, Series E¹		5.500			11/15/2021			11/15/2012	^A		53,327
	2,205,000	NY MTA, Series F¹		5.000			11/15/2030			05/15/2029	^C		2,160,261
	38,550,000	NY MTA, Series F¹		5.000			11/15/2031			06/07/2030	^C		37,837,596
	40,000	NY New Hartford-Sunset Wood Funding Corp.		5.950			08/01/2027			02/01/2011	^A		40,023
	3,945,000	NY Newark-Wayne Community Hospital¹		5.875			01/15/2033			01/15/2011	^A		3,945,000
	930,000	NY Newark-Wayne Community Hospital		7.600			09/01/2015			03/01/2011	^A		929,823
	50,000	NY Oneida Healthcare Corp. (Oneida Health Systems)¹		5.300			02/01/2021			02/01/2013	^A		49,422
	3,895,000	NY Oneida Healthcare Corp. (Oneida Health Systems)¹		5.500			02/01/2016	²		02/01/2013	^A		3,937,300
	4,000,000	NY Seneca Nation Indians Capital Improvements¹		5.000			12/01/2023			11/11/2020	^C		3,181,240
	9,700,000	NY Seneca Nation Indians Capital Improvements¹		5.250			12/01/2016			06/14/2015	^C		8,914,494
	500,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.250			06/01/2020			06/01/2013	^A		532,305
	2,220,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.250			06/01/2021			06/01/2013	^A		2,303,894
	130,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.500			06/01/2014			06/01/2011	^A		130,462

LIMITED TERM NEW YORK MUNICIPAL FUND


							Effective
Principal							Maturity
Amount			Coupon			Maturity	(Unaudited)*	Value

New York Continued
$	30,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.500	%	06/01/2015	06/01/2011^A	$	30,103
	3,685,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.500		06/01/2015	06/01/2011^A		3,698,082
	11,900,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.500		06/01/2016	06/01/2011^A		11,937,961
	5,020,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.500		06/01/2017	06/01/2011^A		5,102,177
	21,000,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.500		06/01/2018	06/01/2012^A		22,076,880
	20,500,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.500		06/01/2019	06/01/2013^A		22,107,405
	11,000,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.500		06/01/2020	06/01/2013^A		11,827,750
	18,395,000	NY Tobacco Settlement Financing Corp. (TASC)¹		5.500		06/01/2021	06/01/2013^A		19,417,946
	40,000	NY Triborough Bridge & Tunnel Authority¹		5.000		01/01/2024	04/01/2011^A		40,120
	5,170,000	NY Triborough Bridge & Tunnel Authority¹		5.000		11/15/2026	11/15/2012^A		5,222,786
	163,755,000	NY TSASC, Inc. (TFABs)¹		4.750		06/01/2022	10/09/2011^C		156,648,033
	91,000,000	NY TSASC, Inc. (TFABs)¹		5.000		06/01/2026	06/28/2016^C		84,695,520
	14,740,000	NY TSASC, Inc. (TFABs)¹		5.000		06/01/2034	04/20/2020^C		11,410,529
	430,000	NY TSASC, Inc. (TFABs)¹		5.250		07/15/2011	07/15/2011		441,550
	175,000	NY Valley Health Devel. Corp.¹		6.750		05/20/2022	05/20/2015^A		183,979
	10,000,000	NYC Capital Resources Corp. (Albee Retail Devel.)¹		7.250		11/01/2042	05/01/2012^D		9,865,200
	5,000	NYC GO¹		5.000		08/01/2015	02/01/2011^A		5,016
	425,000	NYC GO¹		5.000		08/01/2020	08/01/2014^A		448,350
	5,000	NYC GO¹		5.000		08/01/2022	02/01/2011^A		5,012
	500,000	NYC GO¹		5.000		08/01/2022	08/01/2015^A		522,990
	40,000	NYC GO¹		5.000		09/15/2022	09/15/2013^A		41,281
	29,000,000	NYC GO³		5.000		06/01/2023	06/01/2015^A		30,206,690
	615,000	NYC GO¹		5.000		08/01/2023	08/01/2015^A		640,867
	8,065,000	NYC GO¹		5.000		08/01/2023	08/01/2019^A		8,548,335
	10,000,000	NYC GO³		5.000		08/15/2023	02/15/2013^A		10,428,814
	4,945,000	NYC GO¹		5.000		09/01/2023	09/01/2015^A		5,153,778
	11,340,000	NYC GO³		5.000		12/01/2023	02/15/2013^A		11,835,104
	21,015,000	NYC GO¹		5.000		08/01/2024	08/01/2016^A		21,887,963
	3,650,000	NYC GO¹		5.000		12/01/2024	12/01/2014^A		3,776,035
	19,880,000	NYC GO¹		5.000		08/01/2028	08/01/2019^A		20,261,298
	1,000,000	NYC GO¹		5.000		10/15/2029	10/15/2013^A		989,120
	10,000,000	NYC GO³		5.000		04/01/2030	04/01/2015^A		10,018,346
	5,000	NYC GO¹		5.125		08/01/2018	02/01/2011^A		5,017

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


								Effective
Principal								Maturity
Amount			Coupon			Maturity		(Unaudited)*			Value

New York Continued
$	10,000	NYC GO¹		5.125	%		08/01/2022		02/01/2011	^A	$	10,025
	5,000	NYC GO¹		5.125			03/15/2025		03/15/2012	^A		5,272
	5,000	NYC GO¹		5.125			08/01/2025		02/01/2011	^A		5,013
	15,000	NYC GO¹		5.125			08/01/2025		02/01/2011	^A		15,038
	10,000	NYC GO¹		5.125			08/01/2025		02/01/2011	^A		10,025
	35,000	NYC GO¹		5.250			08/01/2011		02/01/2011	^A		35,134
	25,000	NYC GO¹		5.250			05/01/2012		06/01/2011	^A		25,396
	5,000	NYC GO		5.250			08/01/2012		02/01/2011	^A		5,018
	5,000	NYC GO¹		5.250			08/01/2015		02/01/2011	^A		5,018
	10,000	NYC GO¹		5.250			05/01/2021		06/01/2011	^A		10,131
	10,000	NYC GO¹		5.250			01/15/2023		01/15/2013	^A		10,864
	15,000	NYC GO¹		5.250			01/15/2023		01/15/2013	^A		15,718
	1,000,000	NYC GO¹		5.250			08/15/2024		08/15/2014	^A		1,058,980
	140,000	NYC GO¹		5.250			06/01/2027		06/01/2012	^A		143,308
	40,000	NYC GO		5.250			01/15/2028		01/15/2013	^A		43,584
	180,000	NYC GO¹		5.250			01/15/2028		01/15/2013	^A		180,859
	9,500,000	NYC GO¹		5.250			04/01/2028		04/01/2019	^A		9,836,775
	30,000	NYC GO¹		5.250			01/15/2033		01/15/2013	^A		32,688
	150,000	NYC GO¹		5.250			01/15/2033		01/15/2013	^A		150,255
	5,000	NYC GO¹		5.300			08/01/2024		02/01/2011	^A		5,014
	70,000	NYC GO¹		5.300			01/15/2026		01/15/2013	^A		72,466
	5,000	NYC GO¹		5.375			08/01/2015		02/01/2011	^A		5,018
	50,000	NYC GO¹		5.375			03/01/2027		03/01/2013	^A		54,875
	55,000	NYC GO¹		5.375			08/01/2027		02/01/2011	^A		55,129
	10,000,000	NYC GO³		5.500			04/01/2022		04/01/2019	^A		11,057,900
	70,000	NYC GO¹		5.500			08/01/2022		02/01/2011	^A		70,208
	95,000	NYC GO¹		5.500			08/01/2022		02/01/2011	^A		95,282
	140,000	NYC GO¹		5.500			06/01/2023		06/01/2013	^A		149,590
	670,000	NYC GO¹		5.500			06/01/2023		06/01/2013	^A		744,397
	20,000	NYC GO¹		5.500			02/15/2026		02/15/2011	^A		20,052
	50,000	NYC GO¹		5.500			02/15/2026		02/15/2011	^A		50,131
	850,000	NYC GO¹		5.500			06/01/2028		06/01/2012	^A		872,423
	15,000	NYC GO¹		5.500			11/15/2037		05/15/2011	^A		15,040
	30,000	NYC GO¹		5.600			12/01/2013		06/01/2011	^A		30,565
	95,000	NYC GO¹		5.625			10/01/2020		04/01/2011	^A		95,357
	10,000	NYC GO¹		5.750			05/15/2012		05/15/2011	^A		10,039
	10,000	NYC GO¹		5.750			05/15/2012		05/15/2011	^A		10,041
	570,000	NYC GO¹		5.750			03/01/2018		03/01/2013	^A		630,152
	55,000	NYC GO¹		5.750			08/01/2018		08/01/2012	^A		59,410
	255,000	NYC GO¹		5.750			08/01/2018		08/01/2012	^A		270,897
	500,000	NYC GO¹		5.750			08/01/2018		08/01/2012	^A		531,170

LIMITED TERM NEW YORK MUNICIPAL FUND


								Effective
Principal								Maturity
Amount			Coupon			Maturity		(Unaudited)*			Value

New York Continued
$	20,000	NYC GO¹		5.875	%		08/01/2015		02/01/2011	^A	$	20,079
	65,000	NYC GO¹		5.875			06/01/2019		06/01/2012	^A		69,808
	4,090,000	NYC GO¹		5.875			06/01/2019		06/01/2012	^A		4,326,770
	85,000	NYC GO¹		5.875			08/01/2019		08/01/2012	^A		92,025
	5,365,000	NYC GO¹		5.875			08/01/2019		08/01/2012	^A		5,709,862
	60,000	NYC GO¹		6.000			05/15/2011		05/15/2011			60,267
	5,000	NYC GO		6.000			02/01/2012		02/01/2011	^A		5,022
	5,000	NYC GO¹		6.000			08/01/2017		02/01/2011	^A		5,021
	5,000	NYC GO¹		6.000			02/01/2022		02/01/2011	^A		5,017
	35,000	NYC GO¹		6.000			02/15/2024		02/01/2011	^A		35,121
	590,000	NYC GO¹		6.350			05/15/2014		05/15/2011	^A		592,614
	5,000	NYC GO¹		7.000			02/01/2011		02/01/2011			5,027
	80,000	NYC GO¹		7.000			02/01/2012		02/01/2011	^A		80,410
	5,000	NYC GO¹		7.000			02/01/2018		02/01/2011	^A		5,025
	45,000	NYC GO¹		7.750			08/15/2027		02/15/2011	^A		45,292
	242,302	NYC HDC (Bay Towers)		6.500			08/15/2017		01/15/2011	^A		242,813
	2,783,925	NYC HDC (East Midtown Plaza)		6.500			11/15/2018		01/15/2011	^A		2,793,362
	27,873	NYC HDC (Essex Terrace)		6.500			07/15/2018		07/15/2018			27,968
	1,042,230	NYC HDC (Keith Plaza)		6.500			02/15/2018		01/15/2011	^A		1,045,763
	217,421	NYC HDC (Kingsbridge Arms)		6.500			08/15/2017		01/15/2011	^A		217,897
	1,500,000	NYC HDC (Multifamily Hsg.)¹		5.000			11/01/2030		10/13/2025	^C		1,376,100
	565,000	NYC HDC (Multifamily Hsg.)¹		5.050			11/01/2023		11/01/2012	^A		566,429
	515,000	NYC HDC (Multifamily Hsg.)¹		5.100			11/01/2027		05/01/2017	^A		507,527
	260,000	NYC HDC (Multifamily Hsg.)¹		5.200			11/01/2035		09/14/2033	^C		238,625
	370,000	NYC HDC (Multifamily Hsg.)¹		5.600			11/01/2019		06/01/2011	^A		370,315
	200,000	NYC HDC (Multifamily Hsg.)¹		6.250			11/01/2023		11/01/2018	^A		207,236
	900,000	NYC HDC (Multifamily Hsg.), Series A¹		5.375			11/01/2023		05/01/2012	^A		905,967
	20,000	NYC HDC (Multifamily Hsg.), Series C¹		5.700			05/01/2031		06/01/2011	^A		20,002
	255,000	NYC HDC (Multifamily Hsg.), Series E¹		6.250			05/01/2036		06/01/2011	^A		255,097
	13,000,000	NYC HDC, Series A¹		5.000			07/01/2025		07/01/2015	^A		13,203,970
	2,215,000	NYC HDC, Series C¹		5.000			11/01/2026		07/16/2022	^C		2,172,583
	11,460,000	NYC Health & Hospital Corp.¹		5.000			02/15/2024		02/15/2020	^A		11,601,760
	100,000	NYC Health & Hospital Corp.¹		5.375			02/15/2026		02/15/2012	^A		105,361
	18,600,000	NYC Health & Hospital Corp. (Health System)¹		5.000			02/15/2030		06/09/2028	^C		18,530,994
	9,400,000	NYC IDA (AIRIS JFK I/JFK International Airport)¹		5.500			07/01/2028		09/16/2023	^C		8,169,258
	8,150,000	NYC IDA (AIRIS JFK I/JFK International Airport)¹		6.000			07/01/2015		03/09/2013	^C		7,972,167
	1,840,000	NYC IDA (Beth Abraham Health Services)¹		6.000			02/15/2013		06/10/2011	^C		1,835,584
	395,000	NYC IDA (Beth Abraham Health Services)		6.000			11/15/2013		06/28/2011	^C		393,748

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


								Effective
Principal								Maturity
Amount			Coupon			Maturity		(Unaudited)*			Value

New York Continued
$	190,000	NYC IDA (Beth Abraham Health Services)		6.000	%		11/15/2013		11/15/2013		$	189,398
	570,000	NYC IDA (Calhoun School)		6.250			12/01/2016		11/22/2012	^C		551,030
	4,010,000	NYC IDA (Calhoun School)¹		6.250			12/01/2017		12/06/2013	^C		3,852,487
	440,000	NYC IDA (Center for Elimination of Family Violence)		6.250			11/01/2016		03/25/2013	^C		424,314
	6,375,000	NYC IDA (Chapin School)¹		4.800			11/01/2018		09/21/2014	^C		6,162,075
	525,000	NYC IDA (Comprehensive Care Management)		5.625			11/01/2015		11/01/2014	^A		520,307
	400,000	NYC IDA (Comprehensive Care Management)		5.625			11/01/2015		11/01/2014	^A		396,424
	2,045,000	NYC IDA (Comprehensive Care Management)¹		5.750			08/01/2018		12/04/2014	^C		1,874,508
	2,175,000	NYC IDA (Comprehensive Care Management)¹		5.750			11/01/2018		12/04/2014	^C		1,989,212
	2,270,000	NYC IDA (Comprehensive Care Management)¹		5.750			05/01/2019		12/03/2015	^C		2,037,870
	595,000	NYC IDA (Family Support Systems)⁴		6.500			11/01/2014		02/02/2012	^C		388,880
	650,000	NYC IDA (Gourmet Boutique)		5.250			05/01/2013		05/01/2013			595,829
	1,285,000	NYC IDA (Guttmacher Institute)¹		5.250			12/01/2016		12/29/2012	^C		1,177,844
	45,000	NYC IDA (Horace Mann School)¹		5.000			07/01/2023		07/01/2011	^A		45,001
	500,000	NYC IDA (Independent Living Assoc.)		6.200			07/01/2020		05/04/2015	^C		466,475
	16,350,000	NYC IDA (JFK International Airport)¹		8.000			08/01/2012		08/01/2012			16,684,848
	26,150,000	NYC IDA (Liberty-7 World Trade Center)¹		6.250			03/01/2015		03/01/2015			25,789,392
	6,000,000	NYC IDA (Liberty-7 World Trade Center)		6.500			03/01/2035		09/13/2027	^C		5,732,520
	10,000	NYC IDA (Lighthouse International)¹		4.500			07/01/2023		08/01/2021	^C		9,433
	2,030,000	NYC IDA (Lycee Francais De New York)¹		5.375			06/01/2023		12/01/2012	^A		2,059,800
	2,355,000	NYC IDA (Lycee Francais De New York)¹		5.500			06/01/2013		12/01/2012	^A		2,501,528
	730,000	NYC IDA (Lycee Francais De New York)¹		5.500			06/01/2015		12/01/2012	^A		765,814
	2,880,000	NYC IDA (Lycee Francais De New York)¹		5.500			06/01/2016		12/01/2012	^A		3,005,568
	2,000,000	NYC IDA (Lycee Francais De New York)¹		5.500			06/01/2017		12/01/2012	^A		2,071,200
	3,210,000	NYC IDA (Lycee Francais De New York)¹		5.500			06/01/2018		12/01/2012	^A		3,312,239
	570,000	NYC IDA (Manhattan Community Access Corp.)		5.250			12/01/2016		12/24/2012	^C		522,103
	3,065,000	NYC IDA (Margaret Tietz Nursing & Rehabilitation Center)¹		5.375			11/01/2016		03/18/2013	^C		2,828,750
	345,000	NYC IDA (Margaret Tietz Nursing & Rehabilitation Center)		5.375			11/01/2018		09/13/2014	^C		309,662
	1,695,000	NYC IDA (Margaret Tietz Nursing & Rehabilitation Center)¹		5.375			11/01/2018		10/05/2014	^C		1,521,381
	250,000	NYC IDA (Marymount School of New York)¹		5.125			09/01/2021		09/01/2012	^A		253,430
	980,000	NYC IDA (Metro Biofuels)		5.500			11/01/2013		12/12/2011	^C		915,565
	1,700,000	NYC IDA (Metropolitan College of New York)¹		5.750			03/01/2020		03/01/2018	^C		1,662,022
	4,585,000	NYC IDA (Montefiore Medical Center Corp.)¹		5.125			11/01/2025		06/01/2011	^A		4,587,797

LIMITED TERM NEW YORK MUNICIPAL FUND


								Effective
Principal								Maturity
Amount			Coupon			Maturity		(Unaudited)*	Value

New York Continued
$	5,865,000	NYC IDA (Montefiore Medical Center Corp.)¹		5.125	%	11/01/2035		11/01/2011^A	$	5,865,000
	250,000	NYC IDA (Queens Baseball Stadium)¹		5.000		01/01/2025		01/01/2025		226,655
	920,000	NYC IDA (Reece School)		6.500		12/01/2017		10/01/2014^C		904,342
	325,000	NYC IDA (Rockefeller Foundation)¹		5.375		07/01/2023		04/01/2011^A		326,030
	3,080,000	NYC IDA (Rosco, Inc.)¹		5.625		06/01/2022		06/01/2019^C		3,003,277
	1,000,000	NYC IDA (Royal Charter NY Presbyterian)¹		5.750		12/15/2029		12/15/2011^A		1,037,840
	4,400,000	NYC IDA (Samaritan Aids Services)¹		5.000		11/01/2024		11/01/2011^A		4,427,544
	500,000	NYC IDA (SFTU/YAI/CRV Obligated Group)		4.350		07/01/2011		07/01/2011		496,585
	100,000	NYC IDA (SFTU/YAI/CRV Obligated Group)		4.400		07/01/2012		07/01/2012		97,377
	435,000	NYC IDA (Showman Fabricators)		7.125		11/01/2013		03/24/2011^C		410,849
	75,000	NYC IDA (Special Needs Facilities Pooled Program)		4.150		07/01/2014		04/08/2012^C		72,932
	200,000	NYC IDA (Special Needs Facilities Pooled Program)		5.800		07/01/2023		10/12/2021^C		175,170
	840,000	NYC IDA (Stallion)		5.000		11/01/2016		11/01/2016		709,330
	430,000	NYC IDA (Stallion)		5.500		11/01/2017		11/01/2017		369,748
	1,170,000	NYC IDA (Studio School)¹		6.250		11/01/2018		11/12/2016^C		1,105,603
	8,605,000	NYC IDA (Terminal One Group Assoc.)¹		5.500		01/01/2017		01/01/2016^D		9,156,667
	11,820,000	NYC IDA (Terminal One Group Assoc.)¹		5.500		01/01/2018		01/01/2016^D		12,424,948
	14,620,000	NYC IDA (Terminal One Group Assoc.)¹		5.500		01/01/2019		01/01/2016^D		15,201,730
	15,245,000	NYC IDA (Terminal One Group Assoc.)¹		5.500		01/01/2020		01/01/2016^D		15,646,248
	9,750,000	NYC IDA (Terminal One Group Assoc.)¹		5.500		01/01/2021		01/01/2016^D		9,911,655
	48,790,000	NYC IDA (Terminal One Group Assoc.)¹		5.500		01/01/2024		01/01/2016^D		48,655,340
	715,000	NYC IDA (The Child School)		7.000		06/01/2013		05/01/2012^C		721,700
	6,630,000	NYC IDA (Unicef)¹		5.050		11/01/2018		09/30/2014^C		6,079,909
	1,000,000	NYC IDA (United Nations School)¹		6.350		12/01/2015		06/01/2011^A		1,003,010
	1,000,000	NYC IDA (Urban Resource Institute)¹		5.250		03/01/2023		03/01/2013^A		1,024,570
	560,000	NYC IDA (Urban Resource Institute)		6.500		11/01/2013		04/09/2011^C		545,591
	730,000	NYC IDA (Vaughn College Aeronautics)¹		5.000		12/01/2016		09/15/2013^C		718,970
	2,260,000	NYC IDA (Vaughn College Aeronautics)¹		5.000		12/01/2016		10/21/2012^C		2,225,851
	4,700,000	NYC IDA (Visy Paper)¹		7.800		01/01/2016		01/01/2011^A		4,702,491
	765,000	NYC IDA (Vocational Instruction)		7.250	⁵	02/01/2013		02/01/2013		557,746
	4,375,000	NYC IDA (Yeled Yalda Early Childhood)¹		5.350		11/01/2017		10/02/2013^C		3,963,881
	5,130,000	NYC IDA (YMCA of Greater New York)¹		5.250		08/01/2021		02/01/2011^A		5,132,462
	5,040,000	NYC IDA (YMCA of Greater New York)¹		5.800		08/01/2016	²	04/01/2011^A		5,049,979
	100,000	NYC IDA (Zeluck, Inc.)		6.250		11/01/2011		11/01/2011		100,485
	57,700,000	NYC Municipal Water Finance Authority¹		5.000		06/15/2026		06/15/2011^A		58,233,148
	5,000,000	NYC Municipal Water Finance Authority¹		5.000		06/15/2029		06/15/2016^A		5,068,950
	30,000,000	NYC Municipal Water Finance Authority¹		5.000		06/15/2030		06/15/2020^A		30,439,800
	11,720,000	NYC Municipal Water Finance Authority¹		5.000		06/15/2032		06/15/2011^A		11,723,633

