Oppenheimer U.S. Government Trust

497 1 sai.htm SAI WITH FINANCIALS Oppenheimer U.S. Government Trust

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Oppenheimer U.S. Government Trust
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6803 S. Tucson Way, Englewood, CO 80112
1.800.525.7048

Statement of Additional Information dated December 28, 2001, Revised April 11, 2002

This Statement of Additional Information is not a Prospectus. This document contains additional information about
the Fund and supplements information in the Prospectus dated December 28, 2001. It should be read together with the
Prospectus. You can obtain the Prospectus 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 website 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......................................................... 6
Investment Restrictions............................................................................ 17
How the Fund is Managed ................................................................................ 19
Organization and History........................................................................... 19
Trustees and Officers.............................................................................. 20
The Manager........................................................................................ 26

Brokerage Policies of the Fund.......................................................................... 28
Distribution and Service Plans.......................................................................... 31
Performance of the Fund................................................................................. 35

About Your Account

How To Buy Shares....................................................................................... 40
How To Sell Shares...................................................................................... 49
How To Exchange Shares.................................................................................. 55
Dividends, Capital Gains and Taxes...................................................................... 58
Additional Information About the Fund................................................................... 63

Financial Information About the Fund

Independent Auditors' Report............................................................................ 64
Financial Statements.................................................................................... 65

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

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A B O U T T H E F U N D
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Additional Information About the Fund's Investment Policies and Risks

The investment objective, 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
risks and the types of securities that the Fund's investment Manager, OppenheimerFunds, Inc., can select for the
Fund. Additional information is also provided about the strategies that 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
Fund's Manager may use in selecting portfolio securities will vary over time. The Fund is not required to use all
of the investment techniques and strategies described below in seeking its objective. It may use some of the
special investment techniques and strategies at some times or not at all.

|X| Mortgage-Related Securities. Mortgage-related securities are a form of derivative investment
collateralized by pools of commercial or residential mortgages. Pools of mortgage loans are assembled as securities
for sale to investors by government agencies or instrumentalities or by private issuers. These securities include
collateralized mortgage obligations ("CMOs"), mortgage pass-through securities, stripped mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs") and other real estate-related
securities.

Mortgage-related securities that are issued or guaranteed by agencies or instrumentalities of the U.S.
government have relatively little credit risk (depending on the nature of the issuer) but are subject to interest
rate risks and prepayment risks, as described in the Prospectus. Mortgage-related securities issued by private
issuers have greater credit risk.

As with other debt securities, the prices of mortgage-related securities tend to move inversely to changes
in interest rates. The Fund can buy mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index. Although the value of a mortgage-related
security may decline when interest rates rise, the converse is not always the case.

In periods of declining interest rates, mortgages are more likely to be prepaid. Therefore, a
mortgage-related security's maturity can be shortened by unscheduled prepayments on the underlying mortgages, and it
is not possible to predict accurately the security's yield. The principal that is returned earlier than expected may
have to be reinvested in other investments having a lower yield than the prepaid security. As a result, these
securities may be less effective as a means of "locking in" attractive long-term interest rates, and they may have
less potential for appreciation during periods of declining interest rates, than conventional bonds with comparable
stated maturities.

Prepayment risks can lead to substantial fluctuations in the value of a mortgage-related security. In turn,
this can affect the value of the Fund's shares. If a mortgage-related security has been purchased at a premium, all
or part of the premium the Fund paid may be lost if there is a decline in the market value of the security, whether
that results from interest rate changes or prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than were anticipated, the Fund may fail
to recoup its initial investment on the security.

During periods of rapidly rising interest rates, prepayments of mortgage-related securities may occur at
slower than expected rates. Slower prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate more widely in responses to changes in
interest rates. If the prepayments on the Fund's mortgage-related securities were to decrease broadly, the Fund's
effective duration, and therefore its sensitivity to interest rate changes, would increase.

As with other debt securities, the values of mortgage-related securities may be affected by changes in the
market's perception of the creditworthiness of the entity issuing the securities or guaranteeing them. Their values
may also be affected by changes in government regulations and tax policies.

o Collateralized Mortgage Obligations. CMOs are multi-class bonds that are backed by pools of mortgage loans
or mortgage pass-through certificates. They may be collateralized by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing Administration or guaranteed by the Department
of Veterans' Affairs,
(3) unsecuritized conventional mortgages,
(4) other mortgage-related securities, or
(5) any combination of these.

Each class of CMO, referred to as a "tranche," is issued at a specific coupon rate and has a stated
maturity or final distribution date. Principal prepayments on the underlying mortgages may cause the CMO to be
retired much earlier than the stated maturity or final distribution date. The principal and interest on the
underlying mortgages may be allocated among the several classes of a series of a CMO in different ways. One or more
tranches may have coupon rates that reset periodically at a specified increase over an index. These are floating
rate CMOs, and typically have a cap on the coupon rate. Inverse floating rate CMOs have a coupon rate that moves in
the reverse direction to an applicable index. The coupon rate on these CMOs will increase as general interest rates
decrease. These are usually much more volatile than fixed rate CMOs or floating rate CMOs.

|X| U.S. Government Mortgage-Related Securities. The Fund can invest in a variety of mortgage-related
securities that are issued by U.S. government agencies or instrumentalities, some of which are described below.

o GNMA Certificates. The Government National Mortgage Association ("GNMA") is a wholly-owned corporate
instrumentality of the United States within the U.S. Department of Housing and Urban Development. GNMA's principal
programs involve its guarantees of privately-issued securities backed by pools of mortgages. Ginnie Maes are debt
securities representing an interest in one or a pool of mortgages that are insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by the Veterans Administration
The Ginnie Maes in which the Fund invests are of the "fully modified pass-through" type. They provide that
the registered holders of the Ginnie Maes will receive timely monthly payments of the pro-rata share of the
scheduled principal payments on the underlying mortgages, whether or not those amounts are collected by the
issuers. Amounts paid include, on a pro rata basis, any prepayment of principal of such mortgages and interest (net
of servicing and other charges) on the aggregate unpaid principal balance of the Ginnie Maes, whether or not the
interest on the underlying mortgages has been collected by the issuers.

The Ginnie Maes purchased by the Fund are guaranteed as to timely payment of principal and interest by
GNMA. In giving that guaranty, GNMA expects that payments received by the issuers of Ginnie Maes on account of the
mortgages backing the Ginnie Maes will be sufficient to make the required payments of principal of and interest on
those Ginnie Maes. However if those payments are insufficient, the guaranty agreements between the issuers of the
Ginnie Maes and GNMA require the issuers to make advances sufficient for the payments. If the issuers fail to make
those payments, GNMA will do so.

Under Federal law, the full faith and credit of the United States is pledged to the payment of all amounts
that may be required to be paid under any guaranty issued by GNMA as to such mortgage pools. An opinion of an
Assistant Attorney General of the United States, dated December 9, 1969, states that such guaranties "constitute
general obligations of the United States backed by its full faith and credit." GNMA is empowered to borrow from the
United States Treasury to the extent necessary to make any payments of principal and interest required under those
guaranties.

Ginnie Maes are backed by the aggregate indebtedness secured by the underlying FHA-insured, FMHA-insured or
VA-guaranteed mortgages. Except to the extent of payments received by the issuers on account of such mortgages,
Ginnie Maes do not constitute a liability of those issuers, nor do they evidence any recourse against those issuers.
Recourse is solely against GNMA. Holders of Ginnie Maes (such as the Fund) have no security interest in or lien on
the underlying mortgages.

Monthly payments of principal will be made, and additional prepayments of principal may be made, to the
Fund with respect to the mortgages underlying the Ginnie Maes owned by the Fund. All of the mortgages in the pools
relating to the Ginnie Maes in the Fund are subject to prepayment without any significant premium or penalty, at the
option of the mortgagors. While the mortgages on 1-to-4-family dwellings underlying certain Ginnie Maes have a
stated maturity of up to 30 years, it has been the experience of the mortgage industry that the average life of
comparable mortgages, as a result of prepayments, refinancing and payments from foreclosures, is considerably less.

o Federal Home Loan Mortgage Corporation ("FHLMC") Certificates. FHLMC, a corporate instrumentality of the
United States, issues FHLMC Certificates representing interests in mortgage loans. FHLMC guarantees to each
registered holder of a FHLMC Certificate timely payment of the amounts representing a holder's proportionate share
in:
(i) interest payments less servicing and guarantee fees,
(ii) principal prepayments, and
(iii)

the ultimate collection of amounts representing the holder's proportionate interest in
principal payments on the mortgage loans in the pool represented by the FHLMC
Certificate, in each case whether or not such amounts are actually received.

The obligations of FHLMC under its guarantees are obligations solely of FHLMC and are not backed by the
full faith and credit of the United States or any of its agencies or instrumentalities other than FHLMC.

o Federal National Mortgage Association (Fannie Mae) Certificates. Fannie Mae, a federally-chartered and
privately-owned corporation, issues Fannie Mae Certificates which are backed by a pool of mortgage loans. Fannie
Mae guarantees to each registered holder of a Fannie Mae Certificate that the holder will receive amounts
representing the holder's proportionate interest in scheduled principal and interest payments, and any principal
prepayments, on the mortgage loans in the pool represented by such Certificate, less servicing and guarantee fees,
and the holder's proportionate interest in the full principal amount of any foreclosed or other liquidated mortgage
loan. In each case the guarantee applies whether or not those amounts are actually received. The obligations of
Fannie Mae under its guarantees are obligations solely of Fannie Mae and are not backed by the full faith and credit
of the United States or any of its agencies or instrumentalities other than Fannie Mae.

|X| Forward Rolls. The Fund can enter into "forward roll" transactions with respect to mortgage-related
securities. In this type of transaction, the Fund sells a mortgage-related security to a buyer and simultaneously
agrees to repurchase a similar security (the same type of security, having the same coupon and maturity) at a later
date at a set price. The securities that are repurchased will have the same interest rate as the securities that are
sold, but typically will be collateralized by different pools of mortgages (with different prepayment histories)
than the securities that have been sold. Proceeds from the sale are invested in short-term instruments, such as
repurchase agreements. The income from those investments, plus the fees from the forward roll transaction, are
expected to generate income to the Fund in excess of the yield on the securities that have been sold.

The Fund will only enter into "covered" rolls. To assure its future payment of the purchase price, the Fund
will identify on its books cash, U.S. government securities or other high-grade debt securities in an amount equal
to the payment obligation under the roll.

These transactions have risks. During the period between the sale and the repurchase, the Fund will not be
entitled to receive interest and principal payments on the securities that have been sold. It is possible that the
market value of the securities the Fund sells may decline below the price at which the Fund is obligated to
repurchase securities.

|X| Commercial (Privately-Issued) Mortgage-Related Securities. The Fund may invest up to 20% of its assets in
commercial mortgage-related securities issued by private entities. Generally these are multi-class debt or
pass-through certificates secured by mortgage loans on commercial properties. They are subject to the credit risk of
the issuer. These securities typically are structured to provide protection to investors in senior classes from
possible losses on the underlying loans. They do so by having holders of subordinated classes take the first loss if
there are defaults on the underlying loans. They may also be protected to some extent by guarantees, reserve funds
or additional collateralization mechanisms.

|X| "Stripped" Mortgage-Related Securities. The Fund may invest in stripped mortgage-related securities
that are created by segregating the cash flows from underlying mortgage loans or mortgage securities to create two
or more new securities. Each has a specified percentage of the underlying security's principal or interest payments.
These are a form of derivative investment.

Mortgage securities may be partially stripped so that each class receives some interest and some principal.
However, they may be completely stripped. In that case all of the interest is distributed to holders of one type of
security, known as an "interest-only" security or "I/O," and all of the principal is distributed to holders of
another type of security, known as a "principal-only" security or "P/O." Strips can be created for pass-through
certificates or CMOs.

The yields to maturity of I/Os and P/Os are very sensitive to principal repayments (including prepayments)
on the underlying mortgages. If the underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on those assets. If underlying mortgages
experience less than anticipated prepayments of principal, the yield on the P/Os based on them could decline
substantially.

|X| Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon U.S. government securities.
These will typically be U.S. Treasury Notes and Bonds that have been stripped of their unmatured interest coupons,
the coupons themselves, or certificates representing interests in those stripped debt obligations and coupons.

Zero-coupon securities do not make periodic interest payments and are sold at a deep discount from their
face value at maturity. 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. The discount typically decreases as the maturity date approaches.

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 that pay interest.
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| Portfolio Turnover. "Portfolio turnover" describes the rate at which the Fund traded its portfolio
securities during its last fiscal year. For example, if a fund sold all of its securities during the year, its
portfolio turnover rate would have been 100%. The Fund's portfolio turnover rate will fluctuate from year to year.

Increased portfolio turnover could create higher transaction costs for the Fund, which may reduce its
overall performance. Additionally, the realization of capital gains from selling portfolio securities may result in
distributions of taxable long-term capital gains to shareholders, because the Fund will normally distribute all of
its capital gains realized each year, to avoid excise taxes under the Internal Revenue Code.

Other Investment Techniques and Strategies. In seeking its objective, the Fund may from time to time employ the
types of investment strategies and investments described below. It is not required to use all of these strategies
at all times and at times may not use them.
|X| Repurchase Agreements. The Fund can acquire securities subject to repurchase agreements. It might do so
for liquidity purposes to meet anticipated redemptions of Fund shares, or pending the investment of the proceeds
from sales of Fund shares, or pending the settlement of portfolio securities transactions.

In a repurchase transaction, the Fund buys a security from, and simultaneously resells it to, an approved
vendor for delivery on an agreed-upon future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the repurchase agreement is in effect.
Approved vendors include U.S. commercial banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit requirements set by the Fund's Board
of Trustees from time to time.

The majority of these transactions run from day to day, and delivery pursuant to the resale typically
occurs 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. The Fund will not enter into a repurchase agreement
that causes more than 10% of its net assets to be subject to repurchase agreements having a maturity beyond seven
days. There is no limit on the amount of the Fund's net assets that may be subject to repurchase agreements having
maturities of seven days or less.

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

|X| Reverse Repurchase Agreements. The Fund can use reverse repurchase agreements as a cash management
tool, but not as a source of leverage for investing. When the Fund enters into a reverse repurchase agreement, it
segregates on its books an amount of cash or U.S. government securities equal in value to the purchase price of the
securities it has committed to buy, plus accrued interest, until the payment is made to the seller. Before the Fund
enters into a reverse repurchase agreement, the Manager evaluates the creditworthiness of the seller, typically a
bank or broker-dealer. As a fundamental policy, the Fund will not enter into a reverse repurchase agreement unless
the securities that collateralize the transaction have a maturity date not later than the settlement date of the
transaction.

|X| Asset-Backed Securities. Asset-backed securities are fractional interests in pools of assets,
typically accounts receivable or consumer loans. They are issued by trusts or special-purpose corporations. They are
similar to mortgage-backed securities, described above, and are backed by a pool of assets that consist of
obligations of individual borrowers. The income from the pool is passed through to the holders of participation
interest in the pools. The pools may offer a credit enhancement, such as a bank letter of credit, to try to reduce
the risks that the underlying debtors will not pay their obligations when due. However, the enhancement, if any,
might not be for the full par value of the security. If the enhancement is exhausted and any required payments of
interest or repayments of principal are not made, the Fund could suffer losses on its investment or delays in
receiving payment.

The value of an asset-backed security is affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also affected if any credit enhancement has been
exhausted. The risks of investing in asset-backed securities are ultimately related to payment of consumer loans by
the individual borrowers. As a purchaser of an asset-backed security, the Fund would generally have no recourse to
the entity that originated the loans in the event of default by a borrower. The underlying loans are subject to
prepayments, which may shorten the weighted average life of asset-backed securities and may lower their return, in
the same manner as in the case of mortgage-backed securities and CMOs, described above. Unlike mortgage-backed
securities, asset-backed securities typically do not have the benefit of a security interest in the underlying
collateral.

|X| Treasury Inflation-Protection Securities. The Fund can buy U.S. Treasury securities, called "TIPS,"
that are designed to provide an investment vehicle that is not vulnerable to inflation. The interest rate paid by
TIPS is fixed. The principal value rises or falls semi-annually based on published changes the Consumer Price Index.
If inflation occurs, the principal and interest payments on TIPS are adjusted to protect investors from inflationary
loss. If deflation occurs, the principal and interest payments will be adjusted downward, although the principal
will not fall below its face amount at maturity.

|X| Floating Rate and Variable Rate Obligations. Some of the securities the Fund can purchase have
variable or floating interest rates. Variable rates are adjusted at stated periodic intervals. Variable rate
obligations can have a demand feature that allows the Fund to tender the obligation to the issuer or a third party
prior to its maturity. The tender may be at par value plus accrued interest, according to the terms of the
obligations.

The interest rate on a floating rate demand note is adjusted automatically according to a stated prevailing
market rate, such as a bank's prime rate, the 91-day U.S. Treasury Bill rate, or some other standard. The
instrument's rate is adjusted automatically each time the base 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.
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 no more than 30 days' notice. The issuer of that type of note normally has a
corresponding right in its discretion, after a given period, to prepay the outstanding principal amount of the note
plus accrued interest. Generally the issuer must provide a specified number of days' notice to the holder.

|X| Inverse Floaters. The Fund can invest in a type of variable rate instrument known as an "inverse
floater." These pay interest at rates that vary as the rates on bonds change. However, the rates of interest on
inverse floaters move in the opposite direction of yields on other bonds in response to market changes. As interest
rates rise, inverse floaters produce less current income, and their market value can become volatile.

Inverse floaters may offer relatively high current income, reflecting the spread between short- and
long-term interest rates. As long as the 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 yields than are available from fixed-rate bonds that
have comparable maturities and credit ratings. In some cases, the holder of an inverse floater may have an option to
convert the floater to a fixed-rate bond, pursuant to a "rate-lock" option.

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

|X| When-Issued and Delayed-Delivery Transactions. The Fund can purchase securities on a "when-issued"
basis, and may purchase or sell such securities on a "delayed-delivery" (or "forward commitment") basis.
"When-issued" or "delayed-delivery" refers to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery.

When such transactions are negotiated, the price (which is generally expressed in yield terms) is fixed at
the time the commitment is made. Delivery and payment for the securities take place at a later date. The
securities are subject to change in value from market fluctuations during the period until settlement. 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 a loss to the Fund.
During the period between purchase and settlement, no payment is made by the Fund to the issuer and no interest
accrues to the Fund from the investment. 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 cash, U.S. government securities or other high-grade debt obligations at least equal to the value of
purchase commitments until the Fund pays for the investment.

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

|X| Loans of Portfolio Securities. To raise cash for liquidity purposes, the Fund can lend its portfolio
securities to brokers, dealers and other types of financial institutions approved by the Fund's Board of Trustees.
As a fundamental policy, these loans are limited to not more than 25% of the value of the Fund's total assets. The
Fund currently does not intend to engage in loans of securities, but if it does so, such loans will not likely
exceed 5% of the Fund's total assets. The Fund must receive collateral for a loan

There are some 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 if the borrower defaults..
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 loaned
securities. It also receives one or more of (a) negotiated loan fees, (b) interest on securities used as collateral,
and (c) interest on any short-term debt securities purchased with such loan collateral. Either type of interest may
be shared with the borrower. The Fund may also pay reasonable finder's, custodian and administrative 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| Derivatives. The Fund can invest in a variety of derivative investments to seek income or for hedging
purposes. A number of these derivative investments have been described above. Some other derivative investments the
Fund may use are the hedging instruments described below in this Statement of Additional Information.

|X| Hedging. Although the Fund does not anticipate the extensive use of hedging instruments, the Fund can
use hedging instruments. To attempt to protect against declines in the market value of the Fund's portfolio, to
permit the Fund to retain unrealized gains in the value of portfolio securities which have appreciated, or to
facilitate selling securities for investment reasons, the Fund could:
o sell futures contracts,
o buy puts on such futures or on securities, or
o write covered calls on securities or futures. Covered calls may also be used to increase the Fund's
income, but the Manager does not expect to engage extensively in that practice.

