Oppenheimer AMT-Free Municipals

6803 South Tucson Way, Centennial, Colorado 80112
1.800.225.5677

Statement of Additional Information dated November 28, 2005, revised
December 6, 2005

      This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated November 28, 2005. It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217 or by calling the Transfer Agent at the toll-free number shown above or
by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.

Contents                                                                Page

About the Fund
Additional Information About the Fund's Investment Policies and Risks...  2
    The Fund's Investment Policies......................................  2
    Other Investment Techniques and Strategies..........................  8
    Other Investment Restrictions....................................... 21
    Disclosure of Portfolio Holdings.................................... 24
How the Fund is Managed................................................. 27
    Organization and History............................................ 27
    Board of Trustees and Oversight Committees.......................... 29
    Trustees and Officers of the Fund................................... 31
    The Manager......................................................... 40
Brokerage Policies of the Fund.......................................... 44
Distribution and Service Plans.......................................... 46
Payments to Fund Intermediaries......................................... 51
Performance of the Fund................................................. 54

About Your Account
How to Buy Shares....................................................... 60
How to Sell Shares...................................................... 68
How to Exchange Shares.................................................. 73
Dividends, Capital Gains and Taxes...................................... 76
Additional Information About the Fund................................... 81

Financial Information About the Fund
Report of Independent Registered Public Accounting Firm................. 83
Financial Statements.................................................... 84

Appendix A: Municipal Bond Ratings Definitions..........................  A-1
Appendix B: Industry Classifications....................................  B-1
Appendix C: OppenheimerFunds Special Sales Charge Arrangements and Waivers
C-1






ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

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

The Fund's Investment Policies. The composition of the Fund's portfolio and
the techniques and strategies that the Manager uses in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques described below at all times in seeking its objective.
It may use some of the special investment techniques and strategies at some
times or not at all. The Fund does not make investments with the objective of
seeking capital growth, since that would generally be inconsistent with its
goal of seeking tax-exempt income. However, the value of the securities held
by the Fund may be affected by changes in general interest rates. Because the
current value of debt securities varies inversely with changes in prevailing
interest rates, if interest rates increased after a security was purchased,
that security would normally decline in value. Conversely, should interest
rates decrease after a security was purchased, normally its value would rise.

      However, those fluctuations in value will not generally result in
realized gains or losses to the Fund unless the Fund sells the security prior
to maturity. A debt security held to maturity is redeemable by its issuer at
full principal value plus accrued interest. The Fund does not usually intend
to dispose of securities prior to their maturity, but may do so for liquidity
purposes, or because of other factors affecting the issuer that cause the
Manager to sell the particular security. In that case, the Fund could realize
a capital gain or loss on the sale.

      There are variations in the credit quality of municipal securities,
both within a particular rating classification and between classifications.
These variations depend on numerous factors. The yields of municipal
securities depend on a number of factors, including general conditions in the
municipal securities market, the size of a particular offering, the maturity
of the obligation and rating (if any) of the issue. These factors are
discussed in greater detail below.

Municipal Securities. The types of municipal securities in which the Fund may
invest are described in the Prospectus under "What Does the Fund Mainly
Invest In?" and "About the Fund's Investments." Municipal securities are
generally classified as general obligation bonds, revenue bonds and notes. A
discussion of the general characteristics of these principal types of
municipal securities follows below.

|X|   Municipal Bonds. The Fund has classified longer term municipal
securities as "municipal bonds." The principal classifications of long-term
municipal bonds are "general obligation" and "revenue" bonds (including
"industrial development" and "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 bonds that pay a lower rate of return.

|X|   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 as to the rate or amount of
special assessments that can be levied to meet these obligations.

|X|   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. Revenue bonds are issued to finance a
wide variety of capital projects. Examples include electric, gas, water and
sewer systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals.

      Although the principal security for these types of bonds may vary from
bond to bond, many provide additional security in the form of a debt service
reserve fund that may be used to make principal and interest payments on the
issuer's obligations. Housing finance authorities have a wide range of
security, including partially or fully insured mortgages, rent subsidized
and/or collateralized mortgages, and/or the net revenues from housing or
other public projects. Some authorities provide further security in the form
of a state's ability (without obligation) to make up deficiencies in the debt
service reserve fund.

|X|   Industrial Development Bonds. Industrial development bonds are
considered municipal bonds if the interest paid is exempt from federal income
tax. They are issued by or on behalf of public authorities to raise money to
finance various privately operated facilities for business and manufacturing,
housing, sports, and pollution control. These bonds may also be used to
finance public facilities such as airports, mass transit systems, ports, and
parking. The payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property financed by
the bond as security for those payments.

|X|   Private Activity Municipal Securities. The Tax Reform Act of 1986 (the
"Tax Reform Act") reorganized, as well as amended, the rules governing tax
exemption for interest on certain types of municipal securities. The Tax
Reform Act generally did not change the tax treatment of bonds issued in
order to finance governmental operations. Thus, interest on general
obligation bonds issued by or on behalf of state or local governments, the
proceeds of which are used to finance the operations of such governments,
continues to be tax-exempt. However, the Tax Reform Act limited the use of
tax-exempt bonds for non-governmental (private) purposes. More stringent
restrictions were placed on the use of proceeds of such bonds. Interest on
certain private activity bonds is taxable under the revised rules. There is
an exception for "qualified" tax-exempt private activity bonds, for example,
exempt facility bonds including certain industrial development bonds,
qualified mortgage bonds, qualified Section 501(c)(3) bonds, and qualified
student loan bonds.

      In addition, limitations as to the amount of private activity bonds
which each state may issue were revised downward by the Tax Reform Act, which
will reduce the supply of such bonds. The value of the Fund's portfolio could
be affected if there is a reduction in the availability of such bonds.

      Interest on certain private activity bonds issued after August 7, 1986,
which continues to be tax-exempt, will be treated as a tax preference item
subject to the federal alternative minimum tax to which certain taxpayers are
subject. The Fund will not hold municipal securities the interest on which
(and thus a proportionate share of the exempt-interest dividends paid by the
Fund) would be subject to the Federal alternative minimum tax on individuals
and corporations.

      To determine whether a municipal security is treated as a taxable
private activity bond, it is subject to a test for: (a) a trade or business
use and security interest, or (b) a private loan restriction. Under the trade
or business use and security interest test, an obligation is a private
activity bond if: (i) more than 10% of the bond proceeds are used for private
business purposes and (ii) 10% or more of the payment of principal or
interest on the issue is directly or indirectly derived from such private use
or is secured by the privately used property or the payments related to the
use of the property. For certain types of uses, a 5% threshold is substituted
for this 10% threshold.

      The term "private business use" means any direct or indirect use in a
trade or business carried on by an individual or entity other than a state or
municipal governmental unit. Under the private loan restriction, the amount
of bond proceeds that may be used to make private loans is limited to the
lesser of 5% or $5.0 million of the proceeds. Thus, certain issues of
municipal securities could lose their tax-exempt status retroactively if the
issuer fails to meet certain requirements as to the expenditure of the
proceeds of that issue or the use of the bond-financed facility. The Fund
makes no independent investigation of the users of such bonds or their use of
proceeds of the bonds. If the Fund should hold a bond that loses its
tax-exempt status retroactively, there might be an adjustment to the
tax-exempt income previously distributed to shareholders.

      Additionally, a private activity bond that would otherwise be a
qualified tax-exempt private activity bond will not, under Internal Revenue
Code Section 147(a), be a qualified bond for any period during which it is
held by a person who is a "substantial user" of the facilities or by a
"related person" of such a substantial user. This "substantial user"
provision applies primarily to exempt facility bonds, including industrial
development bonds. The Fund may invest in industrial development bonds and
other private activity bonds. Therefore, the Fund may not be an appropriate
investment for entities which are "substantial users" (or persons related to
"substantial users") of such exempt facilities. Those entities and persons
should consult their tax advisers before purchasing shares of the Fund.

      A "substantial user" of such facilities is defined generally as a
"non-exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be a
"related person" under the Internal Revenue Code unless such individual or
the individual's immediate family (spouse, brothers, sisters and immediate
descendants) own directly or indirectly in the aggregate more than 50% in
value of the equity of a corporation or partnership which is a "substantial
user" of a facility financed from the proceeds of exempt facility bonds.

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

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

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

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

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

|X|   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.

|X|   Municipal Lease Obligations. The Fund's investments in municipal lease
obligations may be through certificates of participation that are offered to
investors by public entities. Municipal leases may take the form of a lease
or an installment purchase contract issued by a state or local government
authority to obtain funds to acquire a wide variety of equipment and
facilities.

      Some municipal lease securities may be deemed to be "illiquid"
securities. Their purchase by the Fund would be limited as described below in
"Illiquid Securities." From time to time the Fund may invest more than 5% of
its net assets in municipal lease obligations that the Manager has determined
to be liquid under guidelines set by the Board of Trustees. Those guidelines
require the Manager to evaluate:
o     the frequency of trades and price quotations for such securities;
o     the number of dealers or other potential buyers willing to purchase or
         sell such securities;
o     the availability of market-makers; and
o     the nature of the trades for such securities.

      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.

      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 Settlement Revenue Bonds. The Fund may invest a significant portion
of its assets in tobacco settlement revenue bonds. As of the Fund's fiscal
year ended July 31, 2005, 5.2% of the Fund's assets were invested in tobacco
revenue settlement bonds.
      Tobacco settlement revenue bonds are secured by an issuing state's
proportionate share in the Master Settlement Agreement ("MSA"). The MSA is an
agreement, reached out of court in November 1998 between 46 states and nearly
all of the U.S. tobacco manufacturers (approximately 99% of the current
combined market share of tobacco manufacturers). 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. 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 risk to the Fund, are highly dependent on the
receipt of future settlement payments to the state or its governmental
entity, as well as several other factors. The actual amount of future
settlement payments, therefore, 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 negatively impacted
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 would cause a downward adjustment in the
payment amounts. A participating manufacturer filing for bankruptcy also
could cause delays or reductions in bond payments. The MSA itself has been
subject to legal challenges and has, to date, withstood those challenges.

      On September 21, 2004, a civil trial (United States v. Philip Morris,
et. al.) began in U.S. district court nearly five years after the U.S.
Department of Justice first filed charges against the tobacco industry. The
federal government alleges that the major tobacco companies defrauded and
misled the American public about the health risks associated with smoking
cigarettes. However, on February 4, 2005, the U.S. Court of Appeals for the
District of Columbia dismissed the specific claim seeking the disgorgement of
$280 billion representing past industry profits, and funding for cessation
and counter-advertising programs, and release of all industry documents.
During final arguments of the case before the U.S. District Court in June
2005, the U.S. government reduced its demand for damages from the tobacco
industry to $14 billion - a significant reduction from the original claim for
$280 billion. On October 17, 2005, the U.S. Supreme Court denied the U.S.
Department of Justice's petition for certiorari seeking further review of the
dismissal of the specific claim seeking disgorgement.

      The named defendant tobacco companies represent approximately 98% of
the tobacco industry's market share. The tobacco industry denies any
wrongdoing and counters that it has greatly modified its practices, including
warning labels on cigarette packs since the 1960s and agreeing to the MSA
with the states. A negative outcome to the trial could adversely affect the
MSA companies and, in turn, could potentially cause delays or reductions in
bond payments by those companies. However, to date, it is not possible to
predict the outcome of the litigation.

|X|   Credit Ratings of Municipal Securities. Ratings by ratings
organizations such as Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc.
("S&P") and Fitch, Inc. represent the respective rating agency's opinions of
the credit quality of the municipal securities they undertake to rate.
However, their ratings are general opinions and are not guarantees of
quality. 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.

      Subsequent to its purchase by the Fund, a municipal security may cease
to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. 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, Inc. change as a result of changes in those rating
organizations or their rating systems, the Fund will attempt to use
comparable ratings as standards for investments in accordance with the Fund's
investment policies.

      The Fund may buy municipal securities that are "pre-refunded." The
issuer's obligation to repay the principal value of the security is generally
collateralized with U.S. government securities placed in an escrow account.
This causes the pre-refunded security to have essentially the same risks of
default as a AAA-rated security.

      A list of the rating categories of Moody's, S&P and Fitch, Inc. for
municipal securities is contained in Appendix A to this Statement of
Additional Information. 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 unrated issues the Fund buys. The
Manager will use criteria similar to those used by the rating agencies, and
assigning a rating category to a security that is comparable to what the
Manager believes a rating agency would assign to that security. However, the
Manager's rating does not constitute a guarantee of the quality of a
particular issue.

            Special Risks of Lower-Grade Securities. Lower grade securities
(often 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.
However, because the added risk of lower quality securities might not be
consistent with the Fund's policy of preservation of capital, the Fund limits
its investments in lower quality securities.

Other Investment Techniques and Strategies. In seeking its objective, the
Fund may from time to time employ the types of investment strategies and
investments described below.

|X|   Floating Rate and Variable Rate Obligations. Variable rate demand
obligations 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
obligation.

      The interest rate on a floating rate demand note is based on a stated
prevailing market rate, such as a bank's prime rate, the 91-day U.S. Treasury
Bill rate, or some other standard, and is adjusted automatically each time
such rate is adjusted. The interest rate on a variable rate demand note is
also based on a stated prevailing market rate but is adjusted automatically
at specified intervals of not less than one year. Generally, the changes in
the interest rate on such securities reduce the fluctuation in their market
value. As interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than that for fixed-rate obligations of
the same maturity. The Manager may determine that an unrated floating rate or
variable rate 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 not more than 30 days' notice. The
issuer of that type of note normally has a corresponding right in its
discretion, after a given period, to prepay the outstanding principal amount
of the note plus accrued interest. Generally the issuer must provide a
specified number of days' notice to the holder.

|X|   Inverse Floaters. "Inverse floaters" are municipal obligations on which
the interest rates typically fall as market rates increase and increase as
market rates fall. Inverse floaters are a form of derivative instruments.
Changes in market interest rates or the floating rate of the security
inversely affect the residual interest rate of an inverse floater. As a
result, the price of an inverse floater will be considerably more volatile
than that of a fixed-rate obligation when interest rates change.

      To provide investment leverage, a municipal issuer might decide to
issue two variable rate obligations instead of a single long-term, fixed-rate
bond. For example, the interest rate on one obligation reflects short-term
interest rates. The interest rate on the other instrument, the inverse
floater, reflects the approximate rate the issuer would have paid on a
fixed-rate bond, multiplied by a factor of two, minus the rate paid on the
short-term instrument. The two portions may be recombined to create a
fixed-rate bond. The Manager might acquire both portions of that type of
offering, to reduce the effect of the volatility of the individual
securities. This provides the Manager with a flexible portfolio management
tool to vary the degree of investment leverage efficiently under different
market conditions. The Fund can invest up to 20% of its total assets in
inverse floaters.

      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 relatively steep and short-term
rates remain relatively low, owners of inverse floaters will have the
opportunity to earn interest at above-market rates because they receive
interest at the higher long-term rates but have paid for bonds with lower
short-term rates. If the yield curve flattens and shifts upward, an inverse
floater will lose value more quickly than a conventional long-term bond. The
Fund will invest in inverse floaters to seek higher tax-exempt yields than
are available from fixed-rate bonds that have comparable maturities and
credit ratings. In some cases the holder of an inverse floater may have an
option to convert the floater to a fixed-rate bond, pursuant to a "rate-lock
option."

      Some inverse floaters have a feature known as an interest rate "cap" as
part of the terms of the investment. Investing in inverse floaters that have
interest rate caps might be part of a portfolio strategy to try to maintain a
high current yield for the Fund when the Fund has invested in inverse
floaters that expose the Fund to the risk of short-term interest rate
fluctuations. "Embedded" caps can be used to hedge a portion of the Fund's
exposure to rising interest rates. When interest rates exceed a
pre-determined rate, the cap generates additional cash flows that offset the
decline in interest rates on the inverse floater, and the hedge is
successful. However, the Fund bears the risk that if interest rates do not
rise above the pre-determined rate, the cap (which is purchased for
additional cost) will not provide additional cash flows and will expire
worthless.

|X|   When-Issued and Delayed Delivery Transactions. The Fund can purchase
securities on a "when-issued" basis, and may purchase or sell such securities
on a "delayed delivery" 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. The Fund will identify on its books liquid securities at least
equal to the value of purchase commitments until the Fund pays for the
investment.

      When-issued transactions and forward commitments can be used by the
Fund as a defensive technique to hedge against anticipated changes in
interest rates and prices. For instance, in periods of rising interest rates
and falling prices, the Fund might sell securities in its portfolio on a
forward commitment basis to attempt to limit its exposure to anticipated
falling prices. In periods of falling interest rates and rising prices, the
Fund might sell portfolio securities and purchase the same or similar
securities on a when-issued or forward commitment basis, to obtain the
benefit of currently higher cash yields.

|X|   Zero-Coupon Securities. The Fund 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 make distributions to shareholders before it receives
any cash payments on the zero-coupon investment. To generate cash to satisfy
those distribution requirements, the Fund may have to sell portfolio
securities that it otherwise might have continued to hold or to use cash
flows from other sources such as the sale of Fund shares.

|X|   Puts and Standby Commitments. The Fund can acquire "stand-by
commitments" or "puts" with respect to municipal securities 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.

|X|   Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements. It may do so for liquidity purposes to meet
anticipated redemptions of Fund shares, or pending the investment of the
proceeds from sales of Fund shares, or pending the settlement of portfolio
securities. In a repurchase transaction, the Fund acquires a security from,
and simultaneously resells it to an approved vendor for delivery on an agreed
upon future date. The resale price exceeds the purchase price by an amount
that reflects an agreed-upon interest rate effective for the period during
which the repurchase agreement is in effect. Approved vendors include U.S.
commercial banks, U.S. branches of foreign banks or broker-dealers that have
been designated a primary dealer in government securities, which meet the
credit requirements set by the Manager from time to time.

      The majority of these transactions run from day to day. Delivery
pursuant to resale typically will occur within one to five days of the
purchase. Repurchase agreements having a maturity beyond seven days are
subject to the Fund's limits on holding illiquid investments. There is no
limit on the amount of the Fund's assets that may be subject to repurchase
agreements of seven days or less. They must meet credit requirements set by
the Manager from time to time.

      Repurchase agreements, considered "loans" under the Investment Company
Act of 1940 (the "Investment Company Act"), are collateralized by the
underlying security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the collateral's value
must equal or exceed the repurchase price to fully collateralize the
repayment obligation. The Manager will monitor the vendor's creditworthiness
to confirm that the vendor is financially sound and will continuously monitor
the collateral's value. However, if the vendor fails to pay the resale price
on the delivery date, the Fund may incur costs in disposing of the collateral
and may experience losses if there is any delay in its ability to do so.

      Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission (the "SEC"), the Fund, along with other affiliated entities
managed by the Manager, may transfer uninvested cash balances into one or
more joint repurchase accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities
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 of the collateral may be subject to legal
proceedings.

|X|   Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments and monitors holdings of
illiquid securities on an ongoing basis to determine whether to sell any
holdings to meet percentage restrictions. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The
expenses of registering restricted securities may be negotiated by the Fund
with the issuer at the time the Fund buys the securities. When the Fund must
arrange registration because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell
the security and the time the security is registered so that the Fund could
sell it. The Fund would bear the risks of any downward price fluctuation
during that period.

      The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the
Fund's ability to dispose of the securities and might lower the amount the
Fund could realize upon the sale.

      The Fund has limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to
qualified institutional purchasers under Rule 144A of the Securities Act of
1933, if those securities have been determined to be liquid by the Manager
under Board-approved guidelines. Those guidelines take into account the
trading activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in a
particular Rule 144A security, the Fund's holdings of that security may be
considered to be illiquid. Illiquid securities include repurchase agreements
maturing in more than seven days.

|X|   Loans of Portfolio Securities. To attempt to raise income or raise cash
for liquidity purposes, the Fund may lend its portfolio securities to
brokers, dealers and other financial institutions. These loans are limited to
not more than 25% of the value of the Fund's total assets. The Fund presently
does not intend to engage in loans of securities that will exceed 5% of the
value of the Fund's total assets in the coming year. Income from securities
loans does not constitute exempt-interest income for the purpose of paying
tax-exempt dividends.

      There are risks in connection with securities lending. The Fund might
experience a delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities. The Fund must receive collateral
for a loan. Under current applicable regulatory requirements (which are
subject to change), on each business day the loan collateral must be at least
equal to the value of the loaned securities. It must consist of cash, bank
letters of credit, securities of the U.S. government or its agencies or
instrumentalities, or other cash equivalents in which the Fund is permitted
to invest. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by the Fund if the demand meets the terms of the
letter. The terms of the letter of credit and the issuing bank both must be
satisfactory to the Fund.

      When it lends securities, the Fund receives amounts equal to the
dividends or interest on the loaned securities. It also receives one or more
of (a) negotiated loan fees, (b) interest on securities used as collateral,
and (c) interest on short-term debt securities purchased with the loan
collateral. Either type of interest may be shared with the borrower. The Fund
may pay reasonable finder's, custodian and administrative or other fees in
connection with these loans. The terms of the Fund's loans must meet
applicable tests under the Internal Revenue Code and must permit the Fund to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.

|X|   Borrowing for Leverage. The Fund has the ability to invest borrowed
funds in portfolio securities. This speculative investment technique is known
as "leverage." Under its fundamental policies, the Fund may not borrow,
except to the extent permitted under the Investment Company Act, the rules or
regulations thereunder or any exemption therefrom that is applicable to the
Fund, as such statutes, rules or regulations may be amended or interpreted
from time to time. Currently, under the Investment Company Act, a mutual fund
may borrow only from banks and the maximum amount it may borrow is up to
one-third of its total assets (including the amount borrowed) less its
liabilities, other than borrowings, except that a fund may borrow up to 5% of
its total assets for temporary purposes from any person. 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 may borrow for
temporary or emergency purposes only to the extent necessary in emergency
situations to meet redemption requests after using all cash held by the Fund
to meet such redemption requests, other than cash necessary to pay Fund fees
and expenses. If the value of a Fund's assets fails to meet the 300% asset
coverage requirement, the Fund is required, within three days to reduce its
bank debt to the extent necessary to meet such requirement and may have to
sell a portion of its investments at a time when independent investment
judgment would not dictate such sale.

      The Fund will pay interest on these loans, and that interest expense
will raise the overall expenses of the Fund and reduce its returns. If it
does borrow, its expenses will be greater than comparable funds that do not
borrow for leverage. The interest on a loan might be more (or less) than the
yield on the securities purchased with the loan proceeds. Additionally, the
Fund's net asset value per share might fluctuate more than that of funds that
do not borrow.

      In addition, pursuant to an exemptive order issued by the SEC to
Citicorp North America, Inc. ("Citicorp"), the Fund also has the ability to
borrow, subject to the limits established by its investment policies, from
commercial paper and medium-term note conduits administered by Citicorp that
issue promissory notes to fund loans to investment companies such as the
Fund. These loans may be secured by assets of the Fund, so long as the Fund's
policies permit it to pledge its assets to secure a debt. Liquidity support
for these loans will be provided by banks obligated to make loans to the Fund
in the event the conduit or conduits are unable or unwilling to make such
loans. The Fund will have the right to prepay such loans and terminate its
participation in the conduit loan facility at any time upon prior notice. As
a borrower under a conduit loan facility, the Fund maintains rights and
remedies under state and federal law comparable to those it would maintain
with respect to a loan from a bank.

      |X|   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 Fund, if the Manager
judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's other investments. These techniques can cause
losses if the counterparty does not perform its promises. An additional risk
of investing in municipal securities that are derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative investments
but have similar credit quality, redemption provisions and maturities.

|X|   Hedging. The Fund may use hedging to attempt to protect against
declines in the market value of its portfolio, to permit the Fund 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:
o     sell interest rate futures or municipal bond index futures,
o     buy puts on such futures or securities, or
o     write covered calls on securities, broadly-based municipal bond
         indices, interest rate futures or municipal bond index futures.
         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:
o     buy interest rate futures or municipal bond index futures, or
o     buy calls on such futures or on securities.

      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.

|X|   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.

      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).

|X|   Put and Call Options. The Fund may buy and sell certain kinds of put
options (puts) and call options (calls). These strategies are described below.

            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:
(1)   After the Fund writes a call, not more than 25% of the Fund's total
assets may be subject to calls.
(2)   Calls the Fund sells must be listed on a securities or commodities
exchange or quoted on NASDAQ, the automated quotation system of The NASDAQ
Stock Market, Inc. or traded in the over-the-counter market.
(3)   Each call the Fund writes must be "covered" while it is outstanding.
That means the Fund must own the investment on which the call was written.
(4)   The Fund may write calls on futures contracts whether or not it owns
them.

      When the Fund writes a call on a security, it receives cash (a
premium). The Fund agrees to sell the underlying investment to a purchaser of
a corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may
differ from the market price of the underlying security. The Fund has
retained the risk of loss that the price of the underlying security may
decline during the call period. That risk may be offset to some extent by the
premium the Fund receives. If the value of the investment does not rise above
the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium and the
investment.

      The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges, or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions.
OCC will release the securities on the expiration of the calls or upon the
Fund's entering into a closing purchase transaction.

      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. The SEC is
evaluating whether OTC options should be considered liquid securities. The
procedure described above could be affected by the outcome of that evaluation.

      To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund
will then realize a profit or loss, depending upon whether the net of the
amount of the option transaction costs and the premium received on the call
the Fund wrote was more or less than the price of the call the Fund purchased
to close out the transaction. A profit may also be realized if the call
lapses unexercised, because the Fund retains the underlying investment and
the premium received. Any such profits are considered short-term capital
gains for Federal tax purposes, as are premiums on lapsed calls. When
distributed by the Fund they are taxable as ordinary income.

      The Fund may also write calls on futures contracts without owning the
futures contract or securities deliverable under the contract. To do so, at
the time the call is written, the Fund must cover the call by segregating in
escrow an equivalent dollar value of liquid assets. The Fund will segregate
additional liquid assets if the value of the escrowed assets drops below 100%
of the current value of the future. Because of this escrow requirement, in no
circumstances would the Fund's receipt of an exercise notice as to that
future put the Fund in a "short" futures position.

            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 must 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 neither 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 the
Fund 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).

|X|   Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques
that are different than what is required for normal portfolio management. If
the Manager uses a hedging instrument at the wrong time or judges market
conditions incorrectly, hedging strategies may reduce the Fund's returns. The
Fund could also experience losses if the prices of its futures and options
positions were not correlated with its other investments.

      The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause
the Fund to sell related portfolio securities, thus increasing its turnover
rate. The exercise by the Fund of puts on securities will cause the sale of
underlying investments, increasing portfolio turnover. Although the decision
whether to exercise a put it holds is within the Fund's control, holding a
put might cause the Fund to sell the related investments for reasons that
would not exist in the absence of the put.

      The Fund may pay a brokerage commission each time it buys a call or
put, sells a call or put, or buys or sells an underlying investment in
connection with the exercise of a call or put. Such commissions may be higher
on a relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to
the market value of the underlying investments. Consequently, put and call
options offer large amounts of leverage. The leverage offered by trading in
options could result in the Fund's net asset value being more sensitive to
changes in the value of the underlying investment.

      If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment
at the call price. It will not be able to realize any profit if the
investment has increased in value above the call price.

      There is a risk in using short hedging by selling interest rate futures
and municipal bond index futures or purchasing puts on municipal bond indices
or futures to attempt to protect against declines in the value of the Fund's
securities. The risk is that the prices of such futures or the applicable
index will correlate imperfectly with the behavior of the cash (that is,
market) prices of the Fund's securities. It is possible for example, that
while the Fund has used hedging instruments in a short hedge, the market may
advance and the value of debt securities held in the Fund's portfolio may
decline. If that occurred, the Fund would lose money on the hedging
instruments and also experience a decline in value of its debt securities.
However, while this could occur over a brief period or to a very small
degree, over time the value of a diversified portfolio of debt securities
will tend to move in the same direction as the indices upon which the hedging
instruments are based.

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

      The ordinary spreads between prices in the cash and futures markets are
subject to distortions due to differences in the natures of those markets.
All participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. From the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin requirements
in the securities markets. Therefore, increased participation by speculators
in the futures markets may cause temporary price distortions.

      The Fund may use hedging instruments to establish a position in the
municipal securities markets as a temporary substitute for the purchase of
individual securities (long hedging). It is possible that the market may
decline. If the Fund then concludes not to invest in such securities because
of concerns that there may be further market decline or for other reasons,
the Fund will realize a loss on the hedging instruments that is not offset by
a reduction in the purchase price of the securities.

      An option position may be closed out only on a market that provides
secondary trading for options of the same series. There is no assurance that
a liquid secondary market will exist for a particular option. If the Fund
could not effect a closing purchase transaction due to a lack of a market, it
would have to hold the callable investment until the call lapsed or was
exercised, and could experience losses.

|X|   Interest Rate Swap Transactions. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation to pay
interest on a security. For example, they may swap a right to receive
floating rate payments for fixed rate payments. The Fund enters into swaps
only on securities it owns. The Fund may not enter into swaps with respect to
more than 25% of its total assets. Also, the Fund will segregate liquid
assets (such as cash or U.S. Government securities) to cover any amounts it
could owe under swaps that exceed the amounts it is entitled to receive, and
it will adjust that amount daily, as needed. Income from interest rate swaps
may be taxable.

      Swap agreements entail both interest rate risk and credit risk. There
is a risk that, based on movements of interest rates in the future, the
payments made by the Fund under a swap agreement will have been greater than
those received by it. Credit risk arises from the possibility that the
counterparty will default. If the counterparty to an interest rate swap
defaults, the Fund's loss will consist of the net amount of contractual
interest payments that the Fund has not yet received. The Manager will
monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis.

      The Fund will enter into swap transactions with appropriate
counterparties pursuant to master netting agreements. A master netting
agreement provides that all swaps done between the Fund and that counterparty
under the master agreement shall be regarded as parts of an integral
agreement. If on any date amounts are payable under one or more swap
transactions, the net amount payable on that date shall be paid. In addition,
the master netting agreement may provide that if one party defaults generally
or on one swap, the counterparty may terminate the swaps with that party.
Under master netting agreements, if there is a default resulting in a loss to
one party, that party's damages are calculated by reference to the average
cost of a replacement swap with respect to each swap. The gains and losses on
all swaps are then netted, and the result is the counterparty's gain or loss
on termination. The termination of all swaps and the netting of gains and
losses on termination is generally referred to as "aggregation."

|X|   Regulatory Aspects of Hedging Instruments. The Commodities Futures
Trading Commission (the "CFTC") has eliminated limitations on futures trading
by certain regulated entities including registered investment companies and
consequently registered investment companies may engage in unlimited futures
transactions and options thereon provided that the Fund claims an exclusion
from regulation as a commodity pool operator. The Fund has claimed such an
exclusion from registration as a commodity pool operator under the Commodity
Exchange Act ("CEA"). The Fund may use futures and options for hedging and
non-hedging purposes to the extent consistent with its investment objective,
internal risk management guidelines adopted by the Fund's investment advisor
(as they may be amended from time to time), and as otherwise set forth in the
Fund's prospectus or this statement of additional information.

      Transactions in options by the Fund are subject to limitations
established by the option exchanges. The exchanges limit the maximum number
of options that may be written or held by a single investor or group of
investors acting in concert. Those limits apply regardless of whether the
options were written or purchased on the same or different exchanges, or are
held in one or more accounts or through one or more different exchanges or
through one or more brokers. Thus, the number of options that the Fund may
write or hold may be affected by options written or held by other entities,
including other investment companies having the same adviser as the Fund (or
an adviser that is an affiliate of the Fund's adviser). 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 interpretations of staff members of the SEC regarding applicable
provisions of the Investment Company Act, when the Fund purchases an interest
rate future or municipal bond index future, it must segregate cash or readily
marketable short-term debt instruments in an amount equal to the purchase
price of the future, less the margin deposit applicable to it. The account
must be a segregated account or accounts held by its custodian bank.

|X|   Portfolio Turnover. A change in the securities held by the Fund from
buying and selling investments is known as "portfolio turnover." Short-term
trading increases the rate of portfolio turnover and could increase the
Fund's transaction costs. However, the Fund ordinarily incurs little or no
brokerage expense because most of the Fund's portfolio transactions are
principal trades that do not require payment of brokerage commissions.

      The Fund ordinarily does not trade securities to achieve short-term
capital gains, because they would not be tax-exempt income. To a limited
degree, the Fund may engage in short-term trading to attempt to take
advantage of short-term market variations. It may also do so to dispose of a
portfolio security prior to its maturity. That might be done if, on the basis
of a revised credit evaluation of the issuer or other considerations, the
Fund believes such disposition 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.

|X|   Temporary Defensive and Interim Investments. The securities the Fund
may invest in for temporary defensive purposes include the following:
o     short-term municipal securities;
o     obligations issued or guaranteed by the U.S. Government or its agencies
         or instrumentalities;
o     corporate debt securities rated within the three highest grades by a
         nationally recognized rating agency;
o     commercial paper rated "A-1" by S&P, or a comparable rating by another
         nationally recognized rating agency; and
o     certificates of deposit of domestic banks with assets of $1 billion or
         more.

      The Fund might also 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 these
temporary defensive or interim investments may not be tax-exempt. Therefore,
when making those investments, the Fund might not achieve its objective.

|X|   Taxable Investments. While the Fund can invest up to 20% of its net
assets (plus borrowing 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. To the extent it
invests in taxable securities, the Fund would not be able to met its
objective of providing tax exempt income to its shareholders. Taxable
investments include, for example, hedging instruments, repurchase agreements,
and the types of securities the Fund would buy for temporary defensive
purposes.

Other Investment Restrictions

|X|   What Are "Fundamental Policies"? Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Fund's outstanding voting
securities. Under the Investment Company Act, such a "majority" vote is
defined as the vote of the holders of the lesser of:
o     67% or more of the shares present or represented by proxy at a
         shareholder meeting, if the holders of more than 50% of the
         outstanding shares are present or represented by proxy, or
o     more than 50% of the outstanding shares.

      The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of
Trustees can change non-fundamental policies without shareholder approval.
However, significant changes to investment policies will be described in
supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's most significant investment policies
are described in the Prospectus.

|X|   Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund:

o     The Fund cannot make loans, except to the extent permitted under the
Investment Company Act, the rules or regulations thereunder or any exemption
therefrom that is applicable to the Fund, as such statute, rules or
regulations may be amended or interpreted from time to time.

o     The Fund may not borrow money, except to the extent permitted under the
Investment Company Act, the rules or regulations thereunder or any exemption
therefrom that is applicable to the Fund, as such statute, rules or
regulations may be amended or interpreted from time to time.

o     The Fund cannot buy securities or other instruments issued or
guaranteed by any one issuer if more than 5% of its total assets would be
invested in securities or other instruments of that issuer or if it would
then own more than 10% of that issuer's voting securities. This limitation
applies to 75% of the Fund's total assets. The limit does not apply to
securities issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities or securities of other investment companies.

o     The Fund cannot invest 25% or more of its total assets in any industry.
That limit does not apply to securities issued or guaranteed by the U.S.
Government or its agencies and instrumentalities or securities issued by
investment companies. Nor does that limit apply to municipal securities in
general.

o     The Fund cannot invest in real estate, physical commodities or
commodity contracts, except to the extent permitted under the Investment
Company Act, the rules or regulations thereunder or any exemption therefrom,
as such statute, rules or regulations may be amended or interpreted from time
to time.

o     The Fund cannot issue senior securities, except to the extent permitted
under the Investment Company Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.

o     The Fund may not underwrite securities issued by others, except to the
extent that a Fund may be considered an underwriter within the meaning of the
Securities Act of 1933, as amended, when reselling securities held in its
portfolio.

|X|   Does the Fund Have Additional Non-Fundamental Policies?

o     The Fund cannot invest more than 15% of its net assets in illiquid or
restricted securities (including repurchase agreements maturing beyond seven
(7) days).

o     The Fund cannot invest in securities of other investment companies,
except to the extent permitted under the Investment Company Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time. Also, the Fund
cannot invest in the securities of other registered investment companies or
registered unit investment trusts in reliance on sub-paragraph (F) or (G) of
section 12(d)(1) of the Investment Company Act. The Fund would be permitted
under this policy to invest its assets in the securities of one or more
open-end management investment companies for which the Manager, one of its
affiliates or a successor is the investment advisor or sub-advisor. That fund
must have substantially the same fundamental investment objective, policies
and limitations as the Fund.

o     The Fund will not invest in municipal  securities  the interest on which
(and thus a proportionate share of the  exempt-interest  dividends paid by the
Fund) would be subject to the Federal  alternative  minimum tax on individuals
and corporations.

      Unless the Prospectus or Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment (except in the case of borrowing and
investments in illiquid securities). In that case the Fund need not sell
securities to meet the percentage limits if the value of the investment
increases in proportion to the size of the Fund.

Diversification. The Fund intends to be "diversified" as defined in the
Investment Company Act 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. To implement its policy not
to concentrate its investments, the Fund has adopted the industry
classifications set forth in Appendix B to this Statement of Additional
Information. Those industry classifications are not a fundamental policy.