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	44,840,000	NYC Municipal Water Finance Authority¹		5.125	%		06/15/2032			06/15/2011	^A	$	44,878,562
	3,735,000	NYC Municipal Water Finance Authority¹		5.125			06/15/2033			06/15/2011	^A		3,743,441
	50,000	NYC Municipal Water Finance Authority¹		5.750			06/15/2013	²		06/15/2011	^A		52,665
	33,745,000	NYC Transitional Finance Authority¹		5.000			08/01/2028			01/25/2028	^C		33,743,650
	150,000	NYC Transitional Finance Authority¹		5.375			01/15/2030			01/15/2019	^A		156,354
	250,000	NYC Transportation Authority MTA (Triborough Bridge & Tunnel Authority)¹		5.400			01/01/2014			01/01/2011	^A		250,798
	3,880,000	NYC Trust for Cultural Resources (Museum of American Folk Art)		6.000			07/01/2022			03/01/2020	^C		2,279,073
	2,720,000	NYC Trust for Cultural Resources (Museum of American Folk Art)		6.125			07/01/2030			04/03/2027	^C		1,563,483
	250,000	NYC Trust for Cultural Resources (Museum of Modern Art)¹		5.125			07/01/2031			07/01/2012	^A		250,195
	2,460,000	NYC Trust for Cultural Resources (Museum of Modern Art)¹		5.500			01/01/2021			04/01/2011	^A		2,518,499
	250,000	NYS DA (Augustana Lutheran Home)¹		5.500			02/01/2041	²		02/01/2013	^A		250,473
	20,000	NYS DA (Brookdale Hospital Medical Center)¹		5.100			02/15/2012			06/01/2011	^A		20,066
	25,000	NYS DA (Brookdale Hospital Medical Center)¹		5.200			02/15/2016			02/15/2011	^A		25,051
	65,000	NYS DA (Brookdale Hospital Medical Center)¹		5.300			02/15/2017			02/15/2011	^A		65,123
	110,000	NYS DA (Brooklyn Hospital Center)¹		5.100			02/01/2019			02/01/2011	^A		110,087
	250,000	NYS DA (Brooklyn Law School)¹		5.125			07/01/2030			07/01/2013	^A		249,238
	30,000	NYS DA (Buena Vida Nursing Home)¹		5.000			07/01/2018			01/01/2011	^A		30,039
	75,000	NYS DA (Canisius College)¹		5.000			07/01/2019			07/01/2015	^A		74,800
	1,300,000	NYS DA (Canisius College)¹		5.000			07/01/2022			07/01/2022			1,230,294
	50,000	NYS DA (Carmel Richmond Nursing Home)¹		5.000			07/01/2018			01/01/2011	^A		49,753
	1,120,000	NYS DA (Catskill Regional Medical Center)		5.250			02/15/2023			02/15/2015	^A		1,149,994
	1,350,000	NYS DA (Chapel Oaks)¹		5.375			07/01/2017	²		04/01/2011	^A		1,354,793
	3,290,000	NYS DA (Chapel Oaks)¹		5.450			07/01/2026			01/01/2011	^A		3,291,842
	9,000,000	NYS DA (Cornell University)¹		5.000			07/01/2035			07/01/2016	^A		9,062,370
	220,000	NYS DA (Culinary Institute of America)¹		5.000			07/01/2022			07/01/2011	^A		220,183
	25,000	NYS DA (D’Youville College)		4.700			07/01/2012			07/01/2011	^A		25,786
	145,000	NYS DA (D’Youville College)		5.250			07/01/2025			07/01/2013	^A		140,286
	350,000	NYS DA (Dept. of Health)¹		5.000			07/01/2021			07/01/2014	^A		365,159
	60,000	NYS DA (Dept. of Health)¹		5.000			07/01/2024			01/01/2011	^A		60,019
	35,000	NYS DA (Dept. of Health)¹		5.000			07/01/2028			01/01/2011	^A		34,558
	880,000	NYS DA (Dept. of Health)¹		5.250			07/01/2023			07/01/2014	^A		910,941
	1,360,000	NYS DA (Dept. of Health)¹		5.500			07/01/2021			04/01/2011	^A		1,364,447
	2,525,000	NYS DA (Ellis Hospital)¹		5.050			08/15/2024			08/15/2014	^A		2,551,462
	100,000	NYS DA (Ellis Hospital)¹		5.500			08/01/2015			02/01/2011	^A		100,204
	150,000	NYS DA (Ellis Hospital)¹		5.600			08/01/2025			02/01/2011	^A		150,081
	175,000	NYS DA (Ellis Hospital)¹		5.625			08/01/2035	²		02/01/2011	^A		175,018

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	785,000	NYS DA (FNHC/KR/MMWNHC Obligated Group)		5.750	%		07/01/2017			04/01/2011	^A	$	787,379
	30,000	NYS DA (Fordham University)¹		5.000			07/01/2028			01/01/2011	^A		30,000
	3,835,000	NYS DA (Frances Schervier Home & Hospital Obligated Group)¹		5.500			07/01/2017	²		04/01/2011	^A		3,837,416
	10,125,000	NYS DA (Frances Schervier Home & Hospital Obligated Group)¹		5.500			07/01/2027	²		04/01/2011	^A		10,130,366
	50,000	NYS DA (Frances Schervier Home & Hospital Obligated Group)¹		5.500			07/01/2027			06/09/2023	^C		47,858
	50,000	NYS DA (Green Chimneys School)¹		5.500			07/01/2018			01/01/2011	^A		50,403
	1,000,000	NYS DA (GSHMC/CHSLI Obligated Group)¹		5.750			07/01/2014			04/01/2011	^A		1,007,250
	1,000,000	NYS DA (Health Center/BFCC/USBFCC Obligated Group)¹		5.000			11/15/2019			11/15/2011	^A		1,025,640
	10,565,000	NYS DA (Hospital)¹		6.450			08/15/2024			08/15/2012	^A		10,839,162
	1,935,000	NYS DA (Hunts Point Multi-Service Center)¹		5.625			07/01/2022			01/01/2011	^A		1,936,800
	35,000	NYS DA (John T. Mather Memorial Hospital)		5.250			07/01/2015			04/01/2011	^A		35,027
	170,000	NYS DA (John T. Mather Memorial Hospital)		5.375			07/01/2019			01/01/2011	^A		169,986
	1,645,000	NYS DA (John T. Mather Memorial Hospital)¹		5.750			07/01/2025			02/27/2023	^C		1,564,313
	15,210,000	NYS DA (Kaleida Health)¹		5.050			02/15/2025			02/15/2014	^A		15,291,982
	1,015,000	NYS DA (L.I. University)¹		5.250			09/01/2028			10/08/2026	^C		962,311
	40,000	NYS DA (La Salle School)¹		5.000			07/01/2018			01/01/2011	^A		40,104
	660,000	NYS DA (Le Moyne College)¹		5.000			07/01/2018			04/01/2011	^A		661,723
	1,100,000	NYS DA (Leake & Watts Services)¹		5.000			07/01/2023			07/01/2014	^A		1,117,809
	10,000	NYS DA (Lenox Hill Hospital Obligated Group)¹		5.750			07/01/2016			07/01/2011	^A		10,127
	2,000,000	NYS DA (Lenox Hill Hospital Obligated Group)¹		5.750			07/01/2017			07/01/2012	^A		2,020,560
	16,800,000	NYS DA (Maimonides Medical Center)¹		5.750			08/01/2029			08/01/2014	^A		17,114,160
	100,000	NYS DA (Manhattan College)		5.500			07/01/2019			07/01/2013	^A		101,437
	75,000	NYS DA (March of Dimes)¹		5.600			07/01/2012			04/01/2011	^A		75,236
	615,000	NYS DA (Master BOCES Program)¹		5.250			08/15/2023			08/15/2013	^A		628,930
	15,000	NYS DA (Memorial Hospital of William F. & Gertrude F. Jones)¹		5.250			08/01/2025			02/01/2011	^A		15,004
	30,000	NYS DA (Mental Health Services Facilities)¹		5.000			02/15/2023			02/15/2011	^A		30,011
	14,000,000	NYS DA (Mental Health Services Facilities)¹		5.000			02/15/2028			02/15/2014	^A		14,011,200
	5,000	NYS DA (Mental Health Services Facilities)		5.250			08/15/2013			02/15/2011	^A		5,016
	225,000	NYS DA (Mental Health Services Facilities)¹		5.250			02/15/2023			02/15/2014	^A		228,002
	5,710,000	NYS DA (Miriam Osborn Memorial Home Assoc.)¹		6.875			07/01/2019	²		07/01/2012	^A		5,826,541
	200,000	NYS DA (Montefiore Medical Center)¹		5.000			02/01/2028			02/01/2015	^A		197,954
	11,875,000	NYS DA (Mount Sinai School of Medicine)¹		5.000			07/01/2035			04/02/2032	^C		11,256,906
	5,000,000	NYS DA (Municipal Health Facilities)¹		5.000			01/15/2032			01/17/2031	^C		4,860,400

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	15,000	NYS DA (New York & Presbyterian Hospital)¹		4.750	%		08/01/2014			08/01/2011	^A	$	15,029
	10,000	NYS DA (New York & Presbyterian Hospital)¹		5.000			02/01/2019			02/01/2011	^A		10,020
	255,000	NYS DA (New York & Presbyterian Hospital)¹		5.000			08/01/2032			02/01/2011	^A		255,518
	50,000	NYS DA (New York Downtown Hospital)¹		5.100			02/15/2012			02/15/2011	^A		50,166
	30,000	NYS DA (New York Downtown Hospital)¹		5.200			02/15/2015			02/15/2011	^A		30,069
	50,000	NYS DA (New York Downtown Hospital)¹		5.200			02/15/2016			02/15/2011	^A		50,102
	280,000	NYS DA (New York Downtown Hospital)¹		5.300			02/15/2020			02/15/2011	^A		280,274
	20,000	NYS DA (New York Hospital Medical Center of Queens)¹		5.450			08/15/2019			08/15/2011	^A		20,013
	100,000	NYS DA (New York Medical College)¹		5.000			07/01/2021			01/01/2011	^A		100,254
	115,000	NYS DA (New York Methodist Hospital)¹		5.250			07/01/2018			07/01/2014	^A		118,666
	2,250,000	NYS DA (New York Methodist Hospital)¹		5.250			07/01/2024			07/01/2014	^A		2,252,138
	4,525,000	NYS DA (North General Hospital)¹		5.750			02/15/2015			02/15/2013	^A		4,714,688
	4,440,000	NYS DA (North General Hospital)¹		5.750			02/15/2019			02/15/2013	^A		4,516,146
	3,750,000	NYS DA (North General Hospital)¹		5.750			02/15/2020			02/15/2013	^A		3,795,488
	110,000	NYS DA (North Shore University Hospital at Forest Hills/North Shore University Hospital Obligated Group)¹		5.000			11/01/2023			06/01/2011	^A		109,995
	35,000	NYS DA (North Shore University Hospital)¹		5.000			11/01/2023			06/01/2011	^A		34,998
	980,000	NYS DA (Northeast Parent & Child)¹		5.500			07/01/2018			04/01/2011	^A		983,165
	5,000	NYS DA (NSUH/NSUHGC/NSUHPL Obligated Group)¹		5.000			11/01/2023			06/01/2011	^A		5,000
	10,535,000	NYS DA (NSUH/NSUHGC/NSUHPL Obligated Group)¹		5.200			11/01/2017			06/01/2011	^A		10,545,114
	200,000	NYS DA (NSUH/NSUHGC/NSUHPL Obligated Group)¹		5.250			11/01/2019			06/01/2011	^A		200,118
	11,100,000	NYS DA (NYU Hospitals Center)¹		5.000			07/01/2026			03/11/2025	^C		10,756,677
	5,525,000	NYS DA (NYU Hospitals Center)¹		5.250			07/01/2024			07/01/2017	^A		5,552,183
	14,170,000	NYS DA (NYU)³		5.250			07/01/2027			07/01/2019	^A		14,949,633
	60,000	NYS DA (Ozanam Hall of Queens Nursing Home)¹		5.000			11/01/2026			12/06/2024	^C		55,330
	2,000,000	NYS DA (Park Ridge Hsg.)¹		6.375			08/01/2020	²		02/01/2011	^A		2,022,600
	1,595,000	NYS DA (Park Ridge Hsg.)¹		6.500			08/01/2025	²		02/01/2011	^A		1,613,885
	3,680,000	NYS DA (Providence Rest)¹		5.000			07/01/2021			07/12/2020	^C		2,912,278
	1,250,000	NYS DA (Providence Rest)		5.125			07/01/2030			08/06/2028	^C		852,475
	150,000	NYS DA (Resurrection Rest Home Castleton on Hudson)¹		6.050			08/01/2035	²		02/01/2011	^A		150,074
	8,730,000	NYS DA (Rochester General Hospital)¹		5.000			12/01/2025			10/25/2021	^C		8,073,155
	7,735,000	NYS DA (Rosalind & Joseph Gurwin Geriatric Home)¹		5.600			02/01/2027			02/01/2011	^A		7,737,630
	4,805,000	NYS DA (Ryan-Clinton Community Health Center)¹		6.100			07/01/2019	²		01/01/2011	^A		4,846,371

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	21,000,000	NYS DA (School District Financing)¹		5.375	%		10/01/2022			10/01/2012	^A	$	21,759,360
	5,000,000	NYS DA (School District Financing)¹		5.750			10/01/2022	²		10/01/2012	^A		5,318,900
	6,180,000	NYS DA (School District Financing)¹		5.750			10/01/2030	²		10/01/2012	^A		6,499,444
	595,000	NYS DA (SCHRC)¹		5.500			07/01/2022			07/01/2011	^A		596,946
	3,460,000	NYS DA (SCHRC/CHSLI Obligated Group)¹		5.700			07/01/2013			04/01/2011	^A		3,485,812
	3,820,000	NYS DA (SCHRC/CHSLI Obligated Group)¹		5.750			07/01/2014			04/01/2011	^A		3,847,695
	1,470,000	NYS DA (SCHRC/CHSLI Obligated Group)¹		5.800			07/01/2015			07/01/2011	^A		1,480,364
	10,000	NYS DA (SCSMC/SV/CHSLI Obligated Group)¹		5.750			07/01/2020			07/01/2011	^A		10,064
	21,020,000	NYS DA (SCSMC/SV/CHSLI Obligated Group)¹		6.000			07/01/2030	²		07/01/2011	^A		21,076,334
	15,000,000	NYS DA (SCSMC/SV/CHSLI Obligated Group)¹		6.500			07/01/2020	²		07/01/2012	^A		15,151,200
	1,100,000	NYS DA (SFH)¹		5.500			07/01/2029			09/17/2026	^C		1,087,427
	250,000	NYS DA (SFH/CHSLI Obligated Group)¹		5.500			07/01/2022			07/01/2011	^A		250,818
	1,000,000	NYS DA (SFH/CHSLI Obligated Group)¹		5.800			07/01/2015			04/01/2011	^A		1,007,050
	15,480,000	NYS DA (SFH/GSHMC/MMC/SCHRC Obligated Group)¹		5.000			07/01/2021			07/01/2014	^A		15,678,144
	35,000	NYS DA (Skidmore College)¹		5.000			07/01/2028			01/01/2011	^A		34,558
	230,000	NYS DA (Southside Hospital)¹		5.000			02/15/2018			02/15/2011	^A		230,219
	170,000	NYS DA (Southside Hospital)¹		5.000			02/15/2025			02/15/2011	^A		166,952
	135,000	NYS DA (Southside Hospital)¹		5.200			02/15/2021			02/15/2011	^A		135,058
	10,000	NYS DA (Special Act School Districts)		5.750			07/01/2011			04/01/2011	^A		10,036
	35,000	NYS DA (Special Act School Districts)¹		5.750			07/01/2019			07/01/2011	^A		35,287
	320,000	NYS DA (Special Act School Districts)¹		5.875			07/01/2013			04/01/2011	^A		321,146
	15,000	NYS DA (Special Act School Districts)		6.000			07/01/2016			04/01/2011	^A		15,048
	925,000	NYS DA (Special Act School Districts)¹		6.000			07/01/2019			04/01/2011	^A		928,145
	2,500,000	NYS DA (Special Surgery Hospital)¹		6.250			08/15/2034			08/15/2019	^A		2,693,850
	5,250,000	NYS DA (SS Joachim & Anne Residence)¹		5.250			07/01/2027			07/01/2012	^A		5,251,470
	2,730,000	NYS DA (St. Barnabas Hospital)¹		5.350			08/01/2017			02/01/2011	^A		2,733,877
	10,000,000	NYS DA (St. John’s University)¹		5.250			07/01/2032			08/06/2030	^C		9,823,000
	3,000,000	NYS DA (St. Joseph’s College)¹		5.250			07/01/2025			08/08/2023	^C		2,993,970
	5,090,000	NYS DA (St. Joseph’s Hospital Health Center)¹		5.250			07/01/2018	²		01/01/2011	^A		5,091,222
	3,685,000	NYS DA (St. Lawrence)¹		5.400			08/15/2026			08/15/2017	^A		3,874,004
	100,900,000	NYS DA (St. Luke’s Roosevelt Hospital)¹		4.800			08/15/2025			02/15/2020	^C		97,097,079
	5,915,000	NYS DA (St. Vincent DePaul Residence)¹		5.300			07/01/2018	²		01/01/2011	^A		5,928,605
	10,000,000	NYS DA (State Personal Income Tax Authority)¹		5.000			03/15/2030			03/15/2015	^A		10,095,500
	100,000	NYS DA (Staten Island University Hospital)		5.000			07/01/2011			01/01/2011	^A		100,144
	40,000	NYS DA (Staten Island University Hospital)¹		5.000			07/01/2017			07/01/2011	^A		39,607
	345,000	NYS DA (Suffern Free Library Assoc.)¹		5.000			07/01/2020			01/01/2011	^A		345,876
	295,000	NYS DA (Suffern Free Library)¹		5.000			07/01/2023			01/01/2011	^A		295,009
	2,820,000	NYS DA (The Bronx-Lebanon Hospital Center)¹		6.250			08/15/2022			02/15/2014	^A		2,957,729

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	250,000	NYS DA (The Bronx-Lebanon Hospital Center)¹		6.250	%		02/15/2035			02/15/2019	^A	$	262,965
	100,000	NYS DA (The Children’s Home of Kingston)		5.250			07/01/2017			01/01/2011	^A		100,349
	1,630,000	NYS DA (The Rosalind & Joseph Gurwin Jewish Geriatric Center of Long Island)¹		5.400			02/01/2015			02/01/2011	^A		1,633,342
	170,000	NYS DA (The Rosalind & Joseph Gurwin Jewish Geriatric Center of Long Island)¹		5.700			02/01/2037			02/01/2011	^A		170,027
	2,150,000	NYS DA (United Cerebral Palsy Assoc. of Nassau County)¹		5.500			07/01/2024			04/01/2011	^A		2,151,570
	1,700,000	NYS DA (United Cerebral Palsy Assoc. of NYC)¹		5.750			07/01/2018	²		07/01/2012	^A		1,724,038
	370,000	NYS DA (United Cerebral Palsy Assoc. of NYC/United Cerebral Palsy Assoc. Obligated Group)¹		5.000			07/01/2013			07/01/2012	^A		379,912
	15,000	NYS DA (United Cerebral Palsy Assoc.)		5.375			07/01/2011			04/01/2011	^A		15,059
	5,000	NYS DA (Upstate Community Colleges)¹		5.000			07/01/2028			07/01/2011	^A		5,001
	1,905,000	NYS DA (Upstate Community Colleges)¹		5.125			07/01/2021			07/01/2014	^A		1,997,564
	1,165,000	NYS DA (Upstate Community Colleges)¹		5.125			07/01/2022			07/01/2014	^A		1,227,794
	20,000	NYS DA (W.K. Nursing Home)¹		5.950			02/01/2016	²		03/01/2011	^A		20,044
	35,000	NYS DA (W.K. Nursing Home)		6.050			02/01/2026			06/01/2011	^A		35,027
	2,500,000	NYS DA (Willow Towers)¹		5.400			02/01/2034			08/01/2014	^A		2,510,375
	2,000,000	NYS DA (Winthrop University Hospital)¹		5.500			07/01/2023			07/01/2013	^A		2,011,100
	285,000	NYS DA (Wyckoff Heights Medical Center)¹		5.200			02/15/2013			02/15/2011	^A		285,735
	1,000,000	NYS DA (Wyckoff Heights Medical Center)¹		5.200			02/15/2014			02/15/2011	^A		1,002,420
	20,000	NYS DA (Wyckoff Heights Medical Center)¹		5.200			02/15/2014			02/15/2011	^A		20,048
	250,000	NYS DA (Wyckoff Heights Medical Center)¹		5.200			02/15/2015			02/15/2011	^A		250,575
	26,180,000	NYS DA (Wyckoff Heights Medical Center)¹		5.300			08/15/2021			02/15/2011	^A		26,199,373
	1,020,000	NYS DA (Wyckoff Heights Medical Center)¹		5.300			08/15/2021			02/15/2011	^A		1,020,755
	39,570,000	NYS DA, Series B³		6.650			08/15/2030			08/15/2012	^A		40,696,843
	1,000,000	NYS DA, Series B¹		6.650			08/15/2030			08/15/2012	^A		1,028,470
	5,000	NYS EFC		5.600			09/15/2013			03/15/2011	^A		5,020
	1,000,000	NYS EFC¹		5.650			02/15/2017			02/15/2011	^A		1,003,990
	45,000	NYS EFC (Clean Water & Drinking Revolving Funds)¹		5.200			07/15/2016			07/15/2011	^A		45,170
	150,000	NYS EFC (Clean Water & Drinking Revolving Funds)¹		5.250			11/15/2017			05/15/2011	^A		150,548
	175,000	NYS EFC (Clean Water & Drinking Revolving Funds)¹		5.700			06/15/2012			06/15/2011	^A		175,705
	955,000	NYS EFC (L.I. Water Corp.)¹		5.250			08/01/2027			08/01/2027			900,937
	20,000	NYS EFC (NYC Municipal Water Finance Authority)		5.875			06/15/2014			06/15/2011	^A		20,083
	25,000	NYS EFC (NYS Water Services)¹		5.700			07/15/2012			02/01/2011	^A		25,101
	7,500,000	NYS EFC (NYS Water Services)¹		5.950			01/15/2020			01/15/2013	^A		7,706,025