The Fund can use hedging to establish a position in the securities market as a temporary substitute for
purchasing particular securities. In that case the Fund would normally seek to purchase the securities and then
terminate that hedging position. The Fund might also use this type of hedge to attempt to protect against the
possibility that its portfolio securities would not be fully included in a rise in value of the market. To do so the
Fund could:
o buy 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 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.

o Futures. The Fund can buy and sell futures contracts that relate to debt securities (these are referred to
as "interest rate futures"). An interest rate future obligates the seller to deliver (and the purchaser to take)
cash or a specified type of debt security to settle the futures transaction at a specified future date. Either party
could also enter into an offsetting contract to close out the position.

No money is paid or received by the Fund on the purchase or sale of a future. Upon entering into a futures
transaction, the Fund will be required to deposit an initial margin payment 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
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 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 any additional cash must be
paid by or released to the Fund. Any loss or gain on the future is then realized by the Fund for tax purposes. All
futures transactions are effected through a clearinghouse associated with the exchange on which the contracts are
traded.

o Put and Call Options. The Fund can buy and sell certain kinds of put options ("puts") and call options
("calls"). The Fund can buy and sell exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, commodities options, and options on the other types of futures
described above.

o Writing Covered Call Options. The Fund can write (that is, sell) covered calls. If the Fund sells a call
option, it must be covered. That means the Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by segregating liquid assets to enable the Fund
to satisfy its obligations if the call is exercised. Up to 100% of the Fund's total assets may be subject to calls
the Fund writes.

When the Fund writes a call on a security, it receives cash (a premium). The Fund agrees to sell the
underlying security 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 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.

|X| When the Fund writes a call on an index, it receives cash (a premium). If the buyer of the call
exercises it, the Fund will pay an amount of cash equal to the difference between the closing price of the call and
the exercise price, multiplied by the specified multiple that determines the total value of the call for each point
of difference. If the value of the underlying investment does not rise above the call price, it is likely that the
call will lapse without being exercised. In that case the Fund would keep the cash premium.

The Fund's custodian, 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 option or when the Fund
enters into a closing 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 will 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 holding illiquid securities) the mark-to-market value of any OTC option it holds,
unless the option is subject to a buy-back agreement by the executing broker.

To terminate its obligation on a call it has written, the Fund may purchase a corresponding call in a
"closing purchase transaction." The Fund will then realize a profit or loss, depending upon whether the net of the
amount of the option transaction costs and the premium received on the call the Fund wrote is more or less than the
price of the call the Fund purchases to close out the transaction. The Fund may realize a profit if the call
expires unexercised, because the Fund will retain the underlying security and the premium it received when it wrote
the call. Any such profits are considered short-term capital gains for federal income tax purposes, as are the
premiums on lapsed calls. When distributed by the Fund they are taxable as ordinary income. If the Fund cannot
effect a closing purchase transaction due to the lack of a market, it will have to hold the callable securities
until the call expires or is exercised.

The Fund may also write calls on a futures contract 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 an equivalent dollar amount of liquid assets. The Fund will segregate additional liquid assets if the
value of the segregated assets drops below 100% of the current value of the future. Because of this segregation
requirement, in no circumstances would the Fund's receipt of an exercise notice as to that future require the Fund
to deliver a futures contract. It would simply put the Fund in a short futures position, which is permitted by the
Fund's hedging policies.

o Writing Put Options. The Fund may sell put options. A put option on securities gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying investment at the exercise price during the
option period. The Fund will not write puts if, as a result, more than 50% of the Fund's net assets would be
required to be segregated to cover such put options.

If the Fund writes a put, the put must be covered by segregated liquid assets. The premium the Fund
receives from writing a put represents a profit, as long as the price of the underlying investment remains equal to
or above the exercise price of the put. However, the Fund also assumes the obligation during the option period to
buy the underlying investment from the buyer of the put at the exercise price, even if the value of the investment
falls below the exercise price. If a put the Fund has written expires unexercised, the Fund realizes a gain in the
amount of the premium less the transaction costs incurred. If the put is exercised, the Fund must fulfill its
obligation to purchase the underlying investment at the exercise price. That price will usually exceed the market
value of the investment at that time. In that case, the Fund may incur a loss if it sells the underlying
investment. That loss will be equal to the sum of the sale price of the underlying investment and the premium
received minus the sum of the exercise price and any transaction costs the Fund incurred.

When writing a put option on a security, to secure its obligation to pay for the underlying security the
Fund will deposit in escrow liquid assets with a value equal to or greater than the exercise price of the underlying
securities. The Fund therefore forgoes the opportunity of investing the segregated assets or writing calls against
those assets.

As long as the Fund's obligation as the put writer continues, it may be assigned an exercise notice by the
broker-dealer through which the put was sold. That notice will require the Fund to take delivery of the underlying
security and pay the exercise price. The Fund has no control over when it may be required to purchase the
underlying security, since it may be assigned an exercise notice at any time prior to the termination of its
obligation as the writer of the put. That obligation terminates upon expiration of the put. It may also terminate
if, before it receives an exercise notice, the Fund effects a closing purchase transaction by purchasing a put of
the same series as it sold. Once the Fund has been assigned an exercise notice, it cannot effect a closing purchase
transaction.
The Fund may decide to effect a closing purchase transaction to realize a profit on an outstanding put
option it has written or to prevent the underlying security from being put. Effecting a closing purchase transaction
will also permit the Fund to write another put option on the security, or to sell the security and use the proceeds
from the sale for other investments. The Fund will realize a profit or loss from a closing purchase transaction
depending on whether the cost of the transaction is less or more than the premium received from writing the put
option. Any profits from writing puts are considered short-term capital gains for federal tax purposes, and when
distributed by the Fund, are taxable as ordinary income.

o Purchasing Calls and Puts. The Fund can purchase calls to protect against the possibility that the Fund's
portfolio will not participate in an anticipated rise in the securities market. When the Fund buys a call (other
than in a closing purchase transaction), it pays a premium. The Fund then 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 it sells the call at a profit or if, during the call period, the market price of
the underlying investment is above the sum of the call price plus the transaction costs and the premium paid for the
call and the Fund exercises the call. If the Fund does not exercise the call or sell it (whether or not at a
profit), the call will become worthless at its expiration date. In that case the Fund will have paid the premium but
lost the right to purchase the underlying investment.

The Fund can buy puts whether or not it holds the underlying investment in its portfolio. When the Fund
purchases a put, it pays a premium and, except as to puts on indices, has the right to sell the underlying
investment to a seller of a put on a corresponding investment during the put period at a fixed exercise price.
Buying a put on securities or futures the Fund owns enables the Fund to attempt to protect itself during the put
period against a decline in the value of the underlying investment below the exercise price by selling the
underlying investment at the exercise price to a seller of a corresponding put. 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 have paid the premium but lost the
right to sell the underlying investment. However, the Fund may sell the put prior to its expiration. That sale may
or may not be at a profit.

When the Fund purchases a call or put on an index or future, it pays a premium, but settlement is in cash
rather than by delivery of the underlying investment to the Fund. Gain or loss depends on changes in the index in
question (and thus on price movements in the securities market generally) rather than on price movements in
individual securities or futures contracts.

The Fund may buy a call or put only if, after the purchase, the value of all call and put options held by
the Fund will not exceed 5% of the Fund's total assets.

o 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 return. 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 could affect its portfolio turnover rate and brokerage commissions. The
exercise of calls written by the Fund might cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The 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 could 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. Those commissions could be higher
on a relative basis than the commissions for direct purchases or sales of the underlying investments. Premiums paid
for options are small in relation to the market value of the underlying investments. Consequently, put and call
options offer large amounts of leverage. The leverage offered by trading in options could result in the Fund's net
asset value being more sensitive to changes in the value of the underlying investment.

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

An option position may be closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist for any particular option. The
Fund might experience losses if it could not close out a position because of an illiquid market for the future or
option.

There is a risk in using short hedging by selling futures or purchasing puts on broadly-based indices or
futures to attempt to protect against declines in the value of the Fund's portfolio securities. The risk is that the
prices of the futures or the applicable index will correlate imperfectly with the behavior of the cash prices of the
Fund's securities. For example, it is possible that while the Fund has used hedging instruments in a short hedge,
the market might advance and the value of the securities held in the Fund's portfolio might decline. If that
occurred, the Fund would lose money on the hedging instruments and also experience a decline in the value of its
portfolio securities. However, while this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio of 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 the portfolio 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 portfolio securities being hedged. It might
do so if the historical volatility of the prices of the portfolio securities being hedged is more 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 nature of those markets. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may
close futures contracts through offsetting transactions which could distort the normal relationship between the cash
and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures market are less onerous than margin requirements in the
securities markets. Therefore, increased participation by speculators in the futures market may cause temporary
price distortions.

The Fund can use hedging instruments to establish a position in the securities markets as a temporary
substitute for the purchase of individual securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does so the market might decline. If the
Fund then concludes not to invest in securities because of concerns that the market might decline further or for
other reasons, the Fund will realize a loss on the hedging instruments that is not offset by a reduction in the
price of the securities purchased.

o Interest Rate Swap Transactions. The Fund can enter into interest rate swap agreements. 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 might swap the right to receive floating rate payments for fixed rate payments. The Fund
can enter into swaps only on securities that it owns. The Fund will not enter into swaps with respect to more than
25% of its total assets. Also, the Fund will identify on its books 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.

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 be greater than the
payments it received. Credit risk arises from the possibility that the counterparty will default. If the
counterparty 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 can enter into swap transactions with certain counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done between the Fund and that counterparty shall be
regarded as parts of an integral agreement. If amounts are payable on a particular date in the same currency in
respect of one or more swap transactions, the amount payable on that date in that currency shall be the net amount.
In addition, the master netting agreement may provide that if one party defaults generally or on one swap, the
counterparty can terminate all of the swaps with that party. Under these agreements, if a default results in a loss
to one party, the measure of that party's damages is calculated by reference to the average cost of a replacement
swap for each swap. It is measured by the mark-to-market value at the time of the termination of 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."

o Regulatory Aspects of Hedging Instruments. When using futures and options on futures, the Fund is required
to operate within certain guidelines and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is exempted from registration with the
CFTC as a "commodity pool operator" if the Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The
Rule does not limit the percentage of the Fund's assets that may be used for futures margin and related options
premiums for a bona fide hedging position. However, under the Rule, the Fund must limit its aggregate initial
futures margin and related options premiums to not more than 5% of the Fund's net assets for hedging strategies that
are not considered bona fide hedging strategies under the Rule. Under the Rule, the Fund must also use short futures
and options on futures solely for bona fide hedging purposes within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.

Transactions in options by the Fund are subject to limitations established by the option exchanges. The
exchanges limit the maximum number of options that may be written or held by a single investor or group of investors
acting in concert. Those limits apply regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more different exchanges or through one or
more brokers. Thus, the number of options that the Fund may write or hold may be affected by options written or
held by other entities, including other investment companies having the same advisor as the Fund (or an advisor that
is an affiliate of the Fund's advisor). 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 the Investment Company Act, when the Fund purchases a future, it must maintain cash or readily
marketable short-term debt instruments in an amount equal to the market value of the securities underlying the
future, less the margin deposit applicable to it.

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, 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 buy securities issued or guaranteed by any one issuer if more than 5% of its total assets
would be invested in securities of that issuer or if it would then own more than 10% of that issuer's voting
securities. That restriction applies to 75% of the Fund's total assets. The limit does not apply to securities
issued by the U.S. government or any of its agencies or instrumentalities.

o The Fund cannot make loans, except to the extent permitted under the 1940 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. Currently, the 1940 Act permits (a) lending of securities, (b) purchasing
debt securities or similar evidences of indebtedness, (c) repurchase agreements and (d) inter-fund lending if the
appropriate approval is obtained by the Fund from the Securities and Exchange Commission. The Fund will not engage
in inter-fund lending until such approval has been granted. The Fund does not currently anticipate making loans of
money.

o The Fund may not borrow money, except to the extent permitted under the 1940 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. Currently, the 1940 Act permits a mutual fund to borrow from banks and/or
affiliated investment companies up to one-third of its total assets (including the amount borrowed). A fund may
borrow up to 5% of its total assets for temporary purposes from any person. Inter-fund borrowing must be approved
by the Securities and Exchange Commission. The Fund will not engage in inter-fund borrowing until such approval has
been granted.

o The Fund cannot purchase securities on margin or make short sales of securities. However, the Fund may make
margin deposits in connection with any of the hedging instruments permitted by any of its other fundamental
policies.

o The Fund cannot invest in real estate.

o The Fund cannot underwrite securities of other companies.

o The Fund cannot invest in securities of other investment companies, except if it acquires them as part of a
merger, consolidation or acquisition of assets.

o The Fund cannot invest in physical commodities. This restriction does not prevent the Fund from investing
in derivative or hedging instruments in accordance with its investment policies.

o The Fund cannot issue "senior securities," but this does not prohibit certain investment activities for
which assets of the Fund are designated as segregated, or margin, collateral or escrow arrangements are established,
to cover the related obligations. Examples of those activities include borrowing money, reverse repurchase
agreements, delayed-delivery and when-issued arrangements for portfolio securities transactions, and contracts to
buy or sell derivatives, hedging instruments, options or futures.

With respect to the Fund's non-fundamental policy to invest, under normal circumstances, at least 80% of its
assets in U.S. government securities, the Fund will provide at least 60 days' prior notice of any change in such
policy as required by the 1940 Act.

The Fund will not invest 25% or more of its assets in investments in any industry. There is no limit,
however, on the Fund's investments in obligations of the U.S. government or its agencies or instrumentalities. For
purposes of the Fund's policy not to concentrate its investments, the Fund has adopted the non-fundamental industry
classifications set forth in Appendix B to this Statement of Additional Information.

As a non-fundamental policy, the Fund cannot invest in interests in oil, gas, or other mineral exploration
or development programs.

Unless the Prospectus or this 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. 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.

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 Massachusetts business trust in
1982. Prior to August 16, 1985, the Fund operated as a money market fund with a fixed net asset value per share.
Effective August 16, 1985, the Fund changed its investment objective and ceased to be a money market fund. It can
currently invest in securities of any maturity.

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. Although the Fund will not normally hold
annual meetings of its shareholders, it may hold shareholder meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove a Trustee or to take other action described in the Fund's
Declaration of Trust.

|X| Classes of Shares. The Board of Trustees has the power, without shareholder approval, to divide
unissued shares of the Fund into two or more classes. The Board has done so, and the Fund currently has five
classes of shares: Class A, Class B, Class C, Class N and Class Y. Only retirement plans may purchase Class N
shares. Only certain institutional investors may elect to purchase Class Y shares. 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 may have a different net asset value,
o may 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 the 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.

The Trustees are authorized to create new series and classes of shares. The Trustees may reclassify
unissued shares of the Fund into additional series or classes of shares. The Trustees also may 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 or preemptive or subscription
rights. Shares may be voted in person or by proxy at shareholder meetings.

|X| Meetings of Shareholders. As a Massachusetts business trust, the Fund is not required to hold, and
does not plan to hold, regular annual meetings of shareholders. The Fund will hold meetings when required to do so
by the Investment Company Act or other applicable law. It will also do so when a shareholder meeting is called by
the Trustees or upon proper request of the shareholders.

Shareholders have the right, upon the declaration in writing or vote of two-thirds of the outstanding
shares of the Fund, to remove a Trustee. The Trustees will call a meeting of shareholders to vote on the removal of
a Trustee upon the written request of the record holders of 10% of its outstanding shares. If the Trustees receive
a request from at least 10 shareholders stating that they wish to communicate with other shareholders to request a
meeting to remove a Trustee, the Trustees will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the applicants' expense. The shareholders making
the request must have been shareholders for at least six months and must hold shares of the Fund valued at $25,000
or more or constituting at least 1% of the Fund's outstanding shares, whichever is less. The Trustees may also take
other action as permitted by the Investment Company Act.

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

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

Trustees and Officers of the Fund. The Fund's Trustees and officers and their positions held with the Fund and
length of service in such position(s) and their principal occupations and business affiliations during the past five
years are listed below. Each of the Trustees except Mr. Murphy is an independent trustee, as defined in the
Investment Company Act. 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. Mr. Murphy
was elected as a Trustee of the Fund with the understanding that in the event his affiliation with the Manager is
terminated, he will resign as a trustee of the Fund and the other Board I Funds for which he is a trustee or
director. All of the Trustees are Trustees or Directors of the following Oppenheimer funds1 (referred to as "Board I
Funds"):

Oppenheimer California Municipal Fund Oppenheimer International Growth Fund
Oppenheimer Capital Appreciation Fund Oppenheimer International Small Company Fund
Oppenheimer Capital Preservation Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Concentrated Growth Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund Oppenheimer Multi-Sector Income Trust
Oppenheimer Discovery Fund Oppenheimer Multi-State Municipal Trust
Oppenheimer Emerging Growth Fund Oppenheimer Municipal Bond Fund
Oppenheimer Emerging Technologies Fund Oppenheimer New York Municipal Fund
Oppenheimer Enterprise Fund Oppenheimer Series Fund, Inc.
Oppenheimer Europe Fund Oppenheimer Special Value Fund
Oppenheimer Global Fund Oppenheimer Trinity Core Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Trinity Large Cap Growth Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Trinity Value Fund
Oppenheimer Growth Fund Oppenheimer U.S. Government Trust

Messrs. Murphy, Manioudakis, Molleur, Wixted and Zack, and Mses. Feld and Ives respectively hold the same
offices with the other New York-based Oppenheimer funds as with the Fund. As of December 10, 2001, the Trustees and
officers of the Fund as a group owned of record or beneficially less than 1% of each class of shares of the Fund.
The foregoing statement does not reflect ownership of shares of the Fund held of record by an employee benefit plan
for employees of the Manager, other than the shares beneficially owned under the plan by the officers of the Fund
listed above.

Independent Trustees

---------------------------------------- --------------------------------------------------------------------------

Name, Address,2 Age, Position(s) Held Principal Occupation(s) During Past 5 Years / Other Trusteeships or
with Fund and Length of Service3 Directorships Held by Trustee / Number of Portfolios in Fund Complex
Overseen by Trustee

Leon Levy, Chairman of the Board of General Partner of Odyssey Partners, L.P. (investment partnership)
Trustees (since 1982) and Chairman of the Board of Avatar Holdings, Inc. (real
Trustee since 1985 estate development) (since 1981). Oversees 31 portfolios in the
Age: 76 OppenheimerFunds complex.

Robert G. Galli, A Trustee or Director of other Oppenheimer funds. Formerly Vice Chairman
Trustee since 1993 of the Manager (October 1995 - December 1997). Director/trustee of 41
Age: 68 investment companies in the OppenheimerFunds complex.

Phillip A. Griffiths, Trustee since The Director of the Institute for Advanced Study, Princeton, N.J. (since
1999 1991), director of GSI Lumonics (since 2001) and a member of the
Age: 63 National Academy of Sciences (since 1979); formerly (in descending
chronological order) a director of Bankers Trust Corporation, Provost
and Professor of Mathematics at Duke University, a director of Research
Triangle Institute, Raleigh, N.C., and a Professor of Mathematics at
Harvard University. Director/trustee of 30 investment companies in the
OppenheimerFunds complex.

Benjamin Lipstein, Trustee since 1985 Professor Emeritus of Marketing, Stern Graduate School of Business
Age: 78 Administration, New York University. Director/trustee of 31 investment
companies in the OppenheimerFunds complex.