      In implementing the Fund's policy not to concentrate its investments,
the Manager will consider a non-governmental user of facilities financed by
industrial development bonds as being in a particular industry. That is done
even though the bonds are municipal securities, as to which the Fund has no
concentration limitation. Although this application of the concentration
restriction is not a fundamental policy of the Fund, it will not be changed
without shareholder approval.

      The Manager has no present intention of investing more than 25% of the
total assets of the Fund in securities of issuers located in the same state,
or in securities paying interest derived from revenues of similar types of
projects. Neither of these is a fundamental policy, and therefore, either of
them may be changed without shareholder approval. Should any such change
occur, the Prospectus and/or this Statement of Additional Information will be
supplemented or revised to reflect the change.

Disclosure of Portfolio Holdings

Disclosure of Portfolio Holdings. The Fund has adopted policies and
procedures concerning the dissemination of information about its portfolio
holdings by employees, officers and/or directors of the Manager, Distributor
and Transfer Agent. These policies are designed to assure that non-public
information about portfolio securities 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.

o     Public Disclosure. The Fund's portfolio holdings are made publicly
            available no later than 60 days after the close of each of the
            Fund's fiscal quarters in semi-annual and annual reports to
            shareholders, or in its Statements of Investments on Form N-Q,
            which are publicly available at the SEC. In addition, the top 10
            or more holdings are posted on the OppenheimerFunds' website at
            www.oppenheimerfunds.com in the "Fund Profiles" section. Other
            general information about the Fund's portfolio investments, such
            as portfolio composition by asset class, industry, country,
            currency, credit rating or maturity, may also be posted with a
            15-day lag.

      Until publicly disclosed, the Fund's portfolio holdings are
proprietary, confidential business information. 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 process, 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 portfolio managers
are trading on the Fund's behalf.

      The Manager and its subsidiaries and affiliates, employees, officers,
and directors, 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. It is a violation of
the Code of Ethics for any covered person to release holdings in
contravention of portfolio holdings disclosure policies and procedures
adopted by the Fund.

      A list of the top 10 or more portfolio securities holdings (based on
invested assets), listed by security or by issuer, as of the end of each
month may be disclosed to third parties (subject to the procedures below) no
sooner than 15 days after month-end.

      Except under special limited circumstances discussed below, month-end
lists of the Fund's complete portfolio holdings may be disclosed no sooner
than 30-days after the relevant month-end, subject to the procedures below.
If the Fund's complete portfolio holdings have not been disclosed publicly,
they may be disclosed pursuant to special requests for legitimate business
reasons, provided that:

o     The third-party recipient must first submit a request for release of
            Fund portfolio holdings, explaining the business reason for the
            request;
o     Senior officers (a Senior Vice President or above) in the Manager's
            Portfolio and Legal departments must approve the completed
            request for release of Fund portfolio holdings; and
o     The third-party recipient must sign the Manager's portfolio holdings
            non-disclosure agreement before receiving the data, agreeing to
            keep information that is not publicly available regarding the
            Fund's holdings confidential and agreeing not to trade directly
            or indirectly based on the information.

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

o     Employees of the Fund's Manager, Distributor and Transfer Agent who
            need to have access to such information (as determined by senior
            officers of such entity),
o     The Fund's independent registered public accounting firm,
o     Members of the Fund's Board and the Board's legal counsel,
o     The Fund's custodian bank,
o     A proxy voting service designated by the Fund and its Board,
o     Rating/ranking organizations (such as Lipper and Morningstar),
o     Portfolio pricing services retained by the Manager to provide portfolio
            security prices, and
o     Dealers, to obtain bids (price quotations if securities are not priced
            by the Fund's regular pricing services).

      Portfolio holdings information of the Fund may be provided, under
limited circumstances, to brokers and/or dealers with whom the Fund trades
and/or entities that provide investment coverage and/or analytical
information regarding the Fund's portfolio, provided that there is a
legitimate investment reason for providing the information to the broker,
dealer or other entity. Month-end portfolio holdings information may, under
this procedure, be provided to vendors providing research information and/or
analytics to the fund, with at least a 15-day delay after the month end, but
in certain cases may be provided to a broker or analytical vendor with a 1-2
day lag to facilitate the provision of requested investment information to
the manager to facilitate a particular trade or the portfolio manager's
investment process for the Fund. Any third party receiving such information
must first sign the Manager's portfolio holdings non-disclosure agreement as
a pre-condition to receiving this information.

      Portfolio holdings information (which may include information on
individual securities positions or multiple securities) may be provided to
the entities listed below (1) by portfolio traders employed by the Manager in
connection with portfolio trading, and (2) by the members of the Manager's
Security Valuation Group and Accounting Departments in connection with
portfolio pricing or other portfolio evaluation purposes:

o     Brokers and dealers in connection with portfolio transactions
            (purchases and sales)
o     Brokers and dealers to obtain bids or bid and asked prices (if
            securities held by the Fund are not priced by the Fund's regular
            pricing services)
o     Dealers to obtain price quotations where the Fund is not identified as
            the owner

      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:

o     Response to legal process in litigation matters, such as responses to
            subpoenas or in class action matters where the Fund may be part
            of the plaintiff class (and seeks recovery for losses on a
            security) or a defendant,
o     Response to regulatory requests for information (the SEC, NASD, state
            securities regulators, and/or foreign securities authorities,
            including without limitation requests for information in
            inspections or for position reporting purposes),
o     To potential sub-advisers of portfolios (pursuant to confidentiality
            agreements),
o     To consultants for retirement plans for plan sponsors/discussions at
            due diligence meetings (pursuant to confidentiality agreements),
o     Investment bankers in connection with merger discussions (pursuant to
            confidentiality agreements)

      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 intermediary 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.

      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 shall report to the Fund's Board on
such compliance oversight and on the categories of entities and individuals
to which disclosure of portfolio holdings of the Funds has been made during
the preceding year pursuant to these policies. The CCO shall report to the
Fund's Board any material violation of these policies and procedures during
the previous calendar quarter and shall make 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/or 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:

A.G. Edwards & Sons            Fixed Income Securities   Natexis Bleichroeder
ABG Securities                 Fortis Securities         Ned Davis Research
                                                         Group
ABN AMRO                       Fox-Pitt, Kelton          Nomura Securities
Advest                         Friedman, Billing, Ramsey Pacific Crest
AG Edwards                     Fulcrum Global Partners   Pacific Crest
                                                         Securities
American Technology Research   Garp Research             Pacific Growth
                                                         Equities
Auerbach Grayson               George K Baum & Co.       Petrie Parkman
Banc of America Securities     Goldman                   Pictet
Barclays                       Goldman Sachs             Piper Jaffray Inc.
Baseline                       HSBC                      Plexus
Bear Stearns                   HSBC Securities Inc       Prager Sealy & Co.
Belle Haven                    ING Barings               Prudential Securities
Bloomberg                      ISI Group                 Ramirez & Co.
BNP Paribas                    Janney Montgomery         Raymond James
BS Financial Services          Jefferies                 RBC Capital Markets
Buckingham Research Group      Jeffries & Co.            RBC Dain Rauscher
Caris & Co.                    JP Morgan                 Research Direct
CIBC World Markets             JP Morgan Securities      Robert W. Baird
Citigroup                      JPP Eurosecurities        Roosevelt & Cross
Citigroup Global Markets       Keefe, Bruyette & Woods   Russell Mellon
Collins Stewart                Keijser Securities        Ryan Beck & Co.
Craig-Hallum Capital Group LLC Kempen & Co. USA Inc.     Sanford C. Bernstein
Credit Agricole Cheuvreux      Kepler Equities/Julius    Scotia Capital Markets
N.A. Inc.                      Baer Sec
Credit Suisse First Boston     KeyBanc Capital Markets   SG Cowen & Co.
Daiwa Securities               Leerink Swan              SG Cowen Securities
Davy                           Legg Mason                Soleil Securities
                                                         Group
Deutsche Bank                  Lehman                    Standard & Poors
Deutsche Bank Securities       Lehman Brothers           Stone & Youngberg
Dresdner Kleinwort Wasserstein Lipper                    SWS Group
Emmet & Co                     Loop Capital Markets      Taylor Rafferty
Empirical Research             MainFirst Bank AG         Think Equity Partners
Enskilda Securities            Makinson Cowell US Ltd    Thomas Weisel Partners
Essex Capital Markets          Maxcor Financial          UBS
Exane BNP Paribas              Merrill                   Wachovia
Factset                        Merrill Lynch             Wachovia Corp
Fidelity Capital Markets       Midwest Research          Wachovia Securities
Fimat USA Inc.                 Mizuho Securities         Wescott Financial
First Albany                   Morgan Stanley            William Blair
First Albany Corporation       Morningstar               Yieldbook

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of
beneficial interest. The Fund was organized as a Maryland corporation in 1976
but was reorganized as a Massachusetts business trust in February 1987. Prior
to October 2003, the Fund's name was "Oppenheimer Municipal Bond Fund."

|X|   Classes of Shares. The Trustees are authorized, without shareholder
approval, to create new series and classes of shares, to reclassify unissued
shares into additional series or classes and to divide or combine the shares
of a class into a greater or lesser number of shares without changing the
proportionate beneficial interest of a shareholder in the Fund. Shares do not
have cumulative voting rights, preemptive rights or subscription rights.
Shares may be voted in person or by proxy at shareholder meetings.

      The Fund currently has three classes of shares: Class A, Class B and
Class C. All classes invest in the same investment portfolio. Each class of
shares:

o     has its own dividends and distributions,
o     pays certain expenses which may be different for the different classes,
o     will generally have a different net asset value,
o     will generally have separate voting rights on matters in which
         interests of one class are different from interests of another
         class, and
o     votes as a class on matters that affect that class alone.

      Shares are freely transferable, and each share of each class has one
vote at shareholder meetings, with fractional shares voting proportionally,
on matters submitted to a vote of shareholders. Each share of the Fund
represents an interest in the Fund proportionately equal to the interest of
each other share of the same class.

|X|   Meetings of Shareholders. As a Massachusetts business trust, the Fund
 is not required to hold, and does not plan to hold, regular annual meetings
 of shareholders, but may hold shareholder meetings from time to time 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.

|X|   Shareholder and Trustee Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally
liable for its obligations. The Declaration of Trust also states that upon
request, the Fund shall assume the defense of any claim made against a
shareholder for any act or obligation of the Fund and shall satisfy any
judgment on that claim. Massachusetts law permits a shareholder of a business
trust (such as the Fund) to be held personally liable as a "partner" under
certain circumstances. However, the risk that a Fund shareholder will incur
financial loss from being held liable as a "partner" of the Fund is limited
to the relatively remote circumstances in which the Fund would be unable to
meet its obligations.

      The Fund's contractual arrangements state that any person doing
business with the Fund (and each shareholder of the Fund) agrees under its
Declaration of Trust to look solely to the assets of the Fund for
satisfaction of any claim or demand that may arise out of any dealings with
the Fund. Additionally, the Trustees shall have no personal liability to any
such person, to the extent permitted by law.

Board of Trustees and Oversight Committees. The Fund is governed by a Board
of Trustees, which is responsible for protecting the interests of
shareholders under Massachusetts law. The Trustees meet periodically
throughout the year to oversee the Fund's activities, review its performance,
and review the actions of the Manager.

      The Board of Trustees has an Audit Committee, a Regulatory & Oversight
Committee, a Governance Committee and a Proxy Committee. Each committee is
comprised solely of Trustees who are not "interested persons" under the
Investment Company Act (the "Independent Trustees"). The members of the Audit
Committee are Joel W. Motley (Chairman), Mary F. Miller, Kenneth A. Randall
and Joseph M. Wikler. The Audit Committee held 6 meetings during the Fund's
fiscal year ended July 31, 2005. The Audit Committee furnishes the Board with
recommendations regarding the selection of the Fund's 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; (v) reviewing the independence of the Fund's independent Auditors;
and (vi) pre-approving 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 members of the Regulatory & Oversight Committee are Robert G. Galli
(Chairman), Matthew P. Fink, Phillip A. Griffiths, Joel W. Motley and Brian
F. Wruble. The Regulatory & Oversight Committee held 6 meetings during the
Fund's fiscal year ended July 31, 2005. 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, among other duties as set forth in the
Regulatory & Oversight Committee's Charter.

      The members of the Governance Committee are, Phillip A. Griffiths
(Chairman), Kenneth A. Randall, Russell S. Reynolds, Jr. and Peter I Wold.
The Governance Committee held 7 meetings during the Fund's fiscal year ended
July 31, 2005. 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, among other duties set forth in the Governance
Committee's Charter.

      The Governance Committee's functions also include the selection and
nomination of Trustees, including Independent Trustees for election. The
Governance Committee may, but need not, consider the advice and
recommendation of the Manager and its affiliates in selecting nominees. The
full Board elects new Trustees except for those instances when a shareholder
vote is required.

      To date, the Governance Committee has been able to identify from its
own resources an ample number of qualified candidates. Nonetheless, under the
current policy of the Board, if the Board determines that a vacancy exists or
is likely to exist on the Board, the Governance Committee will consider
candidates for Board membership including those recommended by the Fund's
shareholders. The Governance Committee will consider nominees recommended by
Independent Board members or recommended by any other Board members including
Board members affiliated with the Fund's Manager. The Governance Committee
may, upon Board approval, retain an executive search firm to assist in
screening potential candidates. Upon Board approval, the Governance Committee
may also use the services of legal, financial, or other external counsel that
it deems necessary or desirable in the screening process. 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 of Oppenheimer AMT-Free
Municipals, 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 trustee nominee. In evaluating trustee
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
the background, skills, and experience of other nominees and will contribute
to the Board. There are no differences in the manner in which the Governance
Committee evaluates nominees for trustees 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.

      The members of the Proxy Committee are Russell S. Reynolds, Jr.
(Chairman), Matthew P. Fink and Mary F. Miller. The Proxy Committee held 1
meeting during the Fund's fiscal year ended July 31, 2005. The Proxy
Committee provides the Board with recommendations for the proxy voting of
portfolio securities held by the Fund and monitors proxy voting by the Fund.

Trustees and Officers of the Fund. Except for Mr. Murphy, each of the
Trustees is an Independent Trustee. All of the Trustees are also directors or
trustees of the following Oppenheimer funds (referred to as "Board I Funds"):

Oppenheimer AMT-Free Municipals            Oppenheimer International Growth Fund
                                           Oppenheimer   International   Large  Cap
Oppenheimer AMT-Free New York Municipals   Core Fund
                                           Oppenheimer  International Small Company
Oppenheimer Balanced Fund                  Fund
Oppenheimer California Municipal Fund      Oppenheimer International Value Fund
                                           Oppenheimer   Limited  Term   California
Oppenheimer Capital Appreciation Fund      Municipal Fund
Oppenheimer Developing Markets Fund        Oppenheimer Money Market Fund, Inc.
Oppenheimer Discovery Fund                 Oppenheimer Multi-State Municipal Trust
Oppenheimer Dividend Growth Fund           Oppenheimer Portfolio Series
Oppenheimer Emerging Growth Fund           Oppenheimer Real Estate Fund
Oppenheimer Emerging Technologies Fund     Oppenheimer Select Value Fund
Oppenheimer Enterprise Fund                Oppenheimer Series Fund, Inc.
Oppenheimer Global Fund                    OFI Tremont Core Strategies Hedge Fund
Oppenheimer Global Opportunities Fund      OFI Tremont Market Neutral Hedge Fund
                                           Oppenheimer  Tremont Market Neutral Fund
Oppenheimer Gold & Special Minerals Fund   LLC
Oppenheimer Growth Fund                    Oppenheimer Tremont Opportunity Fund LLC
Oppenheimer International Diversified Fund Oppenheimer U.S. Government Trust

      In  addition  to being a  director  or  trustee  of each of the  Board I
Funds,  Messrs.  Galli and  Wruble  are  directors  or  trustees  of ten other
portfolios,  and Messrs.  Wikler and Wold are trustees of one other portfolio,
in the OppenheimerFunds complex.

      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.

      Messrs. Cottier, Fielding, Gillespie, Loughran, Murphy, Petersen,
Vandehey, Vottiero, Willis, Wixted and Zack and Mss. Bloomberg and Ives, who
are officers of the Fund, hold the same offices with one or more of the other
Board I Funds. As of October 31, 2005 the Trustees and officers of the Fund,
as a group, owned of record or beneficially less than 1% of any class of
shares of the Fund. 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 listed above. In addition, none of the Independent
Trustees (nor any of their immediate family members) owns securities of
either the Manager or the Distributor of the Board I Funds or of any entity
directly or indirectly controlling, controlled by or under common control
with the Manager or the Distributor.

      Affiliated Transactions and Material Business Relationships. Mr.
Reynolds has reported he has a controlling interest in The Directorship
Group, Inc. (the "Directorship Group"), a director recruiting firm that
provided consulting services to Massachusetts Mutual Life Insurance Company
(which controls the Manager) for fees of $137,500 for calendar year ended
December 31, 2002. Mr. Reynolds reported that the Directorship Group did not
provide consulting services to Massachusetts Mutual Life Insurance Company
during the calendar years ended December 31, 2003 and 2004 and does not
expect to provide any such services in the calendar year ending December 31,
2005.

      The Independent Trustees have unanimously (except for Mr. Reynolds, who
abstained) determined that the consulting arrangements between the
Directorship Group and Massachusetts Mutual Life Insurance Company were not
material business or professional relationships that would compromise Mr.
Reynolds's status as an Independent Trustee. Nonetheless, to assure certainty
as to determinations of the Board and the Independent Trustees as to matters
upon which the Investment Company Act or the rules thereunder require
approval by a majority of Independent Trustees, Mr. Reynolds will not be
counted for purposes of determining whether a quorum of Independent Trustees
was present or whether a majority of Independent Trustees approved the matter.

      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 charts also include 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"). Ms. Miller was elected to certain Board I Funds
during 2004 and did not hold shares of Board I Funds during the calendar year
ended December 31, 2004. Mr. Fink was elected to the Board I Funds in 2005
and did not hold shares of Board I Funds during the calendar year ended
December 31, 2004. The address of each 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.

-------------------------------------------------------------------------------------------
                                   Independent Trustees
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Name, Position(s)   Principal Occupation(s) During the Past 5     Dollar      Aggregate
                                                                             Dollar Range
                                                                 Range of     Of Shares
                                                                  Shares     Beneficially
Held with the       Years; Other Trusteeships/Directorships     Beneficially   Owned in
Fund, Length of     Held; Number of Portfolios in the Fund       Owned in     Supervised
Service, Age        Complex Currently Overseen                   the Fund       Funds
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
                                                                 As of December 31, 2004
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Clayton K.          Director of American Commercial Lines       None        Over $100,000
Yeutter, Chairman   (barge company) (since January 2005);
of the Board of     Attorney at Hogan & Hartson (law firm)
Trustees since      (since June 1993); Director of Covanta
2003,               Holding Corp. (waste-to-energy company)
Trustee since 1993  (since 2002); Director of Weyerhaeuser
Age: 74             Corp. (1999-April 2004); Director of
                    Caterpillar, Inc. (1993-December 2002);
                    Director of ConAgra Foods (1993-2001);
                    Director of Texas Instruments (1993-2001);
                    Director of FMC Corporation (1993-2001).
                    Oversees 38 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Matthew P. Fink,    Trustee of the Committee for Economic       None        None
Trustee since 2005  Development (policy research foundation)
Age: 64             (since 2005); Director of ICI Education
                    Foundation (education foundation) (since
                    October 1991); President of the Investment
                    Company Institute (trade association)
                    (1991-2004); Director of ICI Mutual
                    Insurance Company (insurance company)
                    (1991-2004). Oversees 38 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Robert G. Galli,    A director or trustee of other Oppenheimer  None        Over $100,000
Trustee since 1993  funds. Oversees 48 portfolios in the
Age: 72             OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Phillip A.          Director of GSI Lumonics Inc. (precision    None        Over $100,000
Griffiths,          medical equipment supplier) (since 2001);
Trustee since 1999  Trustee of Woodward Academy (since 1983);
Age: 67             Senior Advisor of The Andrew W. Mellon
                    Foundation (since 2001); Member of the
                    National Academy of Sciences (since 1979);
                    Member of the American Philosophical
                    Society (since 1996); Council on Foreign
                    Relations (since 2002); Director of the
                    Institute for Advanced Study (1991-2004);
                    Director of Bankers Trust New York
                    Corporation (1994-1999). Oversees 38
                    portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Mary F. Miller,     Trustee of the American Symphony Orchestra  None        None
Trustee since 2004  (not-for-profit) (since October 1998); and
Age: 63             Senior Vice President and General Auditor
                    of American Express Company (financial
                    services company) (July 1998-February
                    2003). Oversees 38 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Joel W. Motley,     Director of Columbia Equity Financial       None        Over $100,000
Trustee since 2002  Corp. (privately-held financial adviser)
Age: 53             (since 2002); Managing Director of Carmona
                    Motley, Inc. (privately-held financial
                    adviser) (since January 2002); Managing
                    Director of Carmona Motley Hoffman Inc.
                    (privately-held financial adviser)
                    (January 1998-December 2001); Member of
                    the Finance and Budget Committee of the
                    Council on Foreign Relations, the
                    Investment Committee of the Episcopal
                    Church of America, the Investment
                    Committee of Human Rights Watch and the
                    Investment Committee of Historic Hudson
                    Valley. Oversees 38 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Kenneth A.          Director of Dominion Resources, Inc.        $10,001-$50,Over $100,000
Randall,            (electric utility holding company) (since
Trustee since 1987  February 1972); Former Director of Prime
Age: 78             Retail, Inc. (real estate investment
                    trust), Dominion Energy Inc. (electric
                    power and oil & gas producer), Lumbermens
                    Mutual Casualty Company, American
                    Motorists Insurance Company and American
                    Manufacturers Mutual Insurance Company;
                    Former President and Chief Executive
                    Officer of The Conference Board, Inc.
                    (international economic and business
                    research). Oversees 38 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Russell S.          Chairman of The Directorship Search Group,  None        Over $100,000
Reynolds, Jr.,      Inc. (corporate governance consulting and
Trustee since 1989  executive recruiting) (since 1993); Life
Age: 73             Trustee of International House (non-profit
                    educational organization); Former Trustee
                    of The Historical Society of the Town of
                    Greenwich. Oversees 38 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Joseph M. Wikler,   Director of the following medical device    None        $50,001-$100,000
Trustee since 2005  companies: Medintec (since 1992) and
Age: 64             Cathco (since 1996); Director of Lakes
                    Environmental Association (since 1996);
                    Member of the Investment Committee of the
                    Associated Jewish Charities of Baltimore
                    (since 1994); Director of Fortis/Hartford
                    mutual funds (1994-December 2001).
                    Oversees 39 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Peter I. Wold,      President of Wold Oil Properties, Inc.      None        Over $100,000
Trustee since 2005  (oil and gas exploration and production
Age: 57             company) (since 1994); Vice President,
                    Secretary and Treasurer of Wold Trona
                    Company, Inc. (soda ash processing and
                    production) (since 1996); Vice President
                    of Wold Talc Company, Inc. (talc mining)
                    (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). Oversees 39 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Brian F. Wruble,    General Partner of Odyssey Partners, L.P.   None        Over $100,000
Trustee since 2005  (hedge fund) (since September 1995);
Age: 62             Director of Special Value Opportunities
                    Fund, LLC (registered investment company)
                    (since September 2004); Director of Zurich
                    Financial Investment Advisory Board
                    (affiliate of the Manager's parent
                    company) (since October 2004); Board of
                    Governing Trustees of The Jackson
                    Laboratory (non-profit) (since August
                    1990); Trustee of the Institute for
                    Advanced Study (non-profit educational
                    institute) (since May 1992); Special
                    Limited Partner of Odyssey Investment
                    Partners, LLC (private equity investment)
                    (January 1999-September 2004); Trustee of
                    Research Foundation of AIMR (2000-2002)
                    (investment research, non-profit);
                    Governor, Jerome Levy Economics Institute
                    of Bard College (August 1990-September
                    2001) (economics research); Director of
                    Ray & Berendtson, Inc. (May 2000-April
                    2002) (executive search firm). Oversees 48
                    portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------

      The address of Mr. Murphy is Two World Financial Center, 225 Liberty
Street, 11th Floor, New York, New York 10281-1008. Mr. Murphy serves as a
Trustee for an indefinite term, or until his resignation, retirement, death
or removal and as an officer for an indefinite term, or until his
resignation, retirement, death or removal. Mr. Murphy 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.

-------------------------------------------------------------------------------------------
                              Interested Trustee and Officer
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Name, Position(s)  Principal Occupation(s) During the Past 5      Dollar      Aggregate
                                                                             Dollar Range
                                                                 Range of     Of Shares
                                                                  Shares     Beneficially
Held with Fund,    Years; Other Trusteeships/Directorships      Beneficially   Owned in
Length of          Held; Number of Portfolios in the Fund        Owned in     Supervised
Service, Age       Complex Currently Overseen                    the Fund       Funds
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
                                                                 As of December 31, 2004
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
John V. Murphy,    Chairman, Chief Executive Officer and        None        Over $100,000
President since    Director (since June 2001) and President
2001 and Trustee   (since September 2000) of the Manager;
2001-2004 and      President and a director or trustee of
since 2005         other Oppenheimer funds; President and
Age: 56            Director of Oppenheimer Acquisition Corp.
                   ("OAC") (the Manager's parent holding
                   company) and of Oppenheimer Partnership
                   Holdings, Inc. (holding company subsidiary
                   of the Manager) (since July 2001); Director
                   of OppenheimerFunds Distributor, Inc.
                   (subsidiary of the Manager) (since November
                   2001); Chairman and Director of Shareholder
                   Services, Inc. and of Shareholder Financial
                   Services, Inc. (transfer agent subsidiaries
                   of the Manager) (since July 2001);
                   President and Director of OppenheimerFunds
                   Legacy Program (charitable trust program
                   established by the Manager) (since July
                   2001); Director of the following investment
                   advisory subsidiaries of the Manager: OFI
                   Institutional Asset Management, Inc.,
                   Centennial Asset Management Corporation,
                   Trinity Investment Management Corporation
                   and Tremont Capital Management, Inc. (since
                   November 2001), HarbourView Asset
                   Management Corporation and OFI Private
                   Investments, Inc. (since July 2001);
                   President (since November 1, 2001) and
                   Director (since July 2001) of Oppenheimer
                   Real Asset Management, Inc.; Executive Vice
                   President of Massachusetts Mutual Life
                   Insurance Company (OAC's parent company)
                   (since February 1997); Director of DLB
                   Acquisition Corporation (holding company
                   parent of Babson Capital Management LLC)
                   (since June 1995); Member of the Investment
                   Company Institute's Board of Governors
                   (since October 3, 2003); Chief Operating
                   Officer of the Manager (September 2000-June
                   2001); President and Trustee of MML Series
                   Investment Fund and MassMutual Select Funds
                   (open-end investment companies) (November
                   1999-November 2001); Director of C.M. Life
                   Insurance Company (September 1999-August
                   2000); President, Chief Executive Officer
                   and Director of MML Bay State Life
                   Insurance Company (September 1999-August
                   2000); Director of Emerald Isle Bancorp and
                   Hibernia Savings Bank (wholly-owned
                   subsidiary of Emerald Isle Bancorp) (June
                   1989-June 1998). Oversees 77 portfolios in
                   the OppenheimerFunds complex as a director
                   or trustee and officer and an additional 10
                   portfolios as an officer.
-------------------------------------------------------------------------------------------

      The addresses of the officers in the chart below are as follows: for
Messrs. Cottier, Fielding, Gillespie, Loughran and Zack and Ms. Bloomberg,
Two World Financial Center, 225 Liberty Street, New York, New York
10281-1008, for Messrs. Petersen, Vandehey, Vottiero, and Wixted and Ms.
Ives, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each officer
serves for an indefinite term or until his or her resignation, retirement,
death or removal.

--------------------------------------------------------------------------------------
                             Other Officers of the Fund
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Name, Position(s) Held  Principal Occupation(s) During Past 5 Years
with Fund, Length of
Service, Age
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Ronald H. Fielding,     Senior Vice President of the Manager (since January 1996);
Vice President and      Chairman of the Rochester Division of the Manager (since
Portfolio Manager 2002  January 1996). An officer of 10 portfolios in the
Age: 56                 OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Scott Cottier,          Vice President of the Manager (since 2002); portfolio
Vice President and      manager and trader at Victory Capital Management
Portfolio Manager 2005  (1999-2002). An officer of 8 portfolios in the
Age: 34                 OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Daniel G. Loughran,     Vice President of the Manager (since April 2001). An officer
Vice President and      of 8 portfolios in the OppenheimerFunds complex.
Portfolio Manager 2005
Age: 42
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Troy Willis,            Associate Portfolio Manager of the Manager since 2003;
Vice President and      corporate attorney for Southern Resource Group (1999-2003).
Portfolio Manager 2005  An officer of 8 portfolios in the OppenheimerFunds complex.
Age: 33
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Mark S. Vandehey,       Senior Vice President and Chief Compliance Officer of the
Vice President and      Manager (since March 2004); Vice President of
Chief Compliance        OppenheimerFunds Distributor, Inc., Centennial Asset
Officer since 2004      Management Corporation and Shareholder Services, Inc. (since
Age: 55                 June 1983). Former Vice President and Director of Internal
                        Audit of the Manager (1997-February 2004). An officer of 87
                        portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian W. Wixted,        Senior Vice President and Treasurer of the Manager (since
Treasurer since 1999    March 1999); Treasurer of the following: HarbourView Asset
Age: 46                 Management Corporation, Shareholder Financial Services,
                        Inc., Shareholder Services, Inc., Oppenheimer Real Asset
                        Management Corporation, and Oppenheimer Partnership
                        Holdings, Inc. (since March 1999), OFI Private Investments,
                        Inc. (since March 2000), OppenheimerFunds International Ltd.
                        (since May 2000), OppenheimerFunds plc (since May 2000), OFI
                        Institutional Asset Management, Inc. (since November 2000),
                        and OppenheimerFunds Legacy Program (charitable trust
                        program established by the Manager) (since June 2003);
                        Treasurer and Chief Financial Officer of OFI Trust Company
                        (trust company subsidiary of the Manager) (since May 2000);
                        Assistant Treasurer of the following: OAC (since March
                        1999),Centennial Asset Management Corporation (March
                        1999-October 2003) and OppenheimerFunds Legacy Program
                        (April 2000-June 2003); Principal and Chief Operating
                        Officer of Bankers Trust Company-Mutual Fund Services
                        Division (March 1995-March 1999). An officer of 87
                        portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian Petersen,         Assistant Vice President of the Manager (since August 2002);
Assistant Treasurer     Manager/Financial Product Accounting of the Manager
since 2004              (November 1998-July 2002). An officer of 87 portfolios in
Age: 35                 the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Philip F. Vottiero,     Vice President/Fund Accounting of the Manager (since March
Assistant Treasurer     2002); Vice President/Corporate Accounting of the Manager
since 2002              (July 1999-March 2002); Chief Financial Officer of Sovlink
Age: 42                 Corporation (April 1996-June 1999). An officer of 87
                        portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Robert G. Zack,         Executive Vice President (since January 2004) and General
Secretary since 2001    Counsel (since March 2002) of the Manager; General Counsel
Age: 57                 and Director of the Distributor (since December 2001);
                        General Counsel of Centennial Asset Management Corporation
                        (since December 2001); Senior Vice President and General
                        Counsel of HarbourView Asset Management Corporation (since
                        December 2001); Secretary and General Counsel of OAC (since
                        November 2001); Assistant Secretary (since September 1997)
                        and Director (since November 2001) of OppenheimerFunds
                        International Ltd. and OppenheimerFunds plc; Vice President
                        and Director of Oppenheimer Partnership Holdings, Inc.
                        (since December 2002); Director of Oppenheimer Real Asset
                        Management, Inc. (since November 2001); Senior Vice
                        President, General Counsel and Director of Shareholder
                        Financial Services, Inc. and Shareholder Services, Inc.
                        (since December 2001); Senior Vice President, General
                        Counsel and Director of OFI Private Investments, Inc. and
                        OFI Trust Company (since November 2001); Vice President of
                        OppenheimerFunds Legacy Program (since June 2003); Senior
                        Vice President and General Counsel of OFI Institutional
                        Asset Management, Inc. (since November 2001); Director of
                        OppenheimerFunds (Asia) Limited (since December 2003);
                        Senior Vice President (May 1985-December 2003), Acting
                        General Counsel (November 2001-February 2002) and Associate
                        General Counsel (May 1981-October 2001) of the Manager;
                        Assistant Secretary of the following: Shareholder Services,
                        Inc. (May 1985-November 2001), Shareholder Financial
                        Services, Inc. (November 1989-November 2001), and
                        OppenheimerFunds International Ltd. (September 1997-November
                        2001). An officer of 87 portfolios in the OppenheimerFunds
                        complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Kathleen T. Ives,       Vice President (since June 1998) and Senior Counsel and
Assistant Secretary     Assistant Secretary (since October 2003) of the Manager;
since 2001              Vice President (since 1999) and Assistant Secretary (since
Age: 40                 October 2003) of the Distributor; Assistant Secretary of
                        Centennial Asset Management Corporation (since October
                        2003); Vice President and Assistant Secretary of Shareholder
                        Services, Inc. (since 1999); Assistant Secretary of
                        OppenheimerFunds Legacy Program and Shareholder Financial
                        Services, Inc. (since December 2001); Assistant Counsel of
                        the Manager (August 1994-October 2003). An officer of 87
                        portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Lisa I. Bloomberg,      Vice President and Associate Counsel of the Manager (since
Assistant Secretary     May 2004); First Vice President (April 2001-April 2004),
since 2004              Associate General Counsel (December 2000-April 2004),
Age: 37                 Corporate Vice President (May 1999-April 2001) and Assistant
                        General Counsel (May 1999-December 2000) of UBS Financial
                        Services Inc. (formerly, PaineWebber Incorporated). An
                        officer of 87 portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Phillip S. Gillespie,   Senior Vice President and Deputy General Counsel of the
Assistant Secretary     Manager (since September 2004); Mr. Gillespie held the
since 2004              following positions at Merrill Lynch Investment Management:
Age: 41                 First Vice President (2001-September 2004); Director
                        (2000-September 2004) and Vice President (1998-2000). An
                        officer of 87 portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------

      Remuneration of the Officers and Trustees. The officers and the
interested Trustee of the Fund who are affiliated with the Manager receive no
salary or fee from the Fund. The Independent Trustees' compensation from the
Fund, shown below, is for serving as a Trustee and member of a committee (if
applicable), with respect to the Fund's fiscal year ended July 31, 2005. The
total compensation from the Fund and fund complex represents compensation,
including accrued retirement benefits, 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, 2004.











--------------------------------------------------------------------------------------
Name and Other Fund      Aggregate     Retirement      Estimated          Total
                                        Benefits
                       Compensation    Accrued as       Annual        Compensation
Position(s) (as          From the     Part of Fund   Benefits Upon    From the Fund
applicable)               Fund(1)       Expenses     Retirement(2)  and Fund Complex
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Clayton K. Yeutter       $3,023(3)        None          $86,171         $173,700
Chairman of the Board
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Matthew P. Fink(4)         None           None          $2,641            None
Proxy Committee
Member and Regulatory
& Oversight Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Robert G. Galli           $2,250          None        $100,824(5)      $237,312(6)
Regulatory &
Oversight Committee
Chairman
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Phillip A. Griffiths     $2,610(7)        None          $34,972         $142,092
Governance Committee
Chairman and
Regulatory &
Oversight Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Mary F. Miller(8)
Audit Committee
Member and Proxy          $1,171          None          $7,128           $8,532
Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Joel W. Motley           $2,623(9)        None          $23,945         $150,760
Audit Committee
Chairman and
Regulatory &
Oversight Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Kenneth A. Randall        $2,333        None(10)        $85,944         $134,080
Audit Committee
Member and Governance
Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Edward V. Regan(11)       $1,919          None          $70,977         $118,788
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Russell S. Reynolds,      $1,862          None          $66,602         $106,792
Jr.
Proxy Committee
Chairman and
Governance Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Donald W. Spiro(12)        $279           None           None            $64,080
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Joseph M. Wikler(13)       None           None             -             $23,000
Audit Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Peter I. Wold(13)
Governance Committee       None           None             -             $20,500
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian F. Wruble(14)        None           None        $22,238(15)     $111,000(16)
Regulatory &
Oversight Committee
Member
--------------------------------------------------------------------------------------
1.     "Aggregate Compensation From the Fund" includes fees and deferred
   compensation, if any.
2.    "Estimated Annual Benefits Upon Retirement" is based on a straight life
   payment plan election with the assumption that a Trustee will retire at
   the age of 75 and is eligible (after 7 years of service) to receive
   retirement plan benefits with respect to certain Board I Funds as
   described below under "Retirement Plan for Trustees."
3.    Includes $756 deferred by Mr. Yeutter under the "Deferred Compensation
   Plan" described below.
4.    Mr. Fink was appointed as a Board member of 10 of the Board I Funds
   effective January 1, 2005 and was elected as a Board Member of all of the
   other Board I Funds during 2005.
5.    Includes $45,840 estimated benefits to be paid to Mr. Galli for serving
   as a director or trustee of 10 other Oppenheimer funds that are not Board
   I Funds.
6.    Includes $111,000 for serving as a director or trustee of 10 other
   Oppenheimer funds (at December 31, 2004) that are not Board I Funds.
7.    Includes $2,610 deferred by Mr. Griffiths under the "Deferred
   Compensation Plan" described below.
8.    Ms. Miller was appointed as a Board member of 13 of the Board I Funds
   effective August13, 2004 and of 9 of the Board I Funds effective
   October 26, 2004. She was elected as a Board member of all of the Board I
   Funds during 2005.
9.    Includes $1,049 deferred by Mr. Motley under the "Deferred Compensation
   Plan" described below.
10.   Due to actuarial considerations, no additional retirement benefits were
   accrued with respect to Mr. Randall.
11.   Mr. Regan retired as Trustees of the Board I funds effective June 30,
   2005.
12.   Mr. Spiro retired as Trustees of the Board I funds effective
   October 31, 2004.
13.   Mr. Wikler and Mr. Wold were elected as Board members of 23 of the
   Board I Funds, including the Fund, as of August 17, 2005. They had served
   as Board members of the other 11 Board I Funds prior to that date.
14.   Mr. Wruble was appointed as Trustee of the Board I Funds effective
   October 10, 2005.
15.   Estimated benefits to be paid to Mr. Wruble for serving as a director
   or trustee of 10 other Oppenheimer funds that are not Board I Funds. Mr.
   Wruble's service as a director or trustee of such funds will not be
   counted towards the fulfillment of his eligibility requirements for
   payments under the Board I retirement plan, described below.
16.   For serving as a director or trustee of 10 other Oppenheimer funds (at
   December 31, 2004) that are not Board I Funds.