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	1,705,000	NYS EFC (NYS Water Services)		6.875	%		06/15/2014	²		06/15/2011	^A	$	1,713,525
	160,000	NYS EFC (NYS Water Services)¹		7.500			06/15/2012	²		06/15/2011	^A		160,918
	300,000	NYS EFC (Pollution Control)¹		5.500			08/15/2013			08/15/2011	^A		301,227
	500,000	NYS EFC (Pollution Control)¹		5.550			08/15/2014			02/15/2011	^A		501,950
	135,000	NYS EFC (Pollution Control)¹		5.650			02/15/2018			02/15/2011	^A		135,313
	60,000	NYS EFC (Pollution Control)¹		6.500			06/15/2014			06/15/2011	^A		60,281
	1,040,000	NYS EFC (Spring Valley Water Company)¹		5.650			11/01/2023			06/01/2011	^A		1,040,416
	5,800,000	NYS EFC (Spring Valley Water Company)¹		6.300			08/01/2024			02/01/2011	^A		5,802,900
	25,000	NYS EFC (State Water Revolving Fund)		5.450			02/15/2012			08/15/2011	^A		25,096
	100,000	NYS EFC (State Water Revolving Fund)¹		5.650			12/15/2016			06/15/2011	^A		100,399
	36,805,000	NYS ERDA (Brooklyn Union Gas Company)¹		5.500			01/01/2021			04/01/2011	^A		36,920,200
	3,000,000	NYS ERDA (Brooklyn Union Gas Company) Linked SAVRS & RIBS¹		6.368	⁶		04/01/2020			04/01/2011	^A		3,054,600
	8,310,000	NYS ERDA (Central Hudson Gas & Electric Co.)¹		5.450			08/01/2027			02/01/2011	^A		8,445,370
	25,000	NYS ERDA (Central Hudson Gas & Electric Co.)¹		6.500			12/01/2028			12/01/2013	^A		25,796
	10,650,000	NYS ERDA (Con Ed)¹		0.473	⁶		10/01/2036			10/01/2036			10,040,820
	4,740,000	NYS ERDA (LILCO)¹		5.150			03/01/2016			03/01/2011	^A		4,832,762
	13,795,000	NYS ERDA (LILCO)¹		5.150			03/01/2016			03/01/2011	^A		14,064,968
	5,245,000	NYS ERDA (LILCO)¹		5.150			03/01/2016			03/01/2011	^A		5,347,645
	1,280,000	NYS ERDA (LILCO)¹		5.150			03/01/2016			03/01/2011	^A		1,305,050
	20,495,000	NYS ERDA (LILCO)¹		5.300			11/01/2023			03/01/2011	^A		20,500,329
	200,000	NYS ERDA (LILCO)¹		5.300			10/01/2024			03/01/2011	^A		200,002
	5,720,000	NYS ERDA (Niagara Mohawk Power Corp.)¹		0.652	⁶		12/01/2026			12/01/2026			4,551,976
	315,000	NYS ERDA (Niagara Mohawk Power Corp.)¹		5.150			11/01/2025			06/01/2011	^A		315,072
	880,000	NYS ERDA (NYS Electric & Gas Corp.)¹		5.350			12/01/2028			12/01/2028			820,415
	5,000	NYS GO¹		5.000			09/15/2017			03/15/2011	^A		5,016
	150,000	NYS GO		5.250			10/01/2012			04/01/2011	^A		150,582
	15,000	NYS GO¹		5.250			11/15/2017			05/15/2011	^A		15,231
	35,000	NYS GO¹		5.250			05/01/2018			06/01/2011	^A		35,482
	5,000	NYS GO¹		5.250			11/15/2021			05/15/2011	^A		5,068
	80,000	NYS GO¹		5.300			07/15/2015			01/15/2011	^A		80,279
	10,000	NYS GO¹		5.300			07/15/2017			01/15/2011	^A		10,035
	100,000	NYS GO		5.375			10/01/2011			04/01/2011	^A		100,427
	50,000	NYS GO¹		5.500			07/15/2024			10/01/2012	^A		50,141
	495,000	NYS GO¹		5.500			07/15/2024			02/01/2011	^A		496,391
	40,000	NYS GO¹		6.600			12/01/2014			06/01/2011	^A		40,912
	3,250,000	NYS HFA (Affordable Hsg.)¹		5.250			11/01/2027			09/07/2025	^C		3,210,415
	595,000	NYS HFA (Division Street)¹		5.000			02/15/2026			02/15/2016	^A		584,135
	755,000	NYS HFA (Golden Age Apartments)¹		5.000			02/15/2037			11/07/2024	^C		697,061

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	3,000,000	NYS HFA (Horizons at Wawayanda)¹		5.350	%		06/01/2025			08/01/2017	^A	$	3,051,750
	20,000	NYS HFA (Hospital & Healthcare)		5.000			11/01/2011			03/01/2011	^A		20,056
	9,605,000	NYS HFA (Hospital & Nursing Home)¹		5.150			11/01/2016			06/01/2011	^A		9,647,454
	40,000	NYS HFA (Hospital & Nursing Home)		5.500			11/01/2012			06/01/2011	^A		42,835
	65,000	NYS HFA (Hospital & Nursing Home)		5.500			11/01/2013			06/01/2011	^A		71,672
	10,000	NYS HFA (Hospital & Nursing Home)		6.000			11/01/2013			06/01/2011	^A		11,357
	35,000	NYS HFA (Hospital & Nursing Home)		6.000			11/01/2014			06/01/2011	^A		40,989
	25,000	NYS HFA (Loewn Devel. of Wappingers Falls)¹		5.250			08/15/2019			02/15/2011	^A		25,020
	55,000	NYS HFA (Meadow Manor)¹		7.750			11/01/2019	²		06/01/2011	^A		55,942
	345,000	NYS HFA (Multifamily Hsg.)¹		5.300			08/15/2022			08/15/2012	^A		347,160
	1,340,000	NYS HFA (Multifamily Hsg.)¹		5.300			08/15/2024			02/15/2011	^A		1,340,281
	50,000	NYS HFA (Multifamily Hsg.)¹		5.400			02/15/2016			02/15/2012	^A		50,085
	1,125,000	NYS HFA (Multifamily Hsg.)¹		5.550			08/15/2019			08/15/2011	^A		1,131,514
	40,000	NYS HFA (Multifamily Hsg.)¹		5.600			02/15/2011			02/15/2011			40,201
	1,275,000	NYS HFA (Multifamily Hsg.)¹		5.600			08/15/2019			08/15/2011	^A		1,282,433
	1,240,000	NYS HFA (Multifamily Hsg.)¹		5.600			02/15/2026			02/15/2011	^A		1,240,273
	1,730,000	NYS HFA (Multifamily Hsg.)¹		5.600			08/15/2033			08/15/2012	^A		1,731,540
	270,000	NYS HFA (Multifamily Hsg.)¹		6.100			08/15/2028			02/15/2011	^A		270,181
	125,000	NYS HFA (Multifamily Hsg.)¹		6.250			08/15/2025			02/15/2011	^A		125,100
	325,000	NYS HFA (Multifamily Hsg.)¹		6.750			11/15/2036			05/15/2011	^A		324,412
	15,000	NYS HFA (Multifamily Hsg.)¹		6.800			11/01/2014			06/01/2011	^A		15,047
	90,000	NYS HFA (Multifamily Hsg.)¹		6.850			11/01/2019	²		06/01/2011	^A		90,174
	430,000	NYS HFA (Newburgh Interfaith Emergency Hsg.)		7.050			11/01/2012			05/15/2011	^A		431,733
	50,000	NYS HFA (Nonprofit Hsg.)		6.200			11/01/2011			06/01/2011	^A		50,680
	40,000	NYS HFA (Nonprofit Hsg.)		6.200			11/01/2012			06/01/2011	^A		40,535
	25,000	NYS HFA (Nonprofit Hsg.)		6.200			11/01/2013			06/01/2011	^A		25,325
	5,385,000	NYS HFA (Phillips Village)		7.750			08/15/2017			02/15/2011	^A		5,450,051
	2,770,000	NYS HFA (Senior Devel. Hsg.)¹		5.100			11/15/2023			11/15/2017	^A		2,806,176
	1,590,000	NYS HFA (Simeon Dewitt)¹		8.000			11/01/2018	²		06/01/2011	^A		1,637,716
	270,000	NYS HFA (Tiffany Gardens)¹		4.500			08/15/2015			10/11/2012	^B		282,020
	2,190,000	NYS HFA, Series A¹		6.100			11/01/2015	²		06/01/2011	^A		2,198,979
	405,000	NYS HFA, Series A¹		6.125			11/01/2020	²		06/01/2011	^A		405,365
	1,045,000	NYS Medcare (Hospital & Nursing Home)¹		6.300			08/15/2023			02/15/2011	^A		1,048,480
	740,000	NYS Medcare (Hospital & Nursing Home)¹		6.375			08/15/2033			02/15/2011	^A		742,176
	275,000	NYS Medcare (Hospital & Nursing Home)¹		7.000			08/15/2032			02/15/2011	^A		275,949
	135,000	NYS Medcare (Hospital & Nursing Home)¹		7.400			11/01/2016	²		06/01/2011	^A		135,624
	65,000	NYS Medcare (Hospital & Nursing Home)¹		9.375			11/01/2016	²		06/01/2011	^A		65,449
	10,710,000	NYS Municipal Bond Bank Agency (Special School Purpose)¹		5.250			12/01/2019			06/01/2013	^A		11,334,179
	2,930,000	NYS Municipal Bond Bank Agency (Special School Purpose)¹		5.500			06/01/2015			06/01/2013	^A		3,166,217

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	135,000	NYS UDC (South Mall) CAB		5.857	%⁷		01/01/2011			01/01/2011		$	135,000
	130,000	NYS UDC (South Mall) CAB		6.042	⁷		01/01/2011			01/01/2011			130,000
	4,000,000	NYS UDC (Subordinated Lien)¹		5.125			07/01/2020			07/01/2014	^A		4,192,200
	1,000,000	NYS UDC (Subordinated Lien)¹		5.125			07/01/2021			07/01/2014	^A		1,045,710
	170,000	NYS UDC (Subordinated Lien)		5.500			07/01/2016			01/01/2011	^A		170,682
	5,550,000	NYS UDC (Subordinated Lien)¹		5.500			07/01/2016			04/01/2011	^A		5,570,036
	6,695,000	NYS UDC (Subordinated Lien)¹		5.500			07/01/2022	²		04/01/2011	^A		6,717,495
	6,795,000	NYS UDC (Subordinated Lien)¹		5.600			07/01/2026	²		01/01/2011	^A		6,813,482
	3,675,000	NYS UDC, Series D¹		5.625			01/01/2028			01/01/2019	^A		3,842,176
	70,000	Oneida County, NY GO¹		5.400			03/15/2011			03/15/2011			70,642
	1,885,000	Oneida County, NY IDA (Faxton Hospital)¹		6.625			01/01/2015	²		01/01/2011	^A		1,899,232
	130,000	Oneida County, NY IDA (Mohawk Valley Network/Faxton-St. Luke’s Healthcare Obligated Group)¹		5.000			01/01/2013			01/01/2011	^A		132,484
	1,190,000	Oneida County, NY IDA (Presbyterian Home)¹		5.250			03/01/2019			03/01/2011	^A		1,192,749
	1,615,000	Oneida County, NY IDA (Presbyterian Home)¹		6.100			06/01/2020			06/01/2011	^A		1,629,309
	905,000	Oneida County, NY IDA (Presbyterian Home)¹		6.250			06/01/2015			06/01/2011	^A		916,955
	840,000	Onondaga County, NY IDA (Le Moyne College)¹		5.500			03/01/2014			03/01/2011	^A		842,579
	235,000	Orange County, NY IDA (Orange Mental Retardation Properties)¹		6.125			05/01/2016	²		05/15/2011	^A		235,823
	4,090,000	Orange County, NY IDA (St. Luke’s Cornwall Hospital Obligated Group)¹		6.000			12/01/2016	²		12/01/2012	^A		4,186,279
	1,520,000	Orange County, NY IDA (St. Luke’s Cornwall Hospital Obligated Group)¹		6.000			12/01/2016	²		12/01/2012	^A		1,555,781
	65,000	Oswego County, NY IDA (Seneca Hill Manor)¹		5.550			08/01/2022			02/01/2011	^A		65,034
	3,510,000	Oswego County, NY IDA (Seneca Hill Manor)¹		5.650			08/01/2037			02/01/2011	^A		3,510,176
	565,000	Otsego County, NY IDA (AOFMHS)¹		5.350			10/01/2017			04/01/2011	^A		566,966
	510,000	Otsego County, NY IDA (Bassett Healthcare Project)¹		5.375			11/01/2020			06/01/2011	^A		509,969
	1,350,000	Otsego County, NY IDA (Hartwick College)¹		6.000			07/01/2013			07/01/2012	^A		1,369,278
	1,435,000	Otsego County, NY IDA (Hartwick College)¹		6.000			07/01/2014			07/01/2012	^A		1,450,541
	1,520,000	Otsego County, NY IDA (Hartwick College)¹		6.000			07/01/2015			07/01/2012	^A		1,529,500
	1,610,000	Otsego County, NY IDA (Hartwick College)¹		6.000			07/01/2016			07/01/2012	^A		1,615,249
	3,625,000	Otsego County, NY IDA (Mary Imogene Bassett Hospital)¹		5.350			11/01/2020			01/15/2018	^C		3,624,493
	25,000	Plattsburgh, NY Fire District No. 3		6.250			10/15/2014			06/15/2011	^A		25,388
	96,185,000	Port Authority NY/NJ (JFK International Air Terminal)¹		5.750			12/01/2022			01/10/2021	^C		95,778,137
	43,160,000	Port Authority NY/NJ (JFK International Air Terminal)		5.750			12/01/2025			12/14/2024	^C		43,155,684

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	49,140,000	Port Authority NY/NJ (JFK International Air Terminal)¹		5.900	%		12/01/2017	²		06/01/2011	^A	$	49,397,494
	18,355,000	Port Authority NY/NJ (JFK International Air Terminal)¹		6.250			12/01/2014			12/01/2014			19,408,210
	28,000,000	Port Authority NY/NJ (JFK International Air Terminal)¹		6.500			12/01/2028			12/01/2015	^A		29,063,440
	8,810,000	Port Authority NY/NJ (KIAC)		6.750			10/01/2011			04/08/2011	^C		8,784,011
	29,175,000	Port Authority NY/NJ (KIAC)¹		6.750			10/01/2019			09/03/2016	^C		27,729,379
	20,000	Port Authority NY/NJ, 103rd Series¹		5.250			12/15/2012			06/15/2011	^A		20,070
	10,000	Port Authority NY/NJ, 116th Series¹		5.000			10/01/2012			04/01/2011	^A		10,033
	100,000	Port Authority NY/NJ, 116th Series¹		5.000			10/01/2013			04/01/2011	^A		100,326
	160,000	Port Authority NY/NJ, 116th Series¹		5.250			10/01/2014			04/01/2011	^A		160,558
	55,000	Port Authority NY/NJ, 116th Series¹		5.250			10/01/2015			04/01/2011	^A		55,192
	815,000	Port Authority NY/NJ, 122nd Series¹		5.000			07/15/2018			01/15/2011	^A		815,921
	30,000	Port Authority NY/NJ, 122nd Series¹		5.000			07/15/2020			01/15/2011	^A		30,017
	300,000	Port Authority NY/NJ, 122nd Series¹		5.000			07/15/2022			01/15/2011	^A		300,066
	165,000	Port Authority NY/NJ, 122nd Series¹		5.000			07/15/2031			01/01/2011	^A		160,760
	55,000	Port Authority NY/NJ, 122nd Series¹		5.000			07/15/2031			01/01/2011	^A		53,587
	2,060,000	Port Authority NY/NJ, 122nd Series		5.500			07/15/2011			07/15/2011			2,068,097
	25,000	Port Authority NY/NJ, 122nd Series		5.500			07/15/2012			01/15/2011	^A		25,087
	5,170,000	Port Authority NY/NJ, 122nd Series¹		5.500			07/15/2015			01/15/2011	^A		5,182,356
	30,000	Port Authority NY/NJ, 124th Series¹		4.800			08/01/2018			02/01/2011	^A		30,025
	1,695,000	Port Authority NY/NJ, 124th Series¹		5.000			08/01/2019			02/01/2011	^A		1,696,288
	20,000	Port Authority NY/NJ, 124th Series¹		5.000			08/01/2021			02/01/2011	^A		20,007
	265,000	Port Authority NY/NJ, 124th Series¹		5.000			08/01/2022			02/01/2011	^A		265,061
	325,000	Port Authority NY/NJ, 124th Series¹		5.000			08/01/2024			02/01/2011	^A		324,997
	100,000	Port Authority NY/NJ, 124th Series¹		5.000			08/01/2025			02/01/2011	^A		99,535
	60,000	Port Authority NY/NJ, 124th Series¹		5.000			08/01/2031			02/02/2011	^A		58,455
	15,000	Port Authority NY/NJ, 126th Series¹		5.000			11/15/2024			05/15/2014	^A		15,085
	85,000	Port Authority NY/NJ, 126th Series¹		5.125			11/15/2032			05/15/2013	^A		84,004
	230,000	Port Authority NY/NJ, 127th Series¹		5.000			12/15/2022			06/16/2013	^A		233,167
	30,000	Port Authority NY/NJ, 127th Series¹		5.000			12/15/2024			06/16/2014	^A		30,174
	10,000	Port Authority NY/NJ, 131st Series¹		5.000			12/15/2026			06/15/2015	^A		9,929
	5,745,000	Port Authority NY/NJ, 141st Series¹		5.000			09/01/2021			09/01/2015	^A		5,885,753
	14,110,000	Port Authority NY/NJ, 141st Series¹		5.000			09/01/2022			09/01/2015	^A		14,352,692
	6,000,000	Port Authority NY/NJ, 141st Series¹		5.000			09/01/2025			09/01/2015	^A		6,010,740
	10,000,000	Port Authority NY/NJ, 141st Series¹		5.000			09/01/2026			09/01/2026			9,929,600
	4,300,000	Port Authority NY/NJ, 143rd Series¹		5.000			10/01/2030			11/05/2028	^C		4,202,046
	2,100,000	Port Authority NY/NJ, 151st Series¹		6.000			09/15/2028			03/15/2018	^A		2,189,460
	250,000	Port Authority NY/NJ, 152nd Series¹		5.000			11/01/2023			05/01/2018	^A		250,850
	2,100,000	Port Authority NY/NJ, 152nd Series¹		5.750			11/01/2030			05/01/2018	^A		2,178,582

LIMITED TERM NEW YORK MUNICIPAL FUND


								Effective
Principal								Maturity
Amount			Coupon			Maturity		(Unaudited)*			Value

New York Continued
$	2,780,000	Port Authority NY/NJ, 37th Series¹		5.500	%		07/15/2019		07/15/2014	^A	$	3,016,467
	1,190,000	Poughkeepsie, NY IDA (Eastman & Bixby Redevel. Corp.)¹		5.900			08/01/2020		02/01/2011	^A		1,191,107
	1,200,000	Rensselaer County, NY IDA (Franciscan Heights)¹		5.375			12/01/2025		08/06/2023	^C		1,187,568
	135,000	Rensselaer County, NY IDA (Rensselaer Polytechnical Institute)¹		5.125			08/01/2027		02/01/2011	^A		132,554
	265,000	Rensselaer County, NY IDA (Rensselaer Polytechnical Institute)¹		5.125			08/01/2029		10/07/2028	^C		253,809
	50,000	Rensselaer County, NY IDA (Rensselaer Polytechnical Institute)¹		5.500			08/01/2022		08/01/2011	^A		50,235
	1,750,000	Rensselaer County, NY Tobacco Asset Securitization Corp.¹		5.200			06/01/2025		03/04/2011	^C		1,578,518
	1,490,000	Rensselaer County, NY Tobacco Asset Securitization Corp.¹		5.750			06/01/2043		09/04/2024	^C		1,232,081
	55,000	Rensselaer, NY Hsg. Authority (Renwyck)		7.650			01/01/2011		01/01/2011			55,000
	230,000	Rensselaer, NY Municipal Leasing Corp. (Rensselaer County Nursing Home)¹		5.000			06/01/2019		06/01/2014	^A		233,961
	5,845,000	Rensselaer, NY Municipal Leasing Corp. (Rensselaer County Nursing Home)¹		5.875			06/01/2022		06/01/2014	^A		6,045,951
	25,000	Rockland County, NY Solid Waste Management Authority		5.625			12/15/2014		06/15/2011	^A		25,062
	7,745,000	Rockland County, NY Tobacco Asset Securitization Corp.¹		5.500			08/15/2025		04/24/2014	^C		7,164,900
	55,000	Rome, NY HDC, Series A¹		6.250			01/01/2024		04/01/2011	^A		55,048
	500,000	Saratoga County, NY IDA (Saratoga Hospital/Saratoga Care/ Benedict Community Health Center)¹		5.000			12/01/2014		12/01/2014			532,890
	3,725,000	Saratoga County, NY IDA (Saratoga Hospital/ Saratoga Care/Benedict Community Health Center)¹		5.750			12/01/2023		06/01/2011	^A		3,726,490
	6,540,000	Saratoga County, NY IDA (Saratoga Hospital/ Saratoga Care/Benedict Community Health Center)¹		5.750			12/01/2033		11/17/2029	^C		6,401,156
	3,405,000	Schenectady, NY Metroplex Devel. Authority, Series A¹		5.375			12/15/2021		12/15/2012	^A		3,493,462
	25,000	Scotia, NY GO¹		6.100			01/15/2012		01/15/2011	^A		25,662
	50,000	Seneca County, NY IDA (New York Chiropractic College)¹		4.000			10/01/2015		10/01/2015			51,392
	870,000	SONYMA, Series 101¹		5.000			10/01/2018		10/01/2015	^A		873,811
	25,000	SONYMA, Series 101¹		5.250			04/01/2022		10/01/2011	^A		25,073
	4,550,000	SONYMA, Series 101¹		5.350			10/01/2026		10/01/2011	^A		4,557,235
	795,000	SONYMA, Series 133¹		4.950			10/01/2021		04/01/2015	^A		800,295
	580,000	SONYMA, Series 145¹		4.950			10/01/2023		04/01/2017	^A		582,274