Elizabeth B. Moynihan, Author and architectural historian; a trustee of the Freer Gallery of
Trustee since 1992 Art and Arthur M. Sackler Gallery (Smithsonian Institute), Trustees
Age: 72 Council of the National Building Museum; a member of the Trustees
Council, Preservation League of New York State. Director/trustee of 31
investment companies in the OppenheimerFunds complex.

Kenneth A. Randall, Trustee since 1985 A director of Dominion Resources, Inc. (electric utility holding
Age: 74 company) and Prime Retail, Inc. (real estate investment trust); formerly
a director of Dominion Energy, Inc. (electric power and oil & gas
producer), President and Chief Executive Officer of The Conference
Board, Inc. (international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American Motorists
Insurance Company and American Manufacturers Mutual Insurance Company.
Director/trustee of 31 investment companies in the OppenheimerFunds
complex.

Edward V. Regan, President, Baruch College, CUNY; a director of RBAsset (real estate
Trustee since 1993 manager); a director of OffitBank; formerly Trustee, Financial
Age: 71 Accounting Foundation (FASB and GASB), Senior Fellow of Jerome Levy
Economics Institute, Bard College, Chairman of Municipal Assistance
Corporation for the City of New York, New York State Comptroller and
Trustee of New York State and Local Retirement Fund. Director/trustee of
31 investment companies in the OppenheimerFunds complex.

Russell S. Reynolds, Jr., Chairman of The Directorship Search Group, Inc. (corporate governance
Trustee since 1989 consulting and executive recruiting) (since 1993); a director of
Age: 70 Professional Staff Limited (a U.K. temporary staffing company) (since
1995); a life trustee of International House (non-profit educational
organization), and a trustee of the Greenwich Historical Society (since
1996). Director/trustee of 31 investment companies in the
OppenheimerFunds complex.

Donald W. Spiro, Vice Chairman of the Chairman Emeritus (since January 1991) of the Manager. Formerly he held
Board of Trustees, the following positions: Chairman (November 1987 - January 1991) and a
Trustee since 1985 director (January 1969 - August 1999) of the Manager; President and
Age: 76 Director of OppenheimerFunds Distributor, Inc., a subsidiary of the
Manager and the Fund's Distributor (July 1978 - January 1992). Oversees
31 portfolios in the OppenheimerFunds complex.

Clayton K. Yeutter, Trustee since 1991 Of Counsel, Hogan & Hartson (a law firm) (since 1993). Other
Age: 71 directorships: Caterpillar, Inc. (since 1993) and Weyerhaeuser Co.
(since 1999). Director/trustee of 31 investment companies in the
OppenheimerFunds complex.

---------------------------------------- --------------------------------------------------------------------------

Interested Trustee and Officer

---------------------------------------- --------------------------------------------------------------------------

Name, Address,4 Age, Position(s) Held Principal Occupation(s) During Past 5 Years / Other Trusteeships or
with Fund and Length of Service5 Directorships Held by Trustee / Number of Portfolios in Fund Complex
Overseen by Trustee

John V. Murphy, President and Trustee Chairman, Chief Executive Officer and director (since June 30, 2001)
Trustee since October 2001 and President (since September 2000) of the Manager; President and a
Age: 52 trustee of other Oppenheimer funds; President and a director (since
July 2001) of Oppenheimer Acquisition Corp., the Manager's parent
holding company, and of Oppenheimer Partnership Holdings, Inc. (since
July 2001), a holding company subsidiary of the Manager; Chairman and a
director (since July 2001) of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc., transfer agent subsidiaries of
the Manager; President (since November 1, 2001) and a director (since
July 2001) of Oppenheimer Real Asset Management, Inc., an investment
advisor subsidiary of the Manager; President and a director (since July
2001) of OppenheimerFunds Legacy Program, a charitable trust program
established by the Manager; a director (since November 2001) of Trinity
Investment Management Corp. and Tremont Advisers, Inc., investment
advisory affiliates of the Manager, and of OAM Institutional, Inc.
(since November 2001), an investment advisory subsidiary of the
Manager, and of HarbourView Asset Management Corporation and OFI
Private Investments, Inc. (since July 2001), investment advisor
subsidiaries of the Manager; formerly President and trustee (from
November 1999 to November 2001) of MML Series Investment Fund and
MassMutual Institutional Funds, open-end investment companies; Chief
Operating Officer (September 2000 - July 2001) of the Manager;
Executive Vice President of Massachusetts Mutual Life Insurance Company
(from February 1997 to August 2000); a director (from 1999 to 2000) of
C.M. Life Insurance Company; President, Chief Executive Officer and a
director (from 1999 to 2000) of MML Bay State Life Insurance Company;
Executive Vice President, director and Chief Operating Officer (from
1995 to 1997) of David L. Babson & Company, Inc., an investment
advisor; Senior Vice President and director (from 1995 to 1997) of
Potomac Babson Inc., an investment advisor subsidiary of David L.
Babson & Company, Inc.; Senior Vice President (from 1995-1997) and
director (from 1995 to 1999) of DBL Acquisition Corporation, a holding
company for investment advisers; a director (from 1989 - 1998) of
Emerald Isle Bancorp and Hibernia Savings Bank, wholly-owned subsidiary
of Emerald Isle Bancorp; and Chief Operating Officer (from 1993 to
1996) of Concert Capital Management, Inc., an investment advisor.
Director/trustee of 63 investment companies in the OppenheimerFunds
complex.

---------------------------------------- -------------------------------------------------------------------------

Officers of the Fund

----------------------------------------- --------------------------------------------------------------------------

Name, Address,6 Age, Position(s) Held Principal Occupation(s) During Past 5 Years
with Fund and Length of Service7

Angelo Manioudakis, Vice Senior Vice President of the Manager (since April 2002); an officer and
President and Portfolio portfolio manager of other Oppenheimer funds; formerly Executive
Manager (since April 2002) Director and portfolio manager for Miller, Anderson & Sherrerd, a
Age: 35. division of Morgan Stanley Investment Management (August 1993-March
2002).

Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of the Manager;
Treasurer, Principal Financial and Treasurer (since March 1999) of HarbourView Asset Management
Accounting Officer (since April 1999) Corporation, Shareholder Services, Inc., Oppenheimer Real Asset
Age: 42 Management Corporation, Shareholder Financial Services, Inc.,
Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc.
(since March 2000), OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since May 2000), offshore fund management
subsidiaries of the Manager, and OAM Institutional, Inc. (since November
2000), an investment advisory subsidiary of the Manager; Treasurer and
Chief Financial Officer (since May 2000) of Oppenheimer Trust Company, a
trust company subsidiary of the Manager; Assistant Treasurer (since
March 1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy
Program (since April 2000); an officer of other Oppenheimer funds;
formerly Principal and Chief Operating Officer, Bankers Trust Company -
Mutual Fund Services Division (March 1995 - March 1999).

Robert G. Zack, Secretary (since Senior Vice President (since May 1985) and General Counsel (since
November 1, 2001) February 2002) of the Manager; Assistant Secretary of Shareholder
Age: 53 Services, Inc. (since May 1985), Shareholder Financial Services, Inc.
(since November 1989); OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer of
other Oppenheimer funds; formerly, Acting General Counsel (November
2001-February 2002) and Associate General Counsel (1984 - October 2001)

Denis R. Molleur, Assistant Secretary Vice President and Senior Counsel of the Manager (since July 1999); an
(since November 1, 2001) officer of other Oppenheimer funds; formerly a Vice President and
Age: 44 Associate Counsel of the Manager (September 1995 - July 1999).

Katherine P. Feld, Assistant Secretary Vice President and Senior Counsel of the Manager (since July 1999); an
(since November 1, 2001) officer of other Oppenheimer funds; formerly a Vice President and
Age: 43 Associate Counsel of the Manager (June 1990 - July 1999).

Kathleen T. Ives, Assistant Secretary Vice President and Assistant Counsel of the Manager (since June 1998);
(since November 1, 2001) an officer of other Oppenheimer funds; formerly an Assistant Vice
Age: 36 President and Assistant Counsel of the Manager (August 1997 - June
1998); and Assistant Counsel of the Manager (August 1994-August 1997).

----------------------------------------- --------------------------------------------------------------------------

|X| Remuneration of Trustees. The officers of the Fund and one of the Trustees of the Fund (Mr. Murphy) who are
affiliated with the Manager receive no salary or fee from the Fund. The remaining Trustees of the Fund received the
compensation shown below from the Fund with respect to the Fund's fiscal year ended August 31, 2001. The
compensation from all of the Board I Funds (including the Fund) represents compensation received as a director,
trustee or member of a committee of the boards of those funds during the calendar year 2000.

---------------------------------------- ---------------------- ------------------------- ----------------------------

Trustee's Name Aggregate Retirement Total
Benefits Compensation
Accrued as Part From all
And Other Positions Compensation of Fund Board I Oppenheimer
from Fund1 Expenses Funds (30 Funds)2

Robert G. Galli3 $2,044 $0 $191,134
Study Committee Member

Phillip Griffiths4 $1,125 $0 $59,529

---------------------------------------- ---------------------- ------------------------- ----------------------------
---------------------------------------- ---------------------- ------------------------- ----------------------------
Benjamin Lipstein
Study Committee Chairman,
Audit Committee Member $2,902 $0 $148,639
---------------------------------------- ---------------------- ------------------------- ----------------------------
---------------------------------------- ---------------------- ------------------------- ----------------------------
Elizabeth B. Moynihan $2,044 $0 $104,695
Study Committee Member
---------------------------------------- ---------------------- ------------------------- ----------------------------
---------------------------------------- ---------------------- ------------------------- ----------------------------
Kenneth A. Randall $1,875 $0 $96,034
Audit Committee Chairman
---------------------------------------- ---------------------- ------------------------- ----------------------------
---------------------------------------- ---------------------- ------------------------- ----------------------------

Edward V. Regan $1,855 $0 $94,995
Proxy Committee Chairman, Audit
Committee Member

Russell S. Reynolds, Jr. $1,388 $0 $71,069
Proxy Committee Member

Donald Spiro $1,239 $0 $63,435

Clayton K. Yeutter5 $1,388 $0 $71,069
Proxy Committee Member

---------------------------------------- ---------------------- ------------------------- ----------------------------
1. Aggregate compensation includes fees, deferred compensation, if any, and retirement plan benefits accrued
for a Director. No retirement benefit expenses were allocated to the Fund for fiscal year ended 8/31/01.
2. For the 2000 calendar year.

3. Total compensation for the 2000 calendar year includes $86,439 compensation received for serving as a
trustee (director) of 10 other Oppenheimer funds.
For fiscal year ended 8/31/01, Mr. Griffiths deferred 100% of his compensation from the Fund under the Deferred
Compensation Plan described below.
5. Includes $347 deferred under Deferred Compensation Plan described below.

|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan that provides for payments to
retired Trustees. Payments are up to 80% of the average compensation paid during a Trustee's five years of service
in which the highest compensation was received. A Trustee must serve as trustee for any of the New York-based
Oppenheimer funds for at least 15 years to be eligible for the maximum payment. Each Trustee's retirement benefits
will depend on the amount of the Trustee's future compensation and length of service. Therefore the amount of those
benefits cannot be determined at this time, nor can we estimate the number of years of credited service that will be
used to determine those benefits.

|X| Deferred Compensation Plan for Trustees. The Board of Trustees has adopted a Deferred Compensation
Plan for disinterested trustees that enables them to elect to defer receipt of all or a portion of the annual fees
they are entitled to receive from the Fund. Under the plan, the compensation deferred by a Trustee is periodically
adjusted as though an equivalent amount had been invested in shares of one or more Oppenheimer funds selected by the
Trustee. The amount paid to the Trustee under the plan will be determined based upon the performance of the
selected funds.

Deferral of Trustees' fees under the plan will not materially affect the Fund's assets, liabilities or net
income per share. The plan will not obligate the Fund to retain the services of any Trustee or to pay any
particular level of compensation to any Trustee. Pursuant to an Order issued by the Securities and Exchange
Commission, the Fund may invest in the funds selected by the Trustee under the plan without shareholder approval for
the limited purpose of determining the value of the Trustee's deferred fee account.

|X| Major Shareholders. As of December 10, 2001, the only persons 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 the following:

BancOne Securities Corp., 733 Greencrest Drive, Westerville, Ohio 43081, which owned 9,583,686.939Class A
shares (14.32% of the then-outstanding Class A shares) and 5,129,171.746 Class C shares (38.28% of the
then-outstanding Class C shares), for the benefit of its customers.

RPSS TR Trans-Ocean Import Co Inc. Profit Sharing & Trust Attn. Martin A. Cervone, 1 Barker Ave. White
Plains, NY 10601-1517, which owned 35,335.486 Class N shares (25.23% of the then-outstanding Class N shares
of the Fund).

Micheal Petricko Sr. & Michael D. Petricko TRS Miric Industries, Inc. PSP Plan, 1516 Union TRKE North
Bergen, NJ 07047-2545, which owned 22,441.194 Class N shares (16.02% of the then-outstanding Class N shares
of the Fund).

RPSS TR Mountain Trade Supply Inc.401K PSP, Attn: Kevin Kelly, 4840 Braodway, Denver, CO 80216-6344, which
owned 14,253.540 Class N shares (10.17% of the then-outstanding Class N shares of the Fund).

Reliance Trust Co TR FBO Mesa Industries Inc. 3300 Northeast Expy. NE STE 200, Atlanta GA 30341-3941,
which owned 10,782.315 Class N shares (7.69% of the then-outstanding Class N shares of the Fund).

Persumma Financial Services, 275 Grove St. Auburndale, MA 02466-2272, which owned 132,478.662 Class N
shares (75.04% of the then-outstanding Class N shares of the Fund).
The New York Yacht Club Pension Plan, C/O Oppenheimer Trust Co, 48th Avenue of the Americas, New York NY
10105-0302, which owned 43,949.722 Class Y shares (24.89% of the then-outstanding Class Y shares of the
Fund).

The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding company controlled by
Massachusetts Mutual Life Insurance Company.

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

The Code of Ethics is an exhibit to the Fund's registration statement filed with the Securities and
Exchange Commission 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.

|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. The portfolio managers and associate portfolio
managers of the Fund are employed by the Manager and are the persons who are principally responsible for the
day-to-day management of the Fund's portfolio. Other members of the Manager's Fixed Income Portfolio Team provide
the portfolio managers with counsel and support in managing the Fund's portfolio.

The agreement requires the Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment. It also requires the Manager to provide and supervise the activities of all administrative
and clerical personnel required to provide effective administration for the Fund. Those responsibilities include the
compilation and maintenance of records with respect to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration statements for continuous public sale of shares of the
Fund.

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

--------------------------------------- -----------------------------------------------------------------------------
Fiscal Year ended 8/31: Management Fees Paid to OppenheimerFunds, Inc.
--------------------------------------- -----------------------------------------------------------------------------
--------------------------------------- -----------------------------------------------------------------------------
1999 $4,710,907
--------------------------------------- -----------------------------------------------------------------------------
--------------------------------------- -----------------------------------------------------------------------------
2000 $4,522,725
--------------------------------------- -----------------------------------------------------------------------------
--------------------------------------- -----------------------------------------------------------------------------
2001 $4,959,210
--------------------------------------- -----------------------------------------------------------------------------

The investment advisory agreement states that in the absence of willful misfeasance, bad faith, gross
negligence in the performance of its duties or reckless disregard of its obligations and duties under the investment
advisory agreement, the Manager is not liable for any loss the Fund sustains 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 right of the Fund to use the name "Oppenheimer" as part of its name.

|X| Annual Approval of Investment Advisory Agreement. Each year, the Board Directors, including a
majority of the Independent Directors is required to approve the renewal of the investment advisory agreement. The
Investment Company Act requires that the Board request and evaluate and the Manager provide such information as may
be reasonably necessary to evaluate the terms of the investment advisory agreement. The board employs an
independent consultant to prepare a report that provides such information as the Board requested for this purpose.

The Board also receives information about the 12b-1 distribution fees the Fund pays. These distribution
fees are reviewed and approved at a different time of the year.

The Board reviewed the foregoing information in arriving at its decision to renew the investment advisory
agreement. Among other factors, the Board considered:
o The nature, cost, and quality of the services provided to the Fund and its shareholders;
o The profitability of the Fund to the Manager;
o The investment performance of the Fund in comparison to regular market indices
o Economies of scale that may be available to the Fund from the Manager;
o Fees paid by other mutual funds for similar services;
o The value and quality of any other benefits or services received by the Fund from its relationship with the
Manager, and
o The direct and indirect benefits the Manager received from its relationship with the Fund. These included
services provided by the General Distributor and the Transfer Agent, and brokerage and soft dollar
arrangements permissible under Section 28(e) of the Securities Exchange Act.

The Board considered that the Manager must be able to pay and retain high quality personnel at competitive
rates to provide services to the Fund. The Board also considered that maintaining the financial viability of the
Manager is important so that the Manager will be able to continue to provide quality services to the Fund and its
shareholders in adverse times. The Board also considered the investment performance of other mutual funds advised
by the Manager. The Board is aware that there are alternatives to the use of the Manager.

These matters were also considered by the Independent Directors meeting separately from the full Board with
experienced Counsel to the Fund who assisted the Board in its deliberations. The Fund's Counsel is independent of
the Manager within the meaning and intent of the SEC Rules regarding the independence of counsel.

In arriving at a decision, the Board did not single out any one factor or group of factors as being more
important than other factors, but considered all factors together. The Board judged the terms and conditions of the
Agreement, including the investment advisory fee, in light of all of the surrounding circumstances.

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory Agreement. One of the duties of the Manager under the investment
advisory agreement is to arrange the portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of 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. The Manager may employ broker-dealers that the Manager thinks, in its best
judgment based on all relevant factors, will implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" of the Fund's portfolio transactions. "Best execution" means prompt and reliable execution at the
most favorable price obtainable. The Manager need not seek competitive commission bidding. However, it is expected
to be aware of the current rates of eligible brokers and to minimize the concessions paid to the extent consistent
with the interests and policies of the Fund as established by its Board of Trustees.

Under the investment advisory agreement, the Manager may select brokers (other than affiliates) that
provide brokerage and/or research services for the Fund and/or the other accounts over which the Manager or its
affiliates have investment discretion. The concessions paid to such brokers may be higher than another qualified
broker would charge, if the Manager makes a good faith determination that the concession is fair and reasonable in
relation to the services provided. Subject to those considerations, as a factor in selecting brokers for the Fund's
portfolio transactions, the Manager may also consider sales of shares of the Fund and other investment companies for
which the Manager or an affiliate serves as investment advisor.

Brokerage Practices Followed by the Manager. 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 these orders at the most favorable net
price.

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 based
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.

Transactions in securities other than those for which an exchange is the primary market are generally done
with principals or market makers. In transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated commissions available in U.S. markets.
Brokerage commissions are paid primarily for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise, brokerage commissions are paid only if it appears likely that a
better price or execution can be obtained by doing so. In an option transaction, the Fund ordinarily uses the same
broker for the purchase or sale of the option and any transaction in the securities to which the option relates.
Other funds advised by the Manager have investment policies similar to those of the Fund. Those other funds may
purchase or sell the same securities as the Fund at the same time as the Fund, which could affect the supply and
price of the securities. If two or more funds advised by the Manager purchase the same security on the same day
from the same dealer, 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.

In an option transaction, the Fund ordinarily uses the same broker for the purchase or sale of the option
and any transaction in the securities to which the option relates. 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. The investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of the Manager's other accounts. Investment research 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 analysis on particular companies and industries as
well as market or economic trends and portfolio strategy, market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions), then only the percentage or component
that provides assistance to the Manager in the investment decision-making process may be paid in commission
dollars.

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

The research services provided by brokers broadens the scope and supplements the research activities of the
Manager. That research provides additional views and comparisons for consideration, and helps the Manager to obtain
market information for the valuation of securities that are either held in the Fund's portfolio or are being
considered for purchase. The Manager provides information to the Board about the commissions paid to brokers
furnishing such services, together with the Manager's representation that the amount of such commissions was
reasonably related to the value or benefit of such services.