      Retirement Plan for Trustees. Certain Board I Funds have adopted a
retirement plan that provides for payments to retired Independent Trustees.
Payments are up to 80% of the average compensation paid during a Trustee's
five years of service in which the highest compensation was received. A
Trustee must serve as director or trustee for any of the Board I Funds for at
least seven years to be eligible for retirement plan benefits and must serve
for at least 15 years to be eligible for the maximum benefit. The amount of
retirement benefits a Trustee will receive depends on the amount of the
Trustee's compensation, including future compensation and the length of his
or her service on the Board.

      |X|   Deferred Compensation Plan. The Board of Trustees has adopted a
Deferred Compensation 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 Board I 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 upon 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 October 31, 2005, the only persons or
entities who owned of record or were known by the Fund to own beneficially 5%
or more of any class of the Fund's outstanding shares were:

Citigroup Global Markets Inc., Attn: Cindy Tempesta, 7th Floor, 333 West 34th
Street, New York, NY 10001-2483, which owned 5,331,564.104 Class A shares
(representing approximately 5.55% of the Class A shares then outstanding).

MLPF&S for the sole benefit of its customers, Attn: Fund Admn, 4800 Deer Lake
Dr. E. Fl. 3, Jacksonville, FL 32246-6484, which owned 341,016.872 Class B
shares (representing approximately 7.22% of the Class B shares then
outstanding).

Citigroup Global Markets Inc., Attn: Cindy Tempesta, 7th Floor, 333 West 34th
Street, New York, NY 10001-2483, which owned 300,866.940 Class B shares
(representing approximately 6.37% of the Class B shares then outstanding).

MLPF&S for the sole benefit of its customers, Attn: Fund Admn, 4800 Deer Lake
Dr. E. Fl. 3, Jacksonville, FL 32246-6484, which owned 2,158,062.410 Class C
shares (representing approximately 18.97% of the Class C shares then
outstanding).

Citigroup Global Markets Inc., Attn: Cindy Tempesta, 7th Floor, 333 West 34th
Street, New York, NY 10001-2483, which owned 1,185,246.617 Class C shares
(representing approximately 10.42% of the Class C shares then outstanding).

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

      |X|   Code of Ethics. The Fund, the Manager and the Distributor have a
Code of Ethics. It is designed to detect and prevent improper personal
trading by certain employees, including portfolio managers, that would
compete with or take advantage of the Fund's portfolio transactions. Covered
persons include persons with knowledge of the investments and investment
intentions of the Fund and other funds advised by the Manager. The Code of
Ethics does permit personnel subject to the Code to invest in securities,
including securities that may be purchased or held by the Fund, subject to a
number of restrictions and controls. Compliance with the Code of Ethics is
carefully monitored and enforced by the Manager.

      The Code of Ethics is an exhibit to the Fund's registration statement
filed with the SEC and can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. You can obtain information about the hours
of operation of the Public Reference Room by calling the SEC at
1.202.942.8090. The Code of Ethics can also be viewed as part of the Fund's
registration statement on the SEC's EDGAR database at the SEC's Internet
website at www.sec.gov. Copies may be obtained, after paying a duplicating
fee, by electronic request at the following E-mail address:
publicinfo@sec.gov, or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.

Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting Policies
and Procedures under which the Fund votes proxies relating to securities
("portfolio proxies") held by the Fund. The Fund's primary consideration in
voting portfolio proxies is the financial interests of the Fund and its
shareholders. The Fund has retained an unaffiliated third-party as its agent
to vote portfolio proxies in accordance with the Fund's Portfolio Proxy
Voting Guidelines and to maintain records of such portfolio proxy voting. The
Portfolio Proxy Voting Policies and Procedures include provisions to address
conflicts of interest that may arise between the Fund and the Manager or the
Manager's affiliates or business relationships. Such a conflict of interest
may arise, for example, where the Manager or an affiliate of the Manager
manages or administers the assets of a pension plan or other investment
account of the portfolio company soliciting the proxy or seeks to serve in
that capacity. The Manager and its affiliates generally seek to avoid such
conflicts by maintaining separate investment decision making processes to
prevent the sharing of business objectives with respect to proposed or actual
actions regarding portfolio proxy voting decisions. Additionally, the Manager
employs the following two procedures: (1) if the proposal that gives rise to
the conflict is specifically addressed in the Guidelines, the Manager will
vote the portfolio proxy in accordance with the Guidelines, provided that
they do not provide discretion to the Manager on how to vote on the matter;
and (2) if such proposal is not specifically addressed in the Guidelines or
the Guidelines provide discretion to the Manager on how to vote, the Manager
will vote in accordance with the third-party proxy voting agent's general
recommended guidelines on the proposal provided that the Manager has
reasonably determined that there is no conflict of interest on the part of
the proxy voting agent. If neither of the previous two procedures provides an
appropriate voting recommendation, the Manager may retain an independent
fiduciary to advise the Manager on how to vote the proposal or may abstain
from voting. The Guidelines' provisions with respect to certain routine and
non-routine proxy proposals are summarized below:

o     The Fund generally votes with the recommendation of the issuer's
         management on routine matters, including ratification of the
         independent registered public accounting firm, unless circumstances
         indicate otherwise.
o     The Fund evaluates nominees for director nominated by management on a
         case-by-case basis, examining the following factors, among others:
         Composition of the board and key board committees, attendance at
         board meetings, corporate governance provisions and takeover
         activity, long-term company performance and the nominee's investment
         in the company.
o     In general, the Fund opposes anti-takeover proposals and supports the
         elimination, or the ability of shareholders to vote on the
         preservation or elimination, of anti-takeover proposals, absent
         unusual circumstances.
o     The Fund supports shareholder proposals to reduce a super-majority vote
         requirement, and opposes management proposals to add a
         super-majority vote requirement.
o     The Fund opposes proposals to classify the board of directors.
o     The Fund supports proposals to eliminate cumulative voting.
o     The Fund opposes re-pricing of stock options without shareholder
         approval.
o     The Fund generally considers executive compensation questions such as
         stock option plans and bonus plans to be ordinary business activity.
         The Fund analyzes stock option plans, paying particular attention to
         their dilutive effect. While the Fund generally supports management
         proposals, the Fund opposes plans it considers to be excessive.

      The Fund is required to file Form N-PX, with its complete proxy voting
record for the 12 months ended June 30th, no later than August 31st of each
year. The Fund's Form N-PX filing is available (i) without charge, upon
request, by calling the Fund toll-free at 1.800.525.7048 and (ii) on the
SEC's website at www.sec.gov.

      |X|   The Investment Advisory Agreement. The Manager provides
investment advisory and management services to the Fund under an investment
advisory agreement between the Manager and the Fund. The Manager selects
securities for the Fund's portfolio and handles its day-to day business. That
agreement requires the Manager, at its expense, to provide the Fund with
adequate office space, facilities and equipment. It also requires the Manager
to provide and supervise the activities of all administrative and clerical
personnel required to provide effective corporate administration for the
Fund. Those responsibilities include the compilation and maintenance of
records with respect to the Fund's operations, the preparation and filing of
specified reports, and the composition of proxy materials and registration
statements for continuous public sale of shares of the Fund.

      The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The investment advisory agreement lists examples of
expenses paid by the Fund. The major categories relate to interest, taxes,
fees to Independent Trustees, legal and audit expenses, custodian and
transfer agent expenses, share issuance costs, certain printing and
registration costs, brokerage commissions, and non-recurring expenses,
including litigation cost. The management fees paid by the Fund to the
Manager are calculated at the rates described in the Prospectus, which are
applied to the assets of the Fund as a whole. The fees are allocated to each
class of shares based upon the relative proportion of the Fund's net assets
represented by that class. The management fees paid by the Fund to the
Manager during its last three fiscal years are listed below.

Fiscal Year ended July 31:            Management Fees Paid to the Manager
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2003                                    $3,140,001
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2004                                    $3,424,188
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2005                                    $3,739,885
--------------------------------------------------------------------------------

      During the period January 1, 2002 to October 31, 2003, the Manager
voluntarily agreed to waive advisory fees at an annual rate equal to 0.05% of
the Fund's average daily net assets until the Fund's trailing one year
performance percentile at the end of the preceding calendar quarter is in the
third quintile or better of the Fund's Lipper peer group. This waiver was
voluntary and was terminated when the Fund's relative performance improved.
The waiver of $53,402 in management fees did not affect the fund expense
ratios (when rounded to the nearest basis point). Had this waiver not been in
effect during any portion of the Fund's fiscal year ended July 31, 2004, the
Fund would have paid $3,477,590 in management fees.

      The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties, or
reckless disregard for its obligations and duties under the investment
advisory agreement, the Manager is not liable for any loss the Fund sustains
for any investment, adoption of any investment policy or the purchase, sale
or retention of any security.

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

 Portfolio Managers. The Fund's portfolio is managed by Ronald H. Fielding
and a team of investment professionals including Daniel G. Loughran, Scott
Cottier and Troy Willis, Mark DeMitry and Marcus Franz (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.

            Other Accounts Managed. In addition to managing the Fund's
investment portfolio, Messrs. Fielding, Loughran, Cottier, Willis, DeMitry
and Franz also manage other investment portfolios and other accounts on
behalf of the Manager or its affiliates. The following table provides
information regarding the other portfolios and accounts managed by
Messrs. Fielding, Loughran, Cottier and Willis as of July 31, 2005. No
account has a performance-based advisory fee:

   Portfolio       RegistereTotal      Other        Total    Other   Total
                                                  Assets in
                            Assets in               Other
                            Registered Pooled      Pooled             Assets
                   InvestmenInvestment InvestmentInvestment          in Other
                   CompaniesCompanies  Vehicles   Vehicles   AccountsAccounts
   Manager         Managed   Managed*   Managed   Managed*   Managed  Managed
   ----------------------------------------------------------------------------
   ----------------------------------------------------------------------------
   Ronald H.          10    $19,636.8    None       None       18     $193.0*
   Fielding
   ----------------------------------------------------------------------------
   ----------------------------------------------------------------------------
   Daniel G.          10    $19,636.8    None       None       10      $466+
   Loughran
   ----------------------------------------------------------------------------
   ----------------------------------------------------------------------------
   Scott Cottier      10    $19,636.8    None       None        7      $240+
   ----------------------------------------------------------------------------
   ----------------------------------------------------------------------------
   Troy Willis        10    $19,636.8    None       None        2      $104+
   ----------------------------------------------------------------------------
   ----------------------------------------------------------------------------
   Mark DeMitry       10    $19,636.8    None       None        6      $122+
   ----------------------------------------------------------------------------
   ----------------------------------------------------------------------------
   Marcus Franz       10    $19,636.8    None       None       10      $170+

   * In millions.
   + In thousands.

      As indicated above, the Portfolio Managers also manage other funds and
accounts. Potentially, at times, those responsibilities could 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 fiduciary
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. 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.

     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, their compensation is based primarily on the investment performance
results of the funds and 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
investors. 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
July 31, 2005, 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 appreciation rights in regard
to the common stock of the Manager's holding company parent. Senior portfolio
managers may also 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, to help the Manager attract and retain talent.
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
benchmark selected by management. The Lipper benchmark with respect to the
Fund is Lipper - General Municipal Debt Funds. Other factors 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 managed by the Portfolio Managers. The
compensation structure of the other funds managed by the Portfolio Managers
is the same as the compensation structure of the Fund, described above.

    Ownership of Fund Shares. As of July 31, 2005, the Portfolio Managers
did not beneficially own any shares of the Fund.

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory Agreement. One of the duties
of the Manager under the investment advisory agreement is to buy and sell
portfolio securities for the Fund. The investment advisory agreement allows
the Manager to use broker-dealers to effect the Fund's portfolio
transactions. The Manager is authorized by the advisory agreement to employ
broker-dealers, including "affiliated brokers", as that term is defined in
the Investment Company Act that, in the Manager's best judgment based on all
relevant factors, will implement the Fund's policy to obtain, at reasonable
expense, the "best execution" of portfolio transactions. "Best execution"
refers to prompt and reliable execution at the most favorable price
obtainable. The Manager need not seek competitive commission bidding.
However, the Manager is expected to minimize the commissions paid to the
extent consistent with the interest and policies of the Fund as established
by its Board of Trustees.

      Under the investment advisory agreement, in choosing brokers to execute
portfolio transactions for the Fund, the Manager may select brokers (other
than affiliates) that provide brokerage and/or research services to the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. 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.

      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
the 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 direct portfolio securities transactions to 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.

Brokerage Practices Followed by the Manager. The Manager allocates brokerage
for the Fund subject to the provisions of the investment advisory agreement
and the procedures and rules described above. Generally the Manager's
portfolio traders allocate brokerage upon recommendations from the Manager's
portfolio managers. In certain instances, portfolio managers may directly
place trades and allocate brokerage. In either case, the Manager's executive
officers supervise the allocation of brokerage.

      Most securities purchases made by the Fund are in principal
transactions at net prices. The Fund usually deals directly with the selling
or purchasing principal or market maker without incurring charges for the
services of a broker on its behalf unless the Manager determines that a
better price or execution may be obtained by using the services of a broker.
Therefore, the Fund does not incur substantial brokerage costs. Portfolio
securities purchased from underwriters include a commission or concession
paid by the issuer to the underwriter in the price of the security. Portfolio
securities purchased from dealers include a spread between the bid and asked
price.

      The Fund seeks to obtain prompt execution of orders at the most
favorable net prices. In an option transaction, the Fund ordinarily uses the
same broker for the purchase or sale of the option and any transaction in the
investment to which the option relates. Other funds advised by the Manager
have investment objectives and policies similar to those of the Fund. Those
other funds may purchase or sell the same securities as the Fund at the same
time as the Fund, which could affect the supply and price of the securities.
When possible, the Manager tries to combine concurrent orders to purchase or
sell the same security by more than one of the accounts managed by the
Manager or its affiliates. The transactions under those combined orders are
averaged as to price and allocated in accordance with the purchase or sale
orders actually placed for each account.

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

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

      The research services provided by brokers broaden the scope and
supplement the research activities of the Manager. That research provides
additional views and comparisons for consideration and helps the Manager to
obtain market information for the valuation of securities that are either
held in the Fund's portfolio or are being considered for purchase. The
Manager provides information to the Board of the Fund about the commissions
paid to brokers furnishing 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.







 Fiscal Year Ended July  Total Brokerage Commissions Paid by the
          31:                            Fund(1)
------------------------------------------------------------------
------------------------------------------------------------------
          2003                              $0
------------------------------------------------------------------
------------------------------------------------------------------
          2004                              $0
------------------------------------------------------------------
------------------------------------------------------------------
          2005                            $0(2)
------------------------------------------------------------------
1.    Amounts do not include spreads or commissions on principal amounts on a
           net trade basis.
2.    In the fiscal year ended July 31, 2005, there were no transactions
           directed to brokers for research services.

Distribution and Service Plans

The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of the Fund's classes of 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
retained by the Distributor on the redemption of shares during the Fund's
three most recent fiscal years are shown in the tables below.

  Fiscal Year     Aggregate     Class A   Concessions  Concessions  Concessions
                               Front-End   on Class A
                  Front-End      Sales       Shares
                    Sales       Charges   Advanced by   on Class B   on Class C
                   Charges     Retained   Distributor(2   Shares       Shares    )
                  on Class A      by                   Advanced by  Advanced by
 Ended July 31:     Shares    Distributor(1)           Distributor(2Distributor(2
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
      2003         $657,522    $165,400     $19,855      $254,356     $70,687
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
      2004         $720,299    $163,540     $45,535      $200,299     $81,704
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
      2005        $2,283,340   $391,535     $358,092     $277,944     $402,856
---------------------------------------------------------------------------------
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.

  Fiscal Year     Class A Contingent  Class B Contingent   Class C Contingent
                    Deferred Sales      Deferred Sales       Deferred Sales
                 Charges Retained by   Charges Retained   Charges Retained by
 Ended July 31:      Distributor        by Distributor        Distributor
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
      2003             $10,749             $324,356              $5,367
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
      2004             $15,551             $145,732             $10,427
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
      2005             $26,145             $122,094              $8,476
-------------------------------------------------------------------------------

Distribution and Service Plans. The Fund has adopted a Service Plan for Class
A shares and Distribution and Service Plans for Class B and Class C shares
under Rule 12b-1 of the Investment Company Act. Under those plans the Fund
pays the Distributor for all or a portion of its costs incurred in connection
with the distribution and/or servicing of the shares of the particular class.
Each plan has been approved by a vote of the Board of Trustees, including a
majority of the Independent Trustees(1), cast in person at a meeting called
for the purpose of voting on that plan.

      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.

      Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose
of voting on continuing the plan. A plan may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
shares of that class.

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

      While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan, and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.

      Each plan states that while it is in effect, the selection and
nomination of those Trustees of the Fund who are not "interested persons" of
the Fund is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in the selection and nomination
process as long as the final decision as to selection or nomination is
approved by a majority of the Independent Trustees.

      Under the plans for a class, no payment will be made to any recipient
in any period in which the aggregate net asset value of all Fund shares of
that class held by the recipient for itself and its customers does not exceed
a minimum amount, if any, that may be set from time to time by a majority of
the Independent Trustees.

|X|   Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as
"recipients") for personal services and account maintenance services they
provide for their customers who hold Class A shares. The services include,
among others, answering customer inquiries about the Fund, assisting in
establishing and maintaining accounts in the Fund, making the Fund's
investment plans available and providing other services at the request of the
Fund or the Distributor. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of
Class A shares. The Board has set the rate at that level. The Distributor
does not receive or retain the service fee on Class A shares in accounts for
which the Distributor has been listed as the broker-dealer of record. While
the plan permits the Board to authorize payments to the Distributor to
reimburse itself for services under the plan, the Board has not yet done so.
The Distributor makes payments to plan recipients periodically at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class
A shares held in the accounts of the recipients or their customers.

      For the fiscal year ended July 31, 2005 payments under the Class A plan
totaled $1,476,481, all of which was paid by the Distributor to recipients,
and included $77,256 paid to an affiliate of the Distributor's parent
company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares for any fiscal year may not be recovered in subsequent years.
The Distributor may not use payments received under the Class A plan to pay
any of its interest expenses, carrying charges, other financial costs, or
allocation of overhead.

      |X|   Class B and Class C Distribution and Service Plan Fees. Under
each plan, distribution and service fees are computed on the average of the
net asset value of shares in the respective class, determined as of the close
of each regular business day during the period. Each plan provides for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund
under the plan during the period for which the fee is paid. The types of
services that recipients provide are similar to the services provided under
the Class A service plan, described above.

      Each plan permits the Distributor to retain both the asset-based sales
charges and the service fee on shares or to pay recipients the service fee on
a periodic basis, without payment in advance. However, the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after Class B and Class C shares are purchased. After the first
year shares are outstanding, after their purchase, the Distributor makes
service fee payments periodically on those shares. The advance payment is
based on the net asset value of shares sold. Shares purchased by exchange do
not qualify for the advance service fee payment. If Class B or Class C shares
are redeemed during the first year after their purchase, the recipient of the
service fees on those shares will be obligated to repay the Distributor a pro
rata portion of the advance payment made on those shares. Class B or Class C
shares may not be purchased by an investor directly from the Distributor
without the investor designating another registered broker-dealer. If the
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 asset-based
sales charge paid on Class B and Class C shares, but does not retain any
service fees as to the assets represented by that account.

      The asset-based sales charge and service fees increase Class B and
Class C expenses by 1.00% of the net assets per year of the respective
classes.

      The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales
charge as an ongoing concession to the recipient on Class C shares
outstanding for a year or more. If a dealer has a special agreement with the
Distributor, the Distributor will pay the Class B and/or Class C service fee
and the asset-based sales charge to the dealer periodically in lieu of paying
the sales concession and service fee in advance at the time of purchase.

      The asset-based sales charge on Class B and Class C shares allows
investors to buy shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund pays the
asset-based sales charge to the Distributor for its services rendered in
distributing Class B and Class C shares. The payments are made to the
Distributor in recognition that the Distributor:
o     pays sales concessions to authorized brokers and dealers at the time of
         sale and pays service fees as described above,
o     may finance payment of sales concessions and/or the advance of the
         service fee payment to recipients under the plans, or may provide
         such financing from its own resources or from the resources of an
         affiliate,
o     employs personnel to support distribution of Class B and Class C
         shares,
o     bears the costs of sales literature, advertising and prospectuses
         (other than those furnished to current shareholders) and state "blue
         sky" registration fees and certain other distribution expenses,
o     may not be able to adequately compensate dealers that sell Class B and
         Class C shares without receiving payment under the plans and
         therefore may not be able to offer such Classes for sale absent the
         plans,
o     receives payments under the plans consistent with the service fees and
         asset-based sales charges paid by other non-proprietary funds that
         charge 12b-1 fees,
o     may use the payments under the plan to include the Fund in various
         third-party distribution programs that may increase sales of Fund
         shares,
o     may experience increased difficulty selling the Fund's shares if
         payments under the plan are discontinued because most competitor
         funds have plans that pay dealers for rendering distribution
         services as much or more than the amounts currently being paid by
         the Fund, and
o     may not be able to continue providing, at the same or at a lesser cost,
         the same quality distribution sales efforts and services, or to
         obtain such services from brokers and dealers, if the plan payments
         were to be discontinued.

      During a calendar year, the Distributor's actual expenses in selling
Class B and Class C shares may be more than the payments it receives from the
contingent deferred sales charges collected on redeemed shares and from the
asset-based sales charges paid to the Distributor by the Fund under the
distribution and service plans. Those excess expenses are carried over on the
Distributor's books and may be recouped from asset-based sales charge
payments from the Fund in future years. However, the Distributor has
voluntarily agreed to cap the amount of expenses under the plans that may be
carried over from year to year and recouped that relate to (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. The cap on the carry-over of those
categories of expenses is set at 0.70% of annual gross sales of shares of the
Fund. If those categories of expenses exceed the capped amount, the
Distributor bears the excess costs. If the Class B or Class C plan were to be
terminated by the Fund, the Fund's Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to the Distributor for
distributing shares prior to the termination of the plan.

---------------------------------------------------------------------------------
  Distribution Fees Paid to the Distributor for the Fiscal Year Ended July 31,
                                      2005
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class:            Total          Amount        Distributor's     Distributor's
                                                                  Unreimbursed
                                                 Aggregate       Expenses as %
                 Payments     Retained by      Unreimbursed      of Net Assets
                Under Plan    Distributor   Expenses Under Plan     of Class
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B Plan     $433,615     $338,754(1)       $1,488,971           3.56%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C Plan     $400,752     $153,657(2)       $1,095,099           1.55%
---------------------------------------------------------------------------------
1.    Includes  $3,041  paid  to an  affiliate  of  the  Distributor's  parent
    company.
2.    Includes  $16,243  paid  to an  affiliate  of the  Distributor's  parent
    company.

      All payments under the Class B and the Class C plans are subject to the
limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees.

Payments to Fund Intermediaries

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

      Possible types of payments to financial intermediaries include, without
limitation, those discussed below.

o     Payments made by the Fund, or by an investor buying or selling shares
         of the Fund may include:

o     depending on the share class that the investor selects, contingent
              deferred sales charges or initial front-end sales charges, all
              or a portion of which front-end sales charges are payable by
              the Distributor to financial intermediaries as sales
              commissions (see "About Your Account" in the Prospectus);
o     ongoing asset-based payments attributable to the share class selected,
              including fees payable under the Fund's distribution and/or
              service plans adopted under Rule 12b-1 under the Investment
              Company Act, which are paid from the Fund's assets and
              allocated to the class of shares to which the plan relates (see
              "About the Fund -- Distribution and Service Plans" above);
o     shareholder servicing payments for providing omnibus accounting,
              recordkeeping, networking, sub-transfer agency or other
              administrative or shareholder services, including retirement
              plan and 529 plan administrative services fees, which are paid
              from the assets of a Fund as reimbursement to the Manager or
              Distributor for expenses they incur on behalf of the Fund.

o     Payments made by the Manager or Distributor out of their respective
         resources and assets, which may include profits the Manager derives
         from investment advisory fees paid by the Fund. These payments are
         made at the discretion of the Manager and/or the Distributor. These
         payments, often referred to as "revenue sharing" payments, may be in
         addition to the payments by the Fund listed above.

o     These types of payments may reflect compensation for marketing support,
              support provided in offering the Fund or other Oppenheimer
              funds through certain trading platforms and programs,
              transaction processing or other services;
o     The Manager and Distributor each may also pay other compensation to the
              extent the payment is not prohibited by law or by any
              self-regulatory agency, such as the NASD. Payments are made
              based on the guidelines established by the Manager and
              Distributor, subject to applicable law.

      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
payment may exceed the cost of providing the service. 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 Statement of Additional
Information. 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.

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

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

o     transactional support, one-time charges for setting up access for the
         Fund or other Oppenheimer funds on particular trading systems, and
         paying the intermediary's networking fees;
o     program support, such as expenses related to including the Oppenheimer
         funds in retirement plans, college savings plans, fee-based advisory
         or wrap fee programs, fund "supermarkets", bank or trust company
         products or insurance companies' variable annuity or variable life
         insurance products;
o     placement on the dealer's list of offered funds and providing
         representatives of the Distributor with access to a financial
         intermediary's sales meetings, sales representatives and management
         representatives.

      Additionally, the Manager or Distributor may make payments for firm
support, such as business planning assistance, advertising, and educating a
financial intermediary's sales personnel about the Oppenheimer funds and
shareholder financial planning needs.

      For the year ended December 31, 2004, the following financial
intermediaries that are broker-dealers offering shares of the Oppenheimer
funds, and/or their respective affiliates, received revenue sharing or
similar distribution-related payments from the Manager or Distributor for
marketing or program support:

  ADVEST INC.                             AEGON
  A.G. Edwards & Sons, Inc                AIG Network
  Allianz Life Insurance Company          Allstate Life Insurance Company
  Ameritas Life Insurance Corporation     American Centurian Life Insurance
  American Enterprise Life Insurance      American Express Financial Advisors
                                          Inc.
  American Portfolios                     Annuity Investors Life
  AXA Advisors                            Banc One Securities Corporation
  Bank of New York                        Cadaret Grant & Co. Inc.
  Charter One Securities Inc.             Chase Investment Services
  Citigroup Financial Network             CitiStreet
  Citizens Bank of Rhode Island           CJM Planning Corp.
  Columbus Life Insurance Company         Commonwealth Financial Network
  CUNA Brokerage Services Inc.            CUSO Financial Services, L.P.
  Federal Kemper                          First Allied Securities Inc
  First Global Capital                    GE Financial Assurance
  GlenBrook Life and Annuity Co.          Great West Life & Annuity Co., Inc.
  HD Vest                                 Hewitt Associates
  HSBC Brokerage (USA) Inc.               ING Network
  Jefferson Pilot Securities Corporation  John Hancock Variable Life Insurance
                                          Company
  Kemper Life Assurance Company           Legend Equities Corporation
  Legg Mason Wood Walker, Incorporated    Lincoln National Life Insurance
                                          Company
  Lincoln Financial Advisors Corporation  Lincoln Investment Planning
  Linsco/Private Ledger Corp.             MassMutual Financial Group and
                                          affiliates
  McDonald Investments, Inc.              Merrill Lynch & Co., Inc. and
                                          affiliates
  Metlife and affiliates                  Minnesota Life Insurance Company
  Morgan Stanley DW Inc.                  NPH Network
  Nationwide and affiliates               New York Life Securities, LLC
  PacLife Network                         Park Avenue Securities LLC
  Planmember Securities Corporation       Prime Capital Services, Inc.
  Princor Financial Services Corporation  Protective Life Insurance Co.
  Provident Mutual Insurance Company      Prudential Investment Management
                                          Services LLC
  Raymond James Financial Services, Inc.  Raymond James & Associates, Inc.
  RBC Dain Rauscher Inc.                  Securities America, Inc.
  Security Benefit Life Insurance Company Signator Investments
  Sun Life Insurance Company              Suntrust Investment Services, Inc.
  Tower Square Securities, Inc            Travelers Life & Annuity Co., Inc.
  UBS Financial Services Inc.             Union Central Life Insurance Company
  Wachovia Securities LLC                 Wells Fargo Investments, LLC

      For the year ended December 31, 2004, the following firms, which in
some cases are broker-dealers, received payments from the Manager or
Distributor for administrative or other services provided (other than revenue
sharing arrangements), as described above:

  ABN AMRO                                ADP
  Alliance Benefit Group                  AMVESCAP Retirement Plans
  American Stock & Transfer               Baden Retirement
  BCG                                     Benefit Administration Co., LLC
  Benefit Administration, Inc.            Benefit Plans Administrative Services
  Benetech, Inc.                          BISYS Retirement Services
  Boston Financial Data Services          Ceridian
  Circle Trust Company                    Citigroup
  CitiStreet                              CPI
  Daily Access.Com, Inc.                  Digital Retirement Solutions
  Dyatech                                 ERISA Administrative Services, Inc.
  ExpertPlan.com                          FAScore
  FBD Consulting                          Federated Investors
  Fidelity Institutional                  First National Bank of Omaha
  First Trust Corp.                       Franklin Templeton
  Geller Group                            Gold K
  Great West Financial Services           Hartford Life Insurance Co.
  Equities, Inc.
  ICMA - RC Services                      In West Pension Mgmt
  Independent Plan Coordinators           Ingham Group
  Interactive Retirement Systems, Ltd.    Invesmart, Inc.
  Kaufman & Goble                         Leggette & Co., Inc.
  Manulife                                MassMutual Financial Group and
                                          affiliates
  Matrix Settlement & Clearance Services  Mellon HR Solutions
  Merrill Lynch & Co., Inc.               Metavante
  Metlife Securities Inc.                 MFS Investment Management
  Mid Atlantic Capital Corp.              Milliman USA
  Morgan Stanley DW Inc.                  National City Bank
  National Financial Services Corp.       National Investors Services Corp.
  Nationwide Investment Service Corp.     New York Life Investment Management,
                                          Inc.
  Northwest Plan Services                 Pension Administration and Consulting
  PFPC, Inc.                              PSMI Group
  Putnam Fiduciary Trust Company          Quads Trust Company
  RSM McGladrey                           SAFECO
  Charles Schwab & Co., Inc.              Security Trust Company
  Sentinel / National Life                Standard Insurance Co
  Stanley, Hunt, Dupree & Rhine           State Street Bank & Trust Company
  Suntrust Investment Services, Inc.      Swerdlin & Co.
  T. Rowe Price Brokerage Services, L.P.  Taylor, Perky & Parker, LLC
  The 401k Company                        The Investment Center, Inc.
  Trusource                               Union Bank and Trust Co.
  USI Consulting Group                    Vanguard Group
  Web401K.com                             Wilmington Trust Company

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield,"
"tax-equivalent yield," "dividend yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset value"
and "total return at net asset value." An explanation of how yields and total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain
current performance information by calling the Fund's Transfer Agent at
1.800.225.5677 or by visiting the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

      The Fund's illustrations of its performance data in advertisements must
comply with rules of the SEC. Those rules describe the types of performance
data that may be used and how it is to be calculated. In general, any
advertisement by the Fund of its performance data must include the average
annual total returns for the advertised class of shares of the Fund.

      Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other
investments:
o     Yields and total returns measure the performance of a hypothetical
         account in the Fund over various periods and do not show the
         performance of each shareholder's account. Your account's
         performance will vary from the model performance data if your
         dividends are received in cash, or you buy or sell shares during the
         period, or you bought your shares at a different time and price than
         the shares used in the model.
o     The Fund's performance returns may not reflect the effect of taxes on
         dividends and capital gains distributions.
o     An investment in the Fund is not insured by the FDIC or any other
         government agency.
o     The principal value of the Fund's shares, and its yields and total
         returns are not guaranteed and normally will fluctuate on a daily
         basis.
o     When an investor's shares are redeemed, they may be worth more or less
         than their original cost.
o     Yields and total returns for any given past period represent historical
         performance information and are not, and should not be considered, a
         prediction of future yields or returns.

      The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The yields and
total returns of each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the maturity of those
investments, the types of investments the Fund holds, and its operating
expenses that are allocated to the particular class.

|X|   Yields. The Fund uses a variety of different yields to illustrate its
current returns. Each class of shares calculates its yield separately because
of the different expenses that affect each class.
o     Standardized Yield. The "standardized yield" (sometimes referred to
just as "yield") is shown for a class of shares for a stated 30-day period.
It is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments for that period. It may
therefore differ from the "dividend yield" for the same class of shares,
described below.

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

 Standardized Yield = 2a-b +1)(6) -1]
                     [(
                       cd

      The symbols above represent the following factors:
      a =  dividends and interest earned during the 30-day period.
      b =  expenses accrued for the period (net of any expense assumptions).
      c =  the average daily number of shares of that class outstanding
           during the 30-day period that were entitled to receive dividends.
      d =  the maximum offering price per share of that class on the last day
           of the period, adjusted for undistributed net investment income.

      The standardized yield for a particular 30-day period may differ from
the yield for other periods. The SEC formula assumes that the standardized
yield for a 30-day period occurs at a constant rate for a six-month period
and is annualized at the end of the six-month period. Additionally, because
each class of shares is subject to different expenses, it is likely that the
standardized yields of the Fund's classes of shares will differ for any
30-day period.

o     Dividend Yield. The Fund may quote a "dividend yield" for each class of
its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and
the sum is multiplied by 12 (to annualize the yield) and divided by the
maximum offering price on the last day of the dividend period. The formula is
shown below:

  Dividend Yield = dividends paid x 12/maximum offering price (payment date)

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

o     Tax-Equivalent Yield. The "tax-equivalent yield" of a class of shares
 is the equivalent yield that would have to be earned on a taxable investment
 to achieve the after-tax results represented by the Fund's tax-equivalent
 yield. It adjusts the Fund's standardized yield, as calculated above, by a
 stated tax rate. Using different tax rates to show different tax equivalent
 yields shows investors in different tax brackets the tax equivalent yield of
 the Fund based on their own tax bracket.

      The tax-equivalent yield is based on a 30-day period, and is computed
by dividing the tax-exempt portion of the Fund's current yield (as calculated
above) by one minus a stated income tax rate. The result is added to the
portion (if any) of the Fund's current yield that is not tax-exempt.

      The  tax-equivalent  yield may be used to  compare  the tax  effects  of
income  derived from the Fund with income from taxable  investments at the tax
rates  stated.  Your tax  bracket  is  determined  by your  federal  and state
taxable  income (the net amount  subject to federal and state income tax after
deductions and exemptions).

---------------------------------------------------------------------------------
          The Fund's Yields for the 30-Day Periods Ended July 31, 2005
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of   Standardized Yield      Dividend Yield        Tax-Equivalent Yield
Shares                                                 (35.0% Fed. Tax Bracket)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          Without    After      Without    After        Without     After Sales
          Sales      Sales      Sales      Sales
            Charge     Charge     Charge     Charge   Sales Charge    Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A     4.87%      4.63%      5.55%      5.28%       7.49%         7.12%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B     4.08%       N/A       4.66%       N/A        6.27%          N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C     4.07%       N/A       4.66%       N/A        6.26%          N/A
---------------------------------------------------------------------------------

      |X|   Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in
value of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares and that the investment is redeemed at the end of the
period. Because of differences in expenses for each class of shares, the
total returns for each class are separately measured. The cumulative total
return measures the change in value over the entire period (for example, 10
years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show actual
year-by-year performance. The Fund uses standardized calculations for its
total returns as prescribed by the SEC. The methodology is discussed below.