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	21,410,000	SONYMA, Series 29³		5.450	%		10/01/2031			02/15/2013	^A	$	21,658,686
	400,000	SONYMA, Series 31¹		5.200			10/01/2021			04/01/2011	^A		400,460
	485,000	SONYMA, Series 31¹		5.300			10/01/2031			04/01/2011	^A		477,167
	50,000	SONYMA, Series 63		5.700			04/01/2011			04/01/2011			50,170
	85,000	SONYMA, Series 63		5.700			10/01/2011			04/01/2011	^A		85,259
	5,000	SONYMA, Series 65		5.550			10/01/2012			04/01/2011	^A		5,012
	195,000	SONYMA, Series 67¹		5.600			10/01/2014			03/01/2011	^A		195,345
	100,000	SONYMA, Series 67¹		5.600			10/01/2014	²		03/01/2011	^A		100,170
	1,105,000	SONYMA, Series 67¹		5.700			10/01/2017	²		03/01/2011	^A		1,106,249
	500,000	SONYMA, Series 67¹		5.800			10/01/2028	²		03/01/2011	^A		514,975
	50,000	SONYMA, Series 69¹		5.400			10/01/2019			03/01/2011	^A		50,037
	3,785,000	SONYMA, Series 69¹		5.400			10/01/2019			03/01/2011	^A		3,787,763
	9,085,000	SONYMA, Series 69¹		5.500			10/01/2028			03/01/2011	^A		9,085,363
	145,000	SONYMA, Series 70¹		5.375			10/01/2017			10/01/2011	^A		145,155
	20,000	SONYMA, Series 70¹		5.375			10/01/2017			03/01/2011	^A		20,018
	375,000	SONYMA, Series 71¹		5.350			10/01/2018			01/01/2011	^A		375,285
	10,000	SONYMA, Series 72¹		5.200			10/01/2016			07/01/2011	^A		10,016
	65,000	SONYMA, Series 72¹		5.300			04/01/2027			01/01/2011	^A		65,008
	440,000	SONYMA, Series 73-A¹		5.250			10/01/2017			03/01/2011	^A		440,334
	215,000	SONYMA, Series 73-A		5.300			10/01/2028			03/01/2011	^A		214,566
	29,220,000	SONYMA, Series 77¹		5.150			04/01/2029			02/03/2027	^C		28,708,942
	9,435,000	SONYMA, Series 79¹		5.250			10/01/2021			03/01/2011	^A		9,437,925
	55,000	SONYMA, Series 79¹		5.250			10/01/2021			03/01/2011	^A		55,045
	770,000	SONYMA, Series 79¹		5.300			04/01/2029			03/01/2011	^A		762,831
	2,140,000	SONYMA, Series 80¹		5.100			10/01/2017	²		03/01/2011	^A		2,144,259
	5,395,000	SONYMA, Series 82¹		5.550			10/01/2019	²		04/01/2011	^A		5,399,586
	45,000	SONYMA, Series 82¹		5.650			04/01/2030	²		04/01/2011	^A		45,004
	1,635,000	SONYMA, Series 83¹		5.450			04/01/2018	²		04/01/2011	^A		1,636,684
	15,000	SONYMA, Series 83¹		5.550			10/01/2027			04/01/2011	^A		15,004
	45,000	SONYMA, Series 83¹		5.550			10/01/2027			04/01/2011	^A		45,008
	6,150,000	SONYMA, Series 97¹		5.400			10/01/2021	²		04/01/2011	^A		6,159,348
	500,000	SONYMA, Series 98¹		5.050			10/01/2017			04/01/2011	^A		501,470
	385,000	Spring Valley, NY (Quality Redevel.)¹		5.000			06/15/2021			06/15/2017	^A		391,788
	405,000	Spring Valley, NY (Quality Redevel.)¹		5.000			06/15/2022			06/15/2017	^A		408,123
	300,000	Spring Valley, NY GO¹		5.000			05/01/2020			05/01/2015	^A		306,207
	310,000	Spring Valley, NY GO¹		5.000			05/01/2021			05/01/2015	^A		313,977
	325,000	Spring Valley, NY GO¹		5.000			05/01/2022			05/01/2015	^A		326,801
	335,000	Spring Valley, NY GO¹		5.000			05/01/2023			05/01/2015	^A		333,817
	350,000	Spring Valley, NY GO¹		5.000			05/01/2024			05/01/2015	^A		345,786
	365,000	Spring Valley, NY GO¹		5.000			05/01/2025			05/01/2015	^A		355,324

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	3,185,000	St. Lawrence County, NY IDA (Curran Renewable Energy)¹		6.200	%		12/01/2017			06/01/2014	^C	$	2,764,484
	535,000	Suffolk County, NY IDA (ALIA-CCDRCA)		7.000			06/01/2016			06/01/2013	^A		536,471
	500,000	Suffolk County, NY IDA (ALIA-Civic Facility)		5.950			11/01/2022			11/01/2022			445,630
	135,000	Suffolk County, NY IDA (ALIA-Civic Facility)		6.000			11/01/2017			11/01/2017			126,927
	565,000	Suffolk County, NY IDA (ALIA-Civic Facility)		6.000			11/01/2017			11/01/2017			531,213
	645,000	Suffolk County, NY IDA (ALIA-FREE)		7.000			06/01/2016			06/01/2013	^A		646,774
	215,000	Suffolk County, NY IDA (ALIA-IGHL)		5.950			11/01/2022			11/01/2022			191,621
	225,000	Suffolk County, NY IDA (ALIA-IGHL)		6.500			12/01/2013			06/07/2011	^C		221,843
	800,000	Suffolk County, NY IDA (ALIA-LIHIA)		5.950			11/01/2022			11/01/2022			713,008
	300,000	Suffolk County, NY IDA (ALIA-NYS ARC)		5.950			11/01/2022			11/01/2022			267,378
	300,000	Suffolk County, NY IDA (ALIA-WORCA)		5.950			11/01/2022			11/01/2022			267,378
	305,000	Suffolk County, NY IDA (ALIA-WORCA)		7.000			06/01/2016			04/09/2013	^B		305,839
	300,000	Suffolk County, NY IDA (Catholic Charities)		6.000			10/01/2020			12/27/2014	^C		275,304
	300,000	Suffolk County, NY IDA (DDI)		6.000			10/01/2020			12/27/2014	^C		275,304
	300,000	Suffolk County, NY IDA (DDI)		6.000			10/01/2020			12/27/2014	^C		275,304
	1,065,000	Suffolk County, NY IDA (Dowling College)¹		5.000			06/01/2018			06/01/2018			973,857
	12,000,000	Suffolk County, NY IDA (Engel Berman at East Northport)¹		7.125			11/01/2049			11/01/2012	^A		12,029,280
	24,135,000	Suffolk County, NY IDA (Engel Berman at East Northport)¹		7.125			11/01/2049			11/01/2012	^A		24,193,889
	110,000	Suffolk County, NY IDA (Family Residences)		6.000			10/01/2015			08/12/2012	^C		105,931
	355,000	Suffolk County, NY IDA (Family Residences), Series A		6.375			12/01/2018			12/20/2013	^C		337,474
	2,425,000	Suffolk County, NY IDA (Family Residences), Series A¹		6.375			12/01/2018			10/03/2014	^C		2,305,278
	600,000	Suffolk County, NY IDA (Independent Group Home Living)		6.000			10/01/2020			06/27/2015	^C		550,608
	345,000	Suffolk County, NY IDA (L.I. Network Community Services)		7.000			02/01/2014			09/01/2012	^C		345,838
	265,000	Suffolk County, NY IDA (Mattituck-Laurel Library)¹		6.000			09/01/2019	²		03/01/2011	^A		268,207
	290,000	Suffolk County, NY IDA (Nassau-Suffolk Services for Autism)		6.250			11/01/2016			03/22/2013	^C		279,662
	105,000	Suffolk County, NY IDA (Nassau-Suffolk Services for Autism)		6.250			11/01/2016			04/13/2013	^C		101,257
	700,000	Suffolk County, NY IDA (New York Institute of Technology)¹		5.250			03/01/2017			03/01/2015	^A		741,923
	1,000,000	Suffolk County, NY IDA (New York Institute of Technology)¹		5.250			03/01/2018			03/01/2015	^A		1,044,280
	500,000	Suffolk County, NY IDA (New York Institute of Technology)¹		5.250			03/01/2019			03/01/2015	^A		517,355

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	720,000	Suffolk County, NY IDA (New York Institute of Technology)¹		5.250	%		03/01/2020			03/01/2015	^A	$	736,531
	1,000,000	Suffolk County, NY IDA (New York Institute of Technology)¹		5.250			03/01/2021			03/01/2015	^A		1,014,100
	615,000	Suffolk County, NY IDA (Pederson-Krager Center)		6.375			11/01/2015			08/07/2012	^C		587,147
	530,000	Suffolk County, NY IDA (Pederson-Krager Center)		6.400			02/01/2015			10/23/2011	^C		509,637
	200,000	Suffolk County, NY IDA (Suffolk Hotels)		6.000			10/01/2020			12/27/2014	^C		183,536
	500,000	Suffolk County, NY IDA (WORCA)		6.000			10/01/2020			06/27/2015	^C		458,840
	1,360,000	Sullivan County, NY IDA (Center for Discovery)¹		5.625			06/01/2013			06/01/2013			1,318,425
	4,700,000	Sullivan County, NY IDA (Center for Discovery)¹		5.875			07/01/2022			11/11/2016	^C		3,759,859
	5,370,000	Sullivan County, NY IDA (Center for Discovery)¹		6.375			02/01/2020			12/09/2014	^C		4,888,204
	30,000	Syracuse, NY Hsg. Authority¹		5.400			09/01/2021			09/01/2015	^A		30,840
	265,000	Syracuse, NY IDA (Crouse Irving Companies)¹		5.250			01/01/2017			01/01/2011	^A		265,496
	25,000	Syracuse, NY IDA (Jewish Home of Central New York)		7.375			03/01/2021			04/02/2017	^C		24,448
	510,000	Syracuse, NY IDA (One Center Armory Garage)		6.750			12/01/2017			12/01/2011	^A		509,924
	900,000	Tompkins County, NY IDA (Kendall at Ithaca)¹		5.750			07/01/2018			04/01/2011	^A		900,684
	2,000,000	Tompkins County, NY IDA (Kendall at Ithaca)¹		6.000			07/01/2024			01/01/2011	^A		2,000,260
	110,000	Tompkins, NY Health Care Corp. (Reconstruction Home)¹		5.875			02/01/2033			02/01/2011	^A		110,055
	390,000	Tompkins, NY Health Care Corp. (Reconstruction Home)¹		10.800			02/01/2028	²		02/01/2011	^A		411,243
	10,000	Ulster County, NY GO¹		5.400			11/15/2013			05/15/2011	^A		10,175
	10,000	Ulster County, NY GO¹		5.400			11/15/2015			05/15/2011	^A		10,175
	25,000	Ulster County, NY GO¹		5.500			11/15/2012			05/15/2011	^A		25,447
	1,020,000	Ulster County, NY IDA (Kingston Hospital)¹		5.650			11/15/2024			05/15/2011	^A		1,025,732
	155,000	Ulster County, NY Res Rec¹		5.000			03/01/2016			03/01/2016			166,912
	160,000	Ulster County, NY Res Rec¹		5.000			03/01/2017			03/01/2016	^A		169,685
	170,000	Ulster County, NY Res Rec¹		5.000			03/01/2018			03/01/2016	^A		177,927
	360,000	Ulster County, NY Tobacco Asset Securitization Corp.¹		6.000			06/01/2040			06/04/2028	^C		306,310
	25,000	Ulster County, NY Tobacco Asset Securitization Corp.		6.250			06/01/2025			06/01/2021	^A		23,684
	830,000	Ulster County, NY Tobacco Asset Securitization Corp.¹		6.450			06/01/2040			09/14/2026	^C		708,098

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

New York Continued
$	10,795,000	Ulster County, NY Tobacco Asset Securitization Corp.		6.750	%		06/01/2030			06/01/2022	^C	$	10,130,892
	125,000	Utica, NY IDA (Munson-Williams-Proctor Arts Institute)¹		5.375			07/15/2019			07/15/2011	^A		126,645
	75,000	Utica, NY IDA (Munson-Williams-Proctor Arts Institute)¹		5.400			07/15/2030			07/15/2012	^A		75,360
	20,000	Utica, NY IDA (Munson-Williams-Proctor Arts Institute)¹		5.500			07/15/2016			01/15/2011	^A		20,065
	25,000	Utica, NY IDA (Munson-Williams-Proctor Arts Institute)¹		5.500			07/15/2029			07/15/2011	^A		25,085
	330,000	Utica, NY IDA (Utica College Civic Facility)		6.375			12/01/2011			06/07/2011	^B		337,062
	250,000	Utica, NY SCHC (Multifamily), Series A¹		5.550			12/01/2017			06/01/2011	^A		251,493
	295,000	Utica, NY SCHC (Steinhorst)¹		6.875			04/15/2018			04/15/2011	^A		299,157
	935,000	Utica, NY SCHC (Steinhorst)¹		7.125			04/15/2021			04/01/2011	^A		937,300
	15,000	Victor, NY GO¹		4.800			12/15/2017			06/01/2011	^A		15,280
	100,000	Westchester County, NY GO¹		5.375			12/15/2012			06/15/2011	^A		101,865
	50,000	Westchester County, NY GO¹		5.375			12/15/2013			06/15/2011	^A		50,840
	45,000	Westchester County, NY Healthcare Corp., Series B¹		5.375			11/01/2020			06/01/2011	^A		45,153
	120,000	Westchester County, NY IDA (Clearview School)		6.600			01/01/2014			01/01/2014			119,644
	580,000	Westchester County, NY IDA (Guiding Eyes for the Blind)¹		4.500			08/01/2012			02/18/2011	^C		587,708
	1,000,000	Westchester County, NY IDA (JDAM)¹		6.750			04/01/2016	²		04/01/2011	^A		1,002,500
	200,000	Westchester County, NY IDA (Purchase College Foundation Hsg. Corp.)¹		5.500			12/01/2015			12/01/2013	^A		207,064
	1,990,000	Westchester County, NY IDA (Rippowam-Cisqua School)¹		5.750			06/01/2029			01/22/2022	^C		1,939,195
	605,000	Westchester County, NY IDA (Schnurmacher Center)		6.000			11/01/2011			11/01/2011			604,008
	110,000	Westchester County, NY IDA (Westchester Airport Assoc.)¹		5.850			08/01/2014			02/01/2011	^A		110,286
	690,000	Westchester County, NY IDA (Westchester Airport Assoc.)¹		5.950			08/01/2024	²		02/01/2011	^A		690,186
	100,000	Westchester County, NY IDA (Winward School)		5.200			10/01/2021			10/01/2011	^A		99,342
	7,560,000	Westchester County, NY Tobacco Asset Securitization Corp.¹		4.500			06/01/2021			01/10/2011	^C		7,210,728
	9,600,000	Westchester County, NY Tobacco Asset Securitization Corp.¹		5.000			06/01/2026			07/07/2014	^C		8,286,144
	90,000	White Plains, NY HDC (Battle Hill)¹		6.650			02/01/2025			02/01/2011	^A		90,102
	1,000,000	Yonkers, NY EDC (Charter School of Educational Excellence¹		6.000			10/15/2030			11/16/2024	^C		916,600

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


								Effective
Principal								Maturity
Amount			Coupon			Maturity		(Unaudited)*			Value

New York Continued
$	110,000	Yonkers, NY IDA (Michael Malotz Skilled Nursing Pavilion)¹		5.450	%		02/01/2029		02/01/2011	^A	$	110,031
	165,000	Yonkers, NY IDA (Michael Malotz Skilled Nursing Pavilion)¹		5.650			02/01/2039		02/01/2011	^A		165,041
	1,455,000	Yonkers, NY IDA (Monastery Manor Associates)¹		5.000			04/01/2025		05/06/2023	^C		1,392,653
	1,250,000	Yonkers, NY IDA (Sarah Lawrence College)		5.750			06/01/2024		06/01/2019	^A		1,311,075
	1,565,000	Yonkers, NY IDA (St. John’s Riverside Hospital)¹		6.800			07/01/2016		03/01/2014	^C		1,544,201

												3,280,720,791

U.S. Possessions—28.3%
	9,210,000	Guam Airport Authority, Series C¹		5.375			10/01/2019		10/01/2013	^B		9,298,600
	6,000,000	Guam Airport Authority, Series C¹		5.375			10/01/2020		10/01/2013	^A		6,019,500
	192,000	Guam EDA (TASC)		5.300			05/15/2014		05/15/2014			215,908
	290,000	Guam Government Limited Obligation¹		5.000			11/01/2017		12/07/2015	^C		278,145
	5,000,000	Guam Government Waterworks Authority & Wastewater System¹		5.250			07/01/2025		08/07/2023	^C		4,756,800
	50,000	Guam International Airport Authority¹		4.500			10/01/2014		10/01/2013	^A		50,956
	10,000	Guam International Airport Authority¹		5.000			10/01/2023		10/01/2023			9,338
	25,000	Guam International Airport Authority¹		5.250			10/01/2016		10/01/2013	^A		26,264
	1,290,000	Guam Power Authority, Series A¹		5.000			10/01/2018		10/12/2017	^C		1,267,167
	25,000	Guam Power Authority, Series A¹		5.000			10/01/2024		07/23/2023	^C		23,278
	20,000	Guam Power Authority, Series A		5.250			10/01/2013		04/01/2011	^A		20,036
	335,000	Guam Power Authority, Series A¹		5.250			10/01/2013		04/01/2011	^A		335,610
	50,000	Guam Power Authority, Series A¹		5.250			10/01/2014		04/01/2011	^A		50,000
	710,000	Guam Power Authority, Series A		5.250			10/01/2023		09/02/2019	^C		675,700
	655,000	Guam Power Authority, Series A		5.250			10/01/2023		09/02/2019	^C		623,357
	40,000	Guam Power Authority, Series A¹		5.250			10/01/2034		11/06/2032	^C		36,649
	205,000	Guam Tobacco Settlement Economic Devel. & Commerce Authority (TASC)		5.250			06/01/2032		06/01/2017	^C		185,445
	100,000	Northern Mariana Islands Commonwealth, Series A¹		6.750			10/01/2033		10/31/2012	^C		93,841
	375,000	Puerto Rico Children’s Trust Fund (TASC)¹		4.100			05/15/2013		05/15/2012	^A		375,533
	200,000	Puerto Rico Children’s Trust Fund (TASC)¹		4.250			05/15/2014		05/15/2012	^A		199,432
	214,710,000	Puerto Rico Children’s Trust Fund (TASC)¹		5.375			05/15/2033		01/14/2016	^C		201,805,929
	68,875,000	Puerto Rico Children’s Trust Fund (TASC)¹		5.500			05/15/2039		02/26/2025	^C		60,804,916
	30,755,000	Puerto Rico Children’s Trust Fund (TASC)¹		5.625			05/15/2043		09/24/2022	^C		27,134,214
	17,500,000	Puerto Rico Commonwealth GO¹		4.750			12/01/2015		12/01/2013	^A		17,958,675
	50,000	Puerto Rico Commonwealth GO¹		5.000			07/01/2026		06/21/2026	^C		47,415
	50,000	Puerto Rico Commonwealth GO¹		5.000			07/01/2028		08/05/2026	^C		46,681
	2,000,000	Puerto Rico Commonwealth GO¹		5.000			07/01/2030		07/01/2012	^D		2,056,620

LIMITED TERM NEW YORK MUNICIPAL FUND


								Effective
Principal								Maturity
Amount			Coupon			Maturity		(Unaudited)*			Value

U.S. Possessions Continued
$	2,660,000	Puerto Rico Commonwealth GO¹		5.125	%		07/01/2031		01/10/2031	^C	$	2,563,602
	7,000,000	Puerto Rico Commonwealth GO¹		5.250			01/01/2015		01/01/2015			7,332,360
	880,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2018		07/01/2013	^A		906,576
	900,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2019		07/01/2013	^A		906,588
	500,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2020		07/01/2014	^A		509,345
	2,430,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2021		07/01/2014	^A		2,459,768
	4,795,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2022		07/01/2014	^A		4,830,004
	7,350,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2022		07/01/2016	^A		7,369,110
	2,315,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2022		07/01/2013	^A		2,327,362
	7,395,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2023		07/01/2016	^A		7,400,250
	11,000,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2023		07/01/2013	^A		11,030,580
	4,575,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2023		07/01/2014	^A		4,577,150
	15,850,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2024		07/01/2013	^A		15,857,291
	21,785,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2025		07/01/2025			21,437,747
	4,750,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2027		07/01/2027			4,597,288
	15,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2029		07/01/2017	^A		14,383
	5,000,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2030		07/01/2030			4,765,450
	2,840,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2030		05/08/2029	^C		2,706,776
	14,750,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2032		07/01/2032			13,898,483
	11,735,000	Puerto Rico Commonwealth GO¹		5.250			07/01/2032		10/01/2031	^C		11,057,538
	6,060,000	Puerto Rico Commonwealth GO¹		5.375			07/01/2028		07/01/2028			5,909,167
	3,000,000	Puerto Rico Commonwealth GO¹		5.500			07/01/2019		07/01/2019			3,127,080
	4,500,000	Puerto Rico Commonwealth GO¹		5.500			07/01/2021		07/01/2021			4,641,255
	18,600,000	Puerto Rico Commonwealth GO¹		5.500			07/01/2023		07/01/2018	^A		18,902,436
	305,000	Puerto Rico Commonwealth GO¹		5.625			07/01/2019		01/01/2011	^A		305,159
	1,320,000	Puerto Rico Commonwealth GO¹		6.000			07/01/2027		07/01/2018	^A		1,359,296
	1,950,000	Puerto Rico Commonwealth GO¹		6.500			07/01/2037		07/01/2019	^A		2,090,556
	28,360,000	Puerto Rico Electric Power Authority, Series AAA¹		5.250			07/01/2022		07/01/2020	^A		29,643,574
	10,920,000	Puerto Rico Electric Power Authority, Series AAA¹		5.250			07/01/2023		07/01/2020	^A		11,245,198
	11,490,000	Puerto Rico Electric Power Authority, Series AAA¹		5.250			07/01/2024		07/01/2020	^A		11,601,223
	12,095,000	Puerto Rico Electric Power Authority, Series AAA¹		5.250			07/01/2025		07/01/2020	^A		12,121,851
	4,905,000	Puerto Rico Electric Power Authority, Series CCC¹		5.250			07/01/2028		07/01/2028			4,855,214
	12,500,000	Puerto Rico Electric Power Authority, Series WW¹		5.250			07/01/2025		07/01/2018	^A		12,523,000
	85,000	Puerto Rico HFA¹		5.000			12/01/2020		12/01/2013	^A		86,977
	37,000,000	Puerto Rico HFA (Vivienda Modernization)¹		4.750			10/01/2011		02/01/2011	^A		37,054,760

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


								Effective
Principal								Maturity
Amount			Coupon			Maturity		(Unaudited)*			Value