---------------------------------- -----------------------------------------------------------------
Fiscal Year Ended 8/31: Total Brokerage Commissions Paid by the Fund1
---------------------------------- -----------------------------------------------------------------
---------------------------------- -----------------------------------------------------------------
1999 $358,8302
---------------------------------- -----------------------------------------------------------------
---------------------------------- -----------------------------------------------------------------
2000 $340,955
---------------------------------- -----------------------------------------------------------------
---------------------------------- -----------------------------------------------------------------
2001 $420,485
---------------------------------- -----------------------------------------------------------------
1. Amounts do not include spreads or commissions on principal transactions on a net trade basis.
2. In the fiscal year ended 8/31/99, the amount of transactions directed to brokers for research services was
$6,664,897 and the amount of the commissions paid to broker-dealers for those services was
$16,025.

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. Expenses normally attributable to sales are borne by the Distributor.

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

--------------- ----------------------- -----------------------
Fiscal Year Aggregate Front-End Class A Front-End
Sales Charges
Ended 8/31: Sales Charges on Retained by
Class A Shares Distributor1
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
1999 $1,387,987 $352,357
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2000 $1,385,828 $173,433
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2001 $1,925,920 $352,247
--------------- ----------------------- -----------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent of the Distributor.

-------------- ------------------------ ------------------------ ----------------------- ------------------------
Fiscal Year Concessions on Class A Concessions on Class B Concessions on Class Concessions on Class N
Ended 8/31: Shares Advanced by Shares Advanced by C Shares Advanced by Shares Advanced by
Distributor1 Distributor1 Distributor1 Distributor1
-------------- ------------------------ ------------------------ ----------------------- ------------------------
-------------- ------------------------ ------------------------ ----------------------- ------------------------
1999 $164,214 $2,163,419 $177,771 N/A
-------------- ------------------------ ------------------------ ----------------------- ------------------------
-------------- ------------------------ ------------------------ ----------------------- ------------------------
2000 $196,644 $3,692,550 $244,362 N/A
-------------- ------------------------ ------------------------ ----------------------- ------------------------
-------------- ------------------------ ------------------------ ----------------------- ------------------------
2001 $823,070 $2,578,825 $263,714 $1,2892
-------------- ------------------------ ------------------------ ----------------------- ------------------------
1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for sales
of Class B and Class C shares from its own resources at the time of sale.
2. The inception date of Class N shares was March 1, 2001.

-------------- ------------------------ ----------------------- ------------------------ -------------------------
Fiscal Year Class A Contingent Class B Contingent Class C Contingent Class N Contingent
Deferred Sales
Ended 8/31 Deferred Sales Charges Charges Retained by Deferred Sales Charges Deferred Sales Charges
Retained by Distributor Distributor Retained by Distributor Retained by Distributor
-------------- ------------------------ ----------------------- ------------------------ -------------------------
-------------- ------------------------ ----------------------- ------------------------ -------------------------
2001 $62,909 $484,902 $32,349 $0
-------------- ------------------------ ----------------------- ------------------------ -------------------------

Distribution and Service Plans. The Fund has adopted a Service Plan for Class A shares and Distribution and Service
Plans for Class B, Class C and Class N 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 Trustees8, 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 and in their sole
discretion, from time to time, may use their own resources (at no direct cost to the Fund) to make payments to
brokers, dealers or other financial institutions for distribution and administrative services they perform. The
Manager may use its profits from the advisory fee it receives from the Fund. In their sole discretion, the
Distributor and the Manager may increase or decrease the amount of payments they make from their own resources to
plan recipients.

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

The Board of Trustees and the Independent Trustees must approve all material amendments to a plan. An
amendment to increase materially the amount of payments to be made under a plan must be approved by shareholders of
the class affected by the amendment. Because Class B shares of the Fund automatically convert into Class A shares
after six years, the Fund must obtain the approval of both Class A and Class B shareholders for a proposed material
amendment to the Class A Plan that would materially increase payments under the Plan. That approval must be by a
"majority" (as defined in the Investment Company Act) of the shares of each Class, voting separately by class.

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

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

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

o 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. 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 quarterly 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 August 31, 2001 payments under the Class A Plan totaled $1,399,581 all of which
was paid by the Distributor to recipients. That included $71,960 paid to an affiliate of the Distributor's parent
company. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot
be recovered in subsequent years. The Distributor may not use payments received under the Class A Plan to pay any of
its interest expenses, carrying charges, or other financial costs, or allocation of overhead.

o Class B, Class C and Class N Service and Distribution Plan Fees. Under each plan, service fees and
distribution fees are computed on the average of the net asset value of shares in the respective class, determined
as of the close of each regular business day during the period. 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 fees or to
pay recipients the service fee on a quarterly 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 Class B or Class C shares are outstanding, after their purchase, the Distributor
makes service fee payments quarterly on those shares. The advance payment is based on the net asset value of shares
sold. Shares purchased by exchange do not qualify for 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 of the service fee made on those shares.

The asset-based sales charge and service fees increase Class B and Class C expenses by 1.00% and effective
November 1, 2001 the asset-based sales charge and service fees increases Class N expenses by 0.50% of the net assets
per year of the respective class.

The Distributor retains the asset-based sales charge on Class B and Class N 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, Class C
and/or Class N service fee and the asset-based sales charge to the dealer quarterly in lieu of paying the sales
concessions and service fee in advance at the time of purchase.

The asset-based sales charges on Class B, Class C and Class N shares allow 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 charges to the Distributor for its services rendered in distributing Class B, Class C and
Class N 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, Class C and Class N shares, and
o bears the costs of sales literature, advertising and prospectuses (other than those furnished to current
shareholders) and state "blue sky" registration fees and certain other distribution expenses.
o may not be able to adequately compensate dealers that sell Class B, Class C and Class N 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.

When Class B, Class C or Class N shares are sold without the designation of a broker-dealer, the Distributor
is automatically designated as the broker-dealer of record. In those cases, the Distributor retains the service fee
and asset-based sales charge paid on Class B, Class C and Class N shares.

The Distributor's actual expenses in selling Class B, Class C and Class N shares may be more than the
payments it receives from the contingent deferred sales charges collected on redeemed shares and from the Fund under
the plans. If either the Class B, Class C or Class N plan is terminated by the Fund, the Board of Trustees may allow
the Fund to continue payments of the asset-based sales charge to the Distributor for distributing shares before the
plan was terminated.

---------------------------------------------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 8/31/01
---------------------------------------------------------------------------------------------------------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class: Total Payments Under Amount Retained by Distributor's Distributor's
Aggregate Unreimbursed Expenses
Unreimbursed Expenses as % of Net Assets of
Plan Distributor Under Plan Class
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class B Plan $1,691,332 $1,371,6301 $7,860,407 3.84%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class C Plan $1,088,813 $214,1382 $1,011,796 0.81%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class N Plan $110 $100 N/A N/A
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
1. Includes $8,068 paid to an affiliate of the Distributor's parent company.
2. Includes $5,372 paid to an affiliate of the Distributor's parent company.

All payments under the Class B, Class C and Class N 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.

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to illustrate its performance. These terms
include "standardized 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 1.800.525.7048
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 Securities
and Exchange Commission. Those rules describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data must include the average annual total
returns for the advertised class of shares of the Fund. Those returns must be shown for the 1-, 5- and 10-year
periods (or the life of the class, if less) ending as of the most recently ended calendar quarter prior to the
publication of the advertisement (or its submission for publication). Certain types of yields may also be shown,
provided that they are accompanied by standardized average annual total returns.

Use of standardized performance calculations enables an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other investments:

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

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

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

o Standardized Yield. The "standardized yield" (sometimes referred to just as "yield") is shown for a class
of shares for a stated 30-day period. It is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment income from the Fund's portfolio
investments for that period. It may therefore differ from the "dividend yield" for the same class of shares,
described below.

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

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

--------

The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense 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, Class C and Class N shares is the net asset value per share, without considering
the effect of contingent deferred sales charges. There is no sales charge on Class Y shares. The Class A dividend
yield may also be quoted without deducting the maximum initial sales charge.

--------------------------------------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 8/31/01
--------------------------------------------------------------------------------------------------
---------------- --------------------------------------- -----------------------------------------
Class of Shares Standardized Yield Dividend Yield
---------------- --------------------------------------- -----------------------------------------
---------------- -------------------- ------------------ --------------------- -------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
---------------- -------------------- ------------------ --------------------- -------------------
---------------- -------------------- ------------------ --------------------- -------------------
Class A 5.77% 5.49% 5.69% 5.43%
---------------- -------------------- ------------------ --------------------- -------------------
---------------- -------------------- ------------------ --------------------- -------------------
Class B 5.00% N/A 4.94% N/A
---------------- -------------------- ------------------ --------------------- -------------------
---------------- -------------------- ------------------ --------------------- -------------------
Class C 5.01% N/A 4.95% N/A
---------------- -------------------- ------------------ --------------------- -------------------
---------------- -------------------- ------------------ --------------------- -------------------
Class N 5.78% N/A 5.71% N/A
---------------- -------------------- ------------------ --------------------- -------------------
---------------- -------------------- ------------------ --------------------- -------------------
Class Y 6.16% N/A 6.08% N/A
---------------- -------------------- ------------------ --------------------- -------------------

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

In calculating total returns for Class A shares, the current maximum sales charge of 4.75% (as a percentage
of the offering price) is deducted from the initial investment ("P" 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% contingent deferred sales charge is deducted for returns for the 1-year period. For Class
N shares, the 1% contingent deferred sales charge is deducted for returns for the 1-year and life-of-class periods,
as applicable. There is no sales charge on Class Y shares.

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

ERV l/n - 1 Average Annual Total Return

--------------

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

----------------

o Total Returns at Net Asset Value From time to time the Fund may also quote a cumulative or an average
annual total return "at net asset value" (without deducting sales charges) for Class A, Class B, Class C or Class N
shares. There is no sales charge on Class Y 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 8/31/01
----------------------------------------------------------------------------------------------------------------------
-------------- ------------------------- -----------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Shares Returns (10 years or
life-of-class)
-------------- ------------------------- -----------------------------------------------------------------------------
-------------- ------------------------- ------------------------- ------------------------- -------------------------
1-Year 5-Year 10-Year
(or Life of Class) (or Life of Class)
-------------- ------------------------- ------------------------- ------------------------- -------------------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class A1 85.99% 95.27% 4.53% 9.75% 6.10% 7.14% 6.40% 6.92%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class B 43.07%2 43.07%2 3.92% 8.92% 6.02% 6.34% 6.04%2 6.04%2
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class C 51.41%3 51.41%3 7.81% 8.81% 6.32% 6.32% 5.50%3 5.50%3
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class N4 2.50% 3.50% N/A N/A N/A N/A N/A N/A
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Class Y5 N/A 20.56% N/A 10.10% N/A 5.86% N/A N/A

-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1. Inception of Class A: 8/16/85
2. Inception of Class B: 7/21/95
3. Inception of Class C: 12/1/93
4. Inception of Class N: 3/1/01
5. Inception of Class Y: 5/18/98

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

|X| Lipper Rankings. From time to time the Fund may publish the ranking of the performance of its classes
of shares by Lipper Analytical Services, Inc. Lipper is a widely-recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated investment companies, including the Fund, and ranks their
performance for various periods 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.

o Morningstar Rankings. From time to time the Fund may publish the ranking and/or star rating of the
performance of its classes of shares by Morningstar, Inc., an independent mutual fund monitoring service.
Morningstar rates and ranks mutual funds in broad investment categories: domestic stock funds, international stock
funds, taxable bond funds and municipal bond funds. The Fund is included in the intermediate government fund
category.

Morningstar proprietary star rankings reflect historical risk-adjusted total investment return. For each
fund with at least a three-year history, Morningstar calculates a Morningstar RatingTM metric each month by
subtracting the return on a 90-day U.S. Treasury Bill from the fund's load-adjusted return for the same period, and
then adjusting this excess return for risk. The top 10% of funds in each broad asset class 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. 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 Ratings metrics.

The Fund may also compare its total return ranking to that of other funds in its Morningstar category, in
addition to its star rating. Those total return rankings are percentages from one percent to one hundred percent
and are not risk-adjusted. For example, if a fund is in the 94th percentile, that means that 94% of the funds in
the same category performed better than it did.
o 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 prices 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.

A B O U T Y O U R A C C O U N T

How to Buy Shares

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

AccountLink. When shares are purchased through AccountLink, each purchase must be at least $25. Shares will be
purchased on the regular business day the Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased with the proceeds of ACH transfers
on the business day the Fund receives Federal Funds for the purchase through the ACH system before the close of The
New York Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier on certain days. If
Federal Funds are received on a business day after the close of the Exchange, the shares will be purchased and
dividends will begin to accrue on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund three days after the transfers are initiated. The Distributor and the Fund are not responsible
for any delays in purchasing shares resulting from delays in ACH transmissions.

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

|X| Right of Accumulation. To qualify for the lower sales charge rates that apply to larger purchases of
Class A shares, you and your spouse can add together:
o Class A and Class B shares you purchase for your individual accounts (including IRAs and 403(b) plans), or
for your joint accounts, or for trust or custodial accounts on behalf of your children who are
minors, and
o Current purchases of Class A and Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares, and
o Class A and Class B shares of Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate for current purchases of Class A
shares, provided that you still hold your investment in one of the Oppenheimer funds.

A fiduciary can count all shares purchased for a trust, estate or other fiduciary account (including one or
more employee benefit plans of the same employer) that has multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own to the value of current purchases
to determine the sales charge rate that applies. The reduced sales charge will apply only to current purchases. You
must request it when you buy shares.

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

Oppenheimer Bond Fund Oppenheimer Municipal Bond Fund
Oppenheimer California Municipal Fund Oppenheimer New York Municipal Fund
Oppenheimer Capital Appreciation Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Preservation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Champion Income Fund Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Concentrated Growth Fund Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Convertible Securities Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Developing Markets Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Disciplined Allocation Fund Oppenheimer Real Asset Fund
Oppenheimer Discovery Fund Oppenheimer Real Estate Fund
Oppenheimer Emerging Growth Fund Oppenheimer Rochester National Municipals
Oppenheimer Emerging Technologies Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Enterprise Fund Oppenheimer Small Cap Value Fund
Oppenheimer Europe Fund Oppenheimer Special Value Fund
Oppenheimer Global Fund Oppenheimer Strategic Income Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Gold & Special Minerals Fund Oppenheimer Trinity Core Fund
Oppenheimer Growth Fund Oppenheimer Trinity Large Cap Growth Fund
Oppenheimer High Yield Fund Oppenheimer Trinity Value Fund
Oppenheimer Intermediate Municipal Fund Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund Oppenheimer Value Fund
Oppenheimer International Growth Fund Limited-Term New York Municipal Fund
Oppenheimer International Small Company Fund Rochester Fund Municipals
Oppenheimer Limited-Term Government Fund OSM1- Gartmore Millennium Growth Fund II
Oppenheimer Main Street Growth & Income Fund OSM1 - Jennison Growth Fund
Oppenheimer Main Street Opportunity Fund OSM1 - Mercury Advisors S&P 500 Index
Oppenheimer Main Street Small Cap Fund OSM1 - Mercury Advisors Focus Growth Fund
Oppenheimer MidCap Fund OSM1 - QM Active Balanced Fund
Oppenheimer Multiple Strategies Fund OSM1 - Salomon Brothers Capital Fund
And the following money market funds:

Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
1 - "OSM" stands for Oppenheimer Select Managers

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

Letters of Intent. Under a Letter of Intent, if you
purchase Class A shares or Class A and Class B shares of
the Fund and other Oppenheimer funds during a 13-month
period, you can reduce the sales charge rate that applies
to your purchases of Class A shares. The total amount of
your intended purchases of both Class A and Class B shares
will determine the reduced sales charge rate for the Class
A shares purchased during that period. You can include
purchases made up to 90 days before the date of the Letter.

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

A Letter enables an investor to count the Class A
and Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A shares of
the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter
will be made at the offering price (including the sales
charge) that applies to a single lump-sum purchase of
shares in the amount intended to be purchased under the
Letter.

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

If the total eligible purchases made during the
Letter of Intent period do not equal or exceed the intended
purchase amount, the 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 of Intent period
exceed the intended purchase amount and exceed the amount
needed to qualify for the next sales charge rate reduction
set forth in the Prospectus, the sales charges paid will be
adjusted to the lower rate. That adjustment will be made
only if and when the dealer returns to the Distributor the
excess of the amount of 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 of Intent. If the intended purchase amount under a
Letter of Intent entered into by an OppenheimerFunds
prototype 401(k) plan is not purchased by the plan by the
end of the Letter of Intent 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 of Intent period will be
deducted. It is the responsibility of the dealer of record
and/or the investor to advise the Distributor about the
Letter in placing any purchase orders for the investor
during the Letter of Intent period. All of such purchases
must be made through the Distributor.

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

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

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

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

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

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

Asset Builder Plans. To establish an Asset Builder Plan to
buy shares directly from a bank account, you must enclose a
check (the minimum is $25) for the initial purchase with
your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in the
Prospectus. Asset Builder Plans are available only if your
bank is an ACH member. Asset Builder Plans may not be used
to buy shares for OppenheimerFunds employer-sponsored
qualified retirement accounts. Asset Builder Plans also
enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make monthly automatic purchases of
shares of up to four other Oppenheimer funds.

If you make payments from your bank account to
purchase shares of the Fund, your bank account will be
debited automatically. Normally the debit will be made two
business days prior to the investment dates you selected on
your Application. Neither the Distributor, the Transfer
Agent 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.

Retirement Plans. Certain types of retirement plans are
entitled to purchase shares of the Fund without sales
charge or at reduced sales charge rates, as described in
Appendix C to this Statement of Additional Information.
Certain special sales charge arrangements described in that
Appendix apply to retirement plans whose records are
maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc.("Merrill Lynch") or an
independent record keeper that has a contract or special
arrangement with Merrill Lynch. If on the date the plan
sponsor signed the Merrill Lynch record keeping service
agreement the plan has less than $3 million in assets
(other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may
purchase only Class B shares of the Oppenheimer funds. Any
retirement plans in that category that currently invest in
Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's
applicable investments reach $5 million.

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, Class C or Class N shares and the dividends
payable on Class B, Class C or Class N shares will be
reduced by incremental expenses borne solely by that class.
Those expenses include the asset-based sales charges to
which Class B, Class C and Class N shares are subject.

The availability of different classes of shares
permits an investor to choose the method of purchasing
shares that is more appropriate for the investor. That may
depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant
circumstances. Class A shares normally are sold subject to
an initial sales charge. While Class B, Class C and Class N
shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class
B, Class C and Class N shares is the same as that of the
initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions
that sell shares of the Fund. A salesperson who is
entitled to receive compensation from his or her firm for
selling Fund shares may receive different levels of
compensation for selling one class of shares rather than
another.