      In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P" in the formula below) (unless the return is
shown without sales charge, as described below). For Class B shares, payment
of the applicable contingent deferred sales charge is applied, depending on
the period for which the return is shown: 5.0% in the first year, 4.0% in the
second year, 3.0% in the third and fourth years, 2.0% in the fifth year, 1.0%
in the sixth year and none thereafter. For Class C shares, the 1.0%
contingent deferred sales charge is deducted for returns for the one-year
period.

o     Average Annual Total Return. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in
value of a hypothetical initial investment of $1,000 ("P" in the formula
below) held for a number of years ("n" in the formula) to achieve an Ending
Redeemable Value ("ERV" in the formula) of that investment, according to the
following formula:

   ERV       - 1  = Average Annual Total
         l/n      Return
   ------
     P

o     Average Annual Total Return (After Taxes on Distributions). The
"average annual total return (after taxes on distributions)" of Class A
shares is an average annual compounded rate of return for each year in a
specified number of years, adjusted to show the effect of federal taxes
(calculated using the highest individual marginal federal income tax rates in
effect on any reinvestment date) on any distributions made by the Fund during
the specified period. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below)
held for a number of years ("n" in the formula) to achieve an ending value
("ATVD" in the formula) of that investment, after taking into account the
effect of taxes on Fund distributions, but not on the redemption of Fund
shares, according to the following formula:

           - 1 = Average Annual Total Return (After Taxes on
ATVD  l/n      Distributions)
 P

o     Average Annual Total Return (After Taxes on Distributions and
Redemptions). The "average annual total return (after taxes on distributions
and redemptions)" of Class A shares is an average annual compounded rate of
return for each year in a specified number of years, adjusted to show the
effect of federal taxes (calculated using the highest individual marginal
federal income tax rates in effect on any reinvestment date) on any
distributions made by the Fund during the specified period and the effect of
capital gains taxes or capital loss tax benefits (each calculated using the
highest federal individual capital gains tax rate in effect on the redemption
date) resulting from the redemption of the shares at the end of the period.
It is the rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a number of
years ("n" in the formula) to achieve an ending value ("ATVDR" in the
formula) of that investment, after taking into account the effect of taxes on
fund distributions and on the redemption of Fund shares, according to the
following formula:

            - 1  = Average Annual Total Return (After Taxes on Distributions
ATVDR  l/n       and Redemptions)
 P

o     Cumulative Total Return. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as
average annual total return, but it does not average the rate of return on an
annual basis. Cumulative total return is determined as follows:

  ERV - P   = Total Return
------------
     P

o     Total Returns at Net Asset Value. From time to time the Fund may also
quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for each class of shares. Each is based on
the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.

---------------------------------------------------------------------------------
          The Fund's Total Returns for the Periods Ended July 31, 2005
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of     Cumulative                Average Annual Total Returns
           Total Returns
            (10 Years or
           life-of-class,
Shares        if less)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                1-Year            5-Years           10-Years
                                                                  (or life of
                                                                class, if less)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          After    Without After    Without After    Without    After    Without
          Sales    Sales   Sales    Sales   Sales    Sales      Sales    Sales
           Charge  Charge   Charge  Charge   Charge    Charge    Charge  Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class      73.49%  82.15%   7.34%   12.69%   6.23%     7.37%     5.66%    6.18%
A(1)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class      73.83%  73.83%   6.87%   11.87%   6.24%     6.55%     5.68%    5.68%
B(2)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class      68.05%  68.05%   10.87%  11.87%   6.55%     6.55%     5.37%    5.37%
C(3)
---------------------------------------------------------------------------------
1. Inception of Class A:      10/27/1976
2. Inception of Class B:      03/16/1993
3. Inception of Class C:      08/29/1995

---------------------------------------------------------------------------------
      Average Annual Total Returns for Class A Shares (After Sales Charge)
                      For the Periods Ended July 31, 2005
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                   1-Year          5-Years          10-Years
                                                                  (or life of
                                                                class, if less)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
After Taxes on Distributions       7.34%            6.33%            5.65%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
After Taxes on Distributions       6.75%            6.20%            5.61%
and Redemption of Fund Shares
---------------------------------------------------------------------------------

Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer
Agent at the addresses or telephone numbers shown on the cover of this
Statement of Additional Information. The Fund may also compare its
performance to that of other investments, including other mutual funds, or
use rankings of its performance by independent ranking entities. Examples of
these performance comparisons are set forth below.

      |X|   Lipper Rankings. From time to time the Fund may publish the
ranking of the performance of its classes of shares by Lipper, Inc.
("Lipper"). Lipper is a widely-recognized
independent mutual fund monitoring service. Lipper monitors the performance
of regulated investment companies, including the Fund, and ranks their
performance for various periods in categories based on investment styles. The
Lipper performance rankings are based on total returns that include the
reinvestment of capital gain distributions and income dividends but do not
take sales charges or taxes into consideration. Lipper also publishes
"peer-group" indices of the performance of all mutual funds in a category
that it monitors and averages of the performance of the funds in particular
categories.

|X|   Morningstar Ratings. From time to time the Fund may publish the star
rating of the performance of its classes of shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar rates and ranks
mutual funds in their specialized market sectors. The Fund is ranked among
High Yield Municipal Bond funds.

      Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. For each fund with at least a three-year history,
Morningstar calculates a Morningstar Rating(TM)based on a Morningstar
Risk-Adjusted Return measure that accounts for variation in a fund's monthly
performance (including the effects of sales charges, loads, and redemption
fees), placing more emphasis on downward variations and rewarding consistent
performance. 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. (Each share class is counted as a
fraction of one fund within this scale and rated separately, which may cause
slight variations in the distribution percentages.) The Overall Morningstar
Rating for a fund is derived from a weighted average of the performance
figures associated with its three-, five- and ten-year (if applicable)
Morningstar Rating metrics.

      |X|   Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements
and sales literature performance information about the Fund cited in
newspapers and other periodicals such as The New York Times, The Wall Street
Journal, Barron's, or similar publications. That information may include
performance quotations from other sources, including Lipper and Morningstar.
The performance of the Fund's classes of shares may be compared in
publications to the performance of various market indices or other
investments, and averages, performance rankings or other benchmarks prepared
by recognized mutual fund statistical services.

      Investors may also wish to compare the returns on the Fund's share
classes to the return on fixed-income investments available from banks and
thrift institutions. Those include certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed or
variable time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed or insured by
the FDIC or any other agency and will fluctuate daily, while bank depository
obligations may be insured by the FDIC and may provide fixed rates of return.
Repayment of principal and payment of interest on Treasury securities is
backed by the full faith and credit of the U.S. government.

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

      From time to time the Fund may include in its advertisements and sales
literature the total return performance of a hypothetical investment account
that includes shares of the Fund and other Oppenheimer funds. The combined
account may be part of an illustration of an asset allocation model or
similar presentation. The account performance may combine total return
performance of the Fund and the total return performance of other Oppenheimer
funds included in the account. Additionally, from time to time, the Fund's
advertisements and sales literature may include, for illustrative or
comparative purposes, statistical data or other information about general or
specific market and economic conditions. That may include, for example,
o     information about the performance of certain securities or commodities
         markets or segments of those markets,
o     information about the performance of the economies of particular
         countries or regions,
o     the earnings of companies included in segments of particular
         industries, sectors, securities markets, countries or regions,
o     the availability of different types of securities or offerings of
         securities,
o     information relating to the gross national or gross domestic product of
         the United States or other countries or regions,
o     comparisons of various market sectors or indices to demonstrate
         performance, risk, or other characteristics of the Fund.

ABOUT YOUR ACCOUNT

How to Buy Shares

Additional information is presented below about the methods that can be used
to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances
in which sales charges may be reduced or waived for certain classes of
investors.

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.

AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $50 and shareholders must invest at least $500 before an
Asset Builder Plan (described below) can be established on a new account.
Accounts established prior to November 1, 2002 will remain at $25 for
additional purchases. Shares will be purchased on the regular business day
the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy the shares. Dividends will begin to accrue on shares
purchased with the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of the New York Stock Exchange (the "NYSE"). The NYSE normally closes
at 4:00 p.m., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the NYSE, the shares will be
purchased and dividends will begin to accrue on the next regular business
day. The proceeds of ACH transfers are normally received by the Fund three
days after the transfers are initiated. If the proceeds of the 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.

Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and
Letters of Intent because of the economies of sales efforts and reduction in
expenses realized by the Distributor, dealers and brokers making such sales.
No sales charge is imposed in certain other circumstances described in
Appendix C to this Statement of Additional Information because the
Distributor or dealer or broker incurs little or no selling expenses.

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

Oppenheimer AMT-Free Municipals          Oppenheimer Limited Term Municipal Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer Main Street Fund
Oppenheimer Balanced Fund                Oppenheimer Main Street Opportunity Fund
Oppenheimer Core Bond Fund               Oppenheimer Main Street Small Cap Fund
Oppenheimer California Municipal Fund    Oppenheimer MidCap Fund
Oppenheimer Capital Appreciation Fund    Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Income Fund          Oppenheimer Pennsylvania Municipal Fund
                                         Oppenheimer   Principal  Protected  Main
Oppenheimer Champion Income Fund         Street Fund
                                         Oppenheimer   Principal  Protected  Main
Oppenheimer Convertible Securities Fund  Street Fund II
                                         Oppenheimer   Principal  Protected  Main
Oppenheimer Developing Markets Fund      Street Fund III
Oppenheimer Disciplined Allocation Fund  Oppenheimer Quest Balanced Fund
                                         Oppenheimer  Quest  Capital  Value Fund,
Oppenheimer Discovery Fund               Inc.
                                         Oppenheimer  Quest  International  Value
Oppenheimer Dividend Growth Fund         Fund, Inc.
Oppenheimer Emerging Growth Fund         Oppenheimer Quest Opportunity Value Fund
Oppenheimer Emerging Technologies Fund   Oppenheimer Quest Value Fund, Inc.
Oppenheimer Enterprise Fund              Oppenheimer Real Asset Fund
Oppenheimer Equity Fund, Inc.            Oppenheimer Real Estate Fund
                                         Oppenheimer      Rochester      National
Oppenheimer Global Fund                  Municipals
Oppenheimer Global Opportunities Fund    Oppenheimer Select Value Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund                  Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer High Yield Fund              Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund      Oppenheimer Total Return Bond Fund
Oppenheimer   International  Diversified
Fund                                     Oppenheimer U.S. Government Trust
Oppenheimer International Growth Fund    Oppenheimer Value Fund
Oppenheimer  International Small Company
Fund                                     Limited-Term New York Municipal Fund
Oppenheimer International Value Fund     Rochester Fund Municipals
Oppenheimer   Limited  Term   California
Municipal Fund                           Oppenheimer Portfolio Series:
                                           Active Allocation Fund
                                           Aggressive Investor Fund
                                           Conservative Investor Fund
Oppenheimer Limited-Term Government Fund   Moderate Investor Fund

And the following money market funds:
Oppenheimer Cash Reserves                Centennial Money Market Trust
Oppenheimer Money Market Fund, Inc.      Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust   Centennial Tax Exempt Trust
Centennial Government Trust

      There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the money market funds.
Under certain circumstances described in this Statement of Additional
Information, redemption proceeds of certain money market fund shares may be
subject to a contingent deferred sales charge.

Letters of Intent. Under a Letter of Intent ("Letter"), you can reduce the
sales charge rate that applies to your purchases of Class A shares if you
purchase Class A, Class B or Class C shares of the Fund or other Oppenheimer
funds during a 13-month period. The total amount of your purchases of Class
A, Class B and Class C shares will determine the sales charge rate that
applies to your Class A share purchases during that period. You can choose to
include purchases that you made up to 90 days before the date of the Letter.
Class A shares of Oppenheimer Money Market Fund, Inc. and Oppenheimer Cash
Reserves on which you have not paid a sales charge and any Class N shares you
purchase, or may have purchased, will not be counted towards satisfying the
purchases specified in a Letter.

      A Letter is an investor's statement in writing to the Distributor of
his or her intention to purchase a specified value of Class A, Class B and
Class C shares of the Fund and other Oppenheimer funds during a 13-month
period (the "Letter period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of purchases of
shares which will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or capital gains distributions
and purchases made at net asset value (i.e. without a sales charge) do not
count toward satisfying the amount of the Letter.

      Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that would apply to a single
lump-sum purchase of shares in the amount intended to be purchased under the
Letter.

      In submitting a Letter, the investor makes no commitment to purchase
shares. However, if the investor's purchases of shares within the Letter
period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms
of Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the application used
for a Letter. If those terms are amended, as they may be from time to time by
the Fund, the investor agrees to be bound by the amended terms and that those
amendments will apply automatically to existing Letters.

      If the total eligible purchases made during the Letter period do not
equal or exceed the intended purchase amount, 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 to the rates applicable to
actual total purchases. If total eligible purchases during the Letter period
exceed the intended purchase amount and exceed the amount needed to qualify
for the next sales charge rate reduction set forth in the Prospectus, the
sales charges paid will be adjusted to the lower rate. That adjustment will
be made only if and when the dealer returns to the Distributor the excess of
the amount of concessions allowed or paid to the dealer over the amount of
concessions that apply to the actual amount of purchases. The excess
concessions returned to the Distributor will be used to purchase additional
shares for the investor's account at the net asset value per share in effect
on the date of such purchase, promptly after the Distributor's receipt
thereof.

      The  Transfer  Agent  will not hold  shares in escrow for  purchases  of
shares of the Fund and other Oppenheimer funds by  OppenheimerFunds  prototype
401(k) plans under a Letter.  If the intended  purchase  amount under a Letter
entered into by an OppenheimerFunds  prototype 401(k) plan is not purchased by
the plan by the end of the  Letter  period,  there  will be no  adjustment  of
concessions paid to the  broker-dealer or financial  institution of record for
accounts held in the name of that plan.

      In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter when placing any purchase
orders for the investor during the Letter period. All of such purchases must
be made through the Distributor.

      |X|   Terms of Escrow That Apply to Letters of Intent.

      1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by
the Transfer Agent. For example, if the intended purchase amount is $50,000,
the escrow shall be shares valued in the amount of $2,500 (computed at the
offering price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the investor's
account.

      2. If the total minimum investment specified under the Letter is
completed within the 13-month Letter period, the escrowed shares will be
promptly released to the investor.

      3. If, at the end of the 13-month Letter period the total purchases
pursuant to the Letter are less than the intended purchase amount specified
in the Letter, the investor must remit to the Distributor an amount equal to
the difference between the dollar amount of sales charges actually paid and
the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
difference in sales charges is not paid within twenty days after a request
from the Distributor or the dealer, the Distributor will, within sixty days
of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the
redemption proceeds.

      4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption
any or all escrowed shares.

5.    The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:
(a)   Class A shares sold with a front-end sales charge or subject to a Class
            A contingent deferred sales charge,
(b)   Class B and Class C shares of other Oppenheimer funds acquired subject
            to a contingent deferred sales charge, and
(c)   Class A, Class B or Class C shares acquired by exchange of either (1)
            Class A shares of one of the other Oppenheimer funds that were
            acquired subject to a Class A initial or contingent deferred
            sales charge or (2) Class B or Class C shares of one of the other
            Oppenheimer funds that were acquired subject to a contingent
            deferred sales charge.

      6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares" and the escrow
will be transferred to that other fund.

Asset Builder Plans. As explained in the Prospectus, you must initially
establish your account with $500. Subsequently, you can establish an Asset
Builder Plan to automatically purchase additional shares directly from a bank
account for as little as $50. For those accounts established prior to
November 1, 2002 and which have previously established Asset Builder Plans,
additional purchases will remain at $25. Shares purchased by Asset Builder
Plan payments from bank accounts are subject to the redemption restrictions
for recent purchases described in the Prospectus. Asset Builder Plans are
available only if your bank is an ACH member. Asset Builder Plans may not be
used to buy shares for OppenheimerFunds employer-sponsored qualified
retirement accounts.

      If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit
will be made two business days prior to the investment dates you selected on
your application. Neither the Distributor, the Transfer Agent or the Fund
shall be responsible for any delays in purchasing shares that result from
delays in ACH transmissions.

      Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by
writing to the Transfer Agent. The Transfer Agent requires a reasonable
period (approximately 10 days) after receipt of your instructions to
implement them. The Fund reserves the right to amend, suspend or discontinue
offering Asset Builder plans at any time without prior notice.

Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset 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.

Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has
different shareholder privileges and features. The net income attributable to
Class B or Class C shares and the dividends payable on Class B or Class C
shares will be reduced by incremental expenses borne solely by that class.
Those expenses include the asset-based sales charges to which Class B and
Class C are subject.

      The availability of 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 an investor directly
from the Distributor without the investor designating another registered
broker-dealer.

      |X|   Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of
Class B shares to Class A shares 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. Investors should consult their tax
advisers regarding the state and local tax consequences of the conversion or
exchange of shares.

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

      The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are
allocated pro rata to the shares of all classes. The allocation is based on
the percentage of the Fund's total assets that is represented by the assets
of each class, and then equally to each outstanding share within a given
class. Such general expenses include management fees, legal, bookkeeping and
audit fees, printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, fees to unaffiliated Trustees, custodian expenses, share
issuance costs, organization and start-up costs, interest, taxes and
brokerage commissions, and non-recurring expenses, such as litigation costs.

      Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of
such expenses include distribution and service plan (12b-1) fees, transfer
and shareholder servicing agent fees and expenses and shareholder meeting
expenses (to the extent that such expenses pertain only to a specific class).

Fund Account Fees. As stated in the Prospectus, a $12 annual "Minimum Balance
Fee" is assessed on each Fund account with a share balance valued under $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 Fund Account Fees. These exceptions are
   subject to change:
o     A fund account whose shares were acquired after September 30th of the
      prior year;
o     A fund account that has a balance below $500 due to the automatic
      conversion of shares from Class B to Class A shares. However, once all
      Class B shares held in the account have been converted to Class A
      shares the new account balance may become subject to the Minimum
      Balance Fee;
o     Accounts of shareholders who elect to access their account documents
      electronically via eDoc Direct;
o     A fund account that has only certificated shares and, has a balance
      below $500 and is being escheated;
o     Accounts of shareholders that are held by broker-dealers under the NSCC
      Fund/SERV system;
o     Accounts held under the Oppenheimer Legacy Program and/or holding
      certain Oppenheimer Variable Account Funds;
o     Omnibus accounts holding shares pursuant to the Pinnacle, Ascender,
      Custom Plus, Recordkeeper Pro and Pension Alliance Retirement Plan
      programs; and
o     A fund account that falls below the $500 minimum solely due to market
      fluctuations within the 12-month period preceding the date the fee is
      deducted.

To access account documents electronically via eDocs Direct, please visit the
Service Center on our website at www.oppenheimerfunds.com or call
1.888.470.0862 for instructions.

      The Fund reserves the authority to modify Fund Account Fees in its
discretion.


Determination of Net Asset Values Per Share. The net asset values per share
of each class of shares of the Fund are determined as of the close of
business of the NYSE on each day that the NYSE is open. The calculation is
done by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The 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 Statement of Additional Information
mean "Eastern time." The NYSE's most recent annual announcement regarding
holidays and days when the market may close early is available on the NYSE's
website at www.nyse.com.

      Dealers other than NYSE members may conduct trading in municipal
securities on days on which 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 such days when shareholders
may not purchase or redeem shares.

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

o     Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
o     The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board
of Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1)   debt instruments that have a maturity of more than 397 days when
               issued,
(2)   debt instruments that had a maturity of 397 days or less when issued
               and have a remaining maturity of more than 60 days, and
(3)   non-money market debt instruments that had a maturity of 397 days or
               less when issued and which have a remaining maturity of 60
               days or less.
o     The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1)   money market debt securities held by a non-money market fund that had a
               maturity of less than 397 days when issued that have a
               remaining maturity of 60 days or less, and
(2)   debt instruments held by a money market fund that have a remaining
               maturity of 397 days or less.

o     Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the
"bid" and "asked" prices provided by a single active market maker (which in
certain cases may be the "bid" price if no "asked" price is available).

      In the case of municipal securities, when last sale information is not
generally available, the Manager may use pricing services approved by the
Board of Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield and
maturity. Other special factors may be involved (such as the tax-exempt
status of the interest paid by municipal securities). The Manager will
monitor the accuracy of the pricing services. That monitoring may include
comparing prices used for portfolio valuation to actual sales prices of
selected securities.

      Puts, calls, futures and municipal bond index futures are valued at the
last sale price on the principal exchange on which they are traded or on
NASDAQ(R), as applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager. If there were no sales that day, they
shall be valued at the last sale price on the preceding trading day if it is
within the spread of the closing "bid" and "asked" prices on the principal
exchange or on NASDAQ(R)on the valuation date. If not, the value shall be the
closing bid price on the principal exchange or on NASDAQ(R)on the valuation
date. If the put, call or future is not traded on an exchange or on NASDAQ(R),
it shall be valued by the mean between "bid" and "asked" prices obtained by
the Manager from two active market makers. In certain cases that may be at
the "bid" price if no "asked" price is available.

      When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the
option. In determining the Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the premium
received. If a call or put written by the Fund expires, the Fund has a gain
in the amount of the premium. If the Fund enters into a closing purchase
transaction, it will have a gain or loss, depending on whether the premium
received was more or less than the cost of the closing transaction. If the
Fund exercises a put it holds, the amount the Fund receives on its sale of
the underlying investment is reduced by the amount of premium paid by the
Fund.

How to Sell Shares

The information below supplements the terms and conditions for redeeming
shares set forth in the Prospectus.

Checkwriting. When a check is presented to 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.
This limitation does not affect the use of checks for the payment of bills or
to obtain cash at other banks. The Fund reserves the right to amend, suspend
or discontinue offering checkwriting privileges at any time. 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, by signing
the account application or by completing a Checkwriting card, each individual
who signs:
(1)   for individual accounts, represents that they are the registered
           owner(s) of the shares of the Fund in that account;
(2)   for accounts for corporations, partnerships, trusts and other entities,
           represents that they are an officer, general partner, trustee or
           other fiduciary or agent, as applicable, duly authorized to act on
           behalf of the registered owner(s);
(3)   authorizes the Fund, its Transfer Agent and any bank through which the
           Fund's drafts (checks) are payable to pay all checks drawn on the
           Fund account of such person(s) and to redeem a sufficient amount
           of shares from that account to cover payment of each check;
(4)   specifically acknowledges that if they choose to permit checks to be
           honored if there is a single signature on checks drawn against
           joint accounts, or accounts for corporations, partnerships, trusts
           or other entities, the signature of any one signatory on a check
           will be sufficient to authorize payment of that check and
           redemption from the account, even if that account is registered in
           the names of more than one person or more than one authorized
           signature appears on the Checkwriting card or the application, as
           applicable;
(5)   understands that the Checkwriting privilege may be terminated or
           amended at any time by the Fund and/or the Fund's bank; and
(6)   acknowledges and agrees that neither the Fund nor its bank shall incur
           any liability for that amendment or termination of checkwriting
           privileges or for redeeming shares to pay checks reasonably
           believed by them to be genuine, or for returning or not paying
           checks that have not been accepted for any reason.

Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of
redemption proceeds may be delayed if the Fund's custodian bank is not open
for business on a day when the Fund would normally authorize the wire to be
made, which is usually the Fund's next regular business day following the
redemption. In those circumstances, the wire will not be transmitted until
the next bank business day on which the Fund is open for business. No
dividends will be paid on the proceeds of redeemed shares awaiting transfer
by Federal Funds wire.

Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
o     Class A shares purchased subject to an initial sales charge or Class A
         shares on which a contingent deferred sales charge was paid, or
o     Class B shares that were subject to the Class B contingent deferred
         sales charge when redeemed.

      The reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described in "How to Exchange Shares" below.
Reinvestment will be at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the Transfer
Agent for that privilege at the time of reinvestment. This privilege does not
apply to Class C shares. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date of
such amendment, suspension or cessation.

      Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on
that gain. If there has been a capital loss on the redemption, some or all of
the loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the
sales charge, the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the redemption. However,
in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds.

Payments "In Kind". The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. However, under certain
circumstances, the Board of Trustees of the Fund may determine that it would
be detrimental to the best interests of the remaining shareholders of the
Fund to make payment of a redemption order wholly or partly in cash. In that
case, the Fund may pay the redemption proceeds in whole or in part by a
distribution "in kind" of liquid securities from the portfolio of the Fund,
in lieu of cash.

      The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder. If shares are redeemed in
kind, the redeeming shareholder might incur brokerage or other costs in
selling the securities for cash. The Fund will value securities used to pay
redemptions in kind using the same method the Fund uses to value its
portfolio securities described above under "Determination of Net Asset Values
Per Share." That valuation will be made as of the time the redemption price
is determined.

Involuntary Redemptions. The Fund's Board of Trustees has the right to cause
the involuntary redemption of the shares held in any account if the aggregate
net asset value of those shares is less than $200 or such lesser amount as
the Board may fix. The Board of Trustees will not cause the involuntary
redemption of shares in an account if the aggregate net asset value of such
shares has fallen below the stated minimum solely as a result of market
fluctuations. If the Board exercises this right, it may also fix the
requirements for any notice to be given to the shareholders in question (not
less than 30 days). The Board may alternatively set requirements for the
shareholder to increase the investment, or set other terms and conditions so
that the shares would not be involuntarily redeemed.

Transfers of Shares. A transfer of shares to a different registration is not
an event that triggers the payment of sales charges. Therefore, shares are
not subject to the payment of a contingent deferred sales charge of any class
at the time of transfer to the name of another person or entity. It does not
matter whether the transfer occurs by absolute assignment, gift or bequest,
as long as it does not involve, directly or indirectly, a public sale of the
shares. When shares subject to a contingent deferred sales charge are
transferred, the transferred shares will remain subject to the contingent
deferred sales charge. It will be calculated as if the transferee shareholder
had acquired the transferred shares in the same manner and at the same time
as the transferring shareholder.

      If less than all shares held in an account are transferred, and some
but not all shares in the account would be subject to a contingent deferred
sales charge if redeemed at the time of transfer, the priorities described in
the Prospectus under "How to Buy Shares" for the imposition of the Class B or
Class C contingent deferred sales charge will be followed in determining the
order in which shares are transferred.

Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized
dealers or brokers on behalf of their customers. Shareholders should contact
their broker or dealer to arrange this type of redemption. The repurchase
price per share will be the net asset value next computed after the
Distributor receives an order placed by the dealer or broker. However, if the
Distributor receives a repurchase order from a dealer or broker after the
close of the NYSE on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from
its customers prior to the time the NYSE closes. Normally, the NYSE closes at
4:00 p.m., but may do so earlier on some days. Additionally, the order must
have been transmitted to and received by the Distributor prior to its close
of business that day (normally 5:00 p.m.).

      Ordinarily, for accounts redeemed by a broker-dealer under this
procedure, payment will be made within three business days after the shares
have been redeemed upon the Distributor's receipt of the required redemption
documents in proper form. The signature(s) of the registered owners on the
redemption documents must be guaranteed as described in the Prospectus.

Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will
be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to $1,500
per month may be requested by telephone if payments are to be made by check
payable to all shareholders of record. Payments must also be sent to the
address of record for the account and the address must not have been changed
within the prior 30 days. Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis.

      Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account designated
on the account application or by signature-guaranteed instructions sent to
the Transfer Agent. Shares are normally redeemed pursuant to an Automatic
Withdrawal Plan three business days before the payment transmittal date you
select in the account application. If a contingent deferred sales charge
applies to the redemption, the amount of the check or payment will be reduced
accordingly.

      The Fund cannot guarantee receipt of a payment on the date requested.
The Fund reserves the right to amend, suspend or discontinue offering these
plans at any time without prior notice. Because of the sales charge assessed
on Class A share purchases, shareholders should not make regular additional
Class A share purchases while participating in an Automatic Withdrawal Plan.
Class B and Class C shareholders should not establish automatic withdrawal
plans, because of the potential imposition of the contingent deferred sales
charge on such withdrawals (except where the contingent deferred sales charge
is waived as described in Appendix C to this Statement of Additional
Information).

      By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to
existing Plans.

      |X|   Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent to exchange a pre-determined amount of shares of the Fund for shares
(of the same class) of other Oppenheimer funds automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is $50.
Instructions should be provided on the OppenheimerFunds application or
signature-guaranteed instructions. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of Additional
Information.

      |X|   Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales charge
will be redeemed first. Shares acquired with reinvested dividends and capital
gains distributions will be redeemed next, followed by shares acquired with a
sales charge, to the extent necessary to make withdrawal payments. Depending
upon the amount withdrawn, the investor's principal may be depleted. Payments
made under these plans should not be considered as a yield or income on your
investment.

      The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the plan
authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for
any action taken or not taken by the Transfer Agent in good faith to
administer the plan. Share certificates will not be issued for shares of the
Fund purchased for and held under the plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the plan application so that the shares
represented by the certificate may be held under the plan.

      For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the
account may be paid in cash or reinvested.

      Shares will be redeemed to make withdrawal payments at the net asset
value per share determined on the redemption date. Checks or AccountLink
payments representing the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment, according to the choice specified in writing by the Planholder.
Receipt of payment on the date selected cannot be guaranteed.

      The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time after mailing such
notification for the requested change to be put in effect. The Planholder
may, at any time, instruct the Transfer Agent by written notice to redeem
all, or any part of, the shares held under the plan. That notice must be in
proper form in accordance with the requirements of the then-current
Prospectus of the Fund. In that case, the Transfer Agent will redeem the
number of shares requested at the net asset value per share in effect and
will mail a check for the proceeds to the Planholder.

      The Planholder may terminate a Plan at any time by writing to the
Transfer Agent. The Fund may also give directions to the Transfer Agent to
terminate a Plan. The Transfer Agent will also terminate a Plan upon its
receipt of evidence satisfactory to it that the Planholder has died or is
legally incapacitated. Upon termination of a Plan by the Transfer Agent or
the Fund, shares that have not been redeemed will be held in uncertificated
form in the name of the Planholder. The account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his or her executor or
guardian, or another authorized person.

      If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to
act as agent in administering the plan.

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares
of the same class of other Oppenheimer funds. Shares of Oppenheimer funds
that have a single class without a class designation are deemed "Class A"
shares for this purpose. You can obtain a current list showing which funds
offer which classes of shares by calling the Distributor.

o     All of the Oppenheimer funds currently offer Class A, B, C, N and Y
      shares with the following exceptions:

   The following funds only offer Class A shares:
   Centennial California Tax Exempt Trust    Centennial New York Tax Exempt
                                             Trust
   Centennial Government Trust               Centennial Tax Exempt Trust
   Centennial Money Market Trust

   The following funds do not offer Class N shares:
   Limited Term New York Municipal Fund      Oppenheimer Money Market Fund, Inc.
   Oppenheimer AMT-Free Municipals           Oppenheimer New Jersey Municipal Fund
   Oppenheimer AMT-Free New York             Oppenheimer Principal Protected Main
   Municipals                                Street Fund II
   Oppenheimer California Municipal Fund     Oppenheimer Pennsylvania Municipal
                                             Fund
   Oppenheimer International Value Fund      Oppenheimer Rochester National
                                             Municipals
   Oppenheimer Limited Term California       Oppenheimer Senior Floating Rate Fund
   Municipal Fund
   Oppenheimer Limited Term Municipal        Rochester Fund Municipals
   Fund

   The following funds do not offer Class Y shares:
   Limited Term New York Municipal Fund      Oppenheimer Limited Term California
                                             Municipal Fund
   Oppenheimer AMT-Free Municipals          Oppenheimer Limited Term Municipal Fund
   Oppenheimer AMT-Free New York Municipals Oppenheimer New Jersey Municipal Fund
   Oppenheimer Balanced Fund                Oppenheimer Pennsylvania Municipal Fund
   Oppenheimer California Municipal Fund    Oppenheimer Principal Protected Main
                                            Street Fund
   Oppenheimer Capital Income Fund          Oppenheimer Principal Protected Main
                                            Street Fund II
   Oppenheimer Cash Reserves                Oppenheimer Principal Protected Main
                                            Street Fund III
   Oppenheimer Champion Income Fund         Oppenheimer Quest Capital Value Fund,
                                            Inc.
   Oppenheimer Convertible Securities Fund  Oppenheimer Quest International Value
                                            Fund, Inc.
   Oppenheimer Disciplined Allocation Fund  Oppenheimer Rochester National Municipals
   Oppenheimer Dividend Growth Fund         Oppenheimer Total Return Bond Fund
   Oppenheimer Gold & Special Minerals Fund


o     Oppenheimer  Money  Market  Fund,  Inc.  only offers Class A and Class Y
   shares.
o     Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
      shares of any other fund.
o     Class B and Class C shares of Oppenheimer Cash Reserves are generally
      available only by exchange from the same class of shares of other
      Oppenheimer funds or through OppenheimerFunds-sponsored 401(k) plans.
o     Class M shares of Oppenheimer Convertible Securities Fund may be
      exchanged only for Class A shares of other Oppenheimer funds. They may
      not be acquired by exchange of shares of any class of any other
      Oppenheimer funds except Class A shares of Oppenheimer Money Market
      Fund, Inc. or Oppenheimer Cash Reserves acquired by exchange of Class M
      shares.
o     Class A shares of Oppenheimer funds may be exchanged at net asset value
      for shares of any money market fund offered by the Distributor. Shares
      of any money market fund purchased without a sales charge may be
      exchanged for shares of Oppenheimer funds offered with a sales charge
      upon payment of the sales charge. They may also be used to purchase
      shares of Oppenheimer funds subject to an early withdrawal charge or
      contingent deferred sales charge.
o     Shares of the Fund acquired by reinvestment of dividends or
      distributions from any of the other Oppenheimer funds or from any unit
      investment trust for which reinvestment arrangements have been made
      with the Distributor may be exchanged at net asset value for shares of
      any of the Oppenheimer funds.
o     Shares of Oppenheimer Principal Protected Main Street Fund may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund until after the expiration of the warranty period
      (8/5/2010).
o     Shares of Oppenheimer Principal Protected Main Street Fund II may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund II until after the expiration of the warranty period
      (3/3/2011).
o     Shares of Oppenheimer Principal Protected Main Street Fund III may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund III until after the expiration of the warranty period
      (12/16/2011).

      The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by
applicable law. It may be required to provide 60 days' notice prior to
materially amending or terminating the exchange privilege. That 60 day notice
is not required in extraordinary circumstances.

      |X|   How Exchanges Affect Contingent Deferred Sales Charges. No
contingent deferred sales charge is imposed on exchanges of shares of any
class purchased subject to a contingent deferred sales charge, with the
following exceptions:

o     When Class A shares of any Oppenheimer fund (other than Rochester
National Municipals and Rochester Fund Municipals) acquired by exchange of
Class A shares of any Oppenheimer fund purchased subject to a Class A
contingent deferred sales charge are redeemed within 18 months measured from
the beginning of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on
the redeemed shares.

o     When Class A shares of Rochester National Municipals and Rochester Fund
Municipals acquired by exchange of Class A shares of any Oppenheimer fund
purchased subject to a Class A contingent deferred sales charge are redeemed
within 24 months of the beginning of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A contingent deferred
sales charge is imposed on the redeemed shares.

o     If any Class A shares of another Oppenheimer fund that are exchanged
for Class A shares of Oppenheimer Senior Floating Rate Fund are subject to
the Class A contingent deferred sales charge of the other Oppenheimer fund at
the time of exchange, the holding period for that Class A contingent deferred
sales charge will carry over to the Class A shares of Oppenheimer Senior
Floating Rate Fund acquired in the exchange. The Class A shares of
Oppenheimer Senior Floating Rate Fund acquired in that exchange will be
subject to the Class A Early Withdrawal Charge of Oppenheimer Senior Floating
Rate Fund if they are repurchased before the expiration of the holding period.

o     When Class A shares of Oppenheimer Cash Reserves and Oppenheimer Money
Market Fund, Inc. acquired by exchange of Class A shares of any Oppenheimer
fund purchased subject to a Class A contingent deferred sales charge are
redeemed within the Class A holding period of the fund from which the shares
were exchanged, the Class A contingent deferred sales charge of the fund from
which the shares were exchanged is imposed on the redeemed shares.

o     Except with respect to the Class B shares described in the next two
paragraphs, the contingent deferred sales charge is imposed on Class B shares
acquired by exchange if they are redeemed within six years of the initial
purchase of the exchanged Class B shares.

o     With respect to Class B shares of Oppenheimer Limited Term California
Municipal Fund, Oppenheimer Limited-Term Government Fund, Oppenheimer Limited
Term Municipal Fund, Limited Term New York Municipal Fund and Oppenheimer
Senior Floating Rate Fund, the Class B contingent deferred sales charge is
imposed on the acquired shares if they are redeemed within five years of the
initial purchase of the exchanged Class B shares.

o     With respect to Class B shares of Oppenheimer Cash Reserves that were
acquired through the exchange of Class B shares initially purchased in the
Oppenheimer Capital Preservation Fund, the Class B contingent deferred sales
charge is imposed on the acquired shares if they are redeemed within five
years of that initial purchase.

o     With respect to Class C shares, the Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they are redeemed
within 12 months of the initial purchase of the exchanged Class C shares.

o     When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B, Class C or Class N contingent deferred sales
charge will be followed in determining the order in which the shares are
exchanged. Before exchanging shares, shareholders should take into account
how the exchange may affect any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares.