U.S. Possessions Continued
$	100,000	Puerto Rico HFC¹		5.100	%		12/01/2018		06/01/2011	^A	$	101,490
	90,000	Puerto Rico Highway & Transportation Authority¹		5.000			07/01/2022		01/01/2011	^A		88,495
	90,000	Puerto Rico Highway & Transportation Authority¹		5.000			07/01/2028		08/05/2026	^C		84,025
	35,000	Puerto Rico Highway & Transportation Authority¹		5.000			07/01/2028		02/20/2026	^C		32,676
	45,000	Puerto Rico Highway & Transportation Authority¹		5.250			07/01/2014		01/01/2011	^A		45,464
	425,000	Puerto Rico Highway & Transportation Authority¹		5.750			07/01/2019		07/01/2013	^A		433,254
	230,000	Puerto Rico Highway & Transportation Authority¹		5.750			07/01/2020		07/01/2013	^A		233,846
	85,000	Puerto Rico Highway & Transportation Authority¹		5.750			07/01/2021		07/01/2013	^A		86,162
	7,995,000	Puerto Rico Highway & Transportation Authority¹		5.750			07/01/2022		07/01/2013	^A		8,097,816
	5,000	Puerto Rico Highway & Transportation Authority, Series A¹		5.000			07/01/2028		05/21/2024	^C		4,668
	7,000,000	Puerto Rico Highway & Transportation Authority, Series E¹		5.750			07/01/2024		07/01/2012	^A		7,043,820
	2,145,000	Puerto Rico Highway & Transportation Authority, Series G¹		5.250			07/01/2018		07/01/2013	^A		2,169,496
	1,175,000	Puerto Rico Highway & Transportation Authority, Series G¹		5.250			07/01/2019		07/01/2013	^A		1,201,226
	4,355,000	Puerto Rico Highway & Transportation Authority, Series K¹		5.000			07/01/2021		07/01/2021			4,299,038
	11,000,000	Puerto Rico Highway & Transportation Authority, Series K¹		5.000			07/01/2022		07/01/2022			10,816,080
	12,275,000	Puerto Rico Highway & Transportation Authority, Series K¹		5.000			07/01/2023		07/01/2023			12,012,806
	12,760,000	Puerto Rico Highway & Transportation Authority, Series K¹		5.000			07/01/2024		07/01/2024			12,382,176
	14,545,000	Puerto Rico Highway & Transportation Authority, Series K¹		5.000			07/01/2025		07/01/2025			13,950,982
	16,725,000	Puerto Rico Highway & Transportation Authority, Series K¹		5.000			07/01/2026		07/01/2026			15,860,318
	1,000,000	Puerto Rico Highway & Transportation Authority, Series K¹		5.000			07/01/2027		07/01/2027			941,060
	16,800,000	Puerto Rico Highway & Transportation Authority, Series N¹		0.724	⁶		07/01/2045		07/04/2043	^C		8,795,136
	160,000	Puerto Rico Industrial Devel. Company, Series B¹		5.375			07/01/2016		01/01/2011	^A		160,160

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

U.S. Possessions Continued
$	780,000	Puerto Rico Infrastructure¹		5.000	%		07/01/2019			07/01/2016	^A	$	777,863
	5,000,000	Puerto Rico Infrastructure¹		5.500			07/01/2021			07/01/2021			5,116,150
	175,000	Puerto Rico Infrastructure (Mepsi Campus)		5.600			10/01/2014			10/01/2014			172,951
	4,250,000	Puerto Rico Infrastructure Financing Authority¹		5.500			07/01/2023			07/01/2023			4,348,473
	3,135,000	Puerto Rico ITEMECF (Ana G. Mendez University)¹		5.375			02/01/2019			02/01/2011	^A		3,135,251
	19,610,000	Puerto Rico ITEMECF (Cogeneration Facilities)¹		6.625			06/01/2026	²		06/01/2011	^A		19,648,828
	1,500,000	Puerto Rico ITEMECF (Dr. Pila Hospital)¹		6.125			08/01/2025			02/01/2011	^A		1,501,230
	60,000	Puerto Rico ITEMECF (Guaynabo Municipal Government Center)¹		5.625			07/01/2015			04/01/2011	^A		60,121
	25,000	Puerto Rico ITEMECF (Hospital Auxilio Mutuo)¹		5.500			07/01/2017			01/01/2011	^A		25,021
	95,000	Puerto Rico ITEMECF (Hospital Auxilio Mutuo)¹		5.500			07/01/2026			11/08/2022	^C		89,337
	560,000	Puerto Rico ITEMECF (Hospital Auxilio Mutuo)¹		6.250			07/01/2016			04/01/2011	^A		562,050
	75,000	Puerto Rico ITEMECF (Hospital de la Concepcion)¹		6.125			11/15/2025			11/15/2011	^A		75,962
	750,000	Puerto Rico ITEMECF (Hospital de la Concepcion)¹		6.375			11/15/2015			05/15/2011	^A		760,200
	2,000,000	Puerto Rico ITEMECF (Hospital de la Concepcion)¹		6.500			11/15/2020			11/15/2011	^A		2,026,260
	100,000	Puerto Rico ITEMECF (InterAmerican University)¹		5.000			10/01/2015			04/01/2011	^A		100,210
	130,000	Puerto Rico ITEMECF (InterAmerican University)¹		5.000			10/01/2022			04/01/2011	^A		126,422
	2,250,000	Puerto Rico ITEMECF (SEAM/Hospital Espanol Auxilio Obligated Group)¹		6.250			07/01/2024			04/01/2011	^A		2,251,328
	2,190,000	Puerto Rico ITEMECF (University Plaza)¹		5.625			07/01/2015			01/01/2011	^A		2,223,573
	2,215,000	Puerto Rico ITEMECF (University Plaza)¹		5.625			07/01/2016			01/01/2011	^A		2,248,956
	2,345,000	Puerto Rico ITEMECF (University Plaza)¹		5.625			07/01/2017			01/01/2011	^A		2,380,949
	355,000	Puerto Rico ITEMECF (University Plaza)¹		5.625			07/01/2018			01/01/2011	^A		360,442
	1,875,000	Puerto Rico ITEMECF (University Plaza)¹		5.625			07/01/2019			01/01/2011	^A		1,903,744
	9,400,000	Puerto Rico Municipal Finance Agency, Series A¹		5.250			08/01/2023			08/01/2015	^A		9,404,888
	10,000,000	Puerto Rico Municipal Finance Agency, Series A¹		5.250			08/01/2024			08/01/2024			9,942,000
	305,000	Puerto Rico Municipal Finance Agency, Series A¹		5.500			07/01/2017			04/01/2011	^A		305,448
	25,000	Puerto Rico Municipal Finance Agency, Series B¹		5.750			08/01/2013			08/01/2011	^A		25,201

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

U.S. Possessions Continued
$	6,880,000	Puerto Rico Public Buildings Authority¹		5.000	%		07/01/2028			07/01/2012	^D	$	7,074,773
	11,560,000	Puerto Rico Public Buildings Authority¹		5.000			07/01/2036			07/01/2012	^D		11,887,264
	545,000	Puerto Rico Public Buildings Authority¹		5.125			07/01/2024			01/04/2024	^C		522,699
	14,280,000	Puerto Rico Public Buildings Authority¹		5.250			07/01/2029			05/02/2028	^C		13,692,949
	2,060,000	Puerto Rico Public Buildings Authority¹		5.500			07/01/2021			07/01/2017	^A		2,132,141
	3,255,000	Puerto Rico Public Buildings Authority¹		5.500			07/01/2025			07/01/2017	^A		3,279,738
	13,195,000	Puerto Rico Public Buildings Authority¹		5.500			07/01/2026			07/01/2017	^A		13,237,884
	1,250,000	Puerto Rico Public Buildings Authority¹		5.500			07/01/2035			07/01/2017	^A		1,332,088
	1,400,000	Puerto Rico Public Buildings Authority¹		5.750			07/01/2034			07/01/2017	^A		1,511,580
	8,795,000	Puerto Rico Public Buildings Authority¹		7.000			07/01/2021			06/01/2014	^A		9,691,035
	31,150,000	Puerto Rico Public Buildings Authority¹		7.000			07/01/2025			06/01/2014	^A		33,671,281
	825,000	Puerto Rico Public Buildings Authority, Series G¹		5.250			07/01/2019			07/01/2012	^A		827,945
	1,000,000	Puerto Rico Public Finance Corp., Series A¹		4.100			08/01/2029			02/01/2012	^D		1,001,410
	60,270,000	Puerto Rico Public Finance Corp., Series A¹		5.250			08/01/2029			02/01/2012	^D		61,082,440
	40,635,000	Puerto Rico Public Finance Corp., Series A¹		5.250			08/01/2030			02/01/2012	^D		41,182,760
	28,325,000	Puerto Rico Public Finance Corp., Series A¹		5.250			08/01/2031			02/01/2012	^D		28,706,821
	75,410,000	Puerto Rico Public Finance Corp., Series A¹		5.750			08/01/2027			02/01/2012	^D		76,822,429
	19,000,000	Puerto Rico Sales Tax Financing Corp., Series A¹		5.625			08/01/2030			02/01/2015	^A		19,153,140
	71,000,000	Puerto Rico Sales Tax Financing Corp., Series A¹		6.125			08/01/2029			02/01/2014	^A		73,048,350
	4,080,000	University of Puerto Rico¹		5.000			06/01/2025			06/01/2025			3,835,975
	2,750,000	University of Puerto Rico¹		5.000			06/01/2026			06/01/2026			2,559,480
	95,000	University of Puerto Rico¹		5.500			06/01/2012	²		06/01/2011	^A		95,248
	7,470,000	University of Puerto Rico, Series P¹		5.000			06/01/2021			06/01/2021			7,255,387
	8,500,000	University of Puerto Rico, Series P¹		5.000			06/01/2022			06/01/2022			8,188,815
	5,645,000	University of Puerto Rico, Series P¹		5.000			06/01/2030			12/22/2028	^C		5,074,121
	8,410,000	University of Puerto Rico, Series Q¹		5.000			06/01/2023			06/01/2023			8,047,950
	300,000	University of Puerto Rico, Series Q¹		5.000			06/01/2030			12/22/2028	^C		269,661
	5,250,000	V.I. Government Refinery Facilities (Hovensa Coker)¹		6.500			07/01/2021	²		01/01/2013	^A		5,267,798
	80,000	V.I. HFA, Series A		6.500			03/01/2025	²		03/01/2011	^A		80,051
	1,000,000	V.I. Port Authority, Series A¹		5.250			09/01/2018			09/01/2011	^A		1,006,520
	7,000,000	V.I. Public Finance Authority (Hovensa Refinery)¹		4.700			07/01/2022			10/01/2018	^C		6,116,250
	4,825,000	V.I. Public Finance Authority (Hovensa Refinery)¹		5.875			07/01/2022			10/01/2018	^C		4,678,175
	1,075,000	V.I. Public Finance Authority (Matching Fund Loan Note)¹		5.250			10/01/2021			10/01/2014	^A		1,099,779
	620,000	V.I. Public Finance Authority (Matching Fund Loan Note)¹		6.750			10/01/2037			10/01/2019	^A		640,274

LIMITED TERM NEW YORK MUNICIPAL FUND


									Effective
Principal									Maturity
Amount			Coupon			Maturity			(Unaudited)*			Value

U.S. Possessions Continued
$	1,000,000	V.I. Public Finance Authority, Series A¹		5.250	%		10/01/2016			10/01/2014	^A	$	1,067,840
	2,000,000	V.I. Public Finance Authority, Series A¹		5.250			10/01/2022			10/01/2014	^A		2,033,620
	2,000,000	V.I. Public Finance Authority, Series A¹		5.250			10/01/2023			10/01/2014	^A		2,024,040
	12,035,000	V.I. Public Finance Authority, Series A¹		6.375			10/01/2019	²		10/01/2011	^A		12,177,494
	1,015,000	V.I. Tobacco Settlement Financing Corp. (TASC)¹		4.750			05/15/2012			05/15/2011	^A		1,018,908
	80,000	V.I. Tobacco Settlement Financing Corp. (TASC)¹		4.950			05/15/2014			05/15/2011	^A		80,170
	1,050,000	V.I. Tobacco Settlement Financing Corp. (TASC)¹		5.000			05/15/2021			05/15/2013	^C		978,159
	1,440,000	V.I. Tobacco Settlement Financing Corp. (TASC)¹		5.000			05/15/2031			04/12/2015	^C		1,195,027
	2,500,000	V.I. Water & Power Authority¹		5.500			07/01/2017			01/01/2011	^A		2,504,025

													1,261,976,952

Total Investments, at Value (Cost $4,628,598,737)—101.9%													4,542,697,743
Liabilities in Excess of Other Assets—(1.9)
													(85,024,613	)


Net Assets—100.0%												$	4,457,673,130

Footnotes to Statement of Investments


*		Call Date, Put Date or Average Life of Sinking Fund, if applicable, as detailed.

A.		Optional call date; corresponds to the most conservative yield calculation.

B.		Average life due to mandatory, or expected, sinking fund principal payments prior to the applicable optional call date.

C.		Average life due to mandatory, or expected, sinking fund principal payments prior to maturity.

D.		Date of mandatory put.

1.		All or a portion of the security position has been segregated for collateral to cover borrowings. See Note 5 of the accompanying Notes.

2.		Security also has mandatory sinking fund principal payments prior to maturity and an average life which is shorter than the stated final maturity.

3.		Security represents the underlying municipal bond on an inverse floating rate security. The bond was purchased by the Fund and subsequently transferred to a trust. See Note 1 of the accompanying Notes.

4.		Issue is in default. See Note 1 of the accompanying Notes.

5.		Subject to a forbearance agreement. Rate shown is current rate. See Note 1 of the accompanying Notes.

6.		Represents the current interest rate for a variable or increasing rate security.

7.		Zero coupon bond reflects effective yield on the date of purchase.

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF INVESTMENTS Continued

Footnotes to Statement of Investments Continued

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

	1)		Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)

	2)		Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)

	3)		Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:


					Level 3—
	Level 1—		Level 2—		Significant
	Unadjusted		Other Significant		Unobservable
	Quoted Prices		Observable Inputs		Inputs		Value

Assets Table
Investments, at Value:
Municipal Bonds and Notes
New York	$	—	$	3,266,127,995	$	14,592,796	$	3,280,720,791
U.S. Possessions		—		1,261,976,952		—		1,261,976,952

Total Assets	$	—	$	4,528,104,947	$	14,592,796	$	4,542,697,743

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

LIMITED TERM NEW YORK MUNICIPAL FUND

To simplify the listings of securities, abbreviations are used per the table below:



ACDS		Assoc. for Children with Down Syndrome
ACLD		Adults and Children with Learning and Developmental Disabilities
ALIA		Alliance of Long Island Agencies
AOFMHS		Aurelia Osborn Fox Memorial Hospital Society
ARC		Assoc. of Retarded Citizens
BFCC		Brookdale Family Care Center
BID		Business Improvement District
BOCES		Board of Cooperative Educational Services
CAB		Capital Appreciation Bond
CCDRCA		Catholic Charities of the Diocese of Rockville Centre and Affiliates
CHSLI		Catholic Health Services of Long Island
CMA		Community Mainstreaming Associates, Inc.
COP		Certificates of Participation
CRR		Center for Rapid Recovery
CRV		Crystal Run Village
CSMR		Community Services for the Mentally Retarded
Con Ed		Consolidated Edison Company
DA		Dormitory Authority
DDI		Developmental Disabilities Institute
DRIVERs		Derivative Inverse Tax Exempt Receipts
EDA		Economic Devel. Authority
EDC		Economic Devel. Corp.
EFC		Environmental Facilities Corp.
ERDA		Energy Research and Devel. Authority
FNHC		Ferncilff Nursing Home Company
FREE		Family Residences and Essential Enterprises
GO		General Obligation
GSHMC		Good Samaritan Hospital Medical Center
HDC		Housing Devel. Corp.
HFA		Housing Finance Agency
HFC		Housing Finance Corp.
HKSB		Helen Keller Services for the Blind
IDA		Industrial Devel. Agency
IGHL		Independent Group Home for Living
ITEMECF		Industrial, Tourist, Educational, Medical and Environmental Community Facilities
JDAM		Julia Dyckman Andrus Memorial
JFK		John Fitzgerald Kennedy
KR		Kateri Residence
L.I.		Long Island
LIHIA		Long Island Head Injury Assoc.
LILCO		Long Island Lighting Corp.
MMC		Mercy Medical Center
MMWNHC		Mary Manning Walsh Nursing Home Company
MTA		Metropolitan Transportation Authority
NSUH		North Shore University Hospital
NSUHGC		North Shore University Hospital at Glen Cove
NSUHPL		North Shore University Hospital at Plainview
NY/NJ		New York/New Jersey
NYC		New York City
NYS		New York State
NYU		New York University
RIBS		Residual Interest Bonds
ROLs		Residual Option Longs
Res Rec		Resource Recovery Facility
SAVRS		Select Auction Variable Rate Securities
SCHC		Senior Citizen Housing Corp.
SCHRC		St. Charles Hospital and Rehabilitation Center
SCSMC		St. Catherine of Sienna Medical Center
SEAM		Sociedad Espanola de Auxilio Mutuo
SFH		St. Francis Hospital
SFTU		Services for the Underserved
SONYMA		State of New York Mortgage Agency
SUNY		State University of New York
SV		Sienna Village
TASC		Tobacco Settlement Asset-Backed Bonds
TFABs		Tobacco Flexible Amortization Bonds
UBF		University of Buffalo Foundation
UDC		Urban Devel. Corp.
USBFCC		Urban Strategies Brookdale Family Care Center
V.I.		United States Virgin Islands
WORCA		Working Organization for Retarded Children and Adults
YAI		Young Adult Institute
YMCA		Young Men’s Christian Assoc.

See accompanying Notes to Financial Statements.

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010



Assets
Investments, at value (cost $4,628,598,737)—see accompanying statement of investments	$	4,542,697,743
Cash		5,758,272
Receivables and other assets:
Interest		69,468,765
Shares of beneficial interest sold		6,130,544
Investments sold		2,105,000
Other		176,445

Total assets		4,626,336,769

Liabilities
Payables and other liabilities:
Payable for short-term floating rate notes issued (See Note 1)		101,550,000
Payable on borrowings (See Note 5)		44,100,000
Shares of beneficial interest redeemed		18,521,473
Distribution and service plan fees		2,772,027
Trustees’ compensation		831,820
Investments purchased		331,826
Transfer and shareholder servicing agent fees		139,309
Shareholder communications		102,863
Interest expense on borrowings		3,988
Dividends		865
Other		309,468

Total liabilities		168,663,639

Net Assets	$	4,457,673,130


Composition of Net Assets
Paid-in capital	$	4,610,810,571
Accumulated net investment income		5,141,802
Accumulated net realized loss on investments		(72,378,249	)
Net unrealized depreciation on investments		(85,900,994	)

Net Assets	$	4,457,673,130

LIMITED TERM NEW YORK MUNICIPAL FUND



Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of $3,121,032,983 and 968,566,546 shares of beneficial interest outstanding)	$	3.22
Maximum offering price per share (net asset value plus sales charge of 3.50% of offering price)	$	3.34
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $43,447,853 and 13,501,111 shares of beneficial interest outstanding)	$	3.22
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $1,293,192,294 and 403,053,071 shares of beneficial interest outstanding)	$	3.21

See accompanying Notes to Financial Statements.

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010



Investment Income
Interest	$	220,872,611
Other income		1,403

Total investment income		220,874,014

Expenses
Management fees		17,143,099
Distribution and service plan fees:
Class A		7,386,165
Class B		496,759
Class C		12,464,001
Transfer and shareholder servicing agent fees:
Class A		884,683
Class B		67,990
Class C		511,917
Shareholder communications:
Class A		107,977
Class B		6,398
Class C		54,993
Borrowing fees		1,592,777
Accounting service fees		1,292,829
Interest expense and fees on short-term floating rate notes issued (See Note 1)		1,215,934
Interest expense on borrowings		85,970
Trustees’ compensation		79,118
Custodian fees and expenses		28,568
Administration service fees		1,500
Other		317,286

Total expenses		43,737,964

Net Investment Income		177,136,050

Realized and Unrealized Loss
Net realized loss on investments		(1,444,221	)
Net change in unrealized appreciation/depreciation on investments		(47,908,149	)

Net Increase in Net Assets Resulting from Operations	$	127,783,680

See accompanying Notes to Financial Statements.

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENTS OF CHANGES IN NET ASSETS


Year Ended December 31,	2010			2009

Operations
Net investment income	$	177,136,050		$	156,051,148
Net realized gain (loss)		(1,444,221	)		6,902,848
Net change in unrealized appreciation/depreciation		(47,908,149	)		467,811,089

Net increase in net assets resulting from operations		127,783,680			630,765,085

Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class A		(130,997,041	)		(118,781,933	)
Class B		(1,761,280	)		(2,728,379	)
Class C		(45,266,887	)		(39,795,702	)

		(178,025,208	)		(161,306,014	)

Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Class A		354,464,555			117,821,111
Class B		(15,739,226	)		(40,905,262	)
Class C		170,465,451			87,110,175

		509,190,780			164,026,024

Net Assets
Total increase		458,949,252			633,485,095
Beginning of period		3,998,723,878			3,365,238,783

End of period (including accumulated net investment income of $5,141,802 and $5,327,057, respectively)	$	4,457,673,130		$	3,998,723,878

See accompanying Notes to Financial Statements.

LIMITED TERM NEW YORK MUNICIPAL FUND

STATEMENT OF CASH FLOWS For the Year Ended December 31, 2010



Cash Flows from Operating Activities
Net increase in net assets from operations	$	127,783,680
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchase of investment securities		(950,645,975	)
Proceeds from disposition of investment securities		524,414,294
Short-term investment securities, net		(53,420,230	)
Premium amortization		17,523,393
Discount accretion		(1,517,115	)
Net realized loss on investments		1,444,221
Net change in unrealized appreciation/depreciation on investments		47,908,149
Change in assets:
Decrease in receivable for securities sold		1,390,000
Decrease in other assets		291,163
Increase in interest receivable		(6,463,455	)
Change in liabilities:
Increase in other liabilities		457,610
Decrease in payable for securities purchased		(28,119,630	)

Net cash used in operating activities		(318,953,895	)

Cash Flows from Financing Activities
Proceeds from bank borrowings		657,800,000
Payments on bank borrowings		(670,400,000	)
Payments on short-term floating rate notes issued		(11,080,000	)
Proceeds from shares sold		1,206,576,770
Payments on shares redeemed		(813,343,843	)
Cash distributions paid		(45,781,161	)

Net cash provided by financing activities		323,771,766
Net increase in cash		4,817,871
Cash, beginning balance		940,401

Cash, ending balance	$	5,758,272


Supplemental disclosure of cash flow information:
Noncash financing activities not included herein consist of reinvestment of dividends and distributions of $132,243,711.
Cash paid for interest on bank borrowings—$84,119.
Cash paid for interest on short-term floating rate notes issued—$1,215,934.

See accompanying Notes to Financial Statements.