The Distributor will not accept any order in the
amount of $500,000 or more for Class B shares or $1 million
or more for Class C shares on behalf of a single investor
(not including dealer "street name" or omnibus accounts).
That is because generally it will be more advantageous for
that investor to purchase Class A shares of the Fund.

|X| Class A Shares Subject to a Contingent Deferred
Sales Charge. For purchases of Class A shares subject to a
contingent deferred sales charge as described in the
Prospectus, no sales concessions will be paid to the
broker-dealer of record, as described in the Prospectus, on
sales of Class A shares purchased with the redemption
proceeds of shares of another mutual fund offered as an
investment option in a retirement plan in which Oppenheimer
funds are also offered as investment options under a
special arrangement with the Distributor, if the purchase
occurs more than 30 days after the Oppenheimer funds are
added as an investment option under that plan.
Additionally, that concession will not be paid on purchases
of shares by a retirement plan made with the redemption
proceeds of Class N shares of one or more Oppenheimer funds
held by the plan for more than 18 months.

|X| Class B Conversion. Under current
interpretations of applicable federal income tax law by the
Internal Revenue Service, the conversion of Class B shares
to Class A shares after six years is not treated as a
taxable event for the shareholder. If those laws or the IRS
interpretation of those laws should change, the automatic
conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while
that suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the
basis of relative net asset value of the two classes,
without the imposition of a sales charge or fee, such
exchange could constitute a taxable event for the
shareholder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for
longer than six years.

|X| Availability of Class N Shares. In addition
to the description of the types of retirement plans which
may purchase Class N shares contained in the prospectus,
Class N shares also are offered to the following:
o to all rollover IRAs,
o to all direct rollovers from
OppenheimerFunds-sponsored Pinnacle and
Ascender retirement plans,
o to all trustee-to-trustee IRA transfers,
o to all 90-24 type 403(b) transfers,
o to Group Retirement Plans (as defined in Appendix
C to this Statement of Additional
Information) which have entered into a
special agreement with the Distributor
for that purpose,
o to Retirement Plans qualified under Sections
401(a) or 401(k) of the Internal Revenue
Code, the recordkeeper or the plan
sponsor for which has entered into a
special agreement with the Distributor,
o to Retirement Plans of a plan sponsor where the
aggregate assets of all such plans
invested in the Oppenheimer funds is
$500,000 or more,
o to OppenheimerFunds-sponsored Ascender 401(k)
plans that pay for the purchase with the
redemption proceeds of Class A shares of
one or more Oppenheimer funds.
o to certain customers of broker-dealers and
financial advisors that are identified in
a special agreement between the
broker-dealer or financial advisor and
the Distributor for that purpose.

The sales concession and the advance of the
service fee, as described in the Prospectus, will not be
paid to dealers of record on sales of Class N shares on:
o purchases of Class N shares in amounts of
$500,000 or more by a retirement plan
that pays for the purchase with the
redemption proceeds of Class A shares of
one or more Oppenheimer funds (other than
rollovers from an
OppenheimerFunds-sponsored Pinnacle or
Ascender 401(k) plan to any IRA invested
in the Oppenheimer funds),
o purchases of Class N shares in amounts of $500,000
or more 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 (other than
rollovers from an
OppenheimerFunds-sponsored Pinnacle or
Ascender 401(k) plan to any IRA invested
in the Oppenheimer funds), and
o on purchases of Class N shares by an
OppenheimerFunds-sponsored Pinnacle or
Ascender 401(k) plan made with the
redemption proceeds of Class A shares of
one or more Oppenheimer funds.

|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).

Determination of Net Asset Values Per Share. The net asset
values per share of each class of shares of the Fund are
determined as of the close of business of The New York
Stock Exchange on each day that the Exchange is open. The
calculation is done by dividing the value of the Fund's net
assets attributable to a class by the number of shares of
that class that are outstanding. The Exchange normally
closes at 4:00 P.M., New York time, but may close earlier
on some other days (for example, in case of weather
emergencies or on days falling before a U.S. holiday). The
Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's
Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on
other days.

Dealers other than Exchange members may conduct
trading in certain securities on days on which the Exchange
is closed (including weekends and holidays) or after 4:00
P.M. on a regular business day. Because the Fund's net
asset 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.

Changes in the values of securities traded on
foreign exchanges or markets as a result of events that
occur after the prices of those securities are determined,
but before the close of The New York Stock Exchange, will
not be reflected in the Fund's calculation of its net asset
values that day unless the Manager determines that the
event is likely to effect a material change in the value of
the security. The Manager, or an internal valuation
committee established by the Manager, as applicable, may
establish a valuation, under procedures established by the
Board and subject to the approval, ratification and
confirmation by the Board at its next ensuing meeting.

|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 Equity securities traded on a U.S. securities
exchange or on NASDAQ are valued as follows:
(1) if last sale information is regularly reported,
they are valued at the last
reported sale price on the
principal exchange on which they
are traded or on NASDAQ, as
applicable, on that day, or
(2) if last sale information is not available on a
valuation date, they are valued at
the last reported sale price
preceding the valuation date if it
is within the spread of the
closing "bid" and "asked" prices
on the valuation date or, if not,
at the closing "bid" price on the
valuation date.
o Equity securities traded on a foreign securities
exchange generally are valued in one of the following ways:
(1) at the last sale price available to the pricing
service approved by the Board of
Trustees, or
(2) at the last sale price obtained by the Manager
from the report of the principal
exchange on which the security is
traded at its last trading session
on or immediately before the
valuation date, or
(3) at the mean between the "bid" and "asked" prices
obtained from the principal
exchange on which the security is
traded or, on the basis of
reasonable inquiry, from two
market makers in the security.
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 U.S. government securities,
mortgage-backed securities, corporate bonds and foreign
government 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, and futures are valued at the last
sale price on the principal exchange on which they are
traded or on NASDAQ, as applicable, as determined by a
pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be
valued at the last sale price on the preceding trading day
if it is within the spread of the closing "bid" and "asked"
prices on the principal exchange or on NASDAQ on the
valuation date. If not, the value shall be the closing bid
price on the principal exchange or on NASDAQ on the
valuation date. If the put, call or future is not traded
on an exchange or on NASDAQ, it shall be valued by the mean
between "bid" and "asked" prices obtained by the Manager
from two active market makers. In certain cases that may be
at the "bid" price if no "asked" price is available.

When the Fund writes an option, an amount equal to
the premium received is included in the Fund's Statement of
Assets and Liabilities as an asset. An equivalent credit is
included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of
the option. In determining the Fund's gain on investments,
if a call 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 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, Class N or Class Y shares. The
Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date
of such amendment, suspension or cessation.

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

Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash.
However, 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 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, Class C and Class N contingent
deferred sales charge will be followed in determining the
order in which shares are transferred.

Distributions From Retirement Plans. Requests for
distributions from OppenheimerFunds-sponsored IRAs,
403(b)(7) custodial plans, 401(k) plans or pension or
profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent
at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of this Statement of
Additional Information. The request must
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if
the distribution is premature; and
(3) conform to the requirements of the plan and the
Fund's other redemption requirements.

Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans
with shares of the Fund held in the name of the plan or its
fiduciary may not directly request redemption of their
accounts. The plan administrator or fiduciary must sign
the request.

Distributions from pension and profit sharing
plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from
the Transfer Agent) must be completed and submitted to the
Transfer Agent before the distribution may be made.
Distributions from retirement plans are subject to
withholding requirements under the Internal Revenue Code,
and IRS Form W-4P (available from the Transfer Agent) must
be submitted to the Transfer Agent with the distribution
request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a
certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution
even if the shareholder elects not to have tax withheld.
The Fund, the Manager, the Distributor, and the Transfer
Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax
laws and will not be responsible for any tax penalties
assessed in connection with a distribution.

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

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

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

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

The Fund cannot guarantee receipt of a payment on
the date requested. The Fund reserves the right to amend,
suspend or discontinue offering these plans at any time
without prior notice. Because of the sales charge assessed
on Class A share purchases, shareholders should not make
regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B,
Class C and Class N shareholders should not establish
automatic withdrawal plans, because of the potential
imposition of the contingent deferred sales charge on such
withdrawals (except where the Class B, Class C or Class N
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 $25. Instructions should be
provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under
these plans are subject to the restrictions that apply to
exchanges as set forth in "How to Exchange Shares" in the
Prospectus and below in this Statement of Additional
Information.

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

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

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

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

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

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

To use shares held under the Plan as collateral
for a debt, the Planholder may request issuance of a
portion of the shares in certificated form. Upon written
request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may
be issued without causing the withdrawal checks to stop.
However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.

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

As stated in the Prospectus, shares of a particular class
of Oppenheimer funds having more than one class of shares
may be exchanged only for shares of the same class of other
Oppenheimer funds. Shares of Oppenheimer funds that have a
single class without a class designation are deemed "Class
A" shares for this purpose. You can obtain a current list
showing which funds offer which classes 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 America Fund, L.P. Centennial Tax Exempt Trust
Centennial California Tax Exempt Trust Oppenheimer Concentrated Growth Fund
Centennial Government Trust Oppenheimer Money Market Fund, Inc.
Centennial Money Market Trust Oppenheimer Real Estate Fund
Centennial New York Tax Exempt Trust Oppenheimer Special Value Fund

The following funds do not offer Class N shares:
Oppenheimer California Municipal Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Intermediate Municipal Fund Oppenheimer Rochester National Municipals
Oppenheimer Municipal Bond Fund Rochester Fund Municipals
Oppenheimer New Jersey Municipal Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer New York Municipal Fund Limited Term New York Municipal Fund

The following funds do not offer Class Y shares:
Oppenheimer California Municipal Fund Oppenheimer Intermediate Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Cash Reserves Oppenheimer New York Municipal Fund
Oppenheimer Champion Income Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Convertible Securities Fund Oppenheimer Rochester National Municipals
Oppenheimer Disciplined Allocation Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Small Cap Value Fund
Oppenheimer International Small Company Fund Limited Term New York Municipal Fund

o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for shares of any other fund.
o Class B, Class C and Class N 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 or Oppenheimer Cash Reserves acquired by
exchange of Class M shares.

o Class X shares of Limited Term New York Municipal Fund may be exchanged only for Class B shares of other
Oppenheimer funds and no exchanges may be made to Class X shares.

o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for shares of Oppenheimer Money Market
Fund, Inc., Oppenheimer Cash Reserves or Oppenheimer Limited-Term Government Fund. Only participants in
certain retirement plans may purchase shares of Oppenheimer Capital Preservation Fund, and only those
participants may exchange shares of other Oppenheimer funds for shares of Oppenheimer Capital Preservation
Fund.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available by exchange of shares of
Oppenheimer Money Market Fund or Class A shares of Oppenheimer Cash Reserves.
Shares of Oppenheimer Select Managers Mercury Advisors S&P Index Fund and Oppenheimer Select Managers QM Active
Balanced Fund are only available to retirement plans and are available only by exchange from the same class
of shares of other Oppenheimer funds held by retirement plans.
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 Oppenheimer Money Market Fund, Inc. purchased with the redemption proceeds of shares of
other mutual funds (other than funds managed by the Manager or its subsidiaries) redeemed within the 30
days prior to that purchase may subsequently be exchanged for shares of other Oppenheimer funds without
being subject to an initial sales charge or contingent deferred sales charge. To qualify for that
privilege, the investor or the investor's dealer must notify the Distributor of eligibility for this
privilege at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased. If requested, they
must supply proof of entitlement to this privilege.
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.

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:

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 eighteen (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 twenty-four (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 With respect to Class B shares, the Class B 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 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 With respect to Class N shares, a 1% contingent deferred sales charge will be imposed if the retirement
plan (not including IRAs and 403(b) plans) is terminated or Class N shares of all Oppenheimer funds are terminated
as an investment option of the plan and Class N shares are redeemed within 18 months after the plan's first purchase
of Class N shares of any Oppenheimer fund or with respect to an individual retirement plan or 403(b) plan, Class N
shares are redeemed within 18 months of the plan's first purchase of Class N shares of any Oppenheimer fund.

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.
The Class B 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. 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, Class C or Class N 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 and 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. The Fund may accept requests for
exchanges of up to 50 accounts per day from representatives of authorized dealers that qualify for this privilege.

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

|X| Processing Exchange Requests. Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption Date"). Normally, shares of the fund to
be acquired are purchased on the Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate transfer of the redemption proceeds.
The Fund reserves the right, in its discretion, to refuse any exchange request that may disadvantage it. For
example, if the receipt of multiple exchange requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the Fund, the Fund may refuse the request. When
you exchange some or all of your shares from one fund to another, any special account feature such as an Asset
Builder Plan or Automatic Withdrawal Plan, will be switched to the new fund account unless you tell the Transfer
Agent not to do so. However, special redemption and exchange features such as Automatic Exchange Plans and
Automatic Withdrawal Plans cannot be switched to an account in Oppenheimer Senior Floating Rate Fund.

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

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. The Fund has no fixed dividend rate and there can be no assurance as to the payment of
any dividends or the realization of any capital gains. The dividends and distributions paid by a class of shares
will 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 each class of shares. However, dividends on Class B, Class C or Class N shares are expected to
be lower than dividends on Class A and Class Y shares. That is because of the effect of the asset-based sales charge
on Class B, Class C and Class N shares. Those dividends will also differ in amount as a consequence of any
difference in the net asset values of the different classes of shares.

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.

Tax Status of the Fund's Dividends, Distributions and Redemptions of Shares. The federal tax treatment of the
Fund's dividends and capital gains 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.

|X| 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 ordinary income dividends and capital gain dividends 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. That
qualification enables the Fund to "pass through" its income and realized capital gains to shareholders without
having to pay tax on them. This avoids a "double tax" on that income and capital gains, since shareholders normally
will be taxed on the dividends and capital gains they receive from the Fund (unless their Fund shares are held in a
retirement account or the shareholder is otherwise exempt from tax).

The Internal Revenue Code contains a number of complex tests relating to qualification that the Fund might
not meet in a particular year. If it did not qualify as a regulated investment company, the Fund would be treated
for tax purposes as an ordinary corporation and would receive no tax deduction for payments made 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) 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 twelve 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, 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 Directors 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 anticipates distributing substantially all of its investment
company taxable income for each taxable year. Those distributions will be taxable to shareholders as ordinary
income and treated as dividends for federal income tax purposes.

Special provisions of the Internal Revenue Code govern the eligibility of the Fund's dividends for the
dividends-received deduction for corporate shareholders. Long-term capital gains distributions are not eligible for
the deduction. The amount of dividends paid by the Fund that may qualify for the deduction is limited to the
aggregate amount of qualifying dividends that the Fund derives from portfolio investments that the Fund has held for
a minimum period, usually 46 days. A corporate shareholder will not be eligible for the deduction on dividends paid
on Fund shares held for 45 days or less. To the extent the Fund's dividends are derived from gross income from
option premiums, interest income or short-term gains from the sale of securities or dividends from foreign
corporations, those dividends will not qualify for the deduction. Since it is anticipated that most of the Fund's
income will be derived from interest it receives on its investments, the Fund does not anticipate that its
distributions will qualify for this deduction.

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 net long term capital gains are distributed and
designated as a capital gain distribution, it will be taxable to shareholders as long-term capital gain and will be
properly identified in reports sent to shareholder 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, it is expected that the Fund also will elect
to have shareholders of record on the last day of its taxable year treated as if each received a distribution of
their pro rata share of such gain. 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.

Investment income that may be received by the Fund from sources within foreign countries may be subject to
foreign taxes withheld at the source. The United States has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of, or exemption from, taxes on such income.

Distributions by the Fund that do not constitute ordinary income dividends or capital gain distributions
will be treated as a return of capital to the extent of the shareholder's tax basis in their shares. Any excess will
be treated as gain from the sale of those shares, as discussed below. Shareholders will be advised annually as to
the U.S. federal income tax consequences of distributions made (or deemed made) during the year. If prior
distributions made by the Fund must be re-characterized as a non-taxable return of capital at the end of the fiscal
year as a result of the effect of the Fund's investment policies, they will be identified as such in notices sent to
shareholders.

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 30% (29% for payments after December 31, 2003) of
ordinary income 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). All income and any tax withheld by the Fund is
remitted by the Fund to the U.S. Treasury and is identified in reports mailed to shareholders in January of each
year.

|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.

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 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 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. All income and any tax withheld by the Fund is remitted by the Fund to the U.S. Treasury and is
identified in reports mailed to shareholders in March of each year.

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 her/her foreign status, the Fund will be required
to withhold U.S. tax at a rate of 30% (29% for payments after December 31, 2003) on ordinary income dividends,
capital gains distributions and the proceeds of the redemption of shares, paid to any foreign person. All income and
any tax withheld (in this situation) by the Fund is remitted by the Fund to the U.S. Treasury and is identified in
reports mailed to shareholders in January of each year.

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 (other than Oppenheimer Cash Reserves) 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. 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 will be the practice of the Fund to deal with the custodian in a manner uninfluenced by any
banking relationship the custodian may have with the Manager and its affiliates. 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 Auditors. KPMG LLP are the independent auditors of the Fund. They audit the Fund's financial statements
and perform other related audit services. They also act as auditors for certain other funds advised by the Manager
and its affiliates.

INDEPENDENT AUDITORS' REPORT

--------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Oppenheimer U.S. Government Trust:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer U.S. Government Trust, including the statement of investments, as of
August 31, 2001, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the 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 auditing standards generally
accepted in the United States of America. 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 August 31, 2001, 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 U.S. Government Trust as of August 31, 2001, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.


KPMG LLP

Denver, Colorado
September 24, 2001

37 | OPPENHEIMER U.S. GOVERNMENT TRUST


STATEMENT OF INVESTMENTS  August 31, 2001

                                                                        Principal  Market Value
                                                                           Amount    See Note 1
-----------------------------------------------------------------------------------------------
 Asset-Backed Securities--4.5%
-----------------------------------------------------------------------------------------------
 Amortizing Residential Collateral Trust, Mtg. Pass-Through
 Certificates, Trust 2000-BC1, Cl. B, 6.043%, 1/25/30(1)              $ 2,000,000   $ 2,006,250
-----------------------------------------------------------------------------------------------
 Block Mortgage Finance, Inc., Asset-Backed Certificates,
 Series 1999-1, Cl. A2, 6%, 4/27/20                                     3,183,118     3,276,623
-----------------------------------------------------------------------------------------------
 Conseco Finance Securitizations Corp., Home Equity Loan
 Pass-Through Certificates, Series 2000-4, Cl. M1, 8.73%, 5/1/32        5,000,000     5,331,250
-----------------------------------------------------------------------------------------------
 Embarcadero Aircraft Securitization Trust, Airplane
 Collateral Obligations, Series 2000-A, Cl. B, 4.74%, 8/15/25(1,2)      4,685,195     4,673,482
-----------------------------------------------------------------------------------------------
 MSF Funding LLC, Collateralized Mtg. Obligations,
 Series 2000-1, Cl. A, 6.293%, 7/25/07(1,2)                             3,751,120     3,751,121
-----------------------------------------------------------------------------------------------
 New Century Home Equity Loan Trust, Home Equity Mtg. Obligations,
 Series 2001-NC1, Cl. M3, 7%, 6/20/31                                   8,555,000     8,405,287
-----------------------------------------------------------------------------------------------
 Option One Mortgage Securities Corp. NIM Trust,
 Home Equity Mtg. Obligations:
 Series 1999-2, Cl. CTFS, 9.66%, 6/26/29(2)                             7,628,789     7,557,269
 Series 1999-4, Cl. CTFS, 9.67%, 12/26/29                               1,436,746     1,409,358
-----------------------------------------------------------------------------------------------
 Providian Master Trust, Sub. Collateralized Mtg. Obligations,
 Series 2000-2, Cl. C, 7.98%, 4/15/09(2)                                3,000,000     3,189,375
-----------------------------------------------------------------------------------------------
 Seneca Funding I Ltd., Commercial Bond Obligations,
 Cl. A, 6.25%, 5/31/29(1,2)                                             2,500,000     1,916,300
                                                                                     ----------
 Total Asset-Backed Securities (Cost $40,537,249)                                    41,516,315