      Shareholders owning shares of more than one class must specify which
class of shares they wish to exchange.

      |X|   Limits on Multiple Exchange Orders. The Fund reserves the right
to reject telephone or written exchange requests submitted in bulk by anyone
on behalf of more than one account.

      |X|   Telephone Exchange Requests. When exchanging shares by telephone,
a shareholder must have an existing account in the fund to which the exchange
is to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.

      |X|   Processing Exchange Requests. Shares to be exchanged are redeemed
on the regular business day the Transfer Agent receives an exchange request
in proper form (the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases may be
delayed by either fund up to five business days if it determines that it
would be disadvantaged by an immediate transfer of the redemption proceeds.
The Fund reserves the right, in its discretion, to refuse any exchange
request that may disadvantage it. For example, if the receipt of multiple
exchange requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the Fund,
the Fund may refuse the request.

      When you exchange some or all of your shares from one fund to another,
any special account feature such as an Asset Builder Plan or Automatic
Withdrawal Plan will be switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption and exchange
features such as Automatic Exchange Plans and Automatic Withdrawal Plans
cannot be switched to an account in Oppenheimer Senior Floating Rate Fund.

      In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a
share certificate that is not tendered with the request. In those cases, only
the shares available for exchange without restriction will be exchanged.

      The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that
the fund selected is appropriate for his or her investment and should be
aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of one
fund and a purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of redemption proceeds
in such cases. The Fund, the Distributor, and the Transfer Agent are unable
to provide investment, tax or legal advice to a shareholder in connection
with an exchange request or any other investment transaction.

Dividends, Capital Gains and Taxes

Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or as
otherwise described in "How to Buy Shares." Daily dividends will not be
declared or paid on newly purchased shares until such time as Federal Funds
(funds credited to a member bank's account at the Federal Reserve Bank) are
available from the purchase payment for such shares. Normally, purchase
checks received from investors are converted to Federal Funds on the next
business day. Shares purchased through dealers or brokers normally are paid
for by the third business day following the placement of the purchase order.

      Shares redeemed through the regular redemption procedure will be paid
dividends through and including the day on which the redemption request is
received by the Transfer Agent in proper form. Dividends will be declared on
shares repurchased by a dealer or broker for three business days following
the trade date (that is, up to and including the day prior to settlement of
the repurchase). If all shares in an account are redeemed, all dividends
accrued on shares of the same class in the account will be paid together with
the redemption proceeds.

      The Fund's practice of attempting to pay dividends on Class A shares at
a constant level requires the Manager to monitor the Fund's portfolio and, if
necessary, to select higher-yielding securities when it is deemed appropriate
to seek income at the level needed to meet the target. Those securities must
be within the Fund's investment parameters, however. The Fund expects to pay
dividends at a targeted level from its net investment income and other
distributable income without any impact on the net asset values per share.

      Dividends, distributions and proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund,
Inc. Reinvestment will be made as promptly as possible after the return of
such checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders
or their representatives for compliance with those laws in good faith.

      The amount of a distribution paid on a class of shares may vary from
time to time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a class.
Dividends are calculated in the same manner, at the same time and on the same
day for shares of each class. However, dividends on Class B and Class C
shares are expected to be lower than dividends on Class A shares. That is due
to the effect of the asset-based sales charge on Class B and Class C shares.
Those dividends will also differ in amount as a consequence of any difference
in net asset value among the different classes of shares.

Tax Status of the Fund's Dividends, Distributions and Redemptions of Shares.
The federal tax treatment of the Fund's distributions 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 Statement of Additional
Information is based on tax law in effect on the date of the Prospectus and
this Statement of Additional Information. Those laws and regulations may be
changed by legislative, judicial, or administrative action, sometimes with
retroactive effect. State and local tax treatment of exempt-interest
dividends and potential capital gain distributions from regulated investment
companies may differ from the treatment under the Internal Revenue Code
described below. Potential purchasers of shares of the Fund are urged to
consult their tax advisers with specific reference to their own tax
circumstances as well as the consequences of federal, state and local tax
rules affecting an investment in the Fund.

|X|   Qualification as a Regulated  Investment  Company.  The Fund has elected
to be  taxed as a  regulated  investment  company  under  Subchapter  M of the
Internal Revenue Code of 1986, as amended. As a regulated  investment company,
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 net long-term  capital  gains over net  short-term  capital  losses)
that it distributes 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. The Fund might not meet those tests in a particular year. If it
does not qualify, the Fund will be treated for tax purposes as an ordinary
corporation and will receive no tax deduction for payments of dividends and
other distributions made to shareholders. In such an instance, all of the
Fund's dividends would be taxable to shareholders.

      To qualify as a regulated investment company, the Fund must distribute
at least 90% of its investment company taxable income (in brief, net
investment income and the excess of net short-term capital gain over net
long-term capital loss) and at least 90% of its net tax-exempt income for the
taxable year. The Fund must also satisfy certain other requirements of the
Internal Revenue Code, some of which are described below. Distributions by
the Fund made during the taxable year or, under specified circumstances,
within 12 months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and will therefore
count toward satisfaction of the above-mentioned requirement.

      To qualify as a regulated investment company, the Fund must derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the sale or other disposition of
stock or securities or foreign currencies (to the extent such currency gains
are directly related to the regulated investment company's principal business
of investing in stock or securities) and certain other income.

      In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under that test, at the close of each quarter of the
Fund's taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items (including receivables), U.S. government
securities, securities of other regulated investment companies, and
securities of other issuers. As to each of those issuers, the Fund must not
have invested more than 5% of the value of the Fund's total assets in
securities of each such issuer and the Fund must not hold more than 10% of
the outstanding voting securities of each such issuer. No more than 25% of
the value of its total assets may be invested in the securities of any one
issuer (other than U.S. government securities and securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
For purposes of this test, obligations issued or guaranteed by certain
agencies or instrumentalities of the U.S. government are treated as U.S.
government securities.

|X|   Excise Tax on Regulated Investment Companies. Under the Internal
Revenue Code, by December 31 each year, the Fund must distribute 98% of its
taxable investment income earned from January 1 through December 31 of that
year and 98% of its capital gains realized in the period from November 1 of
the prior year through October 31 of the current year. If it does not, the
Fund must pay an excise tax on the amounts not distributed. It is presently
anticipated that the Fund will meet those requirements. To meet this
requirement, in certain circumstances the Fund might be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability. However, the Board of Trustees and the Manager might determine in
a particular year that it would be in the best interests of shareholders for
the Fund not to make such distributions at the required levels and to pay the
excise tax on the undistributed amounts. That would reduce the amount of
income or capital gains available for distribution to shareholders.

|X|   Taxation of Fund Distributions. The Fund intends to qualify under the
Internal Revenue Code during each fiscal year to pay "exempt-interest
dividends" to its shareholders. To satisfy this qualification, at the end of
each quarter of its taxable year, at least 50% of the value of the Fund's
total assets consists of obligations as defined in Section 103(a) of the
Internal Revenue Code, as amended. Exempt-interest dividends that are derived
from net investment income earned by the Fund on municipal securities will be
excludable from gross income of shareholders for federal income tax purposes.
To the extent the Fund fails to qualify to pay exempt-interest dividends in
any given form, such dividends would be included in the gross income of
shareholders for federal income tax purposes.

      Net investment income includes the allocation of amounts of income from
the municipal securities in the Fund's portfolio that are free from federal
income taxes. This allocation will be made by the use of one designated
percentage applied uniformly to all income dividends paid during the Fund's
tax year. That designation will normally be made following the end of each
fiscal year as to income dividends paid in the prior year. The percentage of
income designated as tax-exempt may substantially differ from the percentage
of the Fund's income that was tax-exempt for a given period.

      A portion of the exempt-interest dividends paid by the Fund may be an
item of tax preference for shareholders subject to the federal alternative
minimum tax. The amount of any dividends attributable to tax preference items
for purposes of the alternative minimum tax will be identified when tax
information is distributed by the Fund.

      A shareholder receiving a dividend from income earned by the Fund from
one or more of the following sources must treat the dividend as ordinary
income in the computation of the shareholder's gross income, regardless of
whether the dividend is reinvested:
(1)   certain taxable temporary investments (such as certificates of deposit,
          repurchase agreements, commercial paper and obligations of the U.S.
          government, its agencies and instrumentalities);
(2)   income from securities loans;
(3)   income or gains from options or futures,
(4)   any net short-term capital gain; and
(5)   any market discount amortization on tax-exempt bonds.

      The Fund's dividends will not be eligible for the dividends-received
deduction for corporations. Shareholders receiving Social Security or
railroad retirement benefits should be aware that exempt-interest dividends
are a factor in determining whether (and the extent to which) such benefits
are subject to federal income tax.

      The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute
any such amounts. If the net capital gain is distributed and designated as a
capital gain distribution, it will be taxable to shareholders as a long-term
capital gain and will be properly identified in reports sent to shareholders
in January of each year. Such treatment will apply no matter how long the
shareholder has held his or her shares or whether that gain was recognized by
the Fund before the shareholder acquired his or her shares.

      If the Fund elects to retain its net capital gain, the Fund will be
subject to tax on it at the 35% corporate tax rate. If the Fund elects to
retain its net capital gain, the Fund will provide to shareholders of record
on the last day of its taxable year information regarding their pro rata
share of the gain and tax paid. As a result, each shareholder will be
required to report his or her pro rata share of such gain on their tax return
as long-term capital gain, will receive a refundable tax credit for his/her
pro rata share of tax paid by the Fund on the gain, and will increase the tax
basis for his/her shares by an amount equal to the deemed distribution less
the tax credit.

      Distributions by the Fund will be treated in the manner described above
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.

      The Fund will be required in certain cases to withhold 28% of ordinary
income dividends (not including "exempt-interest dividends"), capital gains
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 the receipt of interest or
dividend income properly, 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 all income and any tax withheld is
identified in reports mailed to shareholders in January of each year with a
copy sent to the IRS.

|X|   Tax Effects of Redemptions of Shares. If a shareholder redeems all or a
portion of his/her shares, the shareholder will recognize a gain or loss on
the redeemed shares in an amount equal to the difference between the proceeds
of the redeemed shares and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss recognized in that manner may be
disallowed if the shareholder purchases other shares of the Fund within 30
days before or after the redemption. Losses realized by shareholders on the
redemption of Fund shares within six months of purchase will be disallowed
for federal income tax purposes to the extent of exempt-interest dividends
received on such shares.

      In general, any gain or loss arising from the redemption of shares of
the Fund will be considered capital gain or loss, if the shares were held as
a capital asset. It will be long-term capital gain or loss if the shares were
held for more than one year. However, any capital loss arising from the
redemption of shares held for six months or less 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 and
there are limits on the deductibility of capital losses in any year.

|X|   Foreign Shareholders. Under U.S. tax law, taxation of a shareholder who
is a foreign person (to include, but not limited to, a nonresident alien
individual, a foreign trust, a foreign estate, a foreign corporation, or a
foreign partnership) primarily depends on whether the foreign person's income
from the Fund is effectively connected with the conduct of a U.S. trade or
business. Typically, ordinary income dividends paid (not including
exempt-interest dividends paid by the Fund) from a mutual fund are not
considered "effectively connected" income.

      Ordinary income dividends that are paid by the Fund (and are deemed not
"effectively connected income") to foreign persons will be subject to a U.S.
tax withheld by the Fund at a rate of 30%, provided the Fund obtains a
properly completed and signed Certificate of Foreign Status. The tax rate may
be reduced if the foreign person's country of residence has a tax treaty with
the U.S. allowing for a reduced tax rate on ordinary income dividends paid by
the Fund. Any tax withheld by the Fund is remitted by the Fund to the U.S.
Treasury and all income and any tax withheld is identified in reports mailed
to shareholders in March of each year with a copy sent to the IRS.

      If the ordinary income dividends from the Fund are effectively
connected with the conduct of a U.S. trade or business, then the foreign
person may claim an exemption from the U.S. tax described above provided the
Fund obtains a properly completed and signed Certificate of Foreign Status.
If the foreign person fails to provide a certification of his/her foreign
status, the Fund will be required to withhold U.S. tax at a rate of 28% on
ordinary income dividends (not including "exempt-interest dividends"),
capital gains distributions (including short-term and long-term) and the
proceeds of the redemption of shares, paid to any foreign person. Any tax
withheld by the Fund is remitted by the Fund to the U.S. Treasury and all
income and any tax withheld is identified in reports mailed to shareholders
in January of each year with a copy sent to the IRS.

      The tax consequences to foreign persons entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisors or the U.S.
Internal Revenue Service with respect to the particular tax consequences to
them of an investment in the Fund, including the applicability of the U.S.
withholding taxes described above.

Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the
same class of any of the other Oppenheimer funds listed above. Reinvestment
will be made without sales charge at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
To elect this option, the shareholder must notify the Transfer Agent in
writing and must have an existing account in the fund selected for
reinvestment. Otherwise the shareholder first must obtain a prospectus for
that fund and an application from the Distributor to establish an account.
Dividends and/or distributions from shares of certain other Oppenheimer funds
may be invested in shares of this Fund on the same basis.

Additional Information About the Fund

The Distributor. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as
the Fund's Distributor. The Distributor also distributes shares of the other
Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of
the Manager.

The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is
a division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It 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 Bank. 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 $100,000 are not protected by federal deposit insurance. Those
uninsured balances at times may be substantial.

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 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.



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER AMT-FREE MUNICIPALS:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer AMT-Free Municipals, including the statement of investments, as of
July 31, 2005, and the related statement of operations 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 audit 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 July 31, 2005, 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
Oppenheimer AMT-Free Municipals as of July 31, 2005, the results of its
operations 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
September 13, 2005





STATEMENT OF INVESTMENTS  July 31, 2005
--------------------------------------------------------------------------------

    PRINCIPAL                                                                                                                  VALUE
       AMOUNT                                                                              COUPON       MATURITY          SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES--106.3%
------------------------------------------------------------------------------------------------------------------------------------
ALABAMA--0.3%
$      15,000     AL HFA (Pelican)                                                          6.550%    03/20/2030     $       15,467
-----------------------------------------------------------------------------------------------------------------------------------
    1,580,000     AL Space Science Exhibit Finance Authority                                6.000     10/01/2025          1,569,983
-----------------------------------------------------------------------------------------------------------------------------------
       55,000     Birmingham, AL Airport Authority                                          5.625     07/01/2026             57,159
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     Birmingham, AL Private Educational Building Authority
                  (Birmingham-Southern College)                                             6.125     12/01/2025             25,664
-----------------------------------------------------------------------------------------------------------------------------------
       15,000     Birmingham, AL Special Care Facilities Financing
                  Authority (Children's Hospital of Alabama)                                5.500     06/01/2022             15,827
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Camden, AL Industrial Devel. Board
                  (Weyerhaeuser Company), Series A 1                                        6.125     12/01/2024          1,113,490
-----------------------------------------------------------------------------------------------------------------------------------
      130,000     Cooperative District, AL Fort Deposit                                     6.000     02/01/2036            136,296
-----------------------------------------------------------------------------------------------------------------------------------
       15,000     Montgomery, AL Medical Clinic Board Health Care                           7.000     03/01/2015             15,036
                                                                                                                     --------------
                                                                                                                          2,948,922
-----------------------------------------------------------------------------------------------------------------------------------
ALASKA--0.7%
    2,500,000     AK HFC RITES 2                                                           11.954 3   06/01/2032          2,806,100
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     AK HFC ROLs 2                                                            12.508 3   12/01/2033          2,158,800
-----------------------------------------------------------------------------------------------------------------------------------
      780,000     AK HFC, Series A                                                          5.875     12/01/2024            802,012
-----------------------------------------------------------------------------------------------------------------------------------
      175,000     AK Northern Tobacco Securitization Corp. (TASC)                           5.500     06/01/2029            180,847
                                                                                                                     --------------
                                                                                                                          5,947,759
-----------------------------------------------------------------------------------------------------------------------------------
ARIZONA--3.9%
      750,000     AZ West Campus Hsg. (Arizona State University)                            6.375     07/01/2022            885,128
-----------------------------------------------------------------------------------------------------------------------------------
      849,950     Central AZ Irrigation & Drain District, Series A                          6.000     06/01/2013            823,015
-----------------------------------------------------------------------------------------------------------------------------------
       75,000     Glendale, AZ IDA Educational Facilities
                  (American Graduate School International)                                  5.875     07/01/2015             77,664
-----------------------------------------------------------------------------------------------------------------------------------
      125,000     Glendale, AZ IDA Educational Facilities
                  (American Graduate School International)                                  6.000     07/01/2017            127,639
-----------------------------------------------------------------------------------------------------------------------------------
      800,000     Litchfield, AZ Park Community Facility District                           6.375     07/15/2026            851,624
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     Maricopa County, AZ IDA (Christian Care Mesa II)                          6.625     01/01/2034          2,011,380
-----------------------------------------------------------------------------------------------------------------------------------
    1,500,000     Maricopa County, AZ IDA (Sun King Apartments)                             6.750     11/01/2018          1,359,015
-----------------------------------------------------------------------------------------------------------------------------------
    1,260,000     Maricopa County, AZ IDA (Sun King Apartments)                             6.750     05/01/2031          1,076,355
-----------------------------------------------------------------------------------------------------------------------------------
      225,000     Mesa, AZ IDA (Mesa Student Hsg.)                                          6.000     07/01/2032            229,268
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     Mesa, AZ IDA (Mesa Student Hsg.)                                          6.250     07/01/2032             55,395
-----------------------------------------------------------------------------------------------------------------------------------
      200,000     Mesa, AZ IDA Student Hsg.
                  (Arizona State University East)                                           6.000     07/01/2026            219,212
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     Peoria, AZ IDA (Sierra Winds)                                             6.375     08/15/2029          3,033,540
-----------------------------------------------------------------------------------------------------------------------------------
    5,535,000     Phoenix, AZ IDA (Christian Care)                                          5.500     07/01/2035          5,545,627
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Phoenix, AZ IDA (Summit Apartments)                                       6.550     07/20/2037          1,092,300
-----------------------------------------------------------------------------------------------------------------------------------
    1,735,000     Pima County, AZ IDA (Arizona Charter School)                              6.100     07/01/2024          1,770,342
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     Pima County, AZ IDA (Arizona Charter School)                              6.300     07/01/2031            510,425
-----------------------------------------------------------------------------------------------------------------------------------
    1,570,000     Pima County, AZ IDA (Arizona Charter School)                              6.500     07/01/2023          1,638,640


                      20 | OPPENHEIMER AMT-FREE MUNICIPALS


    PRINCIPAL                                                                                                                  VALUE
       AMOUNT                                                                              COUPON       MATURITY          SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------------------
ARIZONA Continued
$   1,290,000     Pima County, AZ IDA (Arizona Charter School)                              6.750%    07/01/2031     $    1,346,670
-----------------------------------------------------------------------------------------------------------------------------------
    1,100,000     Pima County, AZ IDA (Noah Webster Basic School)                           6.125     12/15/2034          1,122,704
-----------------------------------------------------------------------------------------------------------------------------------
    2,845,000     Pima County, AZ IDA
                  (Phoenix Advantage Charter School)                                        5.600     07/01/2023          2,999,171
-----------------------------------------------------------------------------------------------------------------------------------
      120,000     Pima, AZ IDA (Paradise Education Center)                                  5.875     06/01/2033            117,100
-----------------------------------------------------------------------------------------------------------------------------------
    5,000,000     Verrado, AZ Community Facilities District                                 6.500     07/15/2027          5,506,450
-----------------------------------------------------------------------------------------------------------------------------------
    1,375,000     Vistancia, AZ Community Facilities District                               5.500     07/15/2020          1,392,325
-----------------------------------------------------------------------------------------------------------------------------------
    1,200,000     Vistancia, AZ Community Facilities District                               5.750     07/15/2024          1,218,600
-----------------------------------------------------------------------------------------------------------------------------------
       45,000     Yuma, AZ IDA (Regency Apartments)                                         5.500     12/20/2032             45,137
                                                                                                                     --------------
                                                                                                                         35,054,726

-----------------------------------------------------------------------------------------------------------------------------------
ARKANSAS--0.1%
      195,000     Pine Bluff, AR IDA (Colt Industries)                                      6.500     02/15/2009            195,382
-----------------------------------------------------------------------------------------------------------------------------------
      465,000     Pope County, AR Pollution Control
                  (Arkansas Power & Light Company)                                          6.300     11/01/2020            472,440
                                                                                                                     --------------
                                                                                                                            667,822
-----------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA--4.6%
    2,220,000     Beaumont, CA Financing Authority, Series B                                5.875     09/01/2023          2,346,185
-----------------------------------------------------------------------------------------------------------------------------------
    1,200,000     CA GO Fixed Receipts                                                      5.250     02/01/2025          1,285,356
-----------------------------------------------------------------------------------------------------------------------------------
    4,700,000     CA GO RITES 2                                                            11.047 3   02/01/2025          6,037,150
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     CA Golden State Tobacco Securitization Corp.                              6.625     06/01/2040          1,143,460
-----------------------------------------------------------------------------------------------------------------------------------
    6,000,000     CA Statewide CDA (East Campus Apartments)                                 5.625     08/01/2034          6,298,800
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     CA Statewide CDA (East Valley Tourist)                                   11.000     10/01/2020          2,059,060
-----------------------------------------------------------------------------------------------------------------------------------
    1,500,000     CA Statewide CDA COP
                  (Cedars-Sinai Medical Center) INFLOS 2                                    8.184 3   11/01/2015          1,509,420
-----------------------------------------------------------------------------------------------------------------------------------
      590,000     Independent Cities, CA Lease Finance Authority
                  (Morgan Hill-Hacienda Valley)                                             5.950     11/15/2039            612,975
-----------------------------------------------------------------------------------------------------------------------------------
    4,900,000     Los Angeles, CA Community Redevel. Agency ROLs 2                         12.568 3   09/01/2030          5,775,924
-----------------------------------------------------------------------------------------------------------------------------------
    4,175,000     Los Angeles, CA Regional Airports Improvement
                  Corp. (Delta Airlines) 1                                                  6.350     11/01/2025          3,436,526
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     Redding, CA Electric System COP Linked SAVRS & RIBS                       6.368 4   07/01/2022          3,685,560
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     Riverside, CA Unified School District Special Tax                         6.200     09/01/2030             51,291
-----------------------------------------------------------------------------------------------------------------------------------
    7,000,000     Santa Rosa, CA Rancheria Tachi Yokut Tribe Enterprise 1                   6.625     03/01/2018          7,040,810
                                                                                                                    --------------
                                                                                                                         41,282,517
-----------------------------------------------------------------------------------------------------------------------------------
COLORADO--2.8%
      500,000     Beacon Point, CO Metropolitan District                                    6.125     12/01/2025            497,650
-----------------------------------------------------------------------------------------------------------------------------------
    4,800,000     Broomfield, CO Village Metropolitan District No. 2                        6.250     12/01/2032          4,807,920
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Central Marksheffel, CO Metropolitan District                             7.250     12/01/2029          1,056,420
-----------------------------------------------------------------------------------------------------------------------------------
    5,000,000     CO Educational & Cultural Facilities Authority                            6.000     07/01/2042          4,994,550
-----------------------------------------------------------------------------------------------------------------------------------
       30,000     CO Health Facilities Authority
                  (Northern Colorado Medical Center)                                        6.000     05/15/2020             30,073


                      21 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

    PRINCIPAL                                                                                                                  VALUE
       AMOUNT                                                                              COUPON       MATURITY          SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------------------
COLORADO Continued
$   2,270,000     CO Health Facilities Authority RITES 2                                   12.954% 3  03/01/2022     $    2,886,396
-----------------------------------------------------------------------------------------------------------------------------------
      230,000     Denver, CO City & County Airport                                          5.500     11/15/2025            238,637
-----------------------------------------------------------------------------------------------------------------------------------
      210,000     Denver, CO City & County Airport                                          5.700     11/15/2025            215,708
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     High Plains, CO Metropolitan District                                     6.250     12/01/2035            507,095
-----------------------------------------------------------------------------------------------------------------------------------
    1,200,000     Kiowa, CO Water & Sewer                                                   5.500     12/01/2030          1,187,760
-----------------------------------------------------------------------------------------------------------------------------------
      750,000     SBC Metropolitan, CO District 5                                           5.000     12/01/2025            763,598
-----------------------------------------------------------------------------------------------------------------------------------
      720,000     SBC Metropolitan, CO District 5                                           5.000     12/01/2029            730,116
-----------------------------------------------------------------------------------------------------------------------------------
    1,775,000     SBC Metropolitan, CO District 5                                           5.000     12/01/2034          1,794,898
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Southlands, CO Medical District                                           7.000     12/01/2024          1,099,490
-----------------------------------------------------------------------------------------------------------------------------------
    4,000,000     Southlands, CO Medical District                                           7.125     12/01/2034          4,391,520
                                                                                                                     --------------
                                                                                                                         25,201,831
-----------------------------------------------------------------------------------------------------------------------------------
CONNECTICUT--1.3%
       95,000     CT Devel. Authority Pollution Control
                  (Connecticut Light & Power Company)                                       5.850     09/01/2028            103,273
-----------------------------------------------------------------------------------------------------------------------------------
    1,460,000     CT Devel. Authority Water Facilities
                  (Bridgeport Hydraulic Corp.)                                              5.500     06/01/2028          1,462,905
-----------------------------------------------------------------------------------------------------------------------------------
       90,000     CT H&EFA (New Britain General Hospital), Series B                         6.000     07/01/2024             91,121
-----------------------------------------------------------------------------------------------------------------------------------
      140,000     CT H&EFA (Yale-New Haven Hospital)                                        5.700     07/01/2025            145,870
-----------------------------------------------------------------------------------------------------------------------------------
    9,900,000     Mashantucket, CT Western Pequot Tribe, Series B 1                         5.750     09/01/2027         10,220,859
                                                                                                                     --------------
                                                                                                                         12,024,028
-----------------------------------------------------------------------------------------------------------------------------------
DELAWARE--0.4%
    4,000,000     Bridgeville, DE Special Obligation (Heritage Shores)                      5.450     07/01/2035          4,004,680
-----------------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA--0.4%
    1,000,000     District of Columbia (Carnegie Endowment)                                 5.750     11/15/2026          1,039,760
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     District of Columbia Friendship Public Charter School                     5.250     06/01/2033          2,049,600
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     District of Columbia Tobacco Settlement Financing Corp.                   6.750     05/15/2040            558,070
                                                                                                                     --------------
                                                                                                                          3,647,430
-----------------------------------------------------------------------------------------------------------------------------------
FLORIDA--9.2%
-----------------------------------------------------------------------------------------------------------------------------------
    5,990,000     Bartram Park, FL Community Devel. District 5                              5.300     05/01/2035          6,084,283
-----------------------------------------------------------------------------------------------------------------------------------
       40,000     Bay, FL Medical Center                                                    5.650     10/01/2026             41,847
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     Beacon, FL Tradeport Community Devel. District                            7.250     05/01/2033          2,166,300
-----------------------------------------------------------------------------------------------------------------------------------
       30,000     Canaveral, FL Port Authority                                              5.625     06/01/2021             31,315
-----------------------------------------------------------------------------------------------------------------------------------
    2,350,000     Concorde Estates, FL Community Devel. District                            5.850     05/01/2035          2,388,000
-----------------------------------------------------------------------------------------------------------------------------------
      130,000     Dade County, FL Aviation (Miami International Airport)                    5.600     10/01/2026            135,961
-----------------------------------------------------------------------------------------------------------------------------------
    1,970,000     Dade County, FL IDA (Miami Cerebral Palsy Residence)                      8.000     06/01/2022          2,013,163
-----------------------------------------------------------------------------------------------------------------------------------
      195,000     Dade County, FL Public Facilities
                  (Jackson Memorial Hospital)                                               5.250     06/01/2023            195,330
-----------------------------------------------------------------------------------------------------------------------------------
       95,000     Dade County, FL Water & Sewer System                                      5.500     10/01/2025             97,261
-----------------------------------------------------------------------------------------------------------------------------------
    1,975,000     Double Branch, FL Special Assessment
                  Community Devel. District                                                 6.700     05/01/2034          2,154,686


                      22 | OPPENHEIMER AMT-FREE MUNICIPALS


    PRINCIPAL                                                                                                                  VALUE
       AMOUNT                                                                              COUPON       MATURITY          SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------------------
FLORIDA Continued
$   1,500,000     East Homestead, FL Community Devel. District                              5.450%    11/01/2036     $    1,518,750
-----------------------------------------------------------------------------------------------------------------------------------
    2,500,000     FL Capital Trust Agency (American Opportunity)                            5.875     06/01/2038          2,471,075
-----------------------------------------------------------------------------------------------------------------------------------
    1,275,000     FL Capital Trust Agency (River Bend Apartments) 2,6,7                     7.000     10/01/2034              1,594
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     FL Capital Trust Agency (Seminole Tribe Convention)                       8.950     10/01/2033          1,093,200
-----------------------------------------------------------------------------------------------------------------------------------
      750,000     FL Capital Trust Agency (Seminole Tribe Convention)                      10.000     10/01/2033            825,488
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     FL Capital Trust Agency Multifamily Affordable Hsg.,
                  Series C                                                                  8.125     10/01/2038            995,260
-----------------------------------------------------------------------------------------------------------------------------------
      245,000     FL Gateway Services Community Devel. District
                  (Sun City Center)                                                         6.500     05/01/2033            262,603
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     FL Principal One Community Devel. District                                5.650     05/01/2035          1,009,130
-----------------------------------------------------------------------------------------------------------------------------------
      990,000     Heritage Harbour South, FL Community Devel. District                      6.500     05/01/2034          1,061,132
-----------------------------------------------------------------------------------------------------------------------------------
      250,000     Hillsborough County, FL IDA (Senior Care Group)                           6.750     07/01/2029            254,733
-----------------------------------------------------------------------------------------------------------------------------------
      480,000     Hillsborough County, FL IDA (Tampa Electric Company)                      6.250     12/01/2034            495,878
-----------------------------------------------------------------------------------------------------------------------------------
      955,000     Hillsborough County, FL IDA (Tampa Electric Company)                      6.250     12/01/2034            983,268
-----------------------------------------------------------------------------------------------------------------------------------
    1,600,000     Islands at Doral, FL Southwest Community
                  Devel. District                                                           6.375     05/01/2035          1,729,648
-----------------------------------------------------------------------------------------------------------------------------------
      125,000     Jacksonville, FL Electric Authority (St. Johns River)                     5.250     10/01/2021            125,806
-----------------------------------------------------------------------------------------------------------------------------------
    1,875,000     Jacksonville, FL Electric Authority RITES 2                               9.419 3   10/01/2022          1,908,375
-----------------------------------------------------------------------------------------------------------------------------------
    1,225,000     Keys Cove, FL Community Devel. District                                   5.875     05/01/2035          1,275,433
-----------------------------------------------------------------------------------------------------------------------------------
    2,500,000     Lake County, FL School Board COP RITES 2,5                               13.125 3   06/01/2030          3,019,300
-----------------------------------------------------------------------------------------------------------------------------------
    4,500,000     Lee County, FL IDA (Cypress Cove Healthpark)                              6.750     10/01/2032          4,703,175
-----------------------------------------------------------------------------------------------------------------------------------
    1,215,000     Lucaya, FL Community Devel. District                                      5.375     05/01/2035          1,220,310
-----------------------------------------------------------------------------------------------------------------------------------
      600,000     Madison County, FL Mtg. (Twin Oaks)                                       6.000     07/01/2025            596,244
-----------------------------------------------------------------------------------------------------------------------------------
       85,000     Marion County, FL Hospital District
                  (Munroe Regional Medical Center)                                          5.625     10/01/2024             89,251
-----------------------------------------------------------------------------------------------------------------------------------
    2,500,000     Midtown Miami, FL Community Devel. District
                  Special Assessment                                                        6.500     05/01/2037          2,660,000
-----------------------------------------------------------------------------------------------------------------------------------
    8,035,000     Oakland, FL Charter School 1                                              6.950     12/01/2032          8,361,221
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     Orange County, FL Health Facilities Authority
                  (Orlando Lutheran Towers)                                                 8.750     07/01/2026            539,710
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     Palm Beach County, FL Health Facilities Authority
                  (Boca Raton Community Hospital)                                           5.625     12/01/2031             26,396
-----------------------------------------------------------------------------------------------------------------------------------
      195,000     Palm Beach County, FL Multifamily
                  (Boynton Apartments) 6,7                                                  8.000     01/01/2014            107,459
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     Pinellas County, FL Educational Facilities Authority
                  (Barry University)                                                        5.375     10/01/2028             51,861
-----------------------------------------------------------------------------------------------------------------------------------
      250,000     Reunion East, FL Community Devel. District                                5.800     05/01/2036            257,830
-----------------------------------------------------------------------------------------------------------------------------------
    6,000,000     Reunion East, FL Community Devel. District, Series A 1                    7.375     05/01/2033          6,727,980
-----------------------------------------------------------------------------------------------------------------------------------
    2,500,000     Reunion West, FL Community Devel. District
                  Special Assessment                                                        6.250     05/01/2036          2,641,850
-----------------------------------------------------------------------------------------------------------------------------------
      275,000     Santa Rosa Bay, FL Bridge Authority                                       6.250     07/01/2028            285,390


                      23 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

    PRINCIPAL                                                                                                                  VALUE
       AMOUNT                                                                              COUPON       MATURITY          SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------------------
FLORIDA Continued
$      75,000     South Lake County, FL Hospital District
                  (Orlando Regional Healthcare System)                                      5.800%    10/01/2034     $       78,668
-----------------------------------------------------------------------------------------------------------------------------------
      100,000     South Miami, FL Health Facilities Authority
                  (SMH/BHM/BHSSF/SMHS/HHI Obligated Group)                                  5.375     10/01/2016            102,314
-----------------------------------------------------------------------------------------------------------------------------------
    1,280,000     South-Dade, FL Venture Community Devel. District                          6.125     05/01/2034          1,356,006
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     St. John's Forest, FL Community Devel. District, Series A                 6.125     05/01/2034          3,112,770
-----------------------------------------------------------------------------------------------------------------------------------
      975,000     Stonegate, FL Community Devel. District                                   6.000     05/01/2024          1,032,086
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Stonegate, FL Community Devel. District                                   6.125     05/01/2034          1,057,040
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     Sumter Landing, FL Community Devel. District                              6.875     05/01/2023          2,174,740
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     Sumter Landing, FL Community Devel. District                              6.950     05/01/2033          2,142,320
-----------------------------------------------------------------------------------------------------------------------------------
       10,000     University of FL (University Hsg.)                                        5.500     07/01/2023             10,021
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Village Community, FL Devel. District No.5, Series A                      6.100     05/01/2034          1,050,720
-----------------------------------------------------------------------------------------------------------------------------------
      925,000     Village Community, FL Devel. District No.5, Series A                      6.500     05/01/2033            996,937
-----------------------------------------------------------------------------------------------------------------------------------
    5,100,000     Volusia County, FL Educational Facility Authority
                  (Emery-Riddle Aeronautical University)                                    6.125     10/15/2026          5,372,748
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     World Commerce, FL Community Devel.
                  District Special Assessment                                               6.500     05/01/2036          1,033,640
                                                                                                                     --------------
                                                                                                                         82,127,506
-----------------------------------------------------------------------------------------------------------------------------------
GEORGIA--5.3%
   13,000,000     Atlanta, GA Devel. Authority Student Hsg.
                  (ADA/CAU Partners) 1                                                      6.000     07/01/2036         14,203,670
-----------------------------------------------------------------------------------------------------------------------------------
    3,905,000     Atlanta, GA Devel. Authority Student Hsg.
                  (ADA/CAU Partners)                                                        6.250     07/01/2024          4,356,965
-----------------------------------------------------------------------------------------------------------------------------------
    2,380,000     Atlanta, GA Devel. Authority Student Hsg.
                  (ADA/CAU Partners)                                                        6.250     07/01/2036          2,644,799
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Atlanta, GA Tax Allocation (Eastside) 5                                   5.400     01/01/2020          1,000,180
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     Atlanta, GA Tax Allocation (Eastside) 5                                   5.600     01/01/2030          2,007,300
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Augusta, GA Airport (General Passenger Facilities Charge)                 5.150     01/01/2035          1,015,930
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     Burke County, GA Devel. Authority RITES 2                                 9.582 3   05/01/2034          3,029,700
-----------------------------------------------------------------------------------------------------------------------------------
    9,835,000     De Kalb County, GA Devel. Authority Public Purpose 1                      5.500     12/10/2023          9,899,518
-----------------------------------------------------------------------------------------------------------------------------------
      995,000     De Kalb County, GA Hsg. Authority
                  (Alternative Hsg. Snapwoods)                                              5.500     12/20/2032          1,029,606
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     Fulton County, GA Residential Care Facilities
                  (Canterbury Court)                                                        6.125     02/15/2034          2,049,080
-----------------------------------------------------------------------------------------------------------------------------------
       15,000     GA Municipal Electric Authority                                           5.625     01/01/2025             15,453
-----------------------------------------------------------------------------------------------------------------------------------
    2,815,000     GA Municipal Electric Authority RITES 1,2                                16.944 3   01/01/2017          5,100,949
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     GA Municipal Electric Authority, Series X                                 6.500     01/01/2012            560,510
-----------------------------------------------------------------------------------------------------------------------------------
       30,000     Savannah, GA EDA (University Financing Foundation)                        6.750     11/15/2020             33,500
-----------------------------------------------------------------------------------------------------------------------------------
       85,000     Savannah, GA EDA (University Financing Foundation)                        6.750     11/15/2031             93,798
                                                                                                                     --------------
                                                                                                                         47,040,958