LIMITED TERM NEW YORK MUNICIPAL FUND

FINANCIAL HIGHLIGHTS


Class A Year Ended December 31,	2010			2009			2008			2007			2006

Per Share Operating Data
Net asset value, beginning of period	$	3.25		$	2.85		$	3.32		$	3.40		$	3.36

Income (loss) from investment operations:
Net investment income¹		.14			.14			.14			.14			.14
Net realized and unrealized gain (loss)		(.03	)		.40			(.47	)		(.08	)		.03

Total from investment operations		.11			.54			(.33	)		.06			.17

Dividends and/or distributions to shareholders:
Dividends from net investment income		(.14	)		(.14	)		(.14	)		(.14	)		(.13	)

Net asset value, end of period	$	3.22		$	3.25		$	2.85		$	3.32		$	3.40


Total Return, at Net Asset Value²		3.51	%		19.45	%		(10.18	)%		1.74	%		5.30	%

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	3,121,033		$	2,801,988		$	2,355,062		$	2,745,029		$	2,784,037

Average net assets (in thousands)	$	3,000,461		$	2,558,997		$	2,765,248		$	2,721,428		$	2,696,464

Ratios to average net assets:³
Net investment income		4.35	%		4.50	%		4.55	%		4.18	%		4.10	%
Expenses excluding interest and fees on short-term floating rate notes issued and interest and fees from borrowings		0.72	%		0.75	%		0.74	%		0.71	%		0.72	%
Interest and fees from borrowings		0.04	%		0.26	%		0.09	%		0.03	%		0.07	%
Interest and fees on short-term floating rate notes issued⁴		0.03	%		0.04	%		0.10	%		0.21	%		0.18	%

Total expenses		0.79	%		1.05	%		0.93	%		0.95	%		0.97	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.79	%		1.05	%		0.93	%		0.95	%		0.97	%

Portfolio turnover rate		14	%		12	%		19	%		18	%		23	%


1.		Per share amounts calculated based on the average shares outstanding during the period.

2.		Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods less than one year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

3.		Annualized for periods less than one full year.

4.		Interest and fee expense relates to the Fund’s liability for short-term floating rate notes issued in conjunction with inverse floating rate security transactions.

See accompanying Notes to Financial Statements.

LIMITED TERM NEW YORK MUNICIPAL FUND

FINANCIAL HIGHLIGHTS Continued


Class B Year Ended December 31,	2010			2009			2008			2007			2006

Per Share Operating Data
Net asset value, beginning of period	$	3.25		$	2.85		$	3.32		$	3.40		$	3.36

Income (loss) from investment operations:
Net investment income¹		.12			.11			.12			.11			.11
Net realized and unrealized gain (loss)		(.03	)		.41			(.47	)		(.08	)		.04

Total from investment operations		.09			.52			(.35	)		.03			.15

Dividends and/or distributions to shareholders:
Dividends from net investment income		(.12	)		(.12	)		(.12	)		(.11	)		(.11	)

Net asset value, end of period	$	3.22		$	3.25		$	2.85		$	3.32		$	3.40


Total Return, at Net Asset Value²		2.62	%		18.39	%		(10.90	)%		0.95	%		4.48	%

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	43,448		$	59,451		$	90,497		$	228,022		$	318,452

Average net assets (in thousands)	$	49,788		$	71,243		$	157,158		$	272,855		$	346,849

Ratios to average net assets:³
Net investment income		3.50	%		3.64	%		3.72	%		3.38	%		3.31	%
Expenses excluding interest and fees on short-term floating rate notes issued and interest and fees from borrowings		1.58	%		1.66	%		1.54	%		1.51	%		1.52	%
Interest and fees from borrowings		0.04	%		0.26	%		0.09	%		0.03	%		0.07	%
Interest and fees on short-term floating rate notes issued⁴		0.03	%		0.04	%		0.10	%		0.21	%		0.18	%

Total expenses		1.65	%		1.96	%		1.73	%		1.75	%		1.77	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		1.65	%		1.96	%		1.73	%		1.75	%		1.77	%

Portfolio turnover rate		14	%		12	%		19	%		18	%		23	%


1.		Per share amounts calculated based on the average shares outstanding during the period.

2.		Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods less than one year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

3.		Annualized for periods less than one full year.

4.		Interest and fee expense relates to the Fund’s liability for short-term floating rate notes issued in conjunction with inverse floating rate security transactions.

See accompanying Notes to Financial Statements.

LIMITED TERM NEW YORK MUNICIPAL FUND


Class C Year Ended December 31,	2010			2009			2008			2007			2006

Per Share Operating Data
Net asset value, beginning of period	$	3.24		$	2.84		$	3.31		$	3.39		$	3.35

Income (loss) from investment operations:
Net investment income¹		.12			.12			.12			.11			.11
Net realized and unrealized gain (loss)		(.03	)		.40			(.47	)		(.08	)		.04

Total from investment operations		.09			.52			(.35	)		.03			.15

Dividends and/or distributions to shareholders:
Dividends from net investment income		(.12	)		(.12	)		(.12	)		(.11	)		(.11	)

Net asset value, end of period	$	3.21		$	3.24		$	2.84		$	3.31		$	3.39


Total Return, at Net Asset Value²		2.74	%		18.63	%		(10.89	)%		0.97	%		4.52	%

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	1,293,192		$	1,137,285		$	919,680		$	1,052,153		$	1,105,643

Average net assets (in thousands)	$	1,250,552		$	1,021,648		$	1,054,502		$	1,076,271		$	1,127,896

Ratios to average net assets:³
Net investment income		3.59	%		3.75	%		3.78	%		3.40	%		3.34	%
Expenses excluding interest and fees on short-term floating rate notes issued and interest and fees from borrowings		1.48	%		1.50	%		1.51	%		1.49	%		1.49	%
Interest and fees from borrowings		0.04	%		0.26	%		0.09	%		0.03	%		0.07	%
Interest and fees on short-term floating rate notes issued⁴		0.03	%		0.04	%		0.10	%		0.21	%		0.18	%

Total expenses		1.55	%		1.80	%		1.70	%		1.73	%		1.74	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		1.55	%		1.80	%		1.70	%		1.73	%		1.74	%

Portfolio turnover rate		14	%		12	%		19	%		18	%		23	%


1.		Per share amounts calculated based on the average shares outstanding during the period.

2.		Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods less than one year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

3.		Annualized for periods less than one full year.

4.		Interest and fee expense relates to the Fund’s liability for short-term floating rate notes issued in conjunction with inverse floating rate security transactions.

See accompanying Notes to Financial Statements.

LIMITED TERM NEW YORK MUNICIPAL FUND

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Limited Term New York Municipal Fund (the “Fund”) is a separate series of Rochester Portfolio Series, a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund’s investment objective is to seek 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. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).

The Fund offers Class A, Class B and Class C shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B and Class C shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (“CDSC”). All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class A, B and C have separate distribution and/or service plans. Class B shares will automatically convert to Class A shares 72 months after the date of purchase.

The following is a summary of significant accounting policies consistently followed by the Fund.

Securities Valuation. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading.

Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices reported by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current

LIMITED TERM NEW YORK MUNICIPAL FUND

day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

“Money market-type” debt instruments with remaining maturities of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value.

In the absence of a readily available unadjusted quoted market price, including for securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

There have been no significant changes to the fair valuation methodologies of the Fund during the period.

Inverse Floating Rate Securities. The Fund invests in inverse floating rate securities that pay interest at a rate that varies inversely with short-term interest rates. Certain of these securities may be leveraged, whereby the interest rate varies inversely at a multiple of the change in short-term rates. As interest rates rise, inverse floaters produce less current income. The price of such securities is more volatile than comparable fixed rate securities. The Fund may expose up to 5% of its total assets to the effects of leverage from its

LIMITED TERM NEW YORK MUNICIPAL FUND

NOTES TO FINANCIAL STATEMENTS Continued

1. Significant Accounting Policies Continued

investments in inverse floaters. The Fund’s exposure to the effects of leverage from its investments in inverse floaters amount to $101,550,000 as of December 31, 2010, which represents 2.20% of the Fund’s total assets.

Certain inverse floating rate securities are created when the Fund purchases and subsequently transfers a municipal bond security (the “municipal bond”) to a broker dealer. The municipal bond is typically a fixed rate security. The broker dealer (the “sponsor”) creates a trust (the “Trust”) and deposits the municipal bond. The Trust issues short-term floating rate notes available to third parties and a residual interest in the municipal bond (referred to as an “inverse floating rate security”) to the Fund. The terms of these inverse floating rate securities grant the Fund the right to require that the Trust issuing the inverse floating rate security compel a tender of the short-term floating rate notes to facilitate the Fund’s repurchase of the underlying municipal bond. Following such a request, the Fund pays the sponsor the principal amount due to the holders of the short-term floating rate notes issued by the Trust and exchanges the inverse floating rate security for the underlying municipal bond. These transactions are considered secured borrowings for financial reporting purposes. As a result of such accounting treatments, the Fund includes the municipal bond position on its Statement of Investments (but does not separately include the inverse floating rate securities received). The Fund also includes the value of the municipal bond and a payable amount equal to the short-term floating rate notes issued by the Trust on its Statement of Assets and Liabilities. The interest rates on these short-term floating rate notes reset periodically, usually weekly. The holders of these short-term floating rate notes have the option to tender their investment, to the sponsor or the Trust’s liquidity provider, for redemption at par at each reset date. Income from the municipal bond position and the interest expense on the payable for the short-term floating rate notes issued by the Trust are recorded on the Fund’s Statement of Operations. At December 31, 2010, municipal bond holdings with a value of $150,852,016 shown on the Fund’s Statement of Investments are held by such Trusts and serve as collateral for the $101,550,000 in short-term floating rate notes issued and outstanding at that date.

The Fund’s investments in inverse floaters involve certain risks. The market value of an inverse floating rate security can be more volatile than that of a conventional fixed-rate bond having similar credit quality, maturity and redemption provisions. Typically, an inverse floating rate security tends to underperform fixed rate bonds when long-term interest rates are rising but tends to outperform fixed rate bonds when long-term interest rates are stable or falling. An inverse floating rate security entails a degree of leverage because the trust issues short-term securities in a ratio to the inverse floating rate security with the underlying long-term bond providing collateral for the obligation to pay the principal value of the short-term securities if and when they are tendered. If the Fund has created the inverse floater by depositing a long-term bond into a trust, it may be required to provide additional collateral for the short-term securities if the value of the underlying bond deposited in the trust falls.

LIMITED TERM NEW YORK MUNICIPAL FUND

At December 31, 2010, the Fund’s residual exposure to these types of inverse floating rate securities were as follows:


Principal			Coupon			Maturity
Amount		Inverse Floater¹	Rate²			Date		Value

$	3,335,000	NYC GO DRIVERS		10.953	%		8/15/23	$	3,763,814
	3,780,000	NYC GO DRIVERS		10.958			12/1/23		4,275,104
	2,240,000	NYC GO ROLs³		15.777			4/1/30		2,258,346
	7,250,000	NYC GO ROLs³		13.921			6/1/23		8,456,690
	5,000,000	NYC GO ROLs³		8.639			4/1/22		6,057,900
	9,895,000	NYS DA ROLs³		19.622			8/15/30		11,021,843
	7,085,000	NYS DA ROLs³		8.205			7/1/27		7,864,633
	5,355,000	SONYMA, Series 29 DRIVERS		15.578			10/1/31		5,603,686

								$	49,302,016


1.		For a list of abbreviations used in the Inverse Floater table see the Portfolio Abbreviations table on page 57 of the Statement of Investments.

2.		Represents the current interest rate for a variable rate bond known as an “inverse floater.”

3.		Security is subject to a shortfall and forbearance agreement.

The Fund enters into shortfall and forbearance agreements with the sponsors of certain inverse floaters held by the Fund. These agreements commit the Fund to reimburse the sponsor of the inverse floater, in certain circumstances, for the amount of the difference between the liquidation value of the underlying security (which is the basis of the inverse floater) and the principal amount due to the holders of the short-term floating rate notes issued by the Trust in conjunction with the inverse floating rate security. Under the standard terms of an inverse floating rate security, absent such a shortfall and forbearance agreement, the Fund would not be required to make such a reimbursement. The Manager monitors the Fund’s potential exposure with respect to these agreements on a daily basis and intends to take action to terminate the Fund’s investment in such inverse floating rate securities, if it deems it appropriate to do so. As of December 31, 2010, in addition to the exposure detailed in the preceding table, the Fund’s maximum exposure under such agreements is estimated at $71,270,000.

Credit Risk. The Fund invests in high-yield, non-investment-grade bonds, which may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers or underlying obligors subsequently default. Information concerning securities in default as of December 31, 2010 is as follows:



Cost	$	595,000
Market Value	$	388,880
Market Value as a % of Net Assets		0.01	%

The Fund has entered into forbearance agreements with certain obligors under which the Fund has agreed to temporarily forego receipt of the original principal or coupon interest rates. As of December 31, 2010, securities with an aggregate market value of $557,746,

LIMITED TERM NEW YORK MUNICIPAL FUND

NOTES TO FINANCIAL STATEMENTS Continued

1. Significant Accounting Policies Continued

representing 0.01% of the Fund’s net assets, were subject to these forbearance agreements. Interest and principal payments of $13,866 and $410,000, respectively, are contractually owed to the Fund with respect to these securities and will not be collected under these forbearance agreements.

Concentration Risk. There are certain risks arising from geographic concentration in any state, commonwealth or territory. Certain economic, regulatory or political developments occurring in the state, commonwealth or territory may impair the ability of certain issuers of municipal securities to pay principal and interest on their obligations.

Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis 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 comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.

The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.

Net Unrealized

Depreciation

Based on Cost

of Securities and

Undistributed

Accumulated

Other Investments

Net Investment

Long-Term

Loss

for Federal Income

Income

Gain

Carryforward^1,2,3

Tax Purposes

$9,137,212

—

72,862,534

85,416,712


1.		As of December 31, 2010, the Fund had $72,862,534 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of December 31, 2010, details of the capital loss carryforwards were as follows:


Expiring

2011	$	2,127,827
2016		53,401,694
2017		16,519,543
2018		813,470

Total	$	72,862,534

LIMITED TERM NEW YORK MUNICIPAL FUND

2.		During the fiscal year ended December 31, 2010, the Fund did not utilize any capital loss carryforward.

3.		During the fiscal year ended December 31, 2009, the Fund did not utilize any capital loss carryforward.

Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.

Accordingly, the following amounts have been reclassified for December 31, 2010. Net assets of the Fund were unaffected by the reclassifications.


	Increase to
Increase to	Accumulated
Accumulated Net	Net Realized Loss
Investment Income	on Investments

$703,903	$	703,903

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:


	Year Ended		Year Ended
	December 31, 2010		December 31, 2009

Distributions paid from:
Exempt-interest dividends	$	177,065,616	$	159,226,970
Ordinary income		959,592		2,079,044

Total	$	178,025,208	$	161,306,014

The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of December 31, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.



Federal tax cost of securities	$	4,523,875,059	¹


Gross unrealized appreciation	$	37,088,853
Gross unrealized depreciation		(122,505,565	)

Net unrealized depreciation	$	(85,416,712	)


1.		The Federal tax cost of securities does not include cost of $104,239,396, which has otherwise been recognized for financial reporting purposes, related to bonds placed into trusts in conjunction with certain investment transactions. See the Inverse Floating Rate Securities note above.

Trustees’ Compensation. The Fund has adopted an unfunded retirement plan (the “Plan”) for the Fund’s independent trustees. Benefits are based on years of service and fees paid to each trustee during their period of service. The Plan was frozen with respect to adding new participants effective December 31, 2006 (the “Freeze Date”) and existing Plan Participants as of the Freeze Date will continue to receive accrued benefits under the

LIMITED TERM NEW YORK MUNICIPAL FUND

NOTES TO FINANCIAL STATEMENTS Continued

1. Significant Accounting Policies Continued

Plan. Active independent trustees as of the Freeze Date have each elected a distribution method with respect to their benefits under the Plan. During the year ended December 31, 2010, the Fund’s projected benefit obligations, payments to retired trustees and accumulated liability were as follows:



Projected Benefit Obligations Increased	$	6,227
Payments Made to Retired Trustees		68,227
Accumulated Liability as of December 31, 2010		665,903

The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. 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. Amounts will be deferred until distributed in accordance with the compensation deferral plan.

Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually.

Investment Income. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.

Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdraft at a rate equal to the 1 Month LIBOR Rate plus 2.00%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.

Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.

LIMITED TERM NEW YORK MUNICIPAL FUND

Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 increases and decreases in net assets from operations 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:


	Year Ended December 31, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount

Class A
Sold		258,957,836		$	851,290,493			178,713,706		$	561,592,483
Dividends and/or distributions reinvested		29,098,141			95,587,964			27,512,219			85,325,198
Redeemed		(180,902,889	)		(592,413,902	)		(170,581,375	)		(529,096,570	)

Net increase		107,153,088		$	354,464,555			35,644,550		$	117,821,111


Class B
Sold		3,494,253		$	11,454,814			2,443,838		$	7,594,784
Dividends and/or distributions reinvested		418,476			1,372,836			664,269			2,041,991
Redeemed		(8,713,849	)		(28,566,876	)		(16,584,076	)		(50,542,037	)

Net decrease		(4,801,120	)	$	(15,739,226	)		(13,475,969	)	$	(40,905,262	)


Class C
Sold		103,732,010		$	339,374,183			69,423,667		$	217,305,875
Dividends and/or distributions reinvested		10,785,313			35,282,911			10,008,778			30,917,410
Redeemed		(62,531,361	)		(204,191,643	)		(52,148,784	)		(161,113,110	)

Net increase		51,985,962		$	170,465,451			27,283,661		$	87,110,175

3. Purchases and Sales of Securities

The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended December 31, 2010, were as follows:


	Purchases		Sales

Investment securities	$	950,645,975	$	524,414,294

LIMITED TERM NEW YORK MUNICIPAL FUND

NOTES TO FINANCIAL STATEMENTS Continued

4. Fees and Other Transactions with Affiliates

Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:


Fee Schedule

Up to $100 million	0.50	%
Next $150 million	0.45
Next $1.75 billion	0.40
Next $3 billion	0.39
Over $5 billion	0.38

Accounting Service Fees. Accounting service 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 average daily net assets and $9,000 for each additional $30 million of average daily net assets. During the year ended December 31, 2010, the Fund paid $1,292,829 to the Manager for accounting services.

Administration Service Fees. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund’s tax returns.

Transfer Agent Fees. OppenheimerFunds Services (“OFS”), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended December 31, 2010, the Fund paid $1,452,353 to OFS for services to the Fund.

Distribution and Service Plan (12b-1) Fees. Under its General Distributor’s Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the “Distributor”) acts as the Fund’s principal underwriter in the continuous public offering of the Fund’s classes of shares.

Service Plan for Class A Shares. The Fund has adopted a Service Plan (the “Plan”) for Class A shares under Rule 12b-1 of the Investment Company Act of 1940. Under the Plan, the Fund reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made periodically at an annual rate of up to 0.25% of the daily net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions periodically for providing personal service and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent periods. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.

Distribution and Service Plans for Class B and Class C Shares. The Fund has adopted Distribution and Service Plans (the “Plans”) for Class B and Class C shares under Rule 12b-1 of the Investment Company Act of 1940 to compensate the Distributor for its services in connection with the distribution of those shares and servicing accounts. Under the Plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% on Class B and Class C shares daily net assets. The Distributor also receives a service fee of 0.25% per year under each plan. If either the Class B or Class C plan is terminated by the Fund or by the

LIMITED TERM NEW YORK MUNICIPAL FUND

shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. Fees incurred by the Fund under the Plans are detailed in the Statement of Operations. The Distributor determines its uncompensated expenses under the Plans at calendar quarter ends. The Distributor’s aggregate uncompensated expenses under the Plans at December 31, 2010 were as follows:



Class C	$	36,864,496

Sales Charges. Front-end sales charges and contingent deferred sales charges (“CDSC”) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the following table for the period indicated.

Class A

Class B

Class C

Class A

Contingent

Front-End

Deferred

Sales Charges

Retained by

Year Ended

Distributor

December 31, 2010

948,015

128,518

37,970

156,732

Waivers and Reimbursements of Expenses. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class.

Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

5. Borrowings

The Fund can borrow money from banks in amounts up to one third of its total assets (including the amount borrowed) less all liabilities and indebtedness other than borrowings. The Fund can use those borrowings for investment-related purposes such as purchasing portfolio securities. The Fund can also borrow for other purposes, such as to raise money to unwind or “collapse” trusts that issued “inverse floaters” to the Fund, or to contribute to such trusts to enable them to meet tenders of their short-term securities by the holders of those securities. The Fund also may borrow to meet redemption obligations or for temporary and emergency purposes. The purchase of securities with borrowed funds creates leverage in the Fund. The use of leverage will subject the Fund to greater costs than funds that do not borrow for leverage, and may also make the Fund’s share price more sensitive to interest changes. The interest on borrowed money is an expense that might reduce the Fund’s yield. Expenses incurred by the Fund with respect to interest on borrowings and commitment fees are disclosed separately or as other expenses on the Statement of Operations.

LIMITED TERM NEW YORK MUNICIPAL FUND

NOTES TO FINANCIAL STATEMENTS Continued

5. Borrowings Continued

The Fund entered into a Revolving Credit and Security Agreement (the “Agreement”) with conduit lenders and a bank which enables it to participate with certain other Oppenheimer funds in a committed, secured borrowing facility that permits borrowings of up to $2.25 billion, collectively. To secure the loan, the Fund pledges investment securities in accordance with the terms of the Agreement. Securities held in collateralized accounts to cover these borrowings are noted in the Statement of Investments. Interest is charged to the Fund, based on its borrowings, at current commercial paper issuance rates (0.2931% as of December 31, 2010). The Fund pays additional fees annually to its lender on its outstanding borrowings to manage and administer the facility. The Fund is also allocated its pro-rata share of an annual structuring fee and ongoing commitment fees both of which are based on the total facility size. Total fees and interest that are included in expenses on the Fund’s Statement of Operations related to its participation in the borrowing facility during the year ended December 31, 2010 equal 0.04% of the Fund’s average net assets on an annualized basis. The Fund has the right to prepay such loans and terminate its participation in the conduit loan facility at any time upon prior notice.