===============================================================================================
 Mortgage-Backed Obligations--91.9%
-----------------------------------------------------------------------------------------------
 Government Agency--77.8%
-----------------------------------------------------------------------------------------------
 FHLMC/FNMA/Sponsored--70.1%
 Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
 Gtd. Multiclass Mtg. Participation Certificates,
 Series 151, Cl. F, 9%, 5/15/21                                           871,482       921,313
-----------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations:
 Series 2347, Cl. PC, 6.50%, 5/15/30                                    8,000,000     8,090,000
 Series 2355, Cl. TB, 6.50%, 9/15/31(3)                                12,500,000    12,835,938
-----------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp., Gtd. Multiclass
 Mtg. Pass-Through Certificates:
 7.50%, 9/1/12                                                          5,925,527     6,187,080
 9.50%, 12/1/02-11/1/03                                                    63,482        66,155
 11.50%, 6/1/20                                                           228,511       262,946
 12.50%, 7/1/19                                                           596,839       686,413
 13%, 8/1/15                                                              535,300       615,644
 14%, 1/1/11                                                              144,124       166,992


12 | OPPENHEIMER U.S. GOVERNMENT TRUST

                                                                      Principal   Market Value
                                                                         Amount     See Note 1
----------------------------------------------------------------------------------------------
 FHLMC/FNMA/Sponsored Continued
 Federal Home Loan Mortgage Corp.,
 Interest-Only Stripped Mtg.-Backed Security:
 Series 164, Cl. A, 6.01%, 3/1/24(4)                                $ 8,242,095    $ 1,934,317
 Series 192, Cl. IO, 14.71%, 2/1/28(4)                                8,298,798      1,735,616
 Series 197, Cl. IO, 11.12%, 4/1/28(4)                                  386,593         91,303
 Series 199, Cl. IO, 15.26%, 8/1/28(4)                               34,753,872      7,977,100
 Series 202, Cl. IO, 9.91%, 4/1/29(4)                                18,680,490      4,217,705
 Series 203, Cl. IO, 3.91%, 6/15/29(4)                               16,497,805      3,910,496
 Series 204, Cl. IO, 11.16%, 5/15/29(4)                               2,542,338        609,367
 Series 205, Cl. IO, 10.53%, 9/15/29(4)                               8,094,710      1,568,350
 Series 207, Cl. IO, 13.69%, 4/15/30(4)                               9,169,033      1,716,329
 Series 208, Cl. IO, 18.93%, 6/1/30(4)                               10,080,072      1,675,812
----------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp., Principal-Only Stripped
 Mtg.-Backed Security, Series 2155, Cl. PO, 3.42%, 5/15/29(5)         3,533,760      2,416,209
----------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp., Real Estate Mtg.
 Investment Conduit Multiclass Certificates:
 Series 1562, Cl. C, 7%, 3/15/21                                     15,000,000     15,459,300
 Series 2228, Cl. PQ, 7.50%, 8/15/25                                 10,000,000     10,503,100
 Series 2293, Cl. WD, 6.50%, 12/15/29                                10,855,200     10,967,117
 Series 2298, Cl. PC, 6.50%, 10/15/26                                 5,000,000      5,171,094
 Series 2304, Cl. PG, 6.50%, 3/15/30                                 11,000,000     11,188,980
 Series 2312, Cl. PH, 6.50%, 12/15/27                                10,399,000     10,714,220
 Series 2319, Cl. PG, 6.50%, 4/15/30                                 12,500,000     12,800,750
 Series 2328, Cl. QC, 6.50%, 3/15/30                                 10,000,000     10,234,300
 Series 2340, Cl. EG, 6.50%, 7/15/29                                 15,000,000     15,110,742
----------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp.-Government National
 Mortgage Assn., Gtd. Multiclass Mtg. Participation Certificates,
 Series 28, Cl. PG, 6.875%, 2/25/23                                   5,712,000      5,961,900
----------------------------------------------------------------------------------------------
 Federal National Mortgage Assn. Grantor Trust, Commercial Mtg.
 Obligations, Trust 2001-T6, Cl. B, 6.088%, 5/25/11                  10,000,000     10,262,500
----------------------------------------------------------------------------------------------
 Federal National Mortgage Assn.:
 6%, 9/25/31(3)                                                     166,000,000    163,146,460
 6.50%, 11/1/28-5/1/31                                               40,475,376     40,690,382
 6.50%, 9/1/28-10/25/28(3)                                           91,000,000     91,241,250
 7%, 8/25/29-4/1/30                                                  13,935,695     14,261,330
 7%, 9/25/31(3)                                                      71,500,000     73,086,585
 8%, 12/1/22                                                            820,219        862,592
 11%, 7/1/16                                                            392,122        438,299
 11.50%, 11/1/15-11/17/20                                             1,466,670      1,678,597
 13%, 11/1/12                                                            16,883         19,322
----------------------------------------------------------------------------------------------
 Federal National Mortgage Assn., Collateralized Mtg. Obligations,
 Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
 Trust 1992-34, Cl. G, 8%, 3/25/22                                    2,001,344      2,113,920
 Trust 1993-202, Cl. PH, 6.50%, 2/25/22                               2,601,615      2,702,428
 Trust 1994-27, Cl. PH, 6.50%, 9/25/22                                4,000,000      4,162,480
 Trust 1997-75, Cl. PB, 6.35%, 8/18/21                               20,540,000     21,002,150
 Trust 1998-25, Cl. J, 6.50%, 12/18/25                               19,321,609     19,846,771
----------------------------------------------------------------------------------------------
 Federal National Mortgage Assn., Collateralized Mtg. Obligations:
 Trust 2001-28, Cl. PN, 6.50%, 5/25/20                               10,000,000     10,390,625
 Trust 2001-38, Cl. CD, 6.50%, 5/25/29                               10,000,000      9,937,500
 Trust 2001-44, Cl. ML, 6.50%, 8/25/31                                5,000,000      4,937,500


13 | OPPENHEIMER U.S. GOVERNMENT TRUST

STATEMENT OF INVESTMENTS  Continued

                                                                             Principal   Market Value
                                                                                Amount     See Note 1
-----------------------------------------------------------------------------------------------------
 FHLMC/FNMA/Sponsored Continued
 Federal National Mortgage Assn., Gtd. Real Estate
 Mtg. Investment Conduit Pass-Through Certificates,
 Interest-Only Stripped Mtg.-Backed Security:
 Trust 294, Cl. 2, (1.81)%, 2/1/28(4)                                      $ 1,175,427   $    231,963
 Trust 302, Cl. 2, 8.78%, 6/1/29(4)                                         14,035,832      3,430,007
 Trust 311, Cl. 2, 11.597%, 6/1/30(4)                                       12,158,553      2,957,948
 Trust 1997-78, Cl. IC, 10.09%, 10/18/27(4)                                  5,000,000      1,053,125
 Trust 2001-1, Cl. IA, 5.97%, 2/25/31(4)                                     4,419,326        791,336
 Trust 2001-T4, Cl. IO, 34.068%, 7/25/28(4)                                 39,347,245        946,793
-----------------------------------------------------------------------------------------------------
 Federal National Mortgage Assn., Gtd. Real Estate
 Mtg. Investment Conduit Pass-Through Certificates,
 Trust 1999-29, Cl. D, 6.50%, 12/25/26(3)                                    6,755,132      6,932,455
                                                                                         ------------
                                                                                          652,920,906

-----------------------------------------------------------------------------------------------------
 GNMA/Guaranteed--7.7%
 Government National Mortgage Assn.:
 6.38%, 4/20/17(1)                                                             144,921        147,956
 6.50%, 11/15/23-12/15/23                                                    1,071,654      1,089,360
 7%, 1/15/28-1/20/30                                                        15,490,627     15,899,285
 7%, 9/15/28(3)                                                             30,000,000     30,768,900
 7.25%, 12/15/05                                                                 8,985          9,322
 7.50%, 10/15/06-11/15/26                                                   11,958,729     12,450,897
 8%, 4/15/02-8/15/28                                                         5,629,923      5,899,945
 8.25%, 4/15/08                                                                 48,820         51,922
 8.50%, 1/15/06                                                                  2,328          2,453
 9%, 9/15/08-5/15/09                                                           145,426        156,582
 9.50%, 7/15/18-1/15/20                                                        350,669        384,963
 10%, 6/15/16-8/15/19                                                          709,902        791,764
 10.50%, 2/15/13-5/15/21                                                     1,782,253      2,010,191
 11%, 10/20/19-7/20/20                                                       1,367,491      1,552,446
 11.50%, 2/15/13-4/15/13                                                        49,667         56,722
 12%, 12/15/12-3/15/14                                                           8,574          9,872
 12.50%, 1/15/14-6/15/19                                                       294,418        337,650
 13%, 4/15/11-12/15/14                                                          56,050         64,602
 13.50%, 4/15/11-8/15/14                                                        64,939         77,273
 14%, 6/15/11                                                                   14,060         16,746
                                                                                         ------------
                                                                                           71,778,851

-----------------------------------------------------------------------------------------------------
 Private--14.1%
-----------------------------------------------------------------------------------------------------
 Commercial--10.3%
 Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates,
 Series 1997-MD7, Cl. A1B, 7.41%, 1/13/30                                    5,000,000      5,330,469
-----------------------------------------------------------------------------------------------------
 Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
 Pass-Through Certificates, Series 1997-CTL1, 9.30%, 6/22/24(2,4)           60,454,333      2,021,442
-----------------------------------------------------------------------------------------------------
 Columbia Center Trust, Commercial Mtg. Pass-Through Certificates,
 Series 2000-CCT, Cl. E, 5.14%, 12/15/04(1,2)                                1,000,000      1,000,000
-----------------------------------------------------------------------------------------------------
 Commercial Mortgage Acceptance Corp., Interest-Only Stripped
 Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 10.37%, 12/25/20(2,4)       12,145,411          3,795
-----------------------------------------------------------------------------------------------------
 CRIIMI MAE Commercial Mortgage Trust I, Collateralized Mtg
 Obligations, Series 1998-C1, Cl. C, 7%, 6/2/33(2)                           5,000,000      4,307,031


14 | OPPENHEIMER U.S. GOVERNMENT TRUST

                                                                             Principal  Market Value
                                                                                Amount    See Note 1
----------------------------------------------------------------------------------------------------
 Commercial Continued
 CS First Boston Mortgage Securities Corp., Commercial Mtg
 Pass-Through Certificates:
 Series 1995-WF1, Cl. E, 8.245%, 12/21/27(2)                               $12,510,000   $12,924,394
 Series 2001-SPGA, Cl. B, 6.662%, 8/13/18(2)                                10,767,000    10,797,288
----------------------------------------------------------------------------------------------------
 CS First Boston Mortgage Securities Corp., Interest-Only Stripped
 Mtg.-Backed Security, Series 1998-C1, Cl. AX, 8.34%, 4/11/30(4)            24,101,944     1,303,023
----------------------------------------------------------------------------------------------------
 FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through
 Certificates, Series 1994-C1, Cl. 2G, 8.70%, 9/25/25(2)                     3,000,000     2,895,000
----------------------------------------------------------------------------------------------------
 First Union-Lehman Brothers Commercial Mortgage Trust,
 Interest-Only Stripped Mtg.-Backed Security,
 Series 1998-C2, 9.63%, 5/18/28(4)                                          28,701,967       914,875
----------------------------------------------------------------------------------------------------
 GMAC Commercial Mortgage Securities, Inc., Interest-Only
 Stripped Mtg.-Backed Security Pass-Through Certificates,
 Series 1997-C1, Cl. X, 7.80%, 7/15/27(4)                                   21,026,142     1,484,971
----------------------------------------------------------------------------------------------------
 Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
 Certificates, Series 1995-GAL1, Cl. C, 7.95%, 8/15/27(6)                    5,014,988     5,399,885
----------------------------------------------------------------------------------------------------
 PNC Mortgage Acceptance Corp., Commercial Mtg. Obligations,
 Series 2001-C1, Cl. A2, 6.36%, 3/12/34                                     10,000,000    10,175,000
----------------------------------------------------------------------------------------------------
 Prudential Mortgage Capital Co. II LLC, Commercial Mtg
 Pass-Through Certificates, Series PRU-HTG 2000-C1:
 Cl. A2, 7.306%, 10/6/15                                                    10,000,000    10,643,750
 Cl. F, 7.853%, 10/6/15                                                      8,495,659     8,649,643
----------------------------------------------------------------------------------------------------
 Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
 Series 1995-C1, Cl. D, 6.90%, 2/25/27                                       7,677,000     7,589,444
----------------------------------------------------------------------------------------------------
 Strategic Hotel Capital, Inc., Commercial Mtg. Obligations,
 Series 2001-SCH1, Cl. E, 5.84%, 4/17/06(1,2)                                2,000,000     2,000,000
----------------------------------------------------------------------------------------------------
 Structured Asset Securities Corp., Commercial Mtg. Pass-Through
 Certificates, Series 1999-C3, Cl. G, 5.06%, 3/20/02(1,2)                    8,136,237     8,174,376
                                                                                         -----------
                                                                                          95,614,386

----------------------------------------------------------------------------------------------------
 Residential--3.8%
 Countrywide Funding Corp., Mtg. Pass-Through Certificates,
 Series 1993-12, Cl. B1, 6.625%, 2/25/24                                     2,579,499     2,580,299
----------------------------------------------------------------------------------------------------
 First Nationwide Trust, Mtg. Pass-Through Certificates,
 Series 1999-1, Cl. 2A7, 6.50%, 3/25/29                                      5,000,000     5,034,350
----------------------------------------------------------------------------------------------------
 GE Capital Mortgage Services, Inc., Gtd. Real Estate Mtg
 Investment Conduit Multiclass Pass-Through Certificates,
 Series 1998-24, Cl. A1, 1/25/29                                             4,598,830     4,663,490
----------------------------------------------------------------------------------------------------
 Imperial CMB Trust, Collateralized Mtg. Obligations,
 Trust 1998-1, Cl. B, 7.25%, 11/25/29                                        2,279,327     2,342,009
----------------------------------------------------------------------------------------------------
 Norwest Asset Securities Corp., Collateralized Mtg. Obligations,
 Mtg. Pass-Through Certificates, Series 1999-20, Cl. A13, 6.75%, 8/25/29     5,000,000     5,128,100
----------------------------------------------------------------------------------------------------
 Residential Funding Mortgage Securities I, Inc., Mtg. Pass-Through
 Certificates, Series 1993-S10, Cl. A9, 8.50%, 2/25/23                         112,414       112,168
----------------------------------------------------------------------------------------------------
 Structured Asset Securities Corp., Collateralized Mtg. Obligations,
 Mtg. Pass-Through Certificates:
 Series 2001-1, Cl. A, 7.50%, 7/25/30(2)                                     3,792,814     3,761,997
 Series 2001-2, Cl. 1A1, 6.50%, 3/25/31                                      4,673,823     4,757,064


15 | OPPENHEIMER U.S. GOVERNMENT TRUST

STATEMENT OF INVESTMENTS  Continued

                                                                         Principal  Market Value
                                                                            Amount    See Note 1
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
 Residential Continued

 Vendee Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security,
 Series 1995-2B, Cl. 2IO, 6.11%, 6/15/25(4)                           $ 64,940,140  $    1,527,327
--------------------------------------------------------------------------------------------------
 Washington Mutual Finance Corp., Collateralized Mtg. Obligations,
 Series 2000-1, Cl. M3, 5.543%, 1/25/40(2)                               5,200,000       5,180,500
                                                                                    --------------
                                                                                        35,087,304
                                                                                    --------------
 Total Mortgage-Backed Obligations (Cost $847,856,842)                                 855,401,447

==================================================================================================
 U.S. Government Obligations--37.1%
 U.S. Treasury Bonds:
 5.375%, 2/15/31                                                        10,200,000      10,211,954
 5.50%, 8/15/28                                                          3,000,000       3,013,362
 6.125%, 11/15/27                                                       11,400,000      12,435,804
 6.25%, 5/15/30                                                          8,300,000       9,286,281
 8.75%, 5/15/17-5/15/20                                                 32,700,000      44,513,645
 11.25%, 2/15/15                                                         1,450,000       2,287,262
 STRIPS, 6.88%, 5/15/09(7)                                               6,800,000       4,653,532
--------------------------------------------------------------------------------------------------
 U.S. Treasury Nts.:
 4.625%, 5/15/06                                                        14,000,000      14,149,310
 5%, 8/15/11                                                            10,000,000      10,135,160
 5.50%, 5/15/09                                                         14,700,000      15,355,767
 5.75%, 11/15/05-8/15/10                                                52,700,000      55,702,240
 5.875%, 11/15/04(8)                                                    24,500,000      25,796,785
 6.50%, 10/15/06-2/15/10                                                83,800,000      92,990,254
 6.75%, 5/15/05                                                          9,400,000      10,201,942
 7%, 7/15/06                                                            31,600,000      35,099,479
                                                                                    --------------
 Total U.S. Government Obligations (Cost $339,165,709)                                 345,832,777

==================================================================================================
 Corporate Bonds and Notes--2.3%
 Federal National Mortgage Assn. Unsec. Nts., 6%, 5/15/11               15,000,000      15,400,800
--------------------------------------------------------------------------------------------------
 Resolution Funding Corp. Federal Book Entry
 Principal Strips, 6.28%, 1/15/21(7)                                    18,500,000       5,849,015
                                                                                    --------------
 Total Corporate Bonds and Notes (Cost $20,716,558)                                     21,249,815

                                           Date          Strike          Contracts
==================================================================================================
Options Purchased--0.0%
 U.S. Treasury Nts. Futures, 5 yr.,
 11/23/01 Call (Cost $169,163)           9/21/01          106%                 520         211,250

                                                                         Principal
                                                                            Amount
--------------------------------------------------------------------------------------------------
 Repurchase Agreements--3.8%
 Repurchase agreement with Banc One Capital Markets, Inc., 3.62%,
 dated 8/31/01, to be repurchased at $35,021,081 on 9/4/01,
 collateralized by U.S. Treasury Bonds, 5.25%-8.375%,
 2/15/07-11/15/28, with a value of $25,625,887 and U.S. Treasury
 Nts., 7.875%, 11/15/04, with a value of $10,116,044
 (Cost $35,007,000)                                                    $35,007,000      35,007,000
--------------------------------------------------------------------------------------------------
 Total Investments, at Value (Cost $1,283,452,521)                           139.6%  1,299,218,604
--------------------------------------------------------------------------------------------------
 Liabilities in Excess of Other Assets                                       (39.6)   (368,406,836)
                                                                      ----------------------------
 Net Assets                                                                  100.0% $  930,811,768
                                                                      ============================


16 | OPPENHEIMER U.S. GOVERNMENT TRUST

Footnotes to Statement of Investments

1. Represents the current interest rate for a variable or increasing rate
security.
2. Identifies issues considered to be illiquid--See Note 7 of Notes to Financial
Statements.
3. When-issued security to be delivered and settled after August 31, 2001.
4. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $42,103,000 or 4.52% of the Fund's net assets
as of August 31, 2001.
5. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
6. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $5,399,885 or 0.58% of the Fund's net
assets as of August 31, 2001.
7. Zero-coupon bond reflects the effective yield on the date of purchase.
8. Securities with an aggregate market value of $1,052,930 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.

See accompanying Notes to Financial Statements.