                      24 | OPPENHEIMER AMT-FREE MUNICIPALS


    PRINCIPAL                                                                                                                  VALUE
       AMOUNT                                                                              COUPON       MATURITY          SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------------------
HAWAII--1.3%
$   5,000,000     HI Airport System RITES 2                                                 8.962% 3  07/01/2020     $    6,045,800
-----------------------------------------------------------------------------------------------------------------------------------
    4,200,000     HI Department of Budget & Finance Special Purpose
                  (Kahala Nui)                                                              8.000     11/15/2033          4,832,268
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     HI Department of Budget & Finance Special Purpose
                  (Kahala Senior Living Community)                                          7.875     11/15/2023            576,790
-----------------------------------------------------------------------------------------------------------------------------------
       45,000     HI Hsg. Finance & Devel. Corp. (Single Family Mtg.),
                  Series B                                                                  5.900     07/01/2027             45,459
                                                                                                                     --------------
                                                                                                                         11,500,317
-----------------------------------------------------------------------------------------------------------------------------------
IDAHO--3.4%
    2,500,000     ID Health Facilities Authority ROLs 2                                    12.418 3   09/01/2035          2,783,500
-----------------------------------------------------------------------------------------------------------------------------------
    1,780,000     ID Health Facilities Authority ROLs 2,5                                  13.167 3   09/01/2035          1,981,852
-----------------------------------------------------------------------------------------------------------------------------------
       20,000     ID Hsg. Agency (Multifamily Hsg.)                                         6.700     07/01/2024             20,222
-----------------------------------------------------------------------------------------------------------------------------------
   16,720,000     Nez Perce County, ID Pollution Control (Potlatch Corp.) 1                 6.000     10/01/2024         17,027,815
-----------------------------------------------------------------------------------------------------------------------------------
    5,360,000     Pocatello, ID Devel. Authority Revenue Allocation
                  Tax Increment, Series A                                                   6.000     08/01/2028          5,387,711
-----------------------------------------------------------------------------------------------------------------------------------
    2,980,000     Twin Falls, ID Urban Renewal Agency, Series A 5                           5.450     08/01/2022          2,967,246
                                                                                                                     --------------
                                                                                                                         30,168,346
-----------------------------------------------------------------------------------------------------------------------------------
ILLINOIS--6.6%
    6,875,000     Chicago, IL GO 1                                                          5.125     01/01/2025          7,061,038
-----------------------------------------------------------------------------------------------------------------------------------
    9,000,000     Chicago, IL O'Hare International Airport
                  (American Airlines) 1                                                     8.200     12/01/2024          8,886,060
-----------------------------------------------------------------------------------------------------------------------------------
    5,000,000     Chicago, IL Tax (Pilsen Redevel.)                                         6.750     06/01/2022          5,287,200
-----------------------------------------------------------------------------------------------------------------------------------
    2,400,000     Cook County, IL Community School District GO                              7.125     06/01/2024          3,051,768
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     IL Devel. Finance Authority (Illinois Power Company)                      5.400     03/01/2028             50,089
-----------------------------------------------------------------------------------------------------------------------------------
    1,625,000     IL Educational Facilities Authority (Augustana College)                   5.625     10/01/2022          1,715,513
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     IL Educational Facilities Authority (Augustana College)                   5.700     10/01/2032          3,132,570
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     IL Finance Authority (Friendship Village Schaumburg)                      5.375     02/15/2025          2,020,020
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     IL Finance Authority (Friendship Village Schaumburg)                      5.625     02/15/2037          2,027,200
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     IL Finance Authority Student Hsg.
                  (MJH Education Assistance)                                                5.125     06/01/2035          3,014,610
-----------------------------------------------------------------------------------------------------------------------------------
    5,000,000     IL Health Facilities Authority
                  (Covenant Retirement Communities)                                         5.625     12/01/2032          5,357,950
-----------------------------------------------------------------------------------------------------------------------------------
       35,000     IL Health Facilities Authority (Edward Hospital)                          6.000     02/15/2019             35,431
-----------------------------------------------------------------------------------------------------------------------------------
    4,000,000     IL Health Facilities Authority (Lake Forest Hospital)                     6.000     07/01/2033          4,336,360
-----------------------------------------------------------------------------------------------------------------------------------
      615,000     IL Health Facilities Authority
                  (Rush-Presbyterian-St. Luke's Medical Center)                             5.500     11/15/2025            618,758
-----------------------------------------------------------------------------------------------------------------------------------
    3,500,000     IL Health Facilities Authority ROLs 2                                    12.913 3   08/15/2033          4,046,070
-----------------------------------------------------------------------------------------------------------------------------------
       30,000     IL Hsg. Devel. Authority (Multifamily Hsg.)                               7.000     07/01/2017             30,225
-----------------------------------------------------------------------------------------------------------------------------------
       90,000     IL Hsg. Devel. Authority (Multifamily Hsg.), Series 1991-A                8.250     07/01/2016             93,510
-----------------------------------------------------------------------------------------------------------------------------------
       10,000     IL Hsg. Devel. Authority (Multifamily Hsg.), Series A                     6.125     07/01/2025             10,011
-----------------------------------------------------------------------------------------------------------------------------------
    2,500,000     IL Metropolitan Pier & Exposition Authority RITES 2                      10.944 3   12/15/2028          2,952,900


                      25 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON       MATURITY         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
ILLINOIS Continued
$   1,475,000     Lake County, IL HFC, Series A                                             6.700%    11/01/2014     $    1,477,434
-----------------------------------------------------------------------------------------------------------------------------------
    2,725,000     Lincolnshire, IL Special Service Area No. 1 Special Tax
                  (Sedgebrook)                                                              6.250     03/01/2034          2,889,345
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     Schaumburg, IL Multifamily Hsg. (Plum Grove)                              6.050     02/01/2031            522,330
                                                                                                                     --------------
                                                                                                                         58,616,392
-----------------------------------------------------------------------------------------------------------------------------------
INDIANA--2.1%
    5,000,000     Fort Wayne, IN Pollution Control (General Motors Corp.)                   6.200     10/15/2025          4,975,500
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     IN Devel. Finance Authority (USX Corp.)                                   5.600     12/01/2032             25,982
-----------------------------------------------------------------------------------------------------------------------------------
       80,000     IN Devel. Finance Authority (USX Corp.)                                   6.150     07/15/2022             84,257
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     Indianapolis, IN Economic Devel.
                  (Roman Catholic Archdiocese of Indiana)                                   5.500     07/01/2026            520,205
-----------------------------------------------------------------------------------------------------------------------------------
    3,250,000     Indianapolis, IN Local Public Improvement
                  Bond Bank RITES 2                                                        11.954 3   07/01/2033          4,181,320
-----------------------------------------------------------------------------------------------------------------------------------
    2,055,000     Marion, IN Redevel. District County Optional Income Tax                   5.000     01/15/2030          2,116,650
-----------------------------------------------------------------------------------------------------------------------------------
    1,605,000     Marion, IN Redevel. District County Optional Income Tax                   5.250     01/15/2025          1,706,420
-----------------------------------------------------------------------------------------------------------------------------------
    4,750,000     North Manchester, IN (Estelle Peabody Memorial Home)                      7.125     07/01/2022          4,974,295
-----------------------------------------------------------------------------------------------------------------------------------
       65,000     Petersburg, IN Pollution Control
                  (Indianapolis Power & Light Company)                                      5.400     08/01/2017             66,022
-----------------------------------------------------------------------------------------------------------------------------------
      125,000     Petersburg, IN Pollution Control
                  (Indianapolis Power & Light Company)                                      6.625     12/01/2024            127,805
                                                                                                                     --------------
                                                                                                                         18,778,456
-----------------------------------------------------------------------------------------------------------------------------------
IOWA--0.3%
       50,000     IA Finance Authority
                  (Boys & Girls Home & Family Services)                                     6.250     12/01/2028             52,642
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     IA Finance Authority Retirement Community
                  (Friendship Haven)                                                        5.750     11/15/2019            506,505
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     IA Finance Authority Retirement Community
                  (Friendship Haven)                                                        6.000     11/15/2024          1,018,990
-----------------------------------------------------------------------------------------------------------------------------------
      900,000     IA Finance Authority Retirement Community
                  (Friendship Haven)                                                        6.125     11/15/2032            917,550
                                                                                                                     --------------
                                                                                                                          2,495,687
-----------------------------------------------------------------------------------------------------------------------------------
KANSAS--1.4%
    1,770,000     Hays, KS Sales Tax                                                        6.000     01/01/2025          1,793,807
-----------------------------------------------------------------------------------------------------------------------------------
    2,735,000     KS Devel. Finance Authority (Luther Gardens)                              5.600     05/20/2034          3,000,076
-----------------------------------------------------------------------------------------------------------------------------------
      750,000     Wyandotte County/Kansas City, KS Unified
                  Government Pollution Control (General Motors)                             6.000     06/01/2025            757,680
-----------------------------------------------------------------------------------------------------------------------------------
    7,000,000     Wyandotte County/Kansas City, KS Unified
                  Government Special Obligation (Sales Tax)                                 5.000     12/01/2020          7,062,020
                                                                                                                     --------------
                                                                                                                         12,613,583


                      26 | OPPENHEIMER AMT-FREE MUNICIPALS


    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON       MATURITY         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
KENTUCKY--0.3%
$   2,190,000     Boone County, KY Pollution Control
                  (Dayton Power & Light Company)                                            6.500%    11/15/2022     $    2,234,041
-----------------------------------------------------------------------------------------------------------------------------------
      415,000     Kenton County, KY Airport Special Facilities
                  (Delta Airlines)                                                          7.250     02/01/2022            375,525
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     KY Economic Devel. Finance Authority
                  (St. Claire Medical Center)                                               5.625     09/01/2021             51,102
                                                                                                                     --------------
                                                                                                                          2,660,668
-----------------------------------------------------------------------------------------------------------------------------------
LOUISIANA--3.9%
    5,010,000     Calcasieu Parish, LA Industrial Devel. Board (Olin Corp.) 1               6.625     02/01/2016          5,380,039
-----------------------------------------------------------------------------------------------------------------------------------
    3,940,000     LA HFA (VOA New Orleans Affordable Hsg. Corp.)                            6.800     05/01/2029          4,031,960
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     LA Local Government EF&CD (Bellemont Apartments)                          6.000     09/01/2022          1,027,370
-----------------------------------------------------------------------------------------------------------------------------------
    1,750,000     LA Local Government EF&CD (Bellemont Apartments)                          6.000     09/01/2027          1,779,645
-----------------------------------------------------------------------------------------------------------------------------------
    3,810,000     LA Local Government EF&CD (Bellemont Apartments)                          6.000     09/01/2035          3,852,443
-----------------------------------------------------------------------------------------------------------------------------------
      910,000     LA Local Government EF&CD (Bellemont Apartments)                          7.500     09/01/2016            922,103
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     LA Local Government EF&CD (Oakleigh Apartments),
                  Series A                                                                  6.375     06/01/2038          2,076,760
-----------------------------------------------------------------------------------------------------------------------------------
    1,245,000     LA Local Government EF&CD (Oakleigh Apartments),
                  Series A                                                                  7.500     06/01/2038          1,279,213
-----------------------------------------------------------------------------------------------------------------------------------
    2,100,000     LA Tobacco Settlement Financing Corp. Fixed Receipts                      5.875     05/15/2039          2,224,551
-----------------------------------------------------------------------------------------------------------------------------------
   10,695,000     LA Tobacco Settlement Financing Corp. RITES 2                             8.067 3   05/15/2039         11,963,534
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     New Orleans, LA Aviation Board
                  (Passenger Facility Charge)                                               6.000     09/01/2019             50,625
-----------------------------------------------------------------------------------------------------------------------------------
      125,000     Pointe Coupee Parish, LA Pollution Control
                  (Gulf State Utilities Company)                                            6.700     03/01/2013            125,440
                                                                                                                     --------------
                                                                                                                         34,713,683
-----------------------------------------------------------------------------------------------------------------------------------
MAINE--0.0%
       35,000     ME H&HEFA (University of New England)                                     5.750     07/01/2023             35,077
-----------------------------------------------------------------------------------------------------------------------------------
MARYLAND--2.1%
       10,000     Baltimore, MD City Hsg. Corp.                                             7.750     10/01/2009             10,133
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     Baltimore, MD City Hsg. Corp., Series A                                   7.250     07/01/2023             50,681
-----------------------------------------------------------------------------------------------------------------------------------
       20,000     Calvert County, MD Pollution Control
                  (Baltimore Gas & Electric Company)                                        5.550     07/15/2014             20,462
-----------------------------------------------------------------------------------------------------------------------------------
       40,000     MD EDC Student Hsg. (Allegheny College Hsg.)                              6.000     09/01/2032             42,756
-----------------------------------------------------------------------------------------------------------------------------------
    5,000,000     MD EDC Student Hsg. (Bowie State University)                              5.375     06/01/2033          5,011,650
-----------------------------------------------------------------------------------------------------------------------------------
    1,535,000     MD EDC Student Hsg. (Morgan State University)                             6.000     07/01/2022          1,654,530
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     MD EDC Student Hsg. (University of Maryland)                              5.625     10/01/2023          2,108,920
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     MD EDC Student Hsg. (University of Maryland)                              5.750     10/01/2033          2,104,940
-----------------------------------------------------------------------------------------------------------------------------------
       65,000     MD EDC Student Hsg.
                  (University Village at Sheppard Pratt)                                    6.000     07/01/2033             70,393
-----------------------------------------------------------------------------------------------------------------------------------
       75,000     MD H&HEFA (Frederick Memorial Hospital)                                   5.000     07/01/2028             75,107
-----------------------------------------------------------------------------------------------------------------------------------
       45,000     MD H&HEFA (Montgomery General Hospital)                                   5.625     07/01/2018             45,097


                      27 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON       MATURITY         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
MARYLAND Continued
$   7,000,000     MD Hsg. Community Devel. People's Resource Center 1                       5.600%    04/01/2018     $    7,258,790
-----------------------------------------------------------------------------------------------------------------------------------
      100,000     MD Industrial Devel. Financing Authority
                  (Our Lady of Good Counsel)                                                5.500     05/01/2020            101,233
-----------------------------------------------------------------------------------------------------------------------------------
      150,000     MD Industrial Devel. Financing Authority
                  (Our Lady of Good Counsel)                                                6.000     05/01/2035            154,311
-----------------------------------------------------------------------------------------------------------------------------------
      250,000     MD Stadium Authority (Convention Center Expansion)                        5.875     12/15/2013            255,660
-----------------------------------------------------------------------------------------------------------------------------------
       55,000     MD Stadium Authority Sports Facility                                      5.800     03/01/2026             56,425
-----------------------------------------------------------------------------------------------------------------------------------
       65,000     Prince Georges County, MD Pollution Control
                  (Potomac Electric Power Company)                                          6.000     09/01/2022             65,086
-----------------------------------------------------------------------------------------------------------------------------------
      145,000     Prince Georges County, MD Pollution Control
                  (Potomac Electric Power Company)                                          6.375     01/15/2023            147,857
                                                                                                                     --------------
                                                                                                                         19,234,031
-----------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS--1.8%
      200,000     MA Devel. Finance Agency (Boston Biomedical Research)                     5.750     02/01/2029            207,288
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     MA Devel. Finance Agency (Curry College)                                  5.000     03/01/2035          1,014,650
-----------------------------------------------------------------------------------------------------------------------------------
      800,000     MA Devel. Finance Agency (Eastern Nazarene College)                       5.625     04/01/2019            810,576
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     MA Devel. Finance Agency (Eastern Nazarene College)                       5.625     04/01/2029          2,000,780
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     MA Devel. Finance Agency (Evergreen Center)                               5.500     01/01/2035            505,175
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     MA Devel. Finance Agency (Nichols College)                                6.000     10/01/2024             51,137
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     MA Devel. Finance Agency
                  (Northern Berkshire Community Services)                                   6.250     08/15/2029             53,247
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     MA Devel. Finance Agency
                  (Pharmacy & Allied Health Sciences)                                       5.750     07/01/2033          1,060,800
-----------------------------------------------------------------------------------------------------------------------------------
    4,000,000     MA Devel. Finance Agency
                  (Seven Hills Foundation & Affiliates)                                     5.000     09/01/2035          4,150,720
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     MA Devel. Finance Agency
                  (Western New England College)                                             5.875     12/01/2022            532,830
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     MA Devel. Finance Agency
                  (Western New England College)                                             6.125     12/01/2032          1,071,840
-----------------------------------------------------------------------------------------------------------------------------------
       40,000     MA H&EFA (Lahey Clinic Medical Center)                                    5.375     07/01/2023             40,098
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     MA H&EFA (Nichols College)                                                6.125     10/01/2029          1,054,960
-----------------------------------------------------------------------------------------------------------------------------------
       90,000     MA H&EFA (North Adams Regional Hospital)                                  6.750     07/01/2009             92,619
-----------------------------------------------------------------------------------------------------------------------------------
       90,000     MA H&EFA (Schepens Eye Research Institute)                                6.500     07/01/2028            100,489
-----------------------------------------------------------------------------------------------------------------------------------
    1,905,677     MA Industrial Finance Agency (Bradford College)                           5.250     11/01/2018          1,721,893
-----------------------------------------------------------------------------------------------------------------------------------
      100,000     MA Industrial Finance Agency
                  (Cambridge Friends School)                                                5.800     09/01/2028             98,432
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     MA Industrial Finance Agency (General Motors Corp.) 2                     5.550     04/01/2009             49,886
-----------------------------------------------------------------------------------------------------------------------------------
       30,000     MA Industrial Finance Agency (St. John's High School)                     5.350     06/01/2028             30,685
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     University of Lowell, MA Building Authority                               5.625     11/01/2014          1,027,480
                                                                                                                     --------------
                                                                                                                         15,675,585


                      28 | OPPENHEIMER AMT-FREE MUNICIPALS


    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON       MATURITY         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
MICHIGAN--1.2%
$      25,000     Dearborn, MI Economic Devel. Corp.
                  (Oakwood Hospital Corp.)                                                  5.875%    11/15/2025     $       25,698
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     Galesburg-Augusta, MI Community Schools GO                                5.500     05/01/2030             26,967
-----------------------------------------------------------------------------------------------------------------------------------
      420,000     Lansing, MI Building Authority                                            5.600     06/01/2019            429,815
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     MI COP                                                                    5.500     06/01/2027             26,987
-----------------------------------------------------------------------------------------------------------------------------------
       20,000     MI Hospital Finance Authority
                  (Port Huron Hospital/Marwood Manor Nursing Home)                          5.500     07/01/2015             20,439
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     MI Hsg. Devel. Authority (Charter Square)                                 5.500     01/15/2021             50,432
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     MI Job Devel. Authority Pollution Control
                  (General Motors Corp.)                                                    5.550     04/01/2009          2,002,080
-----------------------------------------------------------------------------------------------------------------------------------
    4,000,000     MI Strategic Fund Limited Obligation
                  (The Detroit Edison Company) 1                                            6.400     09/01/2025          4,091,840
-----------------------------------------------------------------------------------------------------------------------------------
    4,015,000     MI Strategic Fund Pollution Control
                  (General Motors Corporation) 1                                            6.200     09/01/2020          4,039,572
-----------------------------------------------------------------------------------------------------------------------------------
       10,000     Mount Clemens, MI Hsg. Corp. (FHA Section 8), Series A                    6.600     06/01/2022             10,217
                                                                                                                     --------------
                                                                                                                         10,724,047
-----------------------------------------------------------------------------------------------------------------------------------
MINNESOTA--2.0%
      165,000     Dakota County, MN Community Devel. Agency
                  (Multifamily Hsg.)                                                        5.500     07/20/2043            168,749
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     Hastings, MN Health Care Facility (Regina Medical Center)                 5.300     09/15/2028             50,941
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Minneapolis, MN Tax Increment (St. Anthony Falls)                         5.750     02/01/2027          1,005,670
-----------------------------------------------------------------------------------------------------------------------------------
       40,000     MN HFA (Single Family Mtg.), Series I                                     6.250     01/01/2015             40,063
-----------------------------------------------------------------------------------------------------------------------------------
      660,000     St. Paul, MN Hsg. & Redevel. Authority
                  (Great Northern Lofts)                                                    6.250     03/01/2029            665,518
-----------------------------------------------------------------------------------------------------------------------------------
    7,000,000     St. Paul, MN Hsg. & Redevel. Authority (Upper Landing) 1                  7.000     03/01/2029          7,016,800
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     St. Paul, MN Port Authority (Healtheast Midway Campus)                    6.000     05/01/2030            508,060
-----------------------------------------------------------------------------------------------------------------------------------
    8,110,000     Washington County, MN Hsg. & Redevel. Authority
                  (Seasons Villas)                                                          6.950     12/01/2023          8,378,441
                                                                                                                     --------------
                                                                                                                         17,834,242
-----------------------------------------------------------------------------------------------------------------------------------
MISSISSIPPI--1.2%
    4,080,000     MS Business Finance Corp. (System Energy Resources) 1                     5.875     04/01/2022          4,141,241
-----------------------------------------------------------------------------------------------------------------------------------
    1,040,000     MS Business Finance Corp. (System Energy Resources) 1                     5.900     05/01/2022          1,055,766
-----------------------------------------------------------------------------------------------------------------------------------
    5,000,000     MS Home Corp. Hsg. (Valley State Student Hsg.)                            5.500     12/01/2035          5,271,600
                                                                                                                     --------------
                                                                                                                         10,468,607
-----------------------------------------------------------------------------------------------------------------------------------
MISSOURI--3.7%
      365,000     Branson, MO IDA (Branson Hills)                                           7.050     05/01/2027            367,913
-----------------------------------------------------------------------------------------------------------------------------------
      210,000     Cameron, MO IDA Health Facilities
                  (Cameron Community Hospital)                                              6.375     12/01/2029            227,029
-----------------------------------------------------------------------------------------------------------------------------------
      750,000     Hanley Road & North of Folk Ave,
                  MO Transportation District                                                5.400     10/01/2031            745,365


                      29 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------
    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON       MATURITY         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
MISSOURI Continued
$  10,280,678     Hanley/Eager Rd., MO Transportation Devel. District,
                  Series A                                                                  0.000% 8  12/01/2023     $    2,549,094
-----------------------------------------------------------------------------------------------------------------------------------
   13,500,000     Hazelwood, MO Transportation Devel. District
                  (370/Missouri Bottom Road/Tausig Road) 1                                  7.200     05/01/2033         14,410,980
-----------------------------------------------------------------------------------------------------------------------------------
      750,000     Maplewood, MO Tax (Maplewood South Redevel.)                              5.750     11/01/2026            752,325
-----------------------------------------------------------------------------------------------------------------------------------
       20,000     MO H&EFA (Freeman Health System)                                          5.500     02/15/2024             20,237
-----------------------------------------------------------------------------------------------------------------------------------
    2,500,000     Richmond Heights, MO Tax Increment &
                  Transportation Sales Tax                                                  5.625     11/01/2025          2,522,100
-----------------------------------------------------------------------------------------------------------------------------------
    9,000,000     St. Joseph, MO IDA (Living Community of St. Joseph) 1                     7.000     08/15/2032          9,633,780
-----------------------------------------------------------------------------------------------------------------------------------
      250,000     St. Joseph, MO IDA (Shoppes at North Village)                             5.375     11/01/2024            248,348
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     St. Joseph, MO IDA, Series B 5                                            5.375     11/01/2023            991,300
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     St. Joseph, MO IDA, Series B 5                                            5.500     11/01/2027            999,270
                                                                                                                     --------------
                                                                                                                         33,467,741
-----------------------------------------------------------------------------------------------------------------------------------
MONTANA--0.1%
      555,000     Forsyth, MT Pollution Control (Northwestern Corp.)                        6.125     05/01/2023            560,600
-----------------------------------------------------------------------------------------------------------------------------------
       30,000     Lewis & Clark County, MT Environmental (Asarco) 6,7                       5.600     01/01/2027             26,419
                                                                                                                     --------------
                                                                                                                            587,019
-----------------------------------------------------------------------------------------------------------------------------------
NEBRASKA--1.3%
    3,730,000     NE Educational Facilities Authority
                  (Midland Lutheran College)                                                5.600     09/15/2029          3,736,714
-----------------------------------------------------------------------------------------------------------------------------------
    7,900,000     Omaha, NE Public Power District, Series A                                 4.700     02/01/2030          7,958,539
                                                                                                                     --------------
                                                                                                                         11,695,253
-----------------------------------------------------------------------------------------------------------------------------------
NEVADA--1.2%
    2,220,000     Clark County, NV Economic Devel.
                  (Alexander Dawson School at Rainbow Mountain)                             5.375     05/15/2033          2,318,901
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Director of the State of NV Dept. of Business
                  & Industry (Las Ventanas Retirement)                                      7.000     11/15/2034          1,057,920
-----------------------------------------------------------------------------------------------------------------------------------
    6,200,000     Las Vegas, NV Paiute Tribe, Series A 1                                    6.625     11/01/2017          6,960,120
                                                                                                                     --------------
                                                                                                                         10,336,941
-----------------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE--2.1%
      495,000     Manchester, NH Hsg. & Redevel. Authority, Series B                        0.000 8   01/01/2023            192,342
-----------------------------------------------------------------------------------------------------------------------------------
      305,000     Manchester, NH Hsg. & Redevel. Authority, Series B                        0.000 8   01/01/2029             82,707
-----------------------------------------------------------------------------------------------------------------------------------
    3,220,000     Manchester, NH Hsg. & Redevel. Authority, Series B 1                      0.000 8   01/01/2030            823,901
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     NH H&EFA (Catholic Medical Center)                                        6.125     07/01/2032          1,071,290
-----------------------------------------------------------------------------------------------------------------------------------
    4,000,000     NH H&EFA (Franklin Pierce College)                                        6.050     10/01/2034          4,355,400
-----------------------------------------------------------------------------------------------------------------------------------
       40,000     NH H&EFA (New Hampshire College)                                          6.375     01/01/2027             42,646
-----------------------------------------------------------------------------------------------------------------------------------
    1,980,000     NH H&EFA (Portsmouth Christian Academy)                                   5.750     07/01/2023          2,116,105
-----------------------------------------------------------------------------------------------------------------------------------
    6,115,000     NH H&EFA (Portsmouth Christian Academy)                                   5.850     07/01/2033          6,517,122
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     NH H&EFA (Southern New Hampshire University)                              5.000     01/01/2030          1,024,500
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     NH H&EFA (Southern New Hampshire University)                              5.000     01/01/2036          2,042,120


                      30 | OPPENHEIMER AMT-FREE MUNICIPALS


    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON      MATURITY          SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE Continued
$     500,000     NH Turnpike System, Series A                                              6.750%    11/01/2011     $      533,520
                                                                                                                     --------------
                                                                                                                         18,801,653
-----------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY--3.8%
    1,000,000     NJ EDA (Cigarette Tax)                                                    5.500     06/15/2031          1,049,690
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     NJ EDA (Cigarette Tax)                                                    5.750     06/15/2029          2,145,620
-----------------------------------------------------------------------------------------------------------------------------------
    7,480,000     NJ Tobacco Settlement Financing Corp. (TASC)                              6.000     06/01/2037          8,063,889
-----------------------------------------------------------------------------------------------------------------------------------
    9,800,000     NJ Tobacco Settlement Financing Corp. (TASC)                              6.125     06/01/2042         10,596,054
-----------------------------------------------------------------------------------------------------------------------------------
    7,000,000     NJ Tobacco Settlement Financing Corp. (TASC)                              6.250     06/01/2043          8,093,750
-----------------------------------------------------------------------------------------------------------------------------------
    3,250,000     NJ Transit Corp. ROLs, Series 15 1,2                                      9.800 3   09/15/2015          3,969,323
                                                                                                                     --------------
                                                                                                                         33,918,326
-----------------------------------------------------------------------------------------------------------------------------------
NEW MEXICO--2.1%
    1,495,000     Cabezon, NM Public Improvement District                                   6.300     09/01/2034          1,505,585
-----------------------------------------------------------------------------------------------------------------------------------
    7,895,000     Eldorado, NM Area Water & Sanitation District                             6.000     02/01/2023          7,882,289
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     Farmington, NM Pollution Control
                  (Public Service Company of New Mexico)                                    6.300     12/01/2016             26,082
-----------------------------------------------------------------------------------------------------------------------------------
    3,365,000     NM Educational Assistance Foundation                                      5.900     09/01/2031          3,532,914
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     NM Hsg. Authority (Villa Del Oso Apartments)                              6.250     01/01/2031          3,000,870
-----------------------------------------------------------------------------------------------------------------------------------
    1,275,000     NM Hsg. Authority (Villa Del Oso Apartments)                              7.500     01/01/2038          1,260,363
-----------------------------------------------------------------------------------------------------------------------------------
    1,800,000     Sandoval County, NM (Santa Ana Pueblo)                                    7.750     07/01/2015          1,879,308
-----------------------------------------------------------------------------------------------------------------------------------
      125,000     Santa Fe, NM Educational Facilities (College of Santa Fe)                 5.875     10/01/2021            126,255
                                                                                                                     --------------
                                                                                                                         19,213,666
-----------------------------------------------------------------------------------------------------------------------------------
NEW YORK--0.0%
       50,000     NYC GO RIBS                                                               9.266 3   08/27/2015             50,214
-----------------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA--0.3%
       65,000     Ashville, NC Water System                                                 5.700     08/01/2025             67,911
-----------------------------------------------------------------------------------------------------------------------------------
       95,000     Charlotte, NC Mtg. (Tryon Hills Associate)                                5.875     01/01/2025             99,532
-----------------------------------------------------------------------------------------------------------------------------------
      195,000     Charlotte-Mecklenburg, NC Hospital Authority
                  (Carolinas Medical Center)                                                5.875     01/15/2026            201,195
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     Kinston, NC Enterprise System                                             5.700     04/01/2021             25,994
-----------------------------------------------------------------------------------------------------------------------------------
    1,130,000     Kinston, NC Hsg. Authority (Kinston Towers)                               6.750     12/01/2018          1,143,594
-----------------------------------------------------------------------------------------------------------------------------------
      105,000     NC Eastern Municipal Power Agency, Series A                               5.625     01/01/2024            110,562
-----------------------------------------------------------------------------------------------------------------------------------
      140,000     NC Eastern Municipal Power Agency, Series B                               5.500     01/01/2017            140,294
-----------------------------------------------------------------------------------------------------------------------------------
      640,000     NC Eastern Municipal Power Agency, Series B                               5.500     01/01/2021            650,080
-----------------------------------------------------------------------------------------------------------------------------------
      475,000     NC Eastern Municipal Power Agency, Series B                               5.500     01/01/2021            475,979
-----------------------------------------------------------------------------------------------------------------------------------
       20,000     NC Eastern Municipal Power Agency, Series B                               6.250     01/01/2023             20,058
-----------------------------------------------------------------------------------------------------------------------------------
       30,000     NC HFA (Multifamily Hsg.)                                                 5.450     09/01/2024             30,143
                                                                                                                     --------------
                                                                                                                          2,965,342


                      31 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON      MATURITY          SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
OHIO--0.8%
$     490,000     Cleveland, OH Rock Glen Hsg. Assistance Corp.
                  (Ambleside Apartments)                                                    7.000%    06/01/2018     $      518,954
-----------------------------------------------------------------------------------------------------------------------------------
      530,000     Cleveland-Cuyahoga County, OH Port Authority
                  (Myers University)                                                        5.600     05/15/2025            539,673
-----------------------------------------------------------------------------------------------------------------------------------
       90,000     Cuyahoga County, OH Hospital
                  (University Hospitals Health System)                                      5.625     01/15/2026             92,758
-----------------------------------------------------------------------------------------------------------------------------------
      920,000     Glenwillow Village, OH GO                                                 5.875     12/01/2024            993,306
-----------------------------------------------------------------------------------------------------------------------------------
    1,500,000     Greene County, OH University Hsg.
                  (Central State University)                                                5.625     09/01/2032          1,575,105
-----------------------------------------------------------------------------------------------------------------------------------
      200,000     Montgomery County, OH Hospital Revenue
                  (Kettering Medical Center)                                                5.500     04/01/2026            206,838
-----------------------------------------------------------------------------------------------------------------------------------
      200,000     OH Air Quality Devel. Authority
                  (Cincinnati Gas & Electric Company)                                       5.450     01/01/2024            201,990
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     OH Air Quality Devel. Authority
                  (Dayton Power & Light Company)                                            6.100     09/01/2030             25,567
-----------------------------------------------------------------------------------------------------------------------------------
      755,000     OH Air Quality Devel. Authority
                  (Dayton Power & Light Company)                                            6.100     09/01/2030            770,704
-----------------------------------------------------------------------------------------------------------------------------------
      180,000     OH Air Quality Devel. Authority
                  (Dayton Power & Light Company)                                            6.400     08/15/2027            183,096
-----------------------------------------------------------------------------------------------------------------------------------
       70,000     OH Water Devel. Authority
                  (Dayton Power & Light Company)                                            6.400     08/15/2027             71,484
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     Port of Greater Cincinnati, OH
                  (Public Parking Infrastructure)                                           6.300     02/15/2024            535,595
-----------------------------------------------------------------------------------------------------------------------------------
    1,485,000     Port of Greater Cincinnati, OH
                  (Public Parking Infrastructure)                                           6.400     02/15/2034          1,579,194
                                                                                                                     --------------
                                                                                                                          7,294,264
-----------------------------------------------------------------------------------------------------------------------------------
OKLAHOMA--1.6%
      130,000     Claremore, OK Industrial & Redevel. Student Hsg.
                  (RSU Foundation)                                                          5.750     09/01/2034            136,782
-----------------------------------------------------------------------------------------------------------------------------------
       15,000     Comanche County, OK Hospital Authority, Series A                          5.375     07/01/2023             15,304
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     Langston, OK Economic Devel. Authority
                  (LDF Student Hsg.)                                                        5.000     05/01/2030          2,022,180
-----------------------------------------------------------------------------------------------------------------------------------
      210,000     Tulsa, OK Metropolitan Utility Authority                                  5.750     09/01/2025            214,677
-----------------------------------------------------------------------------------------------------------------------------------
   12,745,000     Tulsa, OK Municipal Airport Trust (American Airlines)                     6.250     06/01/2020         11,982,849
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     Tulsa, OK Municipal Airport Trust (American Airlines)                     7.350     12/01/2011             25,001
                                                                                                                     --------------
                                                                                                                         14,396,793
-----------------------------------------------------------------------------------------------------------------------------------
OREGON--0.0%
       40,000     OR Hsg. & Community Services (Single Family Mtg.)                         6.400     07/01/2018             40,442
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     OR Hsg. (Elderly & Disabled Hsg.)                                         5.500     08/01/2026             50,033
                                                                                                                     --------------
                                                                                                                             90,475