As of December 31, 2010, the Fund had borrowings outstanding at an interest rate of 0.2931%. Details of the borrowings for the year ended December 31, 2010 are as follows:



Average Daily Loan Balance	$	27,141,644
Average Daily Interest Rate		0.315	%
Fees Paid	$	1,151,390
Interest Paid	$	84,119

6. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

LIMITED TERM NEW YORK MUNICIPAL FUND

The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

7. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

LIMITED TERM NEW YORK MUNICIPAL FUND

Investment Adviser
OppenheimerFunds, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008

Distributor
OppenheimerFunds Distributor, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008

Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.CALL OPP (225.5677)

Independent Registered Public Accounting Firm
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202

Legal Counsel
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036

NYSE Ticker Symbols
Class A	LTNYX
Class B	LTBBX
Class C	LTNCX
Class Y	LTBYX

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
	Class A	Class B	Class C	Class Y*
Management Fees	0.40%	0.40%	0.40%	0.40%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	1.00%	None
Total Other Expenses	0.14%	0.25%	0.15%	0.22%
Interest and Fees From Borrowings	0.04%	0.04%	0.04%	0.04%
Interest and Related Expenses from Inverse Floaters	0.03%	0.03%	0.03%	0.03%
Other Expenses	0.07%	0.18%	0.08%	0.15%
Total Annual Fund Operating Expenses	0.79%	1.65%	1.55%	0.62%

Average Annual Total Returns for the periods ended December 31, 2010
	1 Year	5 Years	10 Years
Class A Shares (inception 09/18/91)
Return Before Taxes	(0.11%)	2.80%	3.98%
Return After Taxes on Distributions	(0.11%)	2.80%	3.98%
Return After Taxes on Distributions and Sale of Fund Shares	1.45%	3.01%	4.04%
Class B Shares (inception 5/01/97)	(1.34%)	2.51%	3.88%
Class C Shares (inception 5/01/97)	1.75%	2.77%	3.58%
Merrill Lynch Municipal Bond Index (3-7 Years)	3.35%	5.02%	4.94%
(reflects no deduction for fees, expenses or taxes)
Consumer Price Index	1.50%	2.18%	2.34%
(reflects no deduction for fees, expenses or taxes)

Amount of Purchase	Front-End Sales Charge As a Percentage of Offering Price	Front-End Sales Charge As a Percentage of Net Amount Invested	Concession As a Percentage of Offering Price
Less than $100,000	3.50%	3.63%	3.00%
$100,000 or more but less than $250,000	3.00%	3.09%	2.50%

Years since Beginning of Month in Which Purchase Order was Accepted	Contingent Deferred Sales Charge on Redemptions in That Year (As % of Amount Subject to Charge)
0-1	4.0%
1-2	3.0%
2-3	2.0%
3-4	2.0%
4-5	1.0%
More than 5	None

Table of contents
THE FUND SUMMARY
Investment Objective	3
Fees and Expenses of the Fund	3
Principal Investment Strategies	3
Principal Risks	4
The Fund's Past Performance	5
Investment Adviser	6
Portfolio Managers	6
Purchase and Sale of Fund Shares	6
Taxes	6
Payments to Broker-Dealers and Other Financial Intermediaries	6
MORE ABOUT THE FUND
About the Fund's Investments	7
How the Fund is Managed	11
MORE ABOUT YOUR ACCOUNT
About Your Account	13
Choosing a Share Class	13
The Price of Fund Shares	16
How to Buy, Sell and Exchange Shares	17
Dividends, Capital Gains and Taxes	23
Financial Highlights	25

Shareholder Fees (fees paid directly from your investment)
	Class A	Class B	Class C	Class Y
Maximum Sales Charge (Load) imposed on purchases (as % of offering price)	3.50%	None	None	None
Maximum Deferred Sales Charge (Load) (as % of the lower of the original offering price or redemption proceeds)	None	4%	1%	None

If shares are redeemed									If shares are not redeemed
	1 Year		3 Years		5 Years		10 Years		1 Year		3 Years		5 Years		10 Years
Class A	$	428	$	594	$	775	$	1,297	$	428	$	594	$	775	$	1,297
Class B	$	569	$	725	$	1,004	$	1,524	$	169	$	525	$	904	$	1,524
Class C	$	259	$	493	$	851	$	1,860	$	159	$	493	$	851	$	1,860
Class Y	$	64	$	199	$	347	$	777	$	64	$	199	$	347	$	777

Telephone:	Call OppenheimerFunds Services toll-free: 1.800.CALL OPP (1.800.225.5677)
Mail:	Use the following address for regular mail: OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270
	Use the following address for courier or express mail: OppenheimerFunds Services 12100 East Iliff Avenue Suite 300 Aurora, Colorado 80014
Internet:	You may request documents, and read or download certain documents at www.oppenheimerfunds.com

Table of contents
ABOUT THE FUND
Additional Information About the Fund's Investment Policies and Risks	3
The Fund's Main Investment Policies	3
Other Investments and Investment Strategies	9
Investment Restrictions	19
Disclosure of Portfolio Holdings	20
How the Fund is Managed	24
Board of Trustees and Oversight Committees	25
Trustees and Officers of the Fund	26
The Manager	40
Brokerage Policies of the Fund	43
Distribution and Service Arrangements	44
Payments to Financial Intermediaries	48
Performance of the Fund	51
ABOUT YOUR ACCOUNT
About Your Account	56
How to Buy Shares	58
How to Sell Shares	61
How to Exchange Shares	64
Distributions and Taxes	66
Additional Information About the Fund	70
Appendix A:
Appendix A: Special Sales Charge Arrangements and Waivers	72
Appendix B:
Appendix B: Special Considerations Relating to State Municipal Obligations and U.S. Territories, Commonwealths and Possessions	77
Appendix C:
Appendix C: Municipal Bond Ratings Definitions	99
FINANCIAL INFORMATION ABOUT THE FUND
Report of Independent Registered Public Accounting Firm	105
Financial Statements	106

13D Research	Exane, Inc.	Multi-Bank Securities
1st Discount Brokerage	Fahnestock	Murphy & Durieu
ABG Sundal Collier	Fidelity Capital Markets	Natexis Bleichroeder
ABN Amro	FMS Bonds, Inc.	National Bank Financial
Advisor Asset Management	Fox-Pitt Kelton Inc.	Ned Davis Research Group
Alfa Capital Markets	Friedman, Billings, Ramsey & Co.	Needham & Company
Altrushare	FTN Financial	Nomura Securities International
Auerbach Grayson	Gabelli & Co.	Oddo Securities Corporation
Banco de Brasil Securities LLC	George K. Baum & Co.	Oppenheimer & Co. Inc.
Bank of America Securities LLC	GMP Securities L.P.	OTA-Off the Record Research
Barclays Capital	Goldman, Sachs & Co.	Pacific Crest Securities
Barnard Jacobs Mellet	Handelsbanken Markets Securities	Petercam
Belle Haven Investments	Hapoalim Securities Bank USA	Piper Jaffray
Beltone Financial	Helvea	Prager McCarthy & Sealy
Bergen Capital	HSBC Securities Inc.	R. Seelaus & Co. Inc.
Bernstein	Hyundai Securities America, Inc.	Ramirez & Co. Inc.
BMO Capital Markets	Intermonte	Raymond James & Associates
BNP Paribas	ISI Group, Inc.	RBC Capital Markets
Bradesco Securities, Inc.	Janco Partners	Red Capital Markets
Branch Bank & Trust Capital Markets	Janney Montgomery Scott LLC	Redburn Partners
Cabrera Capital	Jefferies & Company	Rice Financial Products Co.
Canaccord Adams, Inc.	Jennings Capital Inc.	Robert W. Baird & Co.
Canaccord Capital Corp.	JNK Securities Corp.	Roosevelt & Cross
Caris & Co.	JP Morgan Securities	Royal Bank of Scotland
Carnegie	JPP Eurosecurities	Samsung Securities Inc.
Cazenove	Keefe, Bruyette & Woods, Inc.	Sandford C. Bernstein & Co.
Cheuvreux NA	Keijser Securities N.V.	Scotia Capital Markets
Citigroup	Kempen & Co. USA	Seattle Northwest Securities
Citigroup Global Markets	Kepler Capital Markets	Securevest Financial
Cleveland Research	KeyBanc Capital Markets	SG Cowen
CLSA	Kotak Mahindra Inc.	Siebert Brandford Shank & Co.
Cormark Securities	Lazard Capital Markets	Sterne Agee
Cowen and Company, LLC	Lebenthal & Co. LLC	Stifel Nicolaus & Co.
Craig-Hallum Capital Group	Leerink Swann	Stone & Youngberg
Credit Suisse First Boston	Loop Capital Markets	SWS Group, Inc.
Credit Suisse Securities LLC	M&T Securities	TD Securities
Crews & Associates	Macquarie Securities	Think Equity Partners
D.A. Davidson & Company	Madison Williams and Company LLC	Troika Dialog
Dahlman Rose & Co.	MainFirst Bank AG	UBS
Daiwa Securities	Mediobanca Securities USA LLC	UOB Kay Hian Inc.
Davy	Merrill Lynch & Company, Inc.	US Bancorp
Desjardins Securities, Inc.	Merrion Stockbrokers Ltd.	Vining & Sparks
Deutsche Bank Securities Inc.	Mesirow Financial	Vontobel Securities Ltd.
Dougherty & Co.	MF Global Securities, Ltd.	Wachovia
Duncan Williams, Inc.	Mitsubishi UFJ Securities Inc.	Wedbush Morgan Securities
Dundee Securities Inc.	Mizuho Securities USA, Inc.	Wells Fargo Securities
DZ Financial Markets	Morgan Keegan	WH Mell & Associates
Emmet & Co., Inc.	Morgan Stanley Smith Barney	William Blair & Co.
Empirical Research Partners	Motilal Oswal Securities Ltd.	Ziegler Capital Markets Group
Enam Securities PVT Ltd.	MR Beal & Co.

Limited Term New York Municipal Fund	Oppenheimer Quest International Value Fund
Oppenheimer Absolute Return Fund	Oppenheimer Real Estate Fund
Oppenheimer AMT-Free Municipals	Oppenheimer Rising Dividends Fund
Oppenheimer AMT-Free New York Municipals	Oppenheimer Rochester Arizona Municipal Fund
Oppenheimer Balanced Fund	Oppenheimer Rochester Intermediate Term Municipal Fund
Oppenheimer Baring SMA International Fund	Oppenheimer Rochester Maryland Municipal Fund
Oppenheimer California Municipal Fund	Oppenheimer Rochester Massachusetts Municipal Fund
Oppenheimer Capital Appreciation Fund	Oppenheimer Rochester Michigan Municipal Fund
Oppenheimer Developing Markets Fund	Oppenheimer Rochester Minnesota Municipal Fund
Oppenheimer Discovery Fund	Oppenheimer Rochester North Carolina Municipal Fund
Oppenheimer Equity Income Fund, Inc.	Oppenheimer Rochester Ohio Municipal Fund
Oppenheimer Global Allocation Fund	Oppenheimer Rochester Short Term Municipal Fund
Oppenheimer Global Fund	Oppenheimer Rochester Virginia Municipal Fund
Oppenheimer Global Opportunities Fund	Oppenheimer Select Value Fund
Oppenheimer Global Value Fund	Oppenheimer Series Fund, Inc.
Oppenheimer Gold & Special Minerals Fund	Oppenheimer Small- & Mid- Cap Growth Fund
Oppenheimer Institutional Money Market Fund	Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer International Diversified Fund	Oppenheimer Transition 2010 Fund
Oppenheimer International Growth Fund	Oppenheimer Transition 2015 Fund
Oppenheimer International Small Company Fund	Oppenheimer Transition 2020 Fund
Oppenheimer Limited Term California Municipal Fund	Oppenheimer Transition 2025 Fund
Oppenheimer Limited Term Municipal Fund	Oppenheimer Transition 2030 Fund
Oppenheimer Master International Value Fund, LLC	Oppenheimer Transition 2040 Fund
Oppenheimer Money Market Fund, Inc.	Oppenheimer Transition 2050 Fund
Oppenheimer Multi-State Municipal Trust	Oppenheimer U.S. Government Trust
Oppenheimer Portfolio Series	Rochester Fund Municipals
Oppenheimer Quest Opportunity Value Fund

Each Independent Trustee has served the Fund in the following capacities from the following dates:
	Position(s)	Length of Service
Brian F. Wruble	Board Chairman & Trustee	Since 2007 & 2001
David K. Downes	Trustee	Since 2005
Matthew P. Fink	Trustee	Since 2009
Phillip A. Griffiths	Trustee	Since 2009
Mary F. Miller	Trustee	Since 2009
Joel W. Motley	Trustee	Since 2009
Mary Ann Tynan	Trustee	Since 2009
Joseph M. Wikler	Trustee	Since 2009
Peter I. Wold	Trustee	Since 2009

Independent Trustees
Name, Age, Position(s)	Principal Occupation(s) During the Past 5 Years; Other Trusteeship/Directorships Held	Portfolios Overseen in Fund Complex
Brian F. Wruble (67) Chairman of the Board, Trustee	Chairman (since August 2007) and Trustee (since August 1991) of the Board of Trustees of The Jackson Laboratory (non-profit); Director of Special Value Opportunities Fund, LLC (registered investment company) (affiliate of the Manager's parent company) (since September 2004); Member of Zurich Financial Investment Management Advisory Council (insurance) (since 2004); Treasurer (since 2007) and Trustee of the Institute for Advanced Study (non-profit educational institute) (since May 1992); General Partner of Odyssey Partners, L.P. (hedge fund) (September 1995-December 2007); Special Limited Partner of Odyssey Investment Partners, LLC (private equity investment) (January 1999-September 2004). Mr. Wruble has served on the Boards of certain Oppenheimer funds since April 2001, during which time he has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Boards' deliberations.	59
David K. Downes (71) Trustee	Director of THL Credit Inc. (since June 2009); Independent Chairman GSK Employee Benefit Trust (since April 2006); Trustee of Employee Trusts (since January 2006); Chief Executive Officer and Board Member of Community Capital Management (investment management company) (since January 2004); President of The Community Reinvestment Act Qualified Investment Fund (investment management company) (since 2004); Director of Internet Capital Group (information technology company) (since October 2003); Director of Correctnet (January 2006-2007); Independent Chairman of the Board of Trustees of Quaker Investment Trust (registered investment company) (2004-2007); Chief Operating Officer and Chief Financial Officer of Lincoln National Investment Companies, Inc. (subsidiary of Lincoln National Corporation, a publicly traded company) and Delaware Investments U.S., Inc. (investment management subsidiary of Lincoln National Corporation) (1993-2003); President, Chief Executive Officer and Trustee of Delaware Investment Family of Funds (1993-2003); President and Board Member of Lincoln National Convertible Securities Funds, Inc. and the Lincoln National Income Funds, TDC (1993-2003); Chairman and Chief Executive Officer of Retirement Financial Services, Inc. (registered transfer agent and investment adviser and subsidiary of Delaware Investments U.S., Inc.) (1993-2003); President and Chief Executive Officer of Delaware Service Company, Inc. (1995-2003); Chief Administrative Officer, Chief Financial Officer, Vice Chairman and Director of Equitable Capital Management Corporation (investment subsidiary of Equitable Life Assurance Society) (1985-1992); Corporate Controller of Merrill Lynch Company (financial services holding company) (1977-1985); held the following positions at the Colonial Penn Group, Inc. (insurance company): Corporate Budget Director (1974-1977), Assistant Treasurer (1972-1974) and Director of Corporate Taxes (1969-1972); held the following positions at Price Waterhouse Company (financial services firm): Tax Manager (1967-1969), Tax Senior (1965-1967) and Staff Accountant (1963-1965); United States Marine Corps (1957-1959). Mr. Downes has served on the Boards of certain Oppenheimer funds since December 2005, during which time he has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Boards' deliberations.	59
Matthew P. Fink (70) Trustee	Trustee of the Committee for Economic Development (policy research foundation) (since 2005); Director of ICI Education Foundation (education foundation) (October 1991-August 2006); President of the Investment Company Institute (trade association) (October 1991-June 2004); Director of ICI Mutual Insurance Company (insurance company) (October 1991-June 2004). Mr. Fink has served on the Boards of ceratin Oppenheimer funds since January 2005, during which time he has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Boards' deliberations.	59
Phillip A. Griffiths (72) Trustee	Fellow of the Carnegie Corporation (since 2007); Distinguished Presidential Fellow for International Affairs (since 2002) and Member (since 1979) of the National Academy of Sciences; Council on Foreign Relations (since 2002); Foreign Associate of Third World Academy of Sciences (since 2002); Director of GSI Lumonics Inc. (precision technology products company) (since 2001); Senior Advisor of The Andrew W. Mellon Foundation (since 2001); Chair of Science Initiative Group (since 1999); Member of the American Philosophical Society (since 1996); Trustee of Woodward Academy (since 1983); Director of the Institute for Advanced Study (1991-2004); Director of Bankers Trust New York Corporation (1994-1999); Provost at Duke University (1983-1991). Mr. Griffiths has served on the Boards of certain Oppenheimer funds since June 1999, during which time he has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Boards' deliberations.	59
Mary F. Miller (68) Trustee	Trustee of International House (not-for-profit) (since June 2007); Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998); and Senior Vice President and General Auditor of American Express Company (financial services company) (July 1998-February 2003). Ms. Miller has served on the Boards of certain Oppenheimer funds since August 2004, during which time she has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Boards' deliberations.	59
Joel W. Motley (58) Trustee	Managing Director of Public Capital Advisors, LLC (privately-held financial advisor) (since January 2006); Managing Director of Carmona Motley, Inc. (privately-held financial advisor) (since January 2002); Director of Columbia Equity Financial Corp. (privately-held financial advisor) (2002-2007); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial advisor) (January 1998-December 2001); Member of the Finance and Budget Committee of the Council on Foreign Relations, Chairman of the Investment Committee of the Episcopal Church of America, Member of the Investment Committee and Board of Human Rights Watch and Member of the Investment Committee and Board of Historic Hudson Valley. Mr. Motley has served on the Boards of certain Oppenheimer funds since October 2002, during which time he has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Boards' deliberations.	59
Mary Ann Tynan (65) Trustee	Vice Chair of Board of Trustees of Brigham and Women's/Faulkner Hospitals (non-profit hospital) (since 2000); Chair of Board of Directors of Faulkner Hospital (non-profit hospital) (since 1990); Member of Audit and Compliance Committee of Partners Health Care System (non-profit) (since 2004); Board of Trustees of Middlesex School (educational institution) (since 1994); Board of Directors of Idealswork, Inc. (financial services provider) (since 2003); Partner, Senior Vice President and Director of Regulatory Affairs of Wellington Management Company, LLP (global investment manager) (1976-2002); Vice President and Corporate Secretary, John Hancock Advisers, Inc. (mutual fund investment adviser) (1970-1976). Ms. Tynan has served on the Boards of certain Oppenheimer funds since October 2008, during which time she has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Boards' deliberations.	59
Joseph M. Wikler (69) Trustee	Director of C-TASC (bio-statistics services) (since 2007); Director of the following medical device companies: Medintec (since 1992) and Cathco (since 1996); Member of the Investment Committee of the Associated Jewish Charities of Baltimore (since 1994); Director of Lakes Environmental Association (environmental protection organization) (1996-2008); Director of Fortis/Hartford mutual funds (1994-December 2001). Mr. Wikler has served on the Boards of certain Oppenheimer funds since August 2005, during which time he has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Boards' deliberations.	59
Peter I. Wold (63) Trustee	Director of Arch Coal, Inc. (since 2010); Director and Chairman of Wyoming Enhanced Oil Recovery Institute Commission (enhanced oil recovery study) (since 2004); President of Wold Oil Properties, Inc. (oil and gas exploration and production company) (since 1994); Vice President of American Talc Company, Inc. (talc mining and milling) (since 1999); Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Mr. Wold has served on the Boards of certain Oppenheimer funds since August 2005, during which time he has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Boards' deliberations.	59

Interested Trustee and Officer
Name, Age, Position(s)	Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held	Portfolios Overseen in Fund Complex
William F. Glavin Jr. (52) Trustee, President and Principal Executive Officer	Chairman of the Manager (since December 2009); Chief Executive Officer and Director of the Manager (since January 2009); President of the Manager (since May 2009); Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding company) (since June 2009); Executive Vice President (March 2006 - February 2009) and Chief Operating Officer (July 2007 - February 2009) of Massachusetts Mutual Life Insurance Company (OAC's parent company); Director (May 2004 - March 2006) and Chief Operating Officer and Chief Compliance Officer (May 2004 - January 2005), President (January 2005 - March 2006) and Chief Executive Officer (June 2005 - March 2006) of Babson Capital Management LLC; Director (March 2005 - March 2006), President (May 2003 - March 2006) and Chief Compliance Officer (July 2005 - March 2006) of Babson Capital Securities, Inc. (a broker-dealer); President (May 2003 - March 2006) of Babson Investment Company, Inc.; Director (May 2004 - August 2006) of Babson Capital Europe Limited; Director (May 2004 - October 2006) of Babson Capital Guernsey Limited; Director (May 2004 - March 2006) of Babson Capital Management LLC; Non-Executive Director (March 2005 - March 2007) of Baring Asset Management Limited; Director (February 2005 - June 2006) Baring Pension Trustees Limited; Director and Treasurer (December 2003 - November 2006) of Charter Oak Capital Management, Inc.; Director (May 2006 - September 2006) of C.M. Benefit Insurance Company; Director (May 2008 - June 2009) and Executive Vice President (June 2007 - July 2009) of C.M. Life Insurance Company; President (March 2006 - May 2007) of MassMutual Assignment Company; Director (January 2005 - December 2006), Deputy Chairman (March 2005 - December 2006) and President (February 2005 - March 2005) of MassMutual Holdings (Bermuda) Limited; Director (May 2008 - June 2009) and Executive Vice President (June 2007 - July 2009) of MML Bay State Life Insurance Company; Chief Executive Officer and President (April 2007 - January 2009) of MML Distributors, LLC.; and Chairman (March 2006 -December 2008) and Chief Executive Officer (May 2007 - December 2008) of MML Investors Services, Inc. Mr. Glavin has served on the Board since December 2009, during which time he has become familiar with the Fund's (and other Oppenheimer funds') financial, accounting, regulatory and investment matters and has contributed to the Board's deliberations.	96

Each of the officers has served the Fund in the following capacities from the following dates:
	Position(s)	Length of Service
Daniel G. Loughran	Vice President and Senior Portfolio Manager	Since 2005; 1999
Scott S. Cottier	Vice President and Senior Portfolio Manager	Since 2005; 2002
Troy E. Willis	Vice President and Senior Portfolio Manager	Since 2005; 2003
Mark R. DeMitry	Vice President and Senior Portfolio Manager	Since 2009; 2006
Michael L. Camarella	Vice President and Senior Portfolio Manager	Since 2009; 2008
Richard A. Stein	Vice President	Since 2007
William F. Glavin, Jr.	President and Principal Executive Officer	Since 2009
Thomas W. Keffer	Vice President and Chief Business Officer	Since 2009
Mark S. Vandehey	Vice President and Chief Compliance Officer	Since 2004
Robert G. Zack	Vice President	Since 2011
Brian W. Wixted	Treasurer and Principal Financial & Accounting Officer	Since 2004
Brian S. Peterson	Assistant Treasurer	Since 2004
Stephanie J. Bullington	Assistant Treasurer	Since 2008
Arthur S. Gabinet	Secretary	Since 2011
Kathleen T. Ives	Assistant Secretary	Since 2001
Lisa I. Bloomberg	Assistant Secretary	Since 2004
Taylor V. Edwards	Assistant Secretary	Since 2008
Randy G. Legg	Assistant Secretary	Since 2008
Adrienne M. Ruffle	Assistant Secretary	Since 2008