17 | OPPENHEIMER U.S. GOVERNMENT TRUST

STATEMENT OF ASSETS AND LIABILITIES  August 31, 2001

========================================================================================
Assets
 Investments, at value (cost $1,283,452,521)--see accompanying statement  $1,299,218,604
----------------------------------------------------------------------------------------
 Receivables and other assets:
 Investments sold on a when-issued basis                                     291,673,289
 Interest and principal paydowns                                               7,829,960
 Shares of beneficial interest sold                                            3,370,544
 Other                                                                            31,832
                                                                          --------------
 Total assets                                                              1,602,124,229

========================================================================================
 Liabilities
 Bank overdraft                                                                   33,144
----------------------------------------------------------------------------------------
 Payables and other liabilities:
 Investments purchased on a when-issued basis                                668,285,463
 Shares of beneficial interest redeemed                                        1,776,209
 Dividends                                                                       385,345
 Distribution and service plan fees                                              376,672
 Trustees' compensation                                                          162,795
 Daily variation on futures contracts                                            136,059
 Shareholder reports                                                              35,171
 Transfer and shareholder servicing agent fees                                    33,173
 Other                                                                            88,430
                                                                          --------------
 Total liabilities                                                           671,312,461

========================================================================================
 Net Assets                                                               $  930,811,768
                                                                          --------------

========================================================================================
 Composition of Net Assets
 Paid-in capital                                                          $  955,124,465
----------------------------------------------------------------------------------------
 Undistributed (overdistributed) net investment income                           765,514
----------------------------------------------------------------------------------------
 Accumulated net realized gain (loss) on investment transactions             (40,889,576)
----------------------------------------------------------------------------------------
 Net unrealized appreciation (depreciation) on investments                    15,811,365
                                                                          --------------
 Net Assets                                                               $  930,811,768
                                                                          ==============


18 | OPPENHEIMER U.S. GOVERNMENT TRUST

==========================================================================================
 Net Asset Value Per Share
 Class A Shares:
 Net asset value and redemption price per share (based on net assets of
 $599,658,667 and 62,990,153 shares of beneficial interest outstanding)              $9.52
 Maximum offering price per share (net asset value plus sales charge of
 4.75% of offering price)                                                            $9.99
------------------------------------------------------------------------------------------
 Class B Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $204,575,941
 and 21,516,448 shares of beneficial interest outstanding)                           $9.51
------------------------------------------------------------------------------------------
 Class C Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $124,542,257
 and 13,102,988 shares of beneficial interest outstanding)                           $9.50
------------------------------------------------------------------------------------------
 Class N Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $513,179
 and 53,907 shares of beneficial interest outstanding)                               $9.52
------------------------------------------------------------------------------------------
 Class Y Shares:
 Net asset value, redemption price and offering price per share (based on net
 assets of $1,521,724 and 159,885 shares of beneficial interest outstanding)         $9.52


See accompanying Notes to Financial Statements.


19 | OPPENHEIMER U.S. GOVERNMENT TRUST


STATEMENT OF OPERATIONS  For the Year Ended August 31, 2001

=================================================================================
Investment Income
 Interest                                                             $54,621,869

=================================================================================
 Expenses
 Management fees                                                        4,959,210
---------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                1,399,581
 Class B                                                                1,691,332
 Class C                                                                1,088,813
 Class N                                                                      110
---------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Class A                                                                  426,699
 Class B                                                                  128,468
 Class C                                                                   81,538
 Class N                                                                        4
 Class Y                                                                       63
---------------------------------------------------------------------------------
 Shareholder reports                                                       93,132
---------------------------------------------------------------------------------
 Custodian fees and expenses                                               33,043
---------------------------------------------------------------------------------
 Other                                                                     38,389
                                                                      -----------
 Total expenses                                                         9,940,382
 Less reduction to custodian expenses                                     (32,583)
                                                                      -----------
 Net expenses                                                           9,907,799

=================================================================================
 Net Investment Income                                                 44,714,070

=================================================================================
 Realized and Unrealized Gain (Loss)
 Net realized gain (loss) on:
 Investments                                                           28,988,115
 Closing of futures contracts                                          (4,035,546)
 Closing and expiration of option contracts written                        41,700
                                                                      -----------
 Net realized gain (loss)                                              24,994,269
---------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation) on investments    6,989,425
                                                                      -----------
 Net realized and unrealized gain (loss)                               31,983,694

=================================================================================
 Net Increase in Net Assets Resulting from Operations                 $76,697,764
                                                                      -----------

See accompanying Notes to Financial Statements


20 | OPPENHEIMER U.S. GOVERNMENT TRUST

STATEMENTS OF CHANGES IN NET ASSETS

 Year Ended August 31,                                                    2001            2000
==============================================================================================
 Operations
 Net investment income                                            $ 44,714,070    $ 47,434,237
----------------------------------------------------------------------------------------------
 Net realized gain (loss)                                           24,994,269     (20,863,120)
----------------------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation)                6,989,425      23,566,114
                                                                  ----------------------------
 Net increase (decrease) in net assets resulting from operations    76,697,764      50,137,231
==============================================================================================
 Dividends and/or Distributions to Shareholders
 Dividends from net investment income:
 Class A                                                           (33,307,167)    (34,181,276)
 Class B                                                            (8,346,863)     (8,382,464)
 Class C                                                            (5,390,618)     (4,305,333)
 Class N                                                                (2,515)             --
 Class Y                                                               (28,013)         (1,720)
----------------------------------------------------------------------------------------------
 Tax return of capital distribution:
 Class A                                                                    --        (410,863)
 Class B                                                                    --        (100,744)
 Class C                                                                    --         (51,781)
 Class N                                                                    --              --
 Class Y                                                                    --             (56)

==============================================================================================
 Beneficial Interest Transactions
 Net increase (decrease) in net assets resulting
 from beneficial interest transactions:
 Class A                                                            20,369,071     (21,962,697)
 Class B                                                            58,281,840     (34,285,804)
 Class C                                                            29,324,944      23,372,786
 Class N                                                               508,383         330,557
 Class Y                                                             1,168,806              --

==============================================================================================
 Net Assets
 Total increase (decrease)                                         139,275,632     (29,842,164)
----------------------------------------------------------------------------------------------
 Beginning of period                                               791,536,136     821,378,300
                                                                  ----------------------------
 End of period [including undistributed
 (overdistributed) net investment income of
 $765,514 and $651,260, respectively]                             $930,811,768    $791,536,136
                                                                  ============================

See accompanying Notes to Financial Statements.


21 | OPPENHEIMER U.S. GOVERNMENT TRUST

FINANCIAL HIGHLIGHTS

Class A      Year Ended August 31,                    2001          2000         1999         1998         1997
=====================================================================================================================
 Per Share Operating Data
 Net asset value, beginning of period              $   9.19       $   9.15     $   9.74     $   9.48     $   9.23
---------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                  .51(1)         .58          .56          .65          .71
 Net realized and unrealized gain (loss)                .36(1)         .04         (.59)         .26          .23
                                                   ------------------------------------------------------------------
 Total income (loss) from
 investment operations                                  .87            .62         (.03)         .91          .94
---------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                  (.54)          (.57)        (.55)        (.65)        (.69)
 Tax return of capital distribution                      --           (.01)        (.01)          --           --
                                                   ------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                       (.54)          (.58)        (.56)        (.65)        (.69)
---------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                    $   9.52       $   9.19     $   9.15     $   9.74     $   9.48
                                                   ==================================================================

=====================================================================================================================
 Total Return, at Net Asset Value(2)                   9.75%          7.03%       (0.40)%       9.26%       10.45%

=====================================================================================================================
 Ratios/Supplemental Data
 Net assets, end of period (in thousands)          $599,659       $559,194     $579,064     $573,792     $468,809
---------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                 $580,177       $542,931     $591,229     $516,173     $478,410
---------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                 5.46%(1)       6.37%        5.85%        6.17%        7.58%
 Expenses                                              0.91%          1.12%        1.06%        1.03%(4)     1.06%(4)
---------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                215%           181%         199%          80%          43%

1. Without the adoption of the change in amortization method as discussed in
Note 1 in the Notes to Financial Statements, these amounts would have been:

Net investment income                                 $ .53
Net realized and unrealized gain (loss)                 .34
Net investment income ratio                            5.66%

2. Assumes a $1,000 hypothetical 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.
3. Annualized for periods of less than one full year.
4. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.


22 | OPPENHEIMER U.S. GOVERNMENT TRUST

 Class B      Year Ended August 31,                  2001            2000          1999         1998           1997
=========================================================================================================================
 Per Share Operating Data
 Net asset value, beginning of period              $   9.18        $   9.14     $   9.73     $   9.47        $   9.22
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                  .45(1)          .51          .48          .56             .64
 Net realized and unrealized gain (loss)                .35(1)          .04         (.59)         .27             .23
                                                   ----------------------------------------------------------------------
 Total income (loss) from
 investment operations                                  .80             .55         (.11)         .83             .87
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                  (.47)           (.50)        (.47)        (.57)           (.62)
 Tax return of capital distribution                      --            (.01)        (.01)          --              --
                                                   ----------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                       (.47)           (.51)        (.48)        (.57)           (.62)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                    $   9.51        $   9.18     $   9.14     $   9.73        $   9.47
                                                   ======================================================================

=========================================================================================================================
 Total Return, at Net Asset Value(2)                   8.92%           6.22%       (1.15)%       8.45%           9.63%

=========================================================================================================================
 Ratios/Supplemental Data
 Net assets, end of period (in thousands)          $204,576        $140,512     $174,622     $118,873        $ 52,301
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                 $169,440        $151,770     $160,782     $ 76,030        $ 41,420
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                 4.67%(1)        5.60%        5.09%        5.33%           6.77%
 Expenses                                              1.67%           1.87%        1.81%        1.78%(4)        1.81%(4)
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                215%            181%         199%          80%             43%

1. Without the adoption of the change in amortization method as discussed in
Note 1 in the Notes to Financial Statements, these amounts would have been:

Net investment income                                 $ .47
Net realized and unrealized gain (loss)                 .33
Net investment income ratio                            4.87%

2. Assumes a $1,000 hypothetical 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.
3. Annualized for periods of less than one full year.
4. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.


23 | OPPENHEIMER U.S. GOVERNMENT TRUST

FINANCIAL HIGHLIGHTS Continued

 Class C       Year Ended August 31,                 2001            2000         1999         1998            1997
=========================================================================================================================
 Per Share Operating Data
 Net asset value, beginning of period              $   9.18        $   9.14     $   9.72     $   9.47        $   9.22
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                  .45(1)          .51          .48          .56             .64
 Net realized and unrealized gain (loss)                .34(1)          .04         (.58)         .26             .23
                                                   ----------------------------------------------------------------------
 Total income (loss) from
 investment operations                                  .79             .55         (.10)         .82             .87
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                  (.47)           (.50)        (.47)        (.57)           (.62)
 Tax return of capital distribution                      --            (.01)        (.01)          --              --
                                                   ----------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                       (.47)           (.51)        (.48)        (.57)           (.62)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                    $   9.50        $   9.18     $   9.14     $   9.72        $   9.47
                                                   ======================================================================

=========================================================================================================================
 Total Return, at Net Asset Value(2)                   8.81%           6.21%       (1.05)%       8.34%           9.65%

=========================================================================================================================
 Ratios/Supplemental Data
 Net assets, end of period (in thousands)          $124,542        $ 91,496     $ 67,691     $ 40,456        $ 21,625
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                 $109,060        $ 77,875     $ 56,943     $ 27,135        $ 19,505
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                 4.69%(1)        5.61%        5.11%        5.36%           6.81%
 Expenses                                              1.67%           1.88%        1.81%        1.78%(4)        1.80%(4)
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                215%            181%         199%          80%             43%

1. Without the adoption of the change in amortization method as discussed in
Note 1 in the Notes to Financial Statements, these amounts would have been:

Net investment income                                 $ .47
Net realized and unrealized gain (loss)                 .32
Net investment income ratio                            4.89%

2. Assumes a $1,000 hypothetical 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.
3. Annualized for periods of less than one full year.
4. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

 See accompanying Notes to Financial Statements.


24 | OPPENHEIMER U.S. GOVERNMENT TRUST

                                                     Period Ended
 Class N                                       August 31, 2001(1)
=================================================================
 Per Share Operating Data
 Net asset value, beginning of period                   $9.45
-----------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                    .25(2)
 Net realized and unrealized gain (loss)                  .07(2)
                                                        ---------
 Total income (loss) from investment operations           .32
-----------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                    (.25)
 Tax return of capital distribution                        --
                                                        ---------
 Total dividends and/or distributions to shareholders    (.25)
-----------------------------------------------------------------
 Net asset value, end of period                         $9.52
                                                        =========

=================================================================
Total Return, at Net Asset Value(3)                      3.50%

=================================================================
 Ratios/Supplemental Data
 Net assets, end of period (in thousands)               $ 513
-----------------------------------------------------------------
 Average net assets (in thousands)                      $  90
-----------------------------------------------------------------
 Ratios to average net assets:(4)
 Net investment income                                   5.54%(2)
 Expenses                                                0.85%
-----------------------------------------------------------------
 Portfolio turnover rate                                  215%

1. For the period from March 1, 2001 (inception of offering) to August 31, 2001.
2. Without the adoption of the change in amortization method as discussed in
Note 1 in the Notes to Financial Statements, these amounts would have been:

Net investment income                                   $ .26
Net realized and unrealized gain (loss)                   .06
Net investment income ratio                              5.74%

3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.

See accompanying Notes to Financial Statements.


25 | OPPENHEIMER U.S. GOVERNMENT TRUST

FINANCIAL HIGHLIGHTS Continued

 Class Y       Year Ended August 31,                2001          2000       1999       1998(1)
=================================================================================================
 Per Share Operating Data
 Net asset value, beginning of period              $ 9.19        $ 9.15     $ 9.74     $10.00
-------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                .56(2)        .62        .51        .18
 Net realized and unrealized gain (loss)              .34(2)        .03       (.59)      (.26)
                                                   ----------------------------------------------
 Total income (loss) from investment operations       .90           .65       (.08)      (.08)
-------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                (.57)         (.61)      (.50)      (.18)
 Tax return of capital distribution                    --            --(3)    (.01)        --
                                                   ----------------------------------------------
 Total dividends and/or distributions
 to shareholders                                     (.57)         (.61)      (.51)      (.18)
-------------------------------------------------------------------------------------------------
 Net asset value, end of period                    $ 9.52        $ 9.19     $ 9.15     $ 9.74
                                                   ==============================================

=================================================================================================
 Total Return, at Net Asset Value(4)                10.10%         7.39%     (0.83)%     2.83%

=================================================================================================
 Ratios/Supplemental Data
 Net assets, end of period (in thousands)          $1,522        $  333     $    1     $    1
-------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                 $  464        $   27     $    1     $    1
-------------------------------------------------------------------------------------------------
 Ratios to average net assets:(5)
 Net investment income                               5.83%(2)      6.51%      6.19%      1.77%
 Expenses                                            0.61%         0.83%      0.69%      0.73%(6)
-------------------------------------------------------------------------------------------------
 Portfolio turnover rate                              215%          181%       199%        80%

1. For the period from May 18, 1998 (inception of offering) to August 31, 1998.
2. Without the adoption of the change in amortization method as discussed in
Note 1 in the Notes to Financial Statements, these amounts would have been:

Net investment income                               $ .57
Net realized and unrealized gain (loss)               .33
Net investment income ratio                          6.03%

3. Less than $0.005 per share.
4. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
5. Annualized for periods of less than one full year.
6. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

 See accompanying Notes to Financial Statements.


26 | OPPENHEIMER U.S. GOVERNMENT TRUST

NOTES TO FINANCIAL STATEMENTS

================================================================================
1. Significant Accounting Policies
Oppenheimer U.S. Government Trust (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 high current income consistent with
preservation of capital. The Fund's investment advisor is OppenheimerFunds, Inc.
(the Manager).
      The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC. All classes of shares have identical
rights to earnings, assets and voting privileges, except that each class has its
own expenses directly attributable to that class and exclusive voting rights
with respect to matters affecting that class. Classes A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. 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. Securities listed or traded on National Stock Exchanges or
other domestic or foreign 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. 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 (including
restricted securities) for which quotations are not readily available are valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Trustees, or at their fair value. Fair value is
determined in good faith under 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).


27 | OPPENHEIMER U.S. GOVERNMENT TRUST

NOTES TO FINANCIAL STATEMENTS Continued

--------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
Securities Purchased on a When-Issued or Forward Commitment Basis. Delivery and
payment for securities that have been purchased by the Fund on a when-issued
basis can take place a month 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 beyond
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 segregated assets with a
market value equal to or greater than the amount of its purchase commitments.
The purchase of securities on a when-issued or forward commitment basis may
increase the volatility of the Fund's net asset value to the extent the Fund
makes such purchases while remaining substantially fully invested. As of August
31, 2001, the Fund had entered into net outstanding when-issued or forward
commitments of $376,612,174.
      In connection with its ability to purchase securities on a when-issued
basis, the Fund may enter into mortgage dollar-rolls in which the Fund sells
securities for delivery in the current month and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon and maturity) but
not identical securities on a specified future date. The Fund records each
dollar-roll as a sale and a new purchase transaction.
--------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires its custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
--------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.


28 | OPPENHEIMER U.S. GOVERNMENT TRUST

--------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.

As of August 31, 2001, the Fund had available for federal income tax purposes
unused capital loss carryovers as follows:

                  Expiring
                  --------------------------------------
                      2007                   $ 2,852,868
                      2008                    29,716,276
                                             -----------
                      Total                  $32,569,144
                                             ===========

--------------------------------------------------------------------------------
Trustees' Compensation. The Fund has adopted an unfunded retirement plan for the
Fund's independent Board of Trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
August 31, 2001, the Fund's projected benefit obligations were decreased by
$68,541 and payments of $10,601 were made to retired trustees, resulting in an
accumulated liability of $148,199 as of August 31, 2001.
      The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of annual compensation they are entitled to receive from the Fund. Under
the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Board of Trustees in shares of one
or more Oppenheimer funds selected by the trustee. The amount paid to the Board
of Trustees under the plan will be determined based upon the performance of the
selected funds. Deferral of trustees' fees under the plan will not affect the
net assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net investment income per share.
--------------------------------------------------------------------------------
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.


29 | OPPENHEIMER U.S. GOVERNMENT TRUST

NOTES TO FINANCIAL STATEMENTS Continued

--------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
Classification of Dividends and Distributions to Shareholders. 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 realized gain
was recorded by the Fund.
      The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended August 31, 2001, amounts have been reclassified to reflect an
increase in paid-in capital of $9,017,756, a decrease in overdistributed net
investment income of $2,475,360, and an increase in accumulated net realized
loss on investments of $11,493,116. Net assets of the Fund were unaffected by
the reclassifications.
--------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
--------------------------------------------------------------------------------
Security Transactions. Security transactions are accounted for as of trade date.
Gains and losses on securities sold are determined on the basis of identified
cost.
--------------------------------------------------------------------------------
Other. The Fund adopted the provisions of the AICPA Audit and Accounting Guide
for Investment Companies, as revised, effective for fiscal years beginning after
December 15, 2000. The Fund elected to begin amortizing premiums on debt
securities effective January 1, 2001. Prior to this date, the Fund did not
amortize premiums on debt securities. The cumulative effect of this accounting
change had no impact on the total net assets of the Fund, but resulted in a
$2,371,347 decrease to cost of securities and a corresponding $2,371,347
increase in net unrealized appreciation, based on securities held as of December
31, 2000. For the year ended August 31, 2001, interest income decreased by
$1,754,917, net realized gain on investments decreased by $2,255,162, and the
change in net unrealized appreciation on investments increased by $4,010,079.
      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.