                      32 | OPPENHEIMER AMT-FREE MUNICIPALS


    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON      MATURITY          SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA--3.0%
$   8,200,000     Allegheny County, PA HDA
                  (West Penn Allegheny Health System) 1                                     9.250%    11/15/2030     $    9,855,990
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     Beaver County, PA IDA (Toledo Edison Company)                             7.750     05/01/2020             25,846
-----------------------------------------------------------------------------------------------------------------------------------
    1,500,000     Chester County, PA H&EFA (Jenners Pond)                                   7.750     07/01/2034          1,563,090
-----------------------------------------------------------------------------------------------------------------------------------
    6,000,000     Cumberland County, PA Municipal Authority
                  (Wesley Affiliated Services)                                              7.250     01/01/2035          6,587,220
-----------------------------------------------------------------------------------------------------------------------------------
    3,955,000     Northumberland County, PA IDA (NHS Youth Services)                        7.750     02/15/2029          4,150,377
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Philadelphia, PA H&HEFA
                  (Centralized Comprehensive Human Services)                                7.250     01/01/2021          1,073,870
-----------------------------------------------------------------------------------------------------------------------------------
    1,200,000     Philadelphia, PA H&HEFA
                  (Temple University Children's Medical Center)                             5.625     06/15/2019          1,225,464
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Philadelphia, PA Redevel. Authority
                  (Beech Student Hsg. Complex), Series A                                    5.625     07/01/2023          1,065,990
-----------------------------------------------------------------------------------------------------------------------------------
    1,500,000     Philadelphia, PA Redevel. Authority
                  (Beech Student Hsg. Complex), Series A                                    5.625     07/01/2028          1,586,670
                                                                                                                     --------------
                                                                                                                         27,134,517
-----------------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND--0.8%
    5,000,000     Central Falls, RI Detention Facility 1                                    7.250     07/15/2035          5,142,600
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     Providence, RI HDC (Barbara Jordan Apartments)                            6.750     07/01/2025             50,578
-----------------------------------------------------------------------------------------------------------------------------------
       40,000     RI Hsg. & Mtg. Finance Corp.
                  (Homeownership Opportunity)                                               6.500     04/01/2027             40,055
-----------------------------------------------------------------------------------------------------------------------------------
    1,500,000     Tiverton, RI Special Obligation Tax
                  (Mount Hope Bay Village)                                                  6.875     05/01/2022          1,595,025
                                                                                                                     --------------
                                                                                                                          6,828,258
-----------------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA--0.8%
       15,000     Greenville County, SC School District                                     5.500     12/01/2028             16,260
-----------------------------------------------------------------------------------------------------------------------------------
    2,500,000     Greenville County, SC School District ROLs 2                             10.957 3   12/01/2020          2,884,550
-----------------------------------------------------------------------------------------------------------------------------------
       35,000     Marion County, SC Hospital District                                       5.375     11/01/2025             35,859
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     SC Connector 2000 Association Toll Road, Series B                         0.000 8   01/01/2021            214,210
-----------------------------------------------------------------------------------------------------------------------------------
   10,355,000     SC Connector 2000 Association Toll Road, Series B                         0.000 8   01/01/2026          3,292,476
-----------------------------------------------------------------------------------------------------------------------------------
      600,000     SC Jobs-Economic Devel. Authority
                  (Oconee Memorial Hospital)                                                6.150     03/01/2025            613,506
                                                                                                                     --------------
                                                                                                                          7,056,861
-----------------------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA--1.6%
    6,000,000     SD Educational Enhancement Funding Corp.
                  Tobacco Settlement 1                                                      6.500     06/01/2032          6,563,640
-----------------------------------------------------------------------------------------------------------------------------------
    7,500,000     Sioux Falls, SD Health Facilities
                  (Rummel Memorial Home)                                                    6.750     11/15/2033          7,747,050
                                                                                                                     --------------
                                                                                                                         14,310,690


                      33 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON      MATURITY          SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
TENNESSEE--2.5%
$   3,500,000     Bradley County, TN Industrial Devel. Board (Olin Corp.)                   6.625%    11/01/2017     $    3,815,945
-----------------------------------------------------------------------------------------------------------------------------------
    2,750,000     Chattanooga, TN Health Educational & Hsg. Board
                  (Campus Devel. Foundation Phase I)                                        5.000     10/01/2025          2,723,958
-----------------------------------------------------------------------------------------------------------------------------------
    5,000,000     Chattanooga, TN Health Educational & Hsg. Board
                  (Campus Devel. Foundation Phase I)                                        5.125     10/01/2035          4,976,800
-----------------------------------------------------------------------------------------------------------------------------------
      100,000     Hamilton County, TN Industrial Devel. Board (Park at 58)                  6.700     03/01/2021             86,616
-----------------------------------------------------------------------------------------------------------------------------------
    3,020,000     Maury County, TN Industrial Devel. Board
                  (General Motors Company) 1                                                6.500     09/01/2024          3,029,332
-----------------------------------------------------------------------------------------------------------------------------------
    1,500,000     Shelby County, TN HE&HF
                  (Cornerstone-Cameron & Stonegate)                                         6.000     07/01/2028          1,068,000
-----------------------------------------------------------------------------------------------------------------------------------
    5,980,000     Smyrna, TN Hsg. Association
                  (Imperial Garden Apartments)                                              6.450     10/20/2035          6,701,965
                                                                                                                     --------------
                                                                                                                         22,402,616
-----------------------------------------------------------------------------------------------------------------------------------
TEXAS--12.3%
       15,000     Argyle, TX Independent School District                                    5.500     08/15/2026             15,773
-----------------------------------------------------------------------------------------------------------------------------------
   26,055,000     Austin, TX Convention Enterprises (Convention Center)                     5.750     01/01/2032         27,126,121
-----------------------------------------------------------------------------------------------------------------------------------
   10,765,000     Bexar County, TX HFC (American Opportunity Hsg.) 1                        6.750     12/01/2037         10,242,898
-----------------------------------------------------------------------------------------------------------------------------------
      200,000     Bexar County, TX HFC
                  (American Opportunity Hsg.-Nob Hill Apartments)                           6.000     06/01/2031            200,290
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Bexar County, TX HFC
                  (The Army Retirement Residence Foundation)                                6.300     07/01/2032          1,079,230
-----------------------------------------------------------------------------------------------------------------------------------
      145,000     Brazos County, TX HFDC
                  (St. Joseph Hospital & Health Center)                                     6.000     01/01/2019            145,934
-----------------------------------------------------------------------------------------------------------------------------------
      200,000     Brazos River Authority, TX Special Facilities
                  (Lake Alan Henry)                                                         5.500     08/15/2013            200,284
-----------------------------------------------------------------------------------------------------------------------------------
      200,000     Dallas-Fort Worth, TX Regional Airport                                    6.000     11/01/2009            200,514
-----------------------------------------------------------------------------------------------------------------------------------
      265,000     El Paso County, TX HFC
                  (American Village Communities), Series A                                  6.250     12/01/2020            275,226
-----------------------------------------------------------------------------------------------------------------------------------
      285,000     El Paso County, TX HFC
                  (El Paso American Hsg. Foundation), Series A                              6.375     12/01/2032            293,710
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Folk, TX Avenue South Transportation District                             5.625     11/01/2031          1,001,710
-----------------------------------------------------------------------------------------------------------------------------------
      550,000     Garza County, TX Public Facility Corp.                                    7.500     10/01/2019            590,502
-----------------------------------------------------------------------------------------------------------------------------------
    3,730,000     Harris County, TX Toll Road RITES 2                                      12.454 3   08/15/2024          5,112,338
-----------------------------------------------------------------------------------------------------------------------------------
      100,000     Irving, TX Hospital Authority (Irving Healthcare System)                  5.750     07/01/2010            100,241
-----------------------------------------------------------------------------------------------------------------------------------
      165,000     Keller, TX Independent School District GO                                 5.400     08/15/2023            168,736
-----------------------------------------------------------------------------------------------------------------------------------
      650,000     Lewisville, TX Combination Contract                                       6.000     10/01/2015            722,105
-----------------------------------------------------------------------------------------------------------------------------------
    1,325,000     Lewisville, TX Combination Contract                                       6.000     10/01/2025          1,470,273
-----------------------------------------------------------------------------------------------------------------------------------
    5,510,000     Lewisville, TX Combination Contract                                       6.000     10/01/2034          6,096,650
-----------------------------------------------------------------------------------------------------------------------------------
      100,000     Lewisville, TX GO                                                         5.700     09/01/2028            106,256
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     Lewisville, TX GO                                                         6.125     09/01/2029          3,282,930
-----------------------------------------------------------------------------------------------------------------------------------
    1,175,000     Lubbock, TX HFC (Las Colinas Quail Creek Apartments)                      6.000     07/01/2022          1,201,261
-----------------------------------------------------------------------------------------------------------------------------------
    1,530,000     Lubbock, TX HFC (Las Colinas Quail Creek Apartments)                      6.000     07/01/2025          1,560,692


                      34 | OPPENHEIMER AMT-FREE MUNICIPALS


    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON      MATURITY          SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
TEXAS Continued
$     655,000     Lubbock, TX HFC (Las Colinas Quail Creek Apartments)                      6.000%    07/01/2032     $      665,552
-----------------------------------------------------------------------------------------------------------------------------------
   20,350,000     Matagorda County, TX Navigation District
                  (Centerpoint Energy)                                                      8.000     05/01/2029         22,365,429
-----------------------------------------------------------------------------------------------------------------------------------
       75,000     Mission, TX Economic Devel. Corp.                                         6.600     01/01/2020             75,739
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     North Central, TX HFDC (Northwest Senior Hsg. Corp.)                      7.250     11/15/2019          2,159,720
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     North Central, TX HFDC (Northwest Senior Hsg. Corp.)                      7.500     11/15/2029          3,245,130
-----------------------------------------------------------------------------------------------------------------------------------
    1,910,000     Nueces County, TX HFC (Dolphins Landing Apartments)                       6.750     07/01/2020          1,930,953
-----------------------------------------------------------------------------------------------------------------------------------
      100,000     Nueces, TX River Authority (Asarco) 6,7                                   5.600     04/01/2018             91,132
-----------------------------------------------------------------------------------------------------------------------------------
      200,000     Pantego, TX Economic Devel. Corp. (Sales Tax)                             5.850     02/15/2022            203,132
-----------------------------------------------------------------------------------------------------------------------------------
    1,680,000     Retama, TX Devel. Corp. (Retama Racetrack)                               10.000     12/15/2019          2,525,998
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     Ridge Parc, TX Devel. Corp (Multifamily)                                  6.100     06/20/2033            551,900
-----------------------------------------------------------------------------------------------------------------------------------
    4,020,000     Sabine River Authority, TX Pollution Control
                  (TXU Energy Company) 1                                                    6.150     08/01/2022          4,430,643
-----------------------------------------------------------------------------------------------------------------------------------
      100,000     Temple, TX Junior College District                                        5.800     07/01/2014            102,696
-----------------------------------------------------------------------------------------------------------------------------------
    2,125,000     Tomball, TX Hospital Authority
                  (Tomball Regional Hospital)                                               6.125     07/01/2023          2,155,388
-----------------------------------------------------------------------------------------------------------------------------------
      445,000     TX Affordable Hsg. Corp.
                  (Ashton Place & Woodstock Apartments)                                     6.300     08/01/2033            316,493
-----------------------------------------------------------------------------------------------------------------------------------
       50,000     TX Dormitory Finance Authority
                  (Temple Junior College Foundation)                                        5.750     09/01/2027             52,824
-----------------------------------------------------------------------------------------------------------------------------------
      525,000     TX Panhandle HFA (Amarillo Affordable Hsg.)                               6.625     03/01/2020            543,039
-----------------------------------------------------------------------------------------------------------------------------------
    1,980,000     TX Panhandle HFA (Amarillo Affordable Hsg.)                               6.750     03/01/2031          2,045,043
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     Westador, TX Municipal Utility District GO                                6.875     03/01/2009             25,676
-----------------------------------------------------------------------------------------------------------------------------------
    4,750,000     Wichita County, TX HFDC
                  (Wichita Falls Retirement Foundation)                                     6.250     01/01/2028          4,825,905
                                                                                                                     --------------
                                                                                                                        109,506,066
-----------------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--0.2%
    1,500,000     Puerto Rico Municipal Finance Agency RITES 2                              8.554 3   08/01/2015          1,840,110
-----------------------------------------------------------------------------------------------------------------------------------
UTAH--0.3%
      135,000     Emery County, UT Pollution Control (Pacificorp)                           5.650     11/01/2023            135,905
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     Murray City, UT Hospital RITES 2                                         10.954 3   05/15/2022          2,185,120
-----------------------------------------------------------------------------------------------------------------------------------
       15,000     Sandy City, UT Industrial Devel. (King Properties)                        6.125     08/01/2016             15,038
                                                                                                                     --------------
                                                                                                                          2,336,063
-----------------------------------------------------------------------------------------------------------------------------------
VERMONT--0.0%
      225,000     VT EDA (Wake Robin Corp.)                                                 6.000     03/01/2022            238,433
-----------------------------------------------------------------------------------------------------------------------------------
      130,000     VT EDA (Wake Robin Corp.)                                                 6.300     03/01/2033            138,288
                                                                                                                     --------------
                                                                                                                            376,721
-----------------------------------------------------------------------------------------------------------------------------------
VIRGINIA--3.6%
       20,000     Alexandria, VA IDA Pollution Control
                  (Potomac Electric Power Company)                                          5.375     02/15/2024             20,175


                      35 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON       MATURITY         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
VIRGINIA Continued
$   2,300,000     Buena Vista, VA Public Recreational Facilities
                  Authority (Golf Course) 1                                                 5.250%    07/15/2025     $    2,423,050
-----------------------------------------------------------------------------------------------------------------------------------
    1,090,000     Buena Vista, VA Public Recreational Facilities
                  Authority (Golf Course) 1                                                 5.500     07/15/2035          1,157,820
-----------------------------------------------------------------------------------------------------------------------------------
      920,000     Fairfax County, VA Redevel. & Hsg. Authority
                  (Burke Shire Commons)                                                     7.600     10/01/2036            988,411
-----------------------------------------------------------------------------------------------------------------------------------
       20,000     Fairfax County, VA Redevel. & Hsg. Authority
                  (Paul Spring Retirement Center)                                           6.000     12/15/2028             21,001
-----------------------------------------------------------------------------------------------------------------------------------
      465,000     Louisa, VA IDA Pollution Control
                  (Virginia Electric & Power Company)                                       5.450     01/01/2024            472,538
-----------------------------------------------------------------------------------------------------------------------------------
    4,000,000     Norfolk, VA Water                                                         5.875     11/01/2020          4,109,080
-----------------------------------------------------------------------------------------------------------------------------------
      315,000     Norton, VA IDA (Norton Community Hospital)                                6.000     12/01/2022            340,087
-----------------------------------------------------------------------------------------------------------------------------------
    3,000,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           0.000 8   08/15/2008          2,408,850
-----------------------------------------------------------------------------------------------------------------------------------
      700,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           0.000 8   08/15/2012            485,926
-----------------------------------------------------------------------------------------------------------------------------------
       35,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           0.000 8   08/15/2015             20,613
-----------------------------------------------------------------------------------------------------------------------------------
    2,715,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           0.000 8   08/15/2017          1,415,764
-----------------------------------------------------------------------------------------------------------------------------------
    4,610,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           0.000 8   08/15/2018          2,254,982
-----------------------------------------------------------------------------------------------------------------------------------
    3,255,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           0.000 8   08/15/2020          1,420,157
-----------------------------------------------------------------------------------------------------------------------------------
   13,855,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           0.000 8   08/15/2021          5,706,320
-----------------------------------------------------------------------------------------------------------------------------------
   12,270,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road) 1                                         0.000 8   08/15/2022          4,767,877
-----------------------------------------------------------------------------------------------------------------------------------
      585,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           0.000 8   08/15/2024            198,508
-----------------------------------------------------------------------------------------------------------------------------------
      985,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           0.000 8   08/15/2030            236,006
-----------------------------------------------------------------------------------------------------------------------------------
    1,150,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           5.000     08/15/2010          1,186,662
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road) 1                                         5.000     08/15/2011          1,027,310
-----------------------------------------------------------------------------------------------------------------------------------
       25,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                                           5.500     08/15/2028             25,225
-----------------------------------------------------------------------------------------------------------------------------------
    1,105,000     Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road) 1                                         5.500     08/15/2028          1,151,509
                                                                                                                     --------------
                                                                                                                         31,837,871


                      36 | OPPENHEIMER AMT-FREE MUNICIPALS


    PRINCIPAL                                                                                                                 VALUE
       AMOUNT                                                                              COUPON       MATURITY         SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------------------
WASHINGTON--4.9%
$   2,500,000     King County, WA Sewer RITES 2                                            11.454% 3  01/01/2024      $   3,158,750
-----------------------------------------------------------------------------------------------------------------------------------
      200,000     Kitsap County, WA Consolidated Hsg. Authority                             5.600     12/01/2028            204,502
-----------------------------------------------------------------------------------------------------------------------------------
      100,000     Port Camas, WA Public Industrial Corp.
                  (James River Corp. of VA)                                                 6.700     04/01/2023            100,099
-----------------------------------------------------------------------------------------------------------------------------------
       20,000     Port of Seattle, WA, Series A                                             5.500     09/01/2021             20,788
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     Skagit County, WA Public Hospital District
                  (Skagit Valley Hospital)                                                  5.375     12/01/2022            518,435
-----------------------------------------------------------------------------------------------------------------------------------
      500,000     Skagit County, WA Public Hospital District
                  (Skagit Valley Hospital)                                                  5.500     12/01/2030            517,340
-----------------------------------------------------------------------------------------------------------------------------------
    2,200,000     Vancouver, WA Downtown Redevel. Authority
                  (Conference Center)                                                       5.250     01/01/2034          2,250,996
-----------------------------------------------------------------------------------------------------------------------------------
    3,250,000     Vancouver, WA Downtown Redevel. Authority
                  (Conference Center)                                                       6.000     01/01/2034          3,501,095
-----------------------------------------------------------------------------------------------------------------------------------
   15,030,000     WA Health Care Facilities Authority
                  (Overlake Hospital Medical Center)                                        5.000     07/01/2025         15,522,233
-----------------------------------------------------------------------------------------------------------------------------------
    5,855,000     WA Health Care Facilities Authority
                  (Overlake Hospital Medical Center)                                        5.000     07/01/2030          6,004,478
-----------------------------------------------------------------------------------------------------------------------------------
   10,595,000     WA Health Care Facilities Authority
                  (Overlake Hospital Medical Center)                                        5.000     07/01/2038         10,814,846
-----------------------------------------------------------------------------------------------------------------------------------
       90,000     WA Health Care Facilities Authority
                  (Yakima Valley Memorial Hospital Association)                             5.375     12/01/2027             92,994
-----------------------------------------------------------------------------------------------------------------------------------
    1,350,000     WA HFC (Nickerson Area Properties)                                        5.300     01/01/2028          1,388,624
                                                                                                                     --------------
                                                                                                                         44,095,180
-----------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA--0.4%
    1,540,000     West Liberty State College, WV, Series A                                  6.000     06/01/2023          1,586,878
-----------------------------------------------------------------------------------------------------------------------------------
    1,695,000     West Liberty State College, WV, Series A                                  6.125     06/01/2028          1,754,495
-----------------------------------------------------------------------------------------------------------------------------------
      110,000     WV GO                                                                     5.750     11/01/2021            115,870
                                                                                                                     --------------
                                                                                                                          3,457,243
-----------------------------------------------------------------------------------------------------------------------------------
WISCONSIN--0.9%
      650,000     New Berlin, WI Hsg. Authority (Apple Glen)                                6.700     11/01/2020            671,938
-----------------------------------------------------------------------------------------------------------------------------------
    2,000,000     WI H&EFA (AHC/SLMC/HMH/AMCS Obligated Group)                              5.875     08/15/2026          2,096,440
-----------------------------------------------------------------------------------------------------------------------------------
    2,275,000     WI H&EFA (Hess Memorial Hospital Association)                             7.875     11/01/2022          2,342,704
-----------------------------------------------------------------------------------------------------------------------------------
      870,000     WI H&EFA (Three Pillars Senior Living)                                    5.500     08/15/2034            884,416
-----------------------------------------------------------------------------------------------------------------------------------
    1,075,000     WI H&EFA (WMA/MHCC/MVS Obligated Group)                                   5.600     08/15/2023          1,112,303
-----------------------------------------------------------------------------------------------------------------------------------
    1,000,000     WI H&EFA (WMA/MHCC/MVS Obligated Group)                                   5.750     08/15/2026          1,038,750
-----------------------------------------------------------------------------------------------------------------------------------
      130,000     WI Hsg. & Economic Devel. Authority, Series A                             6.850     11/01/2012            130,242
                                                                                                                     --------------
                                                                                                                          8,276,793
-----------------------------------------------------------------------------------------------------------------------------------
WYOMING--1.4%
   11,680,000     Sweetwater County, WY Pollution Control
                  (Idaho Power Company) 1                                                   6.050     07/15/2026         12,153,624


                      37 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

                                                                          VALUE
                                                                     SEE NOTE 1
-------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $897,909,258)--106.3%           $ 949,897,200
-------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(6.3)                        (56,652,440)
                                                                  -------------
NET ASSETS--100.0%                                                $ 893,244,760
                                                                  =============

FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Security has been segregated for collateral to cover borrowings. See Note 6
of Notes to Financial Statements.

2. Illiquid security. The aggregate value of illiquid securities as of July 31,
2005 was $87,388,761, which represents 9.78% of the Fund's net assets. See Note
5 of Notes to Financial Statements.

3. Represents the current interest rate for a variable rate bond known as an
"inverse floater." See Note 1 of Notes to Financial Statements.

4. Represents the current interest rate for a variable or increasing rate
security.

5. When-issued security or forward commitment to be delivered and settled after
July 31, 2005. See Note 1 of Notes to Financial Statements.

6. Issue is in default. See Note 1 of Notes to Financial Statements.

7. Non-income producing security.

8. Represents a zero coupon bond.

TO SIMPLIFY THE LISTINGS OF SECURITIES, ABBREVIATIONS ARE USED PER THE TABLE
BELOW:

ADA      Atlanta Development Authority               HE&HF    Higher Educational and Housing Facilities
AHC      Aurora Health Center                        HFA      Housing Finance Agency/Authority
AMCS     Aurora Medical Center of Sheboygan          HFC      Housing Finance Corp.
         County                                      HFDC     Health Facilities Development Corp.
BHM      Baptist Hospital of Miami                   HHI      Homestead Hospital
BHSSF    Baptist Health System of South Florida      HMH      Hartford Memorial Hospital
CAU      Clark Atlanta University                    IDA      Industrial Development Agency
CDA      Communities Development Authority           INFLOS   Inverse Floating Rate Securities
COP      Certificates of Participation               MHCC     Masonic Health Care Center
EDA      Economic Development Authority              MVS      Masonic Village on the Square
EDC      Economic Development Corporation            NYC      New York City
EF&CD    Environmental Facilities and Community      RIBS     Residual Interest Bonds
         Development                                 RITES    Residual Interest Tax Exempt Security
FHA      Federal Housing Agency                      ROLs     Residual Option Longs
GO       General Obligation                          SAVRS    Select Auction Variable Rate Securities
H&EFA    Health and Educational Facilities           SLMC     St. Luke's Medical Center
         Authority                                   SMH      South Miami Hospital
H&HEFA   Hospitals and Higher Education Facilities   SMHS     South Miami Health System
         Authority                                   TASC     Tobacco Settlement Asset-Backed Bonds
HDA      Hospital Development Authority              WMA      Wisconsin Masonic Home
HDC      Housing Development Corp.


                      38 | OPPENHEIMER AMT-FREE MUNICIPALS


--------------------------------------------------------------------------------
SUMMARY OF RATINGS   July 31, 2005 / Unaudited
--------------------------------------------------------------------------------

DISTRIBUTION OF INVESTMENTS BY RATINGS CATEGORY, AS A PERCENTAGE OF TOTAL
INVESTMENTS AT VALUE, IS AS FOLLOWS:

RATING                                                                  PERCENT
--------------------------------------------------------------------------------
AAA                                                                        11.9%
AA                                                                          4.3
A                                                                          23.2
BBB                                                                        40.1
BB                                                                          2.5
B                                                                           2.6
CCC                                                                         1.1
CC                                                                          0.4
Not Rated                                                                  13.9
                                                                          -----
Total                                                                     100.0%
                                                                          =====

Bonds rated by any nationally recognized statistical rating organization are
included in the equivalent Standard & Poor's rating category. As a general
matter, unrated bonds may be backed by mortgage liens or equipment liens on the
underlying property, and also may be guaranteed. Bonds which are backed by a
letter of credit or by other financial institutions or agencies may be assigned
an investment-grade rating by the Manager, which reflects the quality of the
guarantor, institution or agency. Unrated bonds may also be assigned a rating
when the issuer has rated bonds outstanding with comparable credit
characteristics, or when, in the opinion of the Manager, the bond itself
possesses credit characteristics which allow for rating. The unrated bonds in
the portfolio are predominantly smaller issuers which have not applied for a
bond rating. Only those unrated bonds which subsequent to purchase have not been
designated investment grade by the Manager are included in the "Not Rated"
category.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      39 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF ASSETS AND LIABILITIES  July 31, 2005
--------------------------------------------------------------------------------

ASSETS
-----------------------------------------------------------------------------------------------------
Investments, at value (cost $897,909,258)--see accompanying statement of investments    $ 949,897,200
-----------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest                                                                                   12,992,422
Investments sold                                                                           12,556,637
Shares of beneficial interest sold                                                          8,772,798
Other                                                                                          27,162
                                                                                          -----------
Total assets                                                                              984,246,219

-----------------------------------------------------------------------------------------------------
LIABILITIES
-----------------------------------------------------------------------------------------------------
Bank overdraft                                                                              4,124,008
-----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Payable on borrowings (See Note 6)                                                         55,200,000
Investments purchased (including $22,418,783 purchased on a when-issued basis
or forward commitment)                                                                     29,741,726
Dividends                                                                                     718,662
Shares of beneficial interest redeemed                                                        655,014
Distribution and service plan fees                                                            171,281
Trustees' compensation                                                                        138,753
Interest expense                                                                              114,061
Shareholder communications                                                                     40,505
Transfer and shareholder servicing agent fees                                                  39,035
Other                                                                                          58,414
                                                                                        -------------
Total liabilities                                                                          91,001,459
-----------------------------------------------------------------------------------------------------
NET ASSETS                                                                              $ 893,244,760
                                                                                        =============

-----------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
-----------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                              $      87,913
-----------------------------------------------------------------------------------------------------
Additional paid-in capital                                                                852,484,880
-----------------------------------------------------------------------------------------------------
Accumulated net investment income                                                           4,921,759
-----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments                                              (16,237,734)
-----------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                 51,987,942
                                                                                        -------------
NET ASSETS                                                                              $ 893,244,760
                                                                                        =============


                      40 | OPPENHEIMER AMT-FREE MUNICIPALS


---------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
---------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $780,570,711 and
76,790,451 shares of beneficial interest outstanding)                                             $ 10.16
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price)   $ 10.67
---------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $41,867,037 and 4,132,552 shares
of beneficial interest outstanding)                                                               $ 10.13
---------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $70,807,012 and 6,990,479 shares
of beneficial interest outstanding)                                                               $ 10.13

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      41 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENT OF OPERATIONS  For the Year Ended July 31, 2005
--------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
----------------------------------------------------------------------------------------------------------
Interest                                                                                     $ 46,826,903

----------------------------------------------------------------------------------------------------------
EXPENSES
----------------------------------------------------------------------------------------------------------
Management fees                                                                                 3,739,885
----------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                                         1,476,481
Class B                                                                                           433,615
Class C                                                                                           400,752
----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                                           369,107
Class B                                                                                            29,213
Class C                                                                                            24,484
----------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                                            58,300
Class B                                                                                             5,101
Class C                                                                                             4,320
----------------------------------------------------------------------------------------------------------
Interest expense                                                                                  588,493
----------------------------------------------------------------------------------------------------------
Custodian fees and expenses                                                                        36,738
----------------------------------------------------------------------------------------------------------
Trustees' compensation                                                                             20,540
----------------------------------------------------------------------------------------------------------
Other                                                                                             122,678
                                                                                             -------------
Total expenses                                                                                  7,309,707
Less reduction to custodian expenses                                                               (4,201)
                                                                                             -------------
Net expenses                                                                                    7,305,506

----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                                          39,521,397

----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
----------------------------------------------------------------------------------------------------------
Net realized gain on investments                                                                3,876,042
----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments                                           40,816,767

----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                                         $ 84,214,206
                                                                                             =============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      42 | OPPENHEIMER AMT-FREE MUNICIPALS


STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

YEAR ENDED JULY 31,                                                                               2005            2004
-----------------------------------------------------------------------------------------------------------------------
OPERATIONS
-----------------------------------------------------------------------------------------------------------------------
Net investment income                                                                    $  39,521,397   $  39,492,433
-----------------------------------------------------------------------------------------------------------------------
Net realized gain                                                                            3,876,042       6,203,618
-----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation                                                       40,816,767      12,342,456
                                                                                         ------------------------------
Net increase in net assets resulting from operations                                        84,214,206      58,038,507

-----------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                                                    (35,574,265)    (31,442,955)
Class B                                                                                     (2,106,289)     (2,674,280)
Class C                                                                                     (1,913,538)     (1,232,388)

-----------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Class A                                                                                    172,919,909      (4,849,786)
Class B                                                                                     (8,015,276)    (18,310,245)
Class C                                                                                     40,746,553       3,484,973

-----------------------------------------------------------------------------------------------------------------------
NET ASSETS
-----------------------------------------------------------------------------------------------------------------------
Total increase                                                                             250,271,300       3,013,826
-----------------------------------------------------------------------------------------------------------------------
Beginning of period                                                                        642,973,460     639,959,634
                                                                                         ------------------------------
End of period (including accumulated net investment income of
$4,921,759 and $4,994,454, respectively)                                                 $ 893,244,760   $ 642,973,460
                                                                                         ==============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      43 | OPPENHEIMER AMT-FREE MUNICIPALS


FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

CLASS A     YEAR ENDED JULY 31,                        2005         2004             2003        2002         2001
---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $    9.53    $    9.19        $    9.48   $    9.57    $    9.35
---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .55 1        .59              .57         .50          .52
Net realized and unrealized gain (loss)                 .63          .28             (.32)       (.10)         .22
                                                  -------------------------------------------------------------------
Total from investment operations                       1.18          .87              .25         .40          .74
---------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.55)        (.53)            (.54)       (.49)        (.52)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $   10.16    $    9.53        $    9.19   $    9.48    $    9.57
                                                  ===================================================================

---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    12.69%        9.60%            2.46%       4.39%        8.03%
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $ 780,571    $ 568,156        $ 553,344   $ 568,935    $ 584,325
---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $ 639,474    $ 567,291        $ 569,881   $ 568,951    $ 531,286
---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  5.56%        6.18%            5.82%       5.35%        5.38%
Total expenses                                         0.92%        0.92%            0.93%       0.88%        0.85% 4
Expenses after payments and waivers and
reduction to custodian expenses                         N/A 5        N/A 5,6,7       0.88%       0.85% 4       N/A
---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  31%          33%              99%         31%          20%

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 of
less than one full 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 of less than one full year.

4. Excludes interest expense.

5. Reduction to custodian expenses less than 0.01%.

6. Voluntary waiver of transfer agent fees less than 0.01%.

7. Voluntary waiver of management fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      44 | OPPENHEIMER AMT-FREE MUNICIPALS


CLASS B     YEAR ENDED JULY 31,                        2005         2004             2003        2002          2001
----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $    9.50    $    9.17        $    9.45   $    9.55     $    9.33
----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .48 1        .52              .49         .43           .45
Net realized and unrealized gain (loss)                 .63          .27             (.31)       (.11)          .21
                                                  --------------------------------------------------------------------
Total from investment operations                       1.11          .79              .18         .32           .66
----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.48)        (.46)            (.46)       (.42)         (.44)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $   10.13    $    9.50        $    9.17   $    9.45     $    9.55
                                                  ====================================================================

----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    11.87%        8.68%            1.80%       3.50%         7.23%
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $  41,867    $  47,024        $  63,104   $  72,241     $  76,880
----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $  43,648    $  55,864        $  67,721   $  73,571     $  65,563
----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  4.83%        5.42%            5.04%       4.58%         4.60%
Total expenses                                         1.69%        1.69%            1.69%       1.65%         1.62% 4
Expenses after payments and waivers and
reduction to custodian expenses                         N/A 5        N/A 5,6,7       1.64%       1.62% 4        N/A
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  31%          33%              99%         31%           20%

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 of
less than one full 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 of less than one full year.

4. Excludes interest expense.

5. Reduction to custodian expenses less than 0.01%.

6. Voluntary waiver of transfer agent fees less than 0.01%.

7. Voluntary waiver of management fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      45 | OPPENHEIMER AMT-FREE MUNICIPALS


FINANCIAL HIGHLIGHTS  Continued
--------------------------------------------------------------------------------

CLASS C    YEAR ENDED JULY 31,                       2005              2004              2003              2002           2001
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     9.50        $     9.16        $     9.45       $     9.55       $   9.33
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .47 1             .51               .49              .43            .44
Net realized and unrealized gain (loss)                  .64               .29              (.32)            (.11)           .22
                                                  ---------------------------------------------------------------------------------
Total from investment operations                        1.11               .80               .17              .32            .66
-----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.48)             (.46)             (.46)            (.42)          (.44)
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $    10.13        $     9.50        $     9.16       $     9.45       $   9.55
                                                  =================================================================================

-----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                     11.87%             8.79%             1.67%            3.50%          7.23%
-----------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $   70,807        $   27,793        $   23,511       $   20,491       $ 17,134
-----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $   40,236        $   25,810        $   22,345       $   17,776       $ 14,506
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   4.70%             5.39%             5.04%            4.57%          4.60%
Total expenses                                          1.69%             1.70%             1.71%            1.65%          1.62% 4
Expenses after payments and waivers and
reduction to custodian expenses                          N/A 5             N/A 5,6,7        1.66%            1.62% 4         N/A
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                   31%               33%               99%              31%            20%

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 of
less than one full 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 of less than one full year.

4. Excludes interest expense.

5. Reduction to custodian expenses less than 0.01%.

6. Voluntary waiver of transfer agent fees less than 0.01%.

7. Voluntary waiver of management fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      46 | OPPENHEIMER AMT-FREE MUNICIPALS


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES

Oppenheimer AMT-Free Municipals (the Fund), is registered under the Investment
Company Act of 1940, as amended, as an open end management investment company.
The Fund's investment objective is to seek as high a level of current interest
income exempt from federal income taxes as is available from investing in
municipal securities, while attempting to preserve capital. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager).

      The Fund offers Class A, Class B and Class C shares. Class A shares are
sold at their offering price, which is normally net asset value plus 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 six years 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 business. Securities listed
or traded on National Stock Exchanges or other domestic exchanges are valued
based on the last sale price of the security traded on that exchange prior to
the time when the Fund's assets are valued. Securities traded on NASDAQ are
valued based on the closing price provided 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
closing "bid" and "asked" prices, and if not, at the closing bid price.
Securities traded on foreign exchanges are valued based on the last sale price
on the principal exchange on which the security is traded, in the country that
is identified by the portfolio pricing service, prior to the time when the
Fund's assets are valued. In the absence of a sale, the security is valued at
the official closing price on the principal exchange. Corporate, government and
municipal debt instruments having a remaining maturity in excess of sixty days
and all mortgage-backed securities will be valued at the mean between the "bid"
and "asked" prices. Futures contracts traded on a commodities or futures
exchange will be valued at the final settlement price or official closing price
on the principal exchange as reported by such principal exchange at its trading
session ending at, or most recently prior to, the time when the Fund's assets
are valued. Securities may be valued primarily using dealer-supplied valuations
or a portfolio pricing service authorized by the Board of Trustees. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and


                      47 | OPPENHEIMER AMT-FREE MUNICIPALS


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

domestic 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 their respective exchanges will be fair valued.
Fair value is determined in good faith using consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).

--------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of July 31, 2005, the Fund had purchased $22,418,783
of securities issued on a when-issued basis or forward commitment.

--------------------------------------------------------------------------------
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 will invest no more than 20% of its total assets in inverse floaters.
Inverse floaters amount to $87,387,495 as of July 31, 2005, which represents
8.88% of the Fund's total assets.

--------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of July 31, 2005, securities with an aggregate
market value of $226,604, representing 0.03% of the Fund's net assets, were in
default.

--------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such


                      48 | OPPENHEIMER AMT-FREE MUNICIPALS


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 tax components of capital shown in the table below 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
                                                                    APPRECIATION
                                                                BASED ON COST OF
                                                                  SECURITIES AND
       UNDISTRIBUTED    UNDISTRIBUTED          ACCUMULATED     OTHER INVESTMENTS
       NET INVESTMENT       LONG-TERM                 LOSS    FOR FEDERAL INCOME
       INCOME                    GAIN   CARRYFORWARD 1,2,3          TAX PURPOSES
       -------------------------------------------------------------------------
       $    5,799,916         $    --        $  16,237,734         $  51,987,942

1. As of July 31, 2005, the Fund had $16,237,734 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of July 31, 2005, details
of the capital loss carryforward were as follows:

                        EXPIRING
                        ---------------------------
                        2010          $  16,237,734

2. During the fiscal year ended July 31, 2005, the Fund utilized $3,857,110 of
capital loss carryforward to offset capital gains realized in that fiscal year.

3. During the fiscal year ended July 31, 2004, the Fund utilized $6,159,705 of
capital loss carryforward to offset capital gains realized in that fiscal year.

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 July 31, 2005. Net assets of the
Fund were unaffected by the reclassifications.