Other Information about the Officers of the Fund
Name, Age, Position(s)	Principal Occupation(s) During the Past 5 Years	Portfolios Overseen in Fund Complex
Daniel G. Loughran (47) Vice President and Senior Portfolio Manager	Senior Vice President of the Manager (since July 2007); Vice President of the Manager (April 2001-June 2007); Team leader, a Senior Portfolio Manager, an officer and a trader for the Fund and other Oppenheimer funds.	20
Scott S. Cottier (39) Vice President and Senior Portfolio Manager	Vice President and Senior Portfolio Manager of the Manager (since September 2002); Portfolio Manager and trader at Victory Capital Management (1999-2002); Senior Portfolio Manager, an officer and trader for the Fund and other Oppenheimer funds.	20
Troy E. Willis (38) Vice President and Senior Portfolio Manager	Vice President of the Manager (since July 2009); Assistant Vice President of the Manager (July 2005-June 2009); Senior Portfolio Manager with the Manager (since January 2006); A corporate attorney for Southern Resource Group (1999-2003); Senior Portfolio Manager, an officer and a trader for the Fund and other Oppenheimer funds.	20
Mark R. DeMitry (35) Vice President and Senior Portfolio Manager	Vice President and Senior Portfolio Manager of the Manager (since July 2009); Associate Portfolio Manager (September 2006-June 2009); Research Analyst of the Manager (June 2003-September 2006); Credit Analyst of the Manager (July 2001-May 2003); Senior Portfolio Manager, an officer and a trader for the Fund and other Oppenheimer funds.	20
Michael L. Camarella (34) Vice President and Senior Portfolio Manager	Vice President of the Manager (since January 2011); Assistant Vice President of the Manager (July 2009-December 2010); Senior Portfolio Manager of the Manager (since January 2011); Associate Portfolio Manager of the Manager (January 2008-January 2011); Research Analyst of the Manager (April 2006 - December 2007); Credit Analyst of the Manager (June 2003 - March 2006). He is a Senior Portfolio Manager, an officer and a trader for the Fund and other Oppenheimer funds.	20
Richard A. Stein (53) Vice President	Director of the Rochester Credit Analysis team (since March 2004) and a Vice President of the Manager (since 1997); head of Rochester's Credit Analysis team (since 1993).	20

As of December 31, 2010
	Dollar Range of Shares Beneficially Owned in the Fund	Aggregate Dollar Range of Shares Beneficially Owned in Supervised Funds
Independent Trustees
Brian Wruble	None	Over $100,000
David K. Downes	None	Over $100,000
Matthew P. Fink	None	Over $100,000
Phillip A. Griffiths	None	Over $100,000
Mary F. Miller	None	Over $100,000
Joel W. Motley	None	Over $100,000
Mary Ann Tynan	None	Over $100,000
Joseph M. Wikler	None	Over $100,000
Peter I. Wold	None	Over $100,000
Interested Trustee
William F. Glavin	None	Over $100,000

Name and Other Fund Position(s) (as applicable)	Aggregate Compensation From the Fund¹	Compensation From the Fund and Fund Complex
	Fiscal Year Ended December 31, 2010	Year Ended December 31, 2010
Brian F. Wruble	$10,092	$234,000
Chairman of the Board
David Downes	$8,176	$189,000
Audit Committee Chairman and Regulatory & Oversight Committee Member
Matthew P. Fink	$8,176	$189,000
Regulatory & Oversight Committee Chairman and Governance Committee Member
Phillip A. Griffiths	$9,082²	$210,280
Audit Committee Member and Regulatory & Oversight Committee Member
Mary F. Miller	$7,665³	$177,000
Audit Committee Member and Governance Committee Member
Joel W. Motley	$8,176⁴	$189,000
Governance Committee Chairman and Regulatory & Oversight Committee Member
Mary Ann Tynan	$7,665	$183,076
Regulatory & Oversight Committee Member and Governance Committee Member
Joseph M. Wikler	$7,665⁵	$177,000
Audit Committee Member and Regulatory & Oversight Committee Member
Peter I. Wold	$7,665⁶	$177,000
Audit Committee Member and Governance Committee Member

Name	Address	% Owned	Share Class
Pershing LLC	1 Pershing Plaza, Jersey City NJ 07399-0001	15.89%	A
MLPF&S For the Sole Benefit of its Customers	ATTN Fund Admin/977T4, 4800 Deer Lake Dr. E Fl. 3, Jacksonville FL 32246-6484	9.91%	A
Citigroup Global Mkts Inc.	ATTN Cindy Tempesta 7th Fl., 333 West 34th Street, New York NY 10001-2483	6.03%	A
Morgan Stanley & Co	ATTN Mutual Funds Operations, Harborside Financial Center, Plaza II 3rd Floor, Jersey City NJ 07311	5.81%	A
UBS WM USA	OMNI Account M/F, ATTN Department Manager, 499 Washington Blvd Fl. 9, Jersey City NJ 07310-2055	5.53%	A
Pershing LLC	1 Pershing Plaza, Jersey City NJ 07399-0001	21.27%	B
MLPF&S For the Sole Benefit of its Customers	ATTN Fund Admin, 4800 Deer Lake Dr. E Fl. 3, Jacksonville FL 32246-6484	7.95%	B
MLPF&S For the Sole Benefit of its Customers	ATTN Fund Admin, 4800 Deer Lake Dr. E Fl 3. Jacksonville FL 32246-6484	24.36%	C
Pershing LLC	1 Pershing Plaza, Jersey City NJ 07399-00012	10.83%	C
Morgan Stanley & Co	Attn Mutual Funds Operations, Harborside Financial Center, Plaza II 3rd Floor, Jersey City NJ 07311	8.02%	C
Citigroup Global Mkts Inc	ATTN Cindy Tempesta 7th Fl, 333 West 34th Street, New York NY 10001-2483	6.82%	C

Fiscal Year ended 12/31	Management Fees Paid to OppenheimerFunds, Inc.	Accounting and Administrative Service Fees Paid to OppenheimerFunds, Inc.
2008	$15,891,889	$1,196,648
2009	$14,610,646	$1,098,029
2010	$17,143,099	$1,292,829

Portfolio Manager	Registered Investment Companies Managed	Total Assets in Registered Investment Companies Managed ¹	Other Pooled Investment Vehicles Managed	Total Assets in Other Pooled Investment Vehicles Managed	Other Accounts Managed	Total Assets in Other Accounts Managed²
Daniel G. Loughran	19	$23.93	0	$0	0	$0
Scott S. Cottier	19	$23.93	0	$0	0	$0
Troy E. Willis	19	$23.93	0	$0	0	$0
Mark R. DeMitry	19	$23.93	0	$0	0	$0
Marcus V. Franz	19	$23.93	0	$0	0	$0
Michael L. Camarella	19	$23.93	0	$0	0	$0
Charles S. Pulire	19	$23.93	0	$0	0	$0

Portfolio Manager	Range of Shares Beneficially Owned in the Fund
Daniel G. Loughran	None
Scott S. Cottier	None
Troy E. Willis	$1-$10,000
Mark R. DeMitry	$10,001-$50,000
Marcus V. Franz	None
Michael L. Camarella	$1-$10,000
Charles S. Pulire	None

Fiscal Year Ended 12/31	Aggregate Front-End Sales Charges on Class A Shares	Class A Front-End Sales Charges Retained by Distributor¹	Concessions on Class A Shares Advanced by Distributor²	Concessions on Class B Shares Advanced by Distributor²	Concessions on Class C Shares Advanced by Distributor²
2008	$4,893,537	$904,465	$992,964	$166,419	$1,655,589
2009	$4,028,474	$766,924	$666,732	$120,820	$1,369,777
2010	$6,017,721	$948,015	$1,403,538	$232,776	$2,225,055

Contingent Deferred Sales Charges
Fiscal Year Ended 12/31:	Class A Contingent Deferred Sales Charges Retained by Distributor	Class B Contingent Deferred Sales Charges Retained by Distributor	Class C Contingent Deferred Sales Charges Retained by Distributor
2008	$323,556	$258,192	$181,729
2009	$128,618	$68,246	$117,759
2010	$128,518	$37,970	$156,732

Distribution and Service Fees Paid to the Distributor for the Fiscal Year Ended 12/31/10
Class:	Total Payments Under Plan	Amount Retained by Distributor	Amount Paid to Affiliate	Distributor's Aggregate Unreimbursed Expenses Under Plan	Distributor's Unreimbursed Expenses as % of Net Assets of Class
Class B Plan	$496,759	$396,201	$2,606	$0	0.00%
Class C Plan	$12,464,001	$2,641,469	$46,290	$36,864,496	2.85%

A.G. Edwards and Sons, Inc.	H.D. Vest Investment Services, Inc.	Prime Capital Services, Inc.
Aetna Life Insurance & Annuity Company	Hartford Life & Annuity Insurance Company	Primevest Financial Services, Inc.
AIG Advisor Group, Inc.	Independent Financial Group, LLC	Proequities, Inc.
Allianz Life Insurance Company	ING Financial Advisers, LLC	Protective Group Securities, Inc.
Allstate Financial Services LLC	ING Financial Partners, Inc.	Protective Life and Annuity Insurance Company
Allstate Life Insurance Company	Invest Financial Corporation	Pruco Securities, LLC
American Enterprise Life Insurance Company	Jackson National Life Insurance Company	Prudential Investment Management Services, Inc.
American General Annuity Insurance Company	Janney Montgomery Scott LLC	Raymond James & Associates, Inc.
American Portfolios Financial Services, Inc.	Jefferson Pilot Securities Corporation	Raymond James Financial Services, Inc.
American United Life Insurance Company	JJB Hillard W.L. Lyons, Inc.	RBC Capital Markets Corporation
Ameriprise Advisor Services, Inc.	JP Morgan Securities, Inc.	RBC Dain Rauscher
Ameriprise Financial Services, Inc.	Kemper Investors Life Insurance Company	Retirement Plan Consultants
Ameritas Life Insurance Company	Key Investment Services LLC	Robert W. Baird & Co.
AXA Advisors, LLC	KMS Financial Services Inc.	Royal Alliance Associates, Inc.
AXA Equitable Life Insurance Company	Legend Equities Corporation	Sagepoint Financial Advisors
Banc of America Investment Services, Inc.	Lincoln Financial Advisors Corporation	Securities America, Inc.
Cadaret Grant & Co.	Lincoln Financial Securities Corporation	Security Benefit Life Insurance Company
Cambridge Investment Research, Inc.	Lincoln Investment Planning, Inc.	Sigma Financial Corp.
CCO Investment Services Corporation	Lincoln National Life Insurance Company	Signator Investments, Inc.
Charles Schwab & Co., Inc.	LPL Financial Corporation	State Farm VP Management Corp.
Chase Investment Services Corporation	Manulife Financial	Stifel, Nicolaus & Company, Inc.
Citigroup Global Markets, Inc.	Massachusetts Mutual Life Insurance Company	Sun Life Financial Distributors, Inc.
CitiStreet Advisors LLC	MassMutual Financial Group	Sun Life Insurance Company
Citizens Bank of Rhode Island	Merrill Lynch Pierce Fenner & Smith Inc.	Sun Trust Securities, Inc.
C.M. Life Insurance Company	MetLife Investors Insurance Company	Sunamerica Securities, Inc.
Commonwealth Financial Network	MetLife Securities, Inc.	SunTrust Bank
CUNA Brokerage Services, Inc.	MML Investor Services, Inc.	Suntrust Investment Services, Inc.
CUSO Financial Services, LP	Morgan Stanley & Co., Incorporated	TD Ameritrade Clearing, Inc.
Direct Services LLC	Morgan Stanley Smith Barney LLC	The Hartford/Planco
Edward D. Jones and Company, LP	Multi-Financial Securities Corporation	The Investment Center, Inc.
Essex National Securities, Inc.	Mutual Funds Against Cancer	Thrivent Financial for Lutherans
Federal Kemper Life Assurance Company	National Planning Corporation	Thrivent Investment Management, Inc.
Financial Network Investment Corporation	National Retirement Partners, Inc.	Transamerica Life Insurance Co.
Financial Services Corporation	Nationwide Financial Services, Inc.	UBS Financial Services, Inc.
First Allied Securities, Inc.	New England Securities, Inc.	Union Central Life Insurance Company
First Clearing LLC	NFP Securities Inc.	USI Securities, Inc.
First Global Capital Corporation	North Ridge Securities Corp.	Valic Financial Advisors, Inc.
FSC Securities Corporation	Northwestern Mutual Investment Services	Vanderbilt Securities LLC
GE Life and Annuity Company	NRP Financial, Inc.	VSR Financial Services, Inc.
Geneos Wealth Management, Inc.	Oppenheimer & Co. Inc.	Wachovia Securities, LLC
Genworth Financial, Inc.	Pacific Life Insurance Co.	Walnut Street Securities, Inc.
Great West Life Insurance Company	Park Avenue Securities LLC	Wells Fargo Advisors, LLC
Guardian Insurance & Annuity Company	Pershing LLC	Wells Fargo Investments, LLC
H. Beck, Inc.	PFS Investments, Inc.	Woodbury Financial Services, Inc.
	PlanMember Securities Corp.

Acensus, Inc.	First Clearing LLC	National Financial Services LLC
ACS HR Solutions LLC	First Global Capital Corporation	New York Life Insurance and Annuity Company
ADP Broker-Dealer, Inc.	First Trust Corp.	Northwest Plan Services Inc.
Aegon USA	GE Financial Assurance	Oppenheimer & Co. Inc.
Aetna Life Insurance & Annuity Company	GE Life and Annuity Company	Pershing LLC
Alliance Benefit Group	Geller Group Ltd.	Phoenix Life Insurance Company
Allianz Life Insurance Company	Genworth Financial, Inc.	Plan Administrators Inc.
American Diversified Distribution, LLC	Great West Life Insurance Company	PlanMember Securities
American Enterprise Life Insurance	Guardian Insurance & Annuity Company	Primevest Financial Services, Inc.
American Funds	H&R Block Financial Advisors, Inc.	Principal Life Insurance
American General Annuity Insurance Company	H.D. Vest Investment Services, Inc.	Protective Life and Annuity Insurance Company
American United Life Insurance Co.	Hartford Life Insurance Company	Prudential Investment Management Services, Inc.
Ameriprise Financial Services, Inc.	Hewitt Associates LLC	PSMI Group
Ameritas Life Insurance Company	ICMA-RC Services LLC	Raymond James & Associates, Inc.
Ameritrade, Inc.	Ingham Group	Reliance Trust Co.
Annuity Investors Life Insurance Company	Interactive Retirement Systems	Robert W. Baird & Co.
AST Trust Company	Intuition Systems, Inc.	RSM McGladrey, Inc.
AXA Equitable Life Insurance Company	Investmart	Scott & Stringfellow, Inc.
Benefit Administration Co.	Janney Montgomery Scott LLC	Scottrade, Inc.
Benefit Consultants Group	JJB Hillard W. L. Lyons, Inc.	Security Benefit Life Insurance Company
Benefit Plans Administrative Services, Inc.	John Hancock Life Insurance Company	Southwest Securities, Inc.
Boston Financial Data Services, Inc.	JP Morgan Securities, Inc.	Standard Insurance Co.
Ceridian	July Business Services	Standard Retirement Services, Inc.
Charles Schwab & Co., Inc.	Kemper Investors Life Insurance Company	Stanton Group, Inc.
Citigroup Global Markets Inc.	Lincoln Benefit National Life	Sterne Agee & Leach, Inc.
CitiStreet Advisors LLC	Lincoln Financial Advisors Corporation	Stifel Nicolaus & Company, Inc.
Clark Consulting	Lincoln Investment Planning Inc.	Sun Trust Securities, Inc.
CPI Qualified Plan Consultants	LPL Financial Corporation	T. Rowe Price
CUNA Mutual Insurance Society	Marshall & Ilsley Trust Company, Inc.	The Princeton Retirement Group
DA Davidson & Co.	Massachusetts Mutual Life Insurance Company	The Retirement Plan Company, LLC
Daily Access. Com, Inc.	Matrix Settlement & Clearance Services	Transamerica Retirement Services
Davenport & Company, LLC	Mercer HR Services	UBS Financial Services, Inc.
David Lerner Associates, Inc.	Merrill Lynch Pierce Fenner & Smith Inc.	Unified Fund Services, Inc.
Digital Retirement Solutions	Mesirow Financial, Inc.	Union Bank & Trust Company
Diversified Advisors Investments Inc.	MG Trust	US Clearing Co.
DR, Inc.	Mid Atlantic Capital Co.	USAA Investment Management Co.
Dyatech, LLC	Milliman, Inc.	USI Consulting Group
E*TRADE Clearing LLC	Minnesota Life Insurance Company	Valic Financial Advisors, Inc.
Edward D. Jones and Company, LP	Mony Life Insurance Company of America	Vanguard Group
ExpertPlan.com	Morgan Stanley & Co., Incorporated	Wachovia Securities, LLC
Federal Kemper Life Assurance Company	Morgan Stanley Dean Witter	Wedbush Morgan Securities
Fidelity Brokerage Services, LLC	Mutual of Omaha Insurance Company	Wells Fargo Bank NA
Fidelity Investments Institutional Operations Co.	National City Bank	Wells Fargo Investments, LLC
Financial Administrative Services Corporation	National Deferred Compensation	Wilmington Trust Company

The Fund's Yields for the 30-Day Periods Ended 12/31/10
	Standardized Yield		Dividend Yield		Tax Equivalent Yield (40.83% combined Federal/New York Tax Brackets)
Class of Shares	Without Sales Charge	After Sales Charge	Without Sales Charge	After Sales Charge	Without Sales Charge	After Sales Charge
Class A	4.37%	4.21%	4.47%	4.31%	7.39%	7.11%
Class B	3.43%	N/A	3.32%	N/A	5.81%	N/A
Class C	3.59%	N/A	3.52%	N/A	6.07%	N/A

The Fund's Total Returns for the Periods Ended 12/31/10
	Cumulative Total Returns		Average Annual Total Returns
	10 Years		1 Year		5 Years		10 Years
Class of Shares	After Sales Charge	Without Sales Charge	After Sales Charge	Without Sales Charge	After Sales Charge	Without Sales Charge	After Sales Charge	Without Sales Charge
Class A¹	47.76%	53.12%	(0.11%)	3.51%	2.80%	3.54%	3.98%	4.35%
Class B²	46.27%	46.27%	(1.34%)	2.62%	2.51%	2.68%	3.88%	3.88%
Class C³	42.09%	42.09%	1.75%	2.74%	2.77%	2.77%	3.58%	3.58%

Average Annual Total Returns for Class A Shares (After Sales Charge) for the Periods Ended 12/31/10 ¹
	1 Year	5 Years	10 Years
After Taxes on Distributions	(0.11%)	2.80%	3.98%
After Taxes on Distributions and Redemption of Fund Shares	1.45%	3.10%	4.04%

Oppenheimer AMT-Free Municipals	Money Market Funds:
Oppenheimer AMT-Free New York Municipals	Oppenheimer Cash Reserves
Oppenheimer Balanced Fund	Oppenheimer Institutional Money Market Fund
Oppenheimer Core Bond Fund	Oppenheimer Money Market Fund, Inc.
Oppenheimer California Municipal Fund	Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Appreciation Fund	Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Income Fund	Oppenheimer Portfolio Series Funds:
Oppenheimer Champion Income Fund	Active Allocation Fund
Oppenheimer Commodity Strategy Total Return Fund	Conservative Investor Fund
Oppenheimer Corporate Bond Fund	Equity Investor Fund
Oppenheimer Currency Opportunities Fund	Moderate Investor Fund
Oppenheimer Developing Markets Fund	Oppenheimer Portfolio Series Fixed Income
Oppenheimer Discovery Fund	Active Allocation Fund
Oppenheimer Emerging Markets Debt Fund	Oppenheimer Principal Protected Main Street Fund III
Oppenheimer Equity Fund, Inc.	Oppenheimer Quest International Value Fund
Oppenheimer Equity Income Fund, Inc.	Oppenheimer Quest Opportunity Value Fund
Oppenheimer Global Fund	Oppenheimer Real Estate Fund
Oppenheimer Global Allocation Fund	Oppenheimer Rising Dividends Fund
Oppenheimer Global Opportunities Fund	Oppenheimer Rochester Arizona Municipal Fund
Oppenheimer Global Strategic Income Fund	Oppenheimer Rochester Intermediate Term Municipal Fund
Oppenheimer Global Value Fund	Oppenheimer Rochester Maryland Municipal Fund
Oppenheimer Gold & Special Minerals Fund	Oppenheimer Rochester Massachusetts Municipal Fund
Oppenheimer International Bond Fund	Oppenheimer Rochester Michigan Municipal Fund
Oppenheimer International Diversified Fund	Oppenheimer Rochester Minnesota Municipal Fund
Oppenheimer International Growth Fund	Oppenheimer Rochester National Municipals
Oppenheimer International Small Company Fund	Oppenheimer Rochester North Carolina Municipal Fund
Oppenheimer Limited Term California Municipal Fund	Oppenheimer Rochester Ohio Municipal Fund
Oppenheimer Limited-Term Government Fund	Oppenheimer Rochester Short Term Municipal Fund
Oppenheimer Limited Term Municipal Fund	Oppenheimer Rochester Virginia Municipal Fund
Oppenheimer Main Street Fund	Oppenheimer Select Value Fund
Oppenheimer Main Street Select Fund	Oppenheimer Senior Floating Rate Fund
Oppenheimer Main Street Small- & Mid-Cap Fund
	Oppenheimer Small- & Mid-Cap Growth Fund
Oppenheimer LifeCycle Funds:	Oppenheimer Small- & Mid-Cap Value Fund
Oppenheimer Transition 2010 Fund	Oppenheimer U.S. Government Trust
Oppenheimer Transition 2015 Fund	Oppenheimer Value Fund
Oppenheimer Transition 2020 Fund	Limited-Term New York Municipal Fund
Oppenheimer Transition 2025 Fund	Rochester Fund Municipals
Oppenheimer Transition 2030 Fund
Oppenheimer Transition 2040 Fund
Oppenheimer Transition 2050 Fund