30 | OPPENHEIMER U.S. GOVERNMENT TRUST

--------------------------------------------------------------------------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:

                           Year Ended August 31, 2001(1)    Year Ended August 31, 2000
                              Shares         Amount           Shares         Amount
------------------------------------------------------------------------------------------
 Class A
 Sold                       39,948,665    $ 373,555,261     39,549,509    $ 359,390,902
 Dividends and/or
 distributions reinvested    3,014,603       28,183,569      3,161,014       28,764,971
 Redeemed                  (40,803,949)    (381,369,759)   (45,153,005)    (410,118,570)
                           ---------------------------------------------------------------
 Net increase (decrease)     2,159,319    $  20,369,071     (2,442,482)   $ (21,962,697)
                           ===============================================================

------------------------------------------------------------------------------------------
 Class B
 Sold                       13,290,123    $ 124,270,442      7,182,939    $  65,338,670
 Dividends and/or
 distributions reinvested      666,342        6,226,507        677,015        6,154,669
 Redeemed                   (7,744,497)     (72,215,109)   (11,658,098)    (105,779,143)
                           ---------------------------------------------------------------
 Net increase (decrease)     6,211,968    $  58,281,840     (3,798,144)   $ (34,285,804)
                           ===============================================================

------------------------------------------------------------------------------------------
 Class C
 Sold                        9,808,466    $  91,673,634      6,380,006    $  57,982,184
 Dividends and/or
 distributions reinvested      509,518        4,758,502        406,764        3,695,541
 Redeemed                   (7,183,749)     (67,107,192)    (4,225,902)     (38,304,939)
                           ---------------------------------------------------------------
 Net increase (decrease)     3,134,235    $  29,324,944      2,560,868    $  23,372,786
                           ===============================================================

------------------------------------------------------------------------------------------
 Class N
 Sold                           53,852    $     507,822             --    $        --
 Dividends and/or
 distributions reinvested          287            2,728             --             --
 Redeemed                         (232)          (2,167)            --             --
                           ---------------------------------------------------------------
 Net increase (decrease)        53,907    $     508,383             --    $        --
                           ===============================================================

------------------------------------------------------------------------------------------
 Class Y
 Sold                          123,128    $   1,164,118         36,265    $     331,466
 Dividends and/or
 distributions reinvested        3,065           28,777            186            1,712
 Redeemed                       (2,578)         (24,089)          (285)          (2,621)
                           ---------------------------------------------------------------
 Net increase (decrease)       123,615    $   1,168,806         36,166    $     330,557
                           ===============================================================

1. For the year ended August 31, 2001, for Class A, B, C and Y shares and for
the period from March 1, 2001 (inception of offering) to August 31, 2001, for
Class N shares.


31 | OPPENHEIMER U.S. GOVERNMENT TRUST

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 August 31, 2001, were
$2,319,478,243 and $2,216,079,769, respectively.

As of August 31, 2001, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $1,292,007,997 was:

      Gross unrealized appreciation                $ 21,318,484
      Gross unrealized depreciation                 (14,107,877)
                                                    -----------
      Net unrealized appreciation (depreciation)   $  7,210,607
                                                   ============

--------------------------------------------------------------------------------
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 of 0.65% of
the first $200 million of average annual net assets of the Fund, 0.60% of the
next $100 million, 0.57% of the next $100 million, 0.55% of the next $400
million, and 0.50% of average annual net assets over $800 million. The Fund's
management fee for the year ended August 31, 2001, was an annualized rate of
0.58%.
--------------------------------------------------------------------------------
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 an agreed-upon per account fee.

Distribution and Service Plan Fees. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.

                    Aggregate         Class A      Commissions          Commissions        Commissions         Commissions
                    Front-End       Front-End       on Class A           on Class B         on Class C          on Class N
                Sales Charges   Sales Charges           Shares               Shares             Shares              Shares
                   on Class A     Retained by      Advanced by          Advanced by        Advanced by         Advanced by
 Year Ended            Shares     Distributor      Distributor(1)       Distributor(1)     Distributor(1)      Distributor(1)
-----------------------------------------------------------------------------------------------------------------------------
 August 31, 2001   $1,925,920        $352,247         $823,070           $2,578,825           $263,714              $1,289

1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B, Class C and Class N shares from its own
resources at the time of sale.

                         Class A            Class B             Class C            Class N
                      Contingent         Contingent          Contingent         Contingent
                        Deferred           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
-------------------------------------------------------------------------------------------
 August 31, 2001         $62,909           $484,902            $32,349                 $--


32 | OPPENHEIMER U.S. GOVERNMENT TRUST

The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B, Class C and Class N shares under Rule 12b-1 of the
Investment Company Act. Under those plans the Fund pays the Distributor for all
or a portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
--------------------------------------------------------------------------------
Class A Service Plan Fees. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares purchased. The Distributor makes payments to plan recipients quarterly at
an annual rate not to exceed 0.25% of the average annual net assets consisting
of Class A shares of the Fund. For the year ended August 31, 2001, payments
under the Class A plan totaled $1,399,581, all of which were paid by the
Distributor to recipients, and included $71,960 paid to an affiliate of the
Manager. Any unreimbursed expenses the Distributor incurs with respect to Class
A shares in any fiscal year cannot be recovered in subsequent years.
--------------------------------------------------------------------------------
Class B, Class C and Class N Distribution and Service Plan Fees. Under each
plan, service fees and distribution fees are computed on the average of the net
asset value of shares in the respective class, determined as of the close of
each regular business day during the period. The Class B, Class C and Class N
plans provide for the Distributor to be compensated at a flat rate, whether the
Distributor's distribution expenses are more or less than the amounts paid by
the Fund under the plan during the period for which the fee is paid.
      The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. The Distributor retains the
asset-based sales charge on Class N shares. The asset-based sales charges on
Class B, Class C and Class N shares allow investors to buy shares without a
front-end sales charge while allowing the Distributor to compensate dealers that
sell those shares.
      The Distributor's actual expenses in selling Class B, Class C and Class N
shares may be more than the payments it receives from the contingent deferred
sales charges collected on redeemed shares and asset-based sales charges from
the Fund under the plans. If any plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales charge
to the Distributor for distributing shares before the plan was terminated. The
plans allow for the carryforward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.


33 | OPPENHEIMER U.S. GOVERNMENT TRUST

NOTES TO FINANCIAL STATEMENTS Continued

--------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates Continued
Distribution fees paid to the Distributor for the year ended August 31, 2001,
were as follows:

                                                                           Distributor's
                                                         Distributor's         Aggregate
                                                             Aggregate      Unreimbursed
                                                          Unreimbursed     Expenses as %
                        Total Payments   Amount Retained      Expenses     of Net Assets
                            Under Plan    by Distributor     Under Plan         of Class
-----------------------------------------------------------------------------------------
 Class B Plan               $1,691,332        $1,371,630    $7,860,407              3.84%
 Class C Plan                1,088,813           214,138     1,011,796              0.81
 Class N Plan                      110               100            --                --

--------------------------------------------------------------------------------
5. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a particular price on a stipulated future
date at a negotiated price. Futures contracts are traded on a commodity
exchange. The Fund may buy and sell futures contracts that relate to broadly
based securities indices "financial futures" or debt securities "interest rate
futures" in order to gain exposure to or to seek to protect against changes in
market value of stock and bonds or interest rates. The Fund may also buy or
write put or call options on these futures contracts.
      The Fund generally sells futures contracts to hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying fixed income
securities.
      Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
      Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin. Realized gains
and losses are reported on the Statement of Operations as closing and expiration
of futures contracts.


34 | OPPENHEIMER U.S. GOVERNMENT TRUST

      Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.

As of August 31, 2001, the Fund had outstanding futures contracts as follows:

                                                                                      Unrealized
                                  Expiration     Number of     Valuation as of      Appreciation
 Contract Description                  Dates     Contracts     August 31, 2001    (Depreciation)
------------------------------------------------------------------------------------------------
 Contracts to Purchase
 U.S. Long Bond                     12/19/01           116         $12,216,250          $ 23,000
 U.S. Long Bond                      9/19/01            80           8,482,500           (35,000)
 U.S. Treasury Nts., 10 yr.         12/19/01           450          47,925,000           101,953
 U.S. Treasury Nts., 10 yr.          9/19/01            80           8,577,500           (42,500)
                                                                                        --------
                                                                                          47,453
                                                                                        --------
 Contracts to Sell
 U.S. Treasury Nts., 5 yr.          12/19/01           139          14,725,312            (2,171)
                                                                                        --------
                                                                                        $ 45,282
                                                                                        ========

--------------------------------------------------------------------------------
6. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
      The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
      Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
      Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a note
to the Statement of Investments. Options written are reported as a liability in
the Statement of Assets and Liabilities. Realized gains and losses are reported
in the Statement of Operations.
      The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.


35 | OPPENHEIMER U.S. GOVERNMENT TRUST

NOTES TO FINANCIAL STATEMENTS Continued

--------------------------------------------------------------------------------
6. Option Activity Continued
Written option activity for the year ended August 31, 2001, was as follows:

                                                                       Call Options
                                                     -------------------------------
                                                            Number of     Amount of
                                                     Contracts (000s)      Premiums
------------------------------------------------------------------------------------
 Options outstanding as of August 31, 2000                         --     $      --
 Options written                                               80,300       587,563
 Options closed or expired                                    (80,300)     (587,563)
                                                     ------------------------------
 Options outstanding as of August 31, 2001                         --     $      --
                                                     ==============================

--------------------------------------------------------------------------------
7. Illiquid Securities
As of August 31, 2001, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of August
31, 2001, was $74,153,370, which represents 7.97% of the Fund's net assets.

--------------------------------------------------------------------------------
8. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
      The Fund had no borrowings outstanding during the year ended or at August
31, 2001.


36 | OPPENHEIMER U.S. GOVERNMENT TRUST

A-5
Appendix A

Ratings Definitions
-------------------

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

Moody's Investors Service, Inc.
----------------------------------------------------------------------------------------------------------------------

Long-Term (Taxable) Bond Ratings

Aaa: Bonds rated "Aaa" are judged to be the best quality. They carry the smallest degree of investment risk.
Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.

Aa: Bonds rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group, they comprise
what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as with "Aaa" securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risk appear somewhat larger than that of
"Aaa" securities.

A: Bonds rated "A" possess many favorable investment attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.

Baa: Bonds rated "Baa" are considered medium-grade obligations; that is, they are neither highly protected nor
poorly secured. Interest payments and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and have speculative characteristics as well.

Ba: Bonds rated "Ba" are judged to have speculative elements. Their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds in this class.

B: Bonds rated "B" generally lack characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period of time may be small.

Caa: Bonds rated "Caa" are of poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest.

Ca: Bonds rated "Ca" represent obligations which are speculative in a high degree. Such issues are often in default
or have other marked shortcomings.

C: Bonds rated "C" are the lowest class of rated bonds and can be regarded as having extremely poor prospects of
ever attaining any real investment standing.

Con. (...): Bonds for which the security depends on the completion of some act or the fulfillment of some condition
are rated conditionally. These bonds are secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals that begin when facilities are completed, or (d) payments
to which some other limiting condition attaches. The parenthetical rating denotes probable credit stature upon
completion of construction or elimination of the basis of the condition.

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa." The
modifier "1" indicates that the obligation ranks in the higher end of its 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. Advanced refunded issues that are secured by certain assets are identified with a # symbol.

Short-Term Ratings - Taxable Debt

These ratings apply to the ability of issuers to honor senior debt obligations having an original maturity not
exceeding one year:

Prime-1: Issuer has a superior ability for repayment of senior short-term debt obligations.

Prime-2: Issuer has a strong ability for repayment of senior short-term debt obligations. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while appropriate,
may be more affected by external conditions. Ample alternate liquidity is maintained.

Prime-3: Issuer has an acceptable ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result
in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Not Prime: Issuer does not fall within any Prime rating category.

Standard & Poor's Rating Services
----------------------------------------------------------------------------------------------------------------------

Long-Term Credit Ratings

AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.

AA: Bonds rated "AA" differ from the highest rated obligations only in small degree. The obligor's capacity to meet
its financial commitment on the obligation is very strong.

A: Bonds rated "A" are somewhat more susceptible to 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: Bonds rated "BBB" exhibit adequate protection parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC, and C
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation, and "C" the highest. While such obligations will likely have some quality
and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse
conditions.

BB: Bonds rated "BB" are less vulnerable to nonpayment than other speculative issues. However, these face major
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: Bonds 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: Bonds 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: Bonds rated "CC" are currently highly vulnerable to nonpayment.

C: A subordinated debt or preferred stock obligation rated "C" is currently highly vulnerable to nonpayment. 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. A "C" also will be assigned to a preferred stock issue in
arrears on dividends or sinking fund payments, but that is currently paying.

D: Bonds rated "D" are in default. Payments on the obligation are not being made on the date due even if the
applicable grace period has not expired, unless Standard and Poor's believes that such payments will be made during
such grace period. The "D" rating will also 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. The "r" symbol is attached to the ratings of instruments with
significant noncredit risks.

Short-Term Issue Credit Ratings

A-1: Obligation is rated in the highest category. The obligor's capacity to meet its financial commitment on the
obligation is strong. Within this category, a plus (+) sign designation indicates the obligor's capacity to meet its
financial obligation is extremely strong.

A-2: Obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
A-3: Obligation 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: Obligation 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: Obligation 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: Obligation is in payment default. Payments on the obligation have not been made on the due date even if the
applicable grace period has not expired, unless Standard and Poor's believes that such payments will be made during
such grace period. The "D" rating will also be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.

Fitch, Inc.
----------------------------------------------------------------------------------------------------------------------

International Long-Term Credit Ratings

Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of credit risk. They are assigned only in
the case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.

AA: Very High Credit Quality. "AA" ratings denote a very low expectation of credit risk. They indicate a very strong
capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable
events.

A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The capacity for timely payment of
financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances
and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category.

Speculative Grade:

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

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

Industry Classifications
------------------------

Aerospace & Defense Household Durables
Air Freight & Couriers Household Products
Airlines Industrial Conglomerates
Auto Components Insurance
Automobiles Internet & Catalog Retail
Banks Internet Software & Services
Beverages Information Technology Consulting & Services
Biotechnology Leisure Equipment & Products
Building Products Machinery
Chemicals Marine
Commercial Services & Supplies Media
Communications Equipment Metals & Mining
Computers & Peripherals Multiline Retail
Construction & Engineering Multi-Utilities
Construction Materials Office Electronics
Containers & Packaging Oil & Gas
Distributors Paper & Forest Products
Diversified Financials Personal Products
Diversified Telecommunication Services Pharmaceuticals
Electric Utilities Real Estate
Electrical Equipment Road & Rail
Electronic Equipment & Instruments Semiconductor Equipment & Products
Energy Equipment & Services Software
Food & Drug Retailing Specialty Retail
Food Products Textiles & Apparel
Gas Utilities Tobacco
Health Care Equipment & Supplies Trading Companies & Distributors
Health Care Providers & Services Transportation Infrastructure
Hotels Restaurants & Leisure Water Utilities
Wireless Telecommunication Services

C-11
Appendix C

OppenheimerFunds Special Sales Charge Arrangements and Waivers
--------------------------------------------------------------

In certain cases, the initial sales charge that applies to purchases of Class A shares1 of the Oppenheimer funds or
the contingent deferred sales charge that may apply to Class A, Class B or Class C shares may be waived.2 That is
because of the economies of sales efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this
document as the "Distributor"), or by dealers or other financial institutions that offer those shares to certain
classes of investors.

Not all waivers apply to all funds. For example, waivers relating to Retirement Plans do not apply to Oppenheimer
municipal funds, because shares of those funds are not available for purchase by or on behalf of retirement plans.
Other waivers apply only to shareholders of certain funds.

For the purposes of some of the waivers described below and in the Prospectus and Statement of Additional
Information of the applicable Oppenheimer funds, the term "Retirement Plan" refers to the following types of plans:
1) plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code,
2) non-qualified deferred compensation plans,
3) employee benefit plans3
4) Group Retirement Plans4
5) 403(b)(7) custodial plan accounts
6) Individual Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs, SEP-IRAs, SARSEPs or
SIMPLE plans

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

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

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."5 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 advisor that has made special arrangements

with the Distributor for those purchases, or
2) by a direct rollover of a distribution from a qualified Retirement Plan if the administrator of that
Plan has made special arrangements with the Distributor for those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of the following record-keeping arrangements:
1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") on a
daily valuation basis for the Retirement Plan. On the date the plan sponsor signs the record-keeping
service agreement with Merrill Lynch, the Plan must have $3 million or more of its assets invested in
(a) mutual funds, other than those advised or managed by Merrill Lynch 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 $3 million or more of its assets (excluding assets invested in money market funds)
invested in Applicable Investments.
3) The record keeping for a Retirement Plan is handled under a service agreement with Merrill Lynch and
on the date the plan sponsor signs that agreement, the Plan has 500 or more eligible employees (as
determined by the Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a cost-allocation agreement with the Transfer Agent
on or before March 1, 2001.

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 advisors that have entered into an agreement with the
Distributor to sell shares to defined contribution employee retirement plans for which the dealer, broker
or investment advisor provides administration services.

|-|

Retirement Plans and deferred compensation plans and trusts used to fund those plans (including, for example,
plans qualified or created under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code), in
each case if those purchases are made through a broker, agent or other financial intermediary that has made
special arrangements with the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose Class B or Class C shares
of a Former Quest for Value Fund were exchanged for Class A shares of that Fund due to the termination of
the Class B and Class C TRAC-2000 program on November 24, 1995.
|_| A qualified Retirement Plan that had agreed with the former Quest for Value Advisors to purchase shares of
any of the Former Quest for Value Funds at net asset value, with such shares to be held through DCXchange,
a sub-transfer agency mutual fund clearinghouse, if that arrangement was consummated and share purchases
commenced by December 31, 1996.

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

Class A shares issued or purchased in the following transactions are not subject to sales charges (and no
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 (other than Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor.
|_| Shares purchased through a broker-dealer that has entered into a special agreement with the Distributor to
allow the broker's customers to purchase and pay for shares of Oppenheimer funds using the proceeds of
shares redeemed in the prior 30 days from a mutual fund (other than a fund managed by the Manager or any of
its subsidiaries) on which an initial sales charge or contingent deferred sales charge was paid. This
waiver also applies to shares purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that
were purchased and paid for in this manner. This waiver must be requested when the purchase order is placed
for shares of the Fund, and the Distributor may require evidence of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any Qualified Unit Investment Liquid
Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a participant in a Retirement Plan for which the
Manager or an affiliate acts as sponsor.

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

The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following cases:
|_| To make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the account
value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts (please
refer to "Shareholder Account Rules and Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or other employee benefit plans for
any of the following purposes:
1) Following the death or disability (as defined in the Internal Revenue Code) of the participant or
beneficiary. The death or disability must occur after the participant's account was established.
2) To return excess contributions.
3) To return contributions made due to a mistake of fact.
4) Hardship withdrawals, as defined in the plan.6
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.7
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, including a trustee of a grantor trust or revocable living trust for which the
trustee is also the sole beneficiary. The death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of disability by the Social
Security Administration.
|_| Distributions from accounts for which the broker-dealer of record has entered into a special agreement with
the Distributor allowing this waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records are maintained on a daily valuation
basis by Merrill Lynch or an independent record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of clients of financial
institutions that have entered into a special arrangement with the Distributor for this purpose.

|-|

Redemptions requested in writing by a Retirement Plan sponsor of Class C shares of an Oppenheimer fund in
amounts of $500,000 or more and made more than 12 months after the Retirement Plan's first purchase of
Class C shares, if the redemption proceeds are invested in Class N shares of one or more Oppenheimer funds.
|_| Distributions8 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.9
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.10
9) On account of the participant's separation from service.11
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 Cap Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global 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.

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

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Shareholders of Oppenheimer Municipal Bond Fund, 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

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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

|X|

Internet Website:

WWW.OPPENHEIMERFUNDS.COM
------------------------

Investment Advisor
OppenheimerFunds, Inc.
498 Seventh Avenue, New York, New York 10018
Englewood, CO 80112

Distributor
OppenheimerFunds Distributor, Inc.
498 Seventh Avenue, New York, New York 10018
Englewood, CO 80112

Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.525.7048

Custodian Bank
Citibank, N.A.
399 Park Avenue
New York, New York 10043

Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202

Legal Counsel

Mayer, Brown, Rowe & Maw
1675 Broadway
New York, New York 10019

1234

PX220.002.1201(Rev. 0402)

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1 Mr. Murphy and Mr. Griffiths are not Directors of Oppenheimer Money Market Fund, Inc. and Mr. Murphy is not a
Trustee of Oppenheimer California Municipal Fund.
2 The address of each Trustee is 6803 S. Tucson Way, Englewood, CO 80112-3924.
3 Each Trustee serves for an indefinite term, until his or her resignation, death or removal.
4 The address of each Trustee is