                                        INCREASE TO
                                    ACCUMULATED NET
       INCREASE TO                    REALIZED LOSS
       PAID-IN CAPITAL               ON INVESTMENTS
       --------------------------------------------
       $  2,051,495                    $  2,051,495


                      49 | OPPENHEIMER AMT-FREE MUNICIPALS


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

The tax character of distributions paid during the years ended July 31, 2005 and
July 31, 2004 was as follows:

                                               YEAR ENDED      YEAR ENDED
                                            JULY 31, 2005   JULY 31, 2004
                ---------------------------------------------------------
                Distributions paid from:
                Exempt-interest dividends   $  39,594,092   $  35,349,623

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 July 31, 2005 are noted below. 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   $  897,909,258
                                                 ===============
                Gross unrealized appreciation    $   54,975,431
                Gross unrealized depreciation        (2,987,489)
                                                 ---------------
                Net unrealized appreciation      $   51,987,942
                                                 ===============

--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended July 31,
2005, the Fund's projected benefit obligations were increased by $3,101 and
payments of $9,858 were made to retired trustees, resulting in an accumulated
liability of $113,640 as of July 31, 2005.

      The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of the annual 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 to the Plan.

--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
daily and paid monthly. Capital gain distributions, if any, are declared and
paid annually.

--------------------------------------------------------------------------------
INVESTMENT INCOME. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.


                      50 | OPPENHEIMER AMT-FREE MUNICIPALS


--------------------------------------------------------------------------------
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 overdrafts at a rate equal to the Federal
Funds Rate plus 0.50%. 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.

--------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.

--------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST

The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:

                                 YEAR ENDED JULY 31, 2005          YEAR ENDED JULY 31, 2004
                                  SHARES           AMOUNT           SHARES           AMOUNT
--------------------------------------------------------------------------------------------
CLASS A
Sold                          22,462,562    $ 225,450,851        8,210,670    $  78,148,633
Dividends and/or
distributions reinvested       2,353,091       23,430,233        2,229,147       21,257,888
Redeemed                      (7,639,925)     (75,961,175)     (11,015,574)    (104,256,307)
                              --------------------------------------------------------------
Net increase (decrease)       17,175,728    $ 172,919,909         (575,757)   $  (4,849,786)
                              ==============================================================

--------------------------------------------------------------------------------------------
CLASS B
Sold                             907,824    $   9,033,823          723,519    $   6,876,990
Dividends and/or
distributions reinvested         126,314        1,251,676          164,028        1,558,967
Redeemed                      (1,851,835)     (18,300,775)      (2,822,542)     (26,746,202)
                              --------------------------------------------------------------
Net decrease                    (817,697)   $  (8,015,276)      (1,934,995)   $ (18,310,245)
                              ==============================================================

--------------------------------------------------------------------------------------------
CLASS C
Sold                           4,627,986    $  46,321,787        1,005,569    $   9,584,113
Dividends and/or
distributions reinvested         125,410        1,246,348           94,290          896,886
Redeemed                        (688,957)      (6,821,582)        (739,420)      (6,996,026)
                              --------------------------------------------------------------
Net increase                   4,064,439    $  40,746,553          360,439    $   3,484,973
                              ==============================================================


                      51 | OPPENHEIMER AMT-FREE MUNICIPALS


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
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 July 31, 2005, were as follows:

                                   PURCHASES          SALES
      -----------------------------------------------------
      Investment securities     $396,576,290   $188,346,704

--------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES

MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.60% of the first $200 million of average annual net assets,
0.55% of the next $100 million, 0.50% of the next $200 million, 0.45% of the
next $250 million, 0.40% of the next $250 million, and 0.35% of average annual
net assets over $1 billion.

--------------------------------------------------------------------------------
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 July 31, 2005, the Fund paid $419,357
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 for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual 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 quarterly for
providing personal services 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
years. 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 for Class B and Class C shares 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% per year on Class B and
Class C shares. The Distributor also receives a service fee of up to 0.25% per
year under each plan. If either the Class B or Class C plan is terminated by the
Fund or by the 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. The Distributor's aggregate uncompensated expenses under the plan
at July 31, 2005 for Class B and Class C


                      52 | OPPENHEIMER AMT-FREE MUNICIPALS


shares were $1,488,971 and $1,095,099, respectively. Fees incurred by the Fund
under the plans are detailed in the Statement of Operations.

--------------------------------------------------------------------------------
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 table below for the period indicated.

                                       CLASS A         CLASS B          CLASS C
                       CLASS A      CONTINGENT      CONTINGENT       CONTINGENT
                     FRONT-END        DEFERRED        DEFERRED         DEFERRED
                 SALES CHARGES   SALES CHARGES   SALES CHARGES    SALES CHARGES
                   RETAINED BY     RETAINED BY     RETAINED BY      RETAINED BY
YEAR ENDED         DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR      DISTRIBUTOR
--------------------------------------------------------------------------------
July 31, 2005         $391,535         $26,145        $122,094           $8,476

--------------------------------------------------------------------------------
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. This undertaking may be amended or
withdrawn at any time.

--------------------------------------------------------------------------------
5. ILLIQUID SECURITIES

As of July 31, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.

--------------------------------------------------------------------------------
6. 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 to purchase portfolio securities, to meet redemption
obligations or for temporary and emergency purposes. The purchase of securities
with borrowed funds creates leverage in the Fund. Until terminated on January
21, 2005, the Fund had entered into an agreement which enabled it to participate
with certain other Oppenheimer funds in a committed, unsecured line of credit
with a bank, which permitted borrowings up to $540 million, collectively.
Interest was charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.75%. The Fund also paid a commitment fee equal to
its pro rata share of the average unutilized amount of the credit facility at a
rate of 0.09% per annum.

      Effective January 21, 2005 the Fund entered into a Revolving Credit and
Security Agreement (the "Agreement") with a conduit lender and a bank which
enables it to


                      53 | OPPENHEIMER AMT-FREE MUNICIPALS


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
6. BORROWINGS Continued

participate with certain other Oppenheimer funds in a committed, secured
borrowing facility that permits borrowings of up to $800 million, collectively.
To secure the loan, the Fund pledges investment securities in accordance with
the terms of the Agreement. Interest is charged to the Fund, based on its
borrowings, at current commercial paper issuance rates (3.3439% as of July 31,
2005). The Fund pays additional fees of 0.30% per annum on its outstanding
borrowings to manage and administer the facility and is allocated its pro-rata
share of a 0.13% per annum commitment fee for a liquidity backstop facility with
respect to the $800 million facility size.

      For the year ended July 31, 2005, the average daily loan balance was
$20,816,438 at an average daily interest rate of 2.749%. The Fund had borrowings
outstanding of $55,200,000 at July 31, 2005 at an interest rate of 3.3439%. The
Fund had gross borrowings and gross loan repayments of $276,000,000 and
$252,600,000, respectively, during the year ended July 31, 2005. The maximum
amount of borrowings outstanding at any month-end during the year ended July 31,
2005 was $55,200,000. The Fund paid $52,789 in fees and $478,177 in interest
during the year ended July 31, 2005.

--------------------------------------------------------------------------------
7. LITIGATION

A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") including the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.

      The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.








                                     A-7
                                  Appendix A

                      MUNICIPAL BOND RATINGS DEFINITIONS

Below are summaries of the rating definitions used by the
nationally-recognized rating agencies listed below for municipal securities.
Those ratings represent the opinion of the agency as to the credit quality of
issues that they rate. The summaries below are based upon publicly available
information provided by the rating organizations.

Moody's Investors Service, Inc. ("Moody's")
Municipal Ratings are opinions of the investment quality of issuers and
issues in the U.S. municipal and tax-exempt markets. As such, these ratings
incorporate Moody's assessment of the default probability and loss severity
of these issuers and issues.

Municipal Ratings are based upon the analysis of four primary factors
relating to municipal finance: economy, debt, finances, and
administration/management strategies. Each of the factors is evaluated
individually and for its effect on the other factors in the context of the
municipality's ability to repay its debt.

MUNICIPAL LONG-TERM RATING DEFINITIONS

Aaa: Issuers or issues rated Aaa demonstrate the strongest creditworthiness
relative to other US municipal or tax-exempt issuers or issues.

Aa: Issuers or issues rated Aa demonstrate very strong creditworthiness
relative to other US municipal or tax-exempt issuers or issues.

A: Issuers or issues rated A present above-average creditworthiness relative
to other US municipal or tax-exempt issuers or issues.

Baa: Issuers or issues rated Baa represent average creditworthiness relative
to other US municipal or tax- exempt issuers or issues.

Ba: Issuers or issues rated Ba demonstrate below-average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.

B: Issuers or issues rated B demonstrate weak creditworthiness relative to
other US municipal or tax- exempt issuers or issues.

Caa: Issuers or issues rated Caa demonstrate very weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.

Ca: Issuers or issues rated Ca demonstrate extremely weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.

C: Issuers or issues rated C demonstrate the weakest creditworthiness
relative to other US municipal or tax-exempt issuers or issues.

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its 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.

MIG/VMIG RATINGS: U.S. SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for short-term
obligations that are considered investment grade. These ratings are
designated as Moody's 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.

In the case of variable rate demand obligations (VRDOs), a two-component
rating is assigned. 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 demand feature, using the MIG rating scale.

The short-term rating assigned to the demand feature of VRDOs is designated
as VMIG. 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.

MIG ratings expire at note maturity. By contrast, VMIG rating expirations
will be a function of each issue's specific structural or credit features.

MIG 1/VMIG 1: 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/VMIG 2: Denotes strong credit quality. Margins of protection are ample
although not as large as in the preceding group.

MIG 3/VMIG 3: 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: Denotes speculative-grade credit quality. Debt instruments in this
category may lack margins of protection.


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:
o     Likelihood of payment-capacity and willingness of the obligor to meet
      its financial commitment on an obligation in accordance with the terms
      of the obligation;
o     Nature of and provisions of the obligation; and
o     Protection afforded by, and relative position of, the obligation in the
      event of bankruptcy, reorganization, or other arrangement under the
      laws of bankruptcy and other laws affecting creditors' rights.
   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' are 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

An obligation 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' are 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' are 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' are 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.

CC: An obligation rated `CC' are currently highly vulnerable to nonpayment.

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' are 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.

N.R. Not rated.

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.

Bond Investment Quality Standards

Under present commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories (`AAA', `AA', `A', `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:
o     Amortization schedule-the larger the final maturity relative to other
      maturities, the more likely it will
      be treated as a note; and
o     Source of payment-the more dependent the issue is on the market for its
      refinancing, the more likely
      it will be treated as a note.

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.

SP-3: Speculative capacity to pay principal and interest.


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.

Speculative Grade:

BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met. 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 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.

D: Default. Denotes actual or imminent payment default.







                                     B-1
                                  Appendix B

                   MUNICIPAL BOND INDUSTRY CLASSIFICATIONS

Adult Living Facilities
Airlines
Education
Electric Utilities
Gas Utilities
General Obligation
Higher Education
Highways/Railways
Hospital/Healthcare
Hotels, Restaurants & Leisure
Manufacturing, Durable Goods
Manufacturing, Non Durable Goods
Marine/Aviation Facilities
Multi-Family Housing
Municipal Leases
Non Profit Organization
Paper, Containers & Packaging
Parking Fee Revenue
Pollution Control
Resource Recovery
Sales Tax Revenue
Sewer Utilities
Single Family Housing
Special Assessment
Special Tax
Sports Facility Revenue
Student Loans
Telephone Utilities
Tobacco
Water Utilities












                                     C-12
                                  Appendix C

        OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class
A shares(2) of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived.(3) 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.

For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds,
the term "Retirement Plan" refers to the following types of plans:
         1) plans created or qualified under Sections 401(a) or 401(k) of the
            Internal Revenue Code,
         2) non-qualified deferred compensation plans,
         3) employee benefit plans(4)
         4) Group Retirement Plans(5)
         5) 403(b)(7) custodial plan accounts
         6) Individual Retirement Accounts ("IRAs"), including traditional
            IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the
"Transfer Agent") of the particular Oppenheimer fund. These waivers and
special arrangements may be amended or terminated at any time by a particular
fund, the Distributor, and/or OppenheimerFunds, Inc. (referred to in this
document as the "Manager").

Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
I.






 Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
------------------------------------------------------------------------------

Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to
Initial Sales Charge but May Be Subject to the Class A Contingent Deferred
Sales Charge (unless a waiver applies).

      There is no initial sales charge on purchases of Class A shares of any
of the Oppenheimer funds in the cases listed below. However, these purchases
may be subject to the Class A contingent deferred sales charge if redeemed
within 18 months (24 months in the case of Oppenheimer Rochester National
Municipals and Rochester Fund Municipals) 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 contingent deferred sales charge, the Distributor will pay the
applicable concession described in the Prospectus under "Class A Contingent
Deferred Sales Charge."(6) This waiver provision applies to:
|_|   Purchases of Class A shares aggregating $1 million or more.
|_|   Purchases of Class A shares by a Retirement Plan that was permitted to
         purchase such shares at net asset value but subject to a contingent
         deferred sales charge prior to March 1, 2001. That included plans
         (other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares
         costing $500,000 or more, 2) had at the time of purchase 100 or more
         eligible employees or total plan assets of $500,000 or more, or 3)
         certified to the Distributor that it projects to have annual plan
         purchases of $200,000 or more.
|_|   Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
         purchases are made:
         1) through a broker, dealer, bank or registered investment adviser
            that has made special arrangements with the Distributor for those
            purchases, or
         2) by a direct rollover of a distribution from a qualified
            Retirement Plan if the administrator of that Plan has made
            special arrangements with the Distributor for those purchases.
|_|   Purchases of Class A shares by Retirement Plans that have any of the
         following record-keeping arrangements:
         1) The record keeping is performed by Merrill Lynch Pierce Fenner &
            Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
            Retirement Plan. On the date the plan sponsor signs the
            record-keeping service agreement with Merrill Lynch, the Plan
            must have $3 million or more of its assets invested in (a) mutual
            funds, other than those advised or managed by Merrill Lynch
            Investment Management, L.P. ("MLIM"), that are made available
            under a Service Agreement between Merrill Lynch and the mutual
            fund's principal underwriter or distributor, and (b) funds
            advised or managed by MLIM (the funds described in (a) and (b)
            are referred to as "Applicable Investments").
         2) The record keeping for the Retirement Plan is performed on a
            daily valuation basis by a record keeper whose services are
            provided under a contract or arrangement between the Retirement
            Plan and Merrill Lynch. On the date the plan sponsor signs the
            record keeping service agreement with Merrill Lynch, the Plan
            must have $5 million or more of its assets (excluding assets
            invested in money market funds) invested in Applicable
            Investments.
         3) The record keeping for a Retirement Plan is handled under a
            service agreement with Merrill Lynch and on the date the plan
            sponsor signs that agreement, the Plan has 500 or more eligible
            employees (as determined by the Merrill Lynch plan conversion
            manager).
II.






            Waivers of Class A Sales Charges of Oppenheimer Funds
------------------------------------------------------------------------------

A. Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers.

Class A shares purchased by the following investors are not subject to any
Class A sales charges (and no concessions are paid by the Distributor on such
purchases):
|_|   The Manager or its affiliates.
|_|   Present or former officers, directors, trustees and employees (and
         their "immediate families") of the Fund, the Manager and its
         affiliates, and retirement plans established by them for their
         employees. The term "immediate family" refers to one's spouse,
         children, grandchildren, grandparents, parents, parents-in-law,
         brothers and sisters, sons- and daughters-in-law, a sibling's
         spouse, a spouse's siblings, aunts, uncles, nieces and nephews;
         relatives by virtue of a remarriage (step-children, step-parents,
         etc.) are included.
|_|   Registered management investment companies, or separate accounts of
         insurance companies having an agreement with the Manager or the
         Distributor for that purpose.
|_|   Dealers or brokers that have a sales agreement with the Distributor, if
         they purchase shares for their own accounts or for retirement plans
         for their employees.
|_|   Employees and registered representatives (and their spouses) of dealers
         or brokers described above or financial institutions that have
         entered into sales arrangements with such dealers or brokers (and
         which are identified as such to the Distributor) or with the
         Distributor. The purchaser must certify to the Distributor at the
         time of purchase that the purchase is for the purchaser's own
         account (or for the benefit of such employee's spouse or minor
         children).
|_|   Dealers, brokers, banks or registered investment advisors that have
         entered into an agreement with the Distributor providing
         specifically for the use of shares of the Fund in particular
         investment products made available to their clients. Those clients
         may be charged a transaction fee by their dealer, broker, bank or
         advisor for the purchase or sale of Fund shares.
|_|   Investment advisors and financial planners who have entered into an
         agreement for this purpose with the Distributor and who charge an
         advisory, consulting or other fee for their services and buy shares
         for their own accounts or the accounts of their clients.
|_|   "Rabbi trusts" that buy shares for their own accounts, if the purchases
         are made through a broker or agent or other financial intermediary
         that has made special arrangements with the Distributor for those
         purchases.
|_|   Clients of investment advisors or financial planners (that have entered
         into an agreement for this purpose with the Distributor) who buy
         shares for their own accounts may also purchase shares without sales
         charge but only if their accounts are linked to a master account of
         their investment advisor or financial planner on the books and
         records of the broker, agent or financial intermediary with which
         the Distributor has made such special arrangements . Each of these
         investors may be charged a fee by the broker, agent or financial
         intermediary for purchasing shares.
|_|   Directors, trustees, officers or full-time employees of OpCap Advisors
         or its affiliates, their relatives or any trust, pension, profit
         sharing or other benefit plan which beneficially owns shares for
         those persons.
|_|   Accounts for which Oppenheimer Capital (or its successor) is the
         investment advisor (the Distributor must be advised of this
         arrangement) and persons who are directors or trustees of the
         company or trust which is the beneficial owner of such accounts.
|_|   A unit investment trust that has entered into an appropriate agreement
         with the Distributor.
|_|   Dealers, brokers, banks, or registered investment advisers that have
         entered into an agreement with the Distributor to sell shares to
         defined contribution employee retirement plans for which the dealer,
         broker or investment adviser provides administration services.
|_|   Retirement Plans and deferred compensation plans and trusts used to
         fund those plans (including, for example, plans qualified or created
         under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
         Code), in each case if those purchases are made through a broker,
         agent or other financial intermediary that has made special
         arrangements with the Distributor for those purchases.
|_|   A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
         Advisors) whose Class B or Class C shares of a Former Quest for
         Value Fund were exchanged for Class A shares of that Fund due to the
         termination of the Class B and Class C TRAC-2000 program on November
         24, 1995.
|_|   A qualified Retirement Plan that had agreed with the former Quest for
         Value Advisors to purchase shares of any of the Former Quest for
         Value Funds at net asset value, with such shares to be held through
         DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
         arrangement was consummated and share purchases commenced by
         December 31, 1996.
|_|   Effective October 1, 2005, taxable accounts established with the
         proceeds of Required Minimum Distributions from Retirement Plans.

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):
|_|   Shares issued in plans of reorganization, such as mergers, asset
         acquisitions and exchange offers, to which the Fund is a party.
|_|   Shares purchased by the reinvestment of dividends or other
         distributions reinvested from the Fund or other Oppenheimer funds or
         unit investment trusts for which reinvestment arrangements have been
         made with the Distributor.
|_|   Shares purchased by certain Retirement Plans that are part of a
         retirement plan or platform offered by banks, broker-dealers,
         financial advisors or insurance companies, or serviced by
         recordkeepers.
|_|   Shares purchased by the reinvestment of loan repayments by a
         participant in a Retirement Plan for which the Manager or an
         affiliate acts as sponsor.
|_|   Shares purchased in amounts of less than $5.

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):
|_|   Retirement Plans that have $5 million or more in plan assets.
|_|   Retirement Plans with a single plan sponsor that have $5 million or
         more in aggregate assets invested in Oppenheimer funds.

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

The Class A contingent deferred sales charge is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
|_|   To make Automatic Withdrawal Plan payments that are limited annually to
         no more than 12% of the account value adjusted annually.
|_|   Involuntary redemptions of shares by operation of law or involuntary
         redemptions of small accounts (please refer to "Shareholder Account
         Rules and Policies," in the applicable fund Prospectus).
|_|   For distributions from Retirement Plans, deferred compensation plans or
         other employee benefit plans for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established.
         2) To return excess contributions.
         3) To return contributions made due to a mistake of fact.
4)    Hardship withdrawals, as defined in the plan.(7)
         5) Under a Qualified Domestic Relations Order, as defined in the
            Internal Revenue Code, or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.
         9) Separation from service.(8)
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) if the plan has made special
            arrangements with the Distributor.
         11)      Plan termination or "in-service distributions," if the
            redemption proceeds are rolled over directly to an
            OppenheimerFunds-sponsored IRA.
|_|   For distributions from 401(k) plans sponsored by broker-dealers that
         have entered into a special agreement with the Distributor allowing
         this waiver.
|_|   For distributions from retirement plans that have $10 million or more
         in plan assets and that have entered into a special agreement with
         the Distributor.
|_|   For distributions from retirement plans which are part of a retirement
         plan product or platform offered by certain banks, broker-dealers,
         financial advisors, insurance companies or record keepers which have
         entered into a special agreement with the Distributor.
III.    Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer
                                         Funds
---------------------------------------------------------------------------------

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_|   Shares redeemed involuntarily, as described in "Shareholder Account
         Rules and Policies," in the applicable Prospectus.
|_|   Redemptions from accounts other than Retirement Plans following the
         death or disability of the last surviving shareholder. The death or
         disability must have occurred after the account was established, and
         for disability you must provide evidence of a determination of
         disability by the Social Security Administration.
|_|   The contingent deferred sales charges are generally not waived
         following the death or disability of a grantor or trustee for a
         trust account. The contingent deferred sales charges will only be
         waived in the limited case of the death of the trustee of a grantor
         trust or revocable living trust for which the trustee is also the
         sole beneficiary. The death or disability must have occurred after
         the account was established, and for disability you must provide
         evidence of a determination of disability (as defined in the
         Internal Revenue Code).
|_|   Distributions from accounts for which the broker-dealer of record has
         entered into a special agreement with the Distributor allowing this
         waiver.
|_|   Redemptions of Class B shares held by Retirement Plans whose records
         are maintained on a daily valuation basis by Merrill Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|_|   Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial institutions that have entered into
         a special arrangement with the Distributor for this purpose.
|_|   Redemptions of Class C shares of an Oppenheimer fund in amounts of $1
         million or more requested in writing by a Retirement Plan sponsor
         and submitted more than 12 months after the Retirement Plan's first
         purchase of Class C shares, if the redemption proceeds are invested
         to purchase Class N shares of one or more Oppenheimer funds.
|_|   Distributions(9) from Retirement Plans or other employee benefit plans
         for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established in an Oppenheimer fund.
         2) To return excess contributions made to a participant's account.
         3) To return contributions made due to a mistake of fact.
         4) To make hardship withdrawals, as defined in the plan.(10)
         5) To make distributions required under a Qualified Domestic
            Relations Order or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.(11)
         9) On account of the participant's separation from service.(12)
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) offered as an investment option in a
            Retirement Plan if the plan has made special arrangements with
            the Distributor.
         11)      Distributions made on account of a plan termination or
            "in-service" distributions, if the redemption proceeds are rolled
            over directly to an OppenheimerFunds-sponsored IRA.
         12)      For distributions from a participant's account under an
            Automatic Withdrawal Plan after the participant reaches age 59 1/2,
            as long as the aggregate value of the distributions does not
            exceed 10% of the account's value, adjusted annually.
         13)      Redemptions of Class B shares under an Automatic Withdrawal
            Plan for an account other than a Retirement Plan, if the
            aggregate value of the redeemed shares does not exceed 10% of the
            account's value, adjusted annually.
         14)      For distributions from 401(k) plans sponsored by
            broker-dealers that have entered into a special arrangement with
            the Distributor allowing this waiver.
|_|   Redemptions of Class B shares or Class C shares under an Automatic
         Withdrawal Plan from an account other than a Retirement Plan if the
         aggregate value of the redeemed shares does not exceed 10% of the
         account's value annually.

B. Waivers for Shares Sold or Issued in Certain Transactions.

The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_|   Shares sold to the Manager or its affiliates.
|_|   Shares sold to registered management investment companies or separate
         accounts of insurance companies having an agreement with the Manager
         or the Distributor for that purpose.
|_|   Shares issued in plans of reorganization to which the Fund is a party.
|_|   Shares sold to present or former officers, directors, trustees or
         employees (and their "immediate families" as defined above in
         Section I.A.) of the Fund, the Manager and its affiliates and
         retirement plans established by them for their employees.
IV.        Special Sales Charge Arrangements for Shareholders of Certain
     Oppenheimer Funds Who Were Shareholders of Former Quest for Value Funds
-------------------------------------------------------------------------------

The initial and contingent deferred sales charge rates and waivers for Class
A, Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described
below for certain persons who were shareholders of the former Quest for Value
Funds. To be eligible, those persons must have been shareholders on November
24, 1995, when OppenheimerFunds, Inc. became the investment advisor to those
former Quest for Value Funds. Those funds include:
   Oppenheimer Quest Value Fund, Inc.           Oppenheimer Small- & Mid- Cap
   Value Fund
   Oppenheimer Quest Balanced Fund              Oppenheimer Quest
   International Value Fund, Inc.
   Oppenheimer Quest Opportunity Value Fund

      These arrangements also apply to shareholders of the following funds
when they merged (were reorganized) into various Oppenheimer funds on
November 24, 1995:

   Quest for Value U.S. Government Income Fund  Quest for Value New York
   Tax-Exempt Fund
   Quest for Value Investment Quality Income Fund     Quest for Value
   National Tax-Exempt Fund
   Quest for Value Global Income Fund     Quest for Value California
   Tax-Exempt Fund

      All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent
deferred sales charges described in this Appendix apply to shares of an
Oppenheimer fund that are either:
|_|   acquired by such shareholder pursuant to an exchange of shares of an
         Oppenheimer fund that was one of the Former Quest for Value Funds,
         or
|_|   purchased by such shareholder by exchange of shares of another
         Oppenheimer fund that were acquired pursuant to the merger of any of
         the Former Quest for Value Funds into that other Oppenheimer fund on
         November 24, 1995.

A. Reductions or Waivers of Class A Sales Charges.

|X|   Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.

Purchases by Groups and Associations. The following table sets forth the
initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of securities.
The rates in the table apply if that Association purchased shares of any of
the Former Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995.

--------------------------------------------------------------------------------
                      Initial Sales       Initial Sales Charge   Concession as
Number of Eligible    Charge as a % of    as a % of Net Amount   % of Offering
Employees or Members  Offering Price      Invested               Price
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9 or Fewer                   2.50%                2.56%              2.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
At  least  10 but not        2.00%                2.04%              1.60%
more than 49
--------------------------------------------------------------------------------

------------------------------------------------------------------------------
      For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.

      Purchases made under this arrangement qualify for the lower of either
the sales charge rate in the table based on the number of members of an
Association, or the sales charge rate that applies under the Right of
Accumulation described in the applicable fund's Prospectus and Statement of
Additional Information. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase
shares for their individual or custodial accounts at these reduced sales
charge rates, upon request to the Distributor.

|X|   Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o     Shareholders who were shareholders of the AMA Family of Funds on
            February 28, 1991 and who acquired shares of any of the Former
            Quest for Value Funds by merger of a portfolio of the AMA Family
            of Funds.
o     Shareholders who acquired shares of any Former Quest for Value Fund by
            merger of any of the portfolios of the Unified Funds.

|X|   Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares purchased by the following investors who were
shareholders of any Former Quest for Value Fund:

      Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.

B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.

|X|   Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with:
o     withdrawals under an automatic withdrawal plan holding only either
            Class B or Class C shares if the annual withdrawal does not
            exceed 10% of the initial value of the account value, adjusted
            annually, and
o     liquidation of a shareholder's account if the aggregate net asset value
            of shares held in the account is less than the required minimum
            value of such accounts.

|X|   Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent
deferred sales charge will be waived for redemptions of Class A, Class B or
Class C shares of an Oppenheimer fund. The shares must have been acquired by
the merger of a Former Quest for Value Fund into the fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on
or after March 6, 1995, but prior to November 24, 1995:
o     redemptions following the death or disability of the shareholder(s) (as
            evidenced by a determination of total disability by the U.S.
            Social Security Administration);
o     withdrawals under an automatic withdrawal plan (but only for Class B or
            Class C shares) where the annual withdrawals do not exceed 10% of
            the initial value of the account value; adjusted annually, and
o     liquidation of a shareholder's account if the aggregate net asset value
            of shares held in the account is less than the required minimum
            account value.
      A shareholder's account will be credited with the amount of any
contingent deferred sales charge paid on the redemption of any Class A, Class
B or Class C shares of the Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another
Oppenheimer fund within 90 days after redemption.
V.         Special Sales Charge Arrangements for Shareholders of Certain
          Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
                            Investment Accounts, Inc.
---------------------------------------------------------------------------

The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix)
of the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
   Oppenheimer U. S. Government Trust,
   Oppenheimer Core Bond Fund,
   Oppenheimer Value Fund and
   Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
   Connecticut Mutual Liquid Account         Connecticut Mutual Total Return
   Account
   Connecticut Mutual Government Securities Account   CMIA LifeSpan Capital
   Appreciation Account
   Connecticut Mutual Income Account         CMIA LifeSpan Balanced Account
   Connecticut Mutual Growth Account         CMIA Diversified Income Account

A. Prior Class A CDSC and Class A Sales Charge Waivers.

|X|   Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue
to make additional purchases of Class A shares at net asset value without a
Class A initial sales charge, but subject to the Class A contingent deferred
sales charge that was in effect prior to March 18, 1996 (the "prior Class A
CDSC"). Under the prior Class A CDSC, if any of those shares are redeemed
within one year of purchase, they will be assessed a 1% contingent deferred
sales charge on an amount equal to the current market value or the original
purchase price of the shares sold, whichever is smaller (in such redemptions,
any shares not subject to the prior Class A CDSC will be redeemed first).

      Those shareholders who are eligible for the prior Class A CDSC are:
         1) persons whose purchases of Class A shares of a Fund and other
            Former Connecticut Mutual Funds were $500,000 prior to March 18,
            1996, as a result of direct purchases or purchases pursuant to
            the Fund's policies on Combined Purchases or Rights of
            Accumulation, who still hold those shares in that Fund or other
            Former Connecticut Mutual Funds, and
         2) persons whose intended purchases under a Statement of Intention
            entered into prior to March 18, 1996, with the former general
            distributor of the Former Connecticut Mutual Funds to purchase
            shares valued at $500,000 or more over a 13-month period entitled
            those persons to purchase shares at net asset value without being
            subject to the Class A initial sales charge

      Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this
arrangement they will be subject to the prior Class A CDSC.

|X|   Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of
the categories below and acquired Class A shares prior to March 18, 1996, and
still holds Class A shares:
         1) any purchaser, provided the total initial amount invested in the
            Fund or any one or more of the Former Connecticut Mutual Funds
            totaled $500,000 or more, including investments made pursuant to
            the Combined Purchases, Statement of Intention and Rights of
            Accumulation features available at the time of the initial
            purchase and such investment is still held in one or more of the
            Former Connecticut Mutual Funds or a Fund into which such Fund
            merged;
         2) any participant in a qualified plan, provided that the total
            initial amount invested by the plan in the Fund or any one or
            more of the Former Connecticut Mutual Funds totaled $500,000 or
            more;
         3) Directors of the Fund or any one or more of the Former
            Connecticut Mutual Funds and members of their immediate families;
         4) employee benefit plans sponsored by Connecticut Mutual Financial
            Services, L.L.C. ("CMFS"), the prior distributor of the Former
            Connecticut Mutual Funds, and its affiliated companies;
         5) one or more members of a group of at least 1,000 persons (and
            persons who are retirees from such group) engaged in a common
            business, profession, civic or charitable endeavor or other
            activity, and the spouses and minor dependent children of such
            persons, pursuant to a marketing program between CMFS and such
            group; and
         6) an institution acting as a fiduciary on behalf of an individual
            or individuals, if such institution was directly compensated by
            the individual(s) for recommending the purchase of the shares of
            the Fund or any one or more of the Former Connecticut Mutual
            Funds, provided the institution had an agreement with CMFS.

      Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.

      Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State
by Connecticut Mutual Life Insurance Company through the Panorama Separate
Account which is beyond the applicable surrender charge period and which was
used to fund a qualified plan, if that holder exchanges the variable annuity
contract proceeds to buy Class A shares of the Fund.

B. Class A and Class B Contingent Deferred Sales Charge Waivers.

In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B
shares of a Fund into Class A or Class B shares of a Former Connecticut
Mutual Fund provided that the Class A or Class B shares of the Fund to be
redeemed or exchanged were (i) acquired prior to March 18, 1996 or (ii) were
acquired by exchange from an Oppenheimer fund that was a Former Connecticut
Mutual Fund. Additionally, the shares of such Former Connecticut Mutual Fund
must have been purchased prior to March 18, 1996:
   1) by the estate of a deceased shareholder;
   2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
      the Internal Revenue Code;
   3) for retirement distributions (or loans) to participants or
      beneficiaries from retirement plans qualified under Sections 401(a) or
      403(b)(7)of the Code, or from IRAs, deferred compensation plans created
      under Section 457 of the Code, or other employee benefit plans;
4)    as tax-free returns of excess contributions to such retirement or
      employee benefit plans;
   5) in whole or in part, in connection with shares sold to any state,
      county, or city, or any instrumentality, department, authority, or
      agency thereof, that is prohibited by applicable investment laws from
      paying a sales charge or concession in connection with the purchase of
      shares of any registered investment management company;
   6) in connection with the redemption of shares of the Fund due to a
      combination with another investment company by virtue of a merger,
      acquisition or similar reorganization transaction;
   7) in connection with the Fund's right to involuntarily redeem or
      liquidate the Fund;
   8) in connection with automatic redemptions of Class A shares and Class B
      shares in certain retirement plan accounts pursuant to an Automatic
      Withdrawal Plan but limited to no more than 12% of the original value
      annually; or
   9) as involuntary redemptions of shares by operation of law, or under
      procedures set forth in the Fund's Articles of Incorporation, or as
      adopted by the Board of Directors of the Fund.
VI.       Special Reduced Sales Charge for Former Shareholders of Advance
                                America Funds, Inc.
------------------------------------------------------------------------------

Shareholders of Oppenheimer AMT-Free Municipals, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Capital Income Fund
who acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those
Oppenheimer funds on October 18, 1991, and who held shares of Advance America
Funds, Inc. on March 30, 1990, may purchase Class A shares of those four
Oppenheimer funds at a maximum sales charge rate of 4.50%.
VII.     Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
                            Convertible Securities Fund
------------------------------------------------------------------------------

Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to
purchase those shares at net asset value without sales charge:
|_|   the Manager and its affiliates,
|_|   present or former officers, directors, trustees and employees (and
         their "immediate families" as defined in the Fund's Statement of
         Additional Information) of the Fund, the Manager and its affiliates,
         and retirement plans established by them or the prior investment
         advisor of the Fund for their employees,
|_|   registered management investment companies or separate accounts of
         insurance companies that had an agreement with the Fund's prior
         investment advisor or distributor for that purpose,
|_|   dealers or brokers that have a sales agreement with the Distributor, if
         they purchase shares for their own accounts or for retirement plans
         for their employees,
|_|   employees and registered representatives (and their spouses) of dealers
         or brokers described in the preceding section or financial
         institutions that have entered into sales arrangements with those
         dealers or brokers (and whose identity is made known to the
         Distributor) or with the Distributor, but only if the purchaser
         certifies to the Distributor at the time of purchase that the
         purchaser meets these qualifications,
|_|   dealers, brokers, or registered investment advisors that had entered
         into an agreement with the Distributor or the prior distributor of
         the Fund specifically providing for the use of Class M shares of the
         Fund in specific investment products made available to their
         clients, and
|_|   dealers, brokers or registered investment advisors that had entered
         into an agreement with the Distributor or prior distributor of the
         Fund's shares to sell shares to defined contribution employee
         retirement plans for which the dealer, broker, or investment advisor
         provides administrative services.







Oppenheimer AMT-Free Municipals

Internet Website
     www.oppenheimerfunds.com

Investment Advisor
      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)

Custodian Bank
     Citibank, N.A.
     111 Wall Street
     New York, New York 10005

Independent Registered Public Accounting Firm
     KPMG LLP
     707 Seventeenth Street
     Denver, Colorado 80202

Legal Counsel
     Mayer, Brown, Rowe & Maw LLP
     1675 Broadway
     New York, New York 10019


1234
PX0310.001.1205




(1) In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not
have any direct or indirect financial interest in the operation of the
distribution plan or any agreement under the plan.
(2) Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
(3) In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to contingent deferred sales
charges mean the Fund's Early Withdrawal Charges and references to
"redemptions" mean "repurchases" of shares.
(4) 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.
(5) 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.
(6) 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.
(7) This provision does not apply to IRAs.
(8) 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.
(9) The distribution must be requested prior to Plan termination or the
elimination of the Oppenheimer funds as an investment option under the Plan.
(10) This provision does not apply to IRAs.
(11) This provision does not apply to loans from 403(b)(7) custodial plans
and loans from the OppenheimerFunds-sponsored Single K retirement plan.
(12) This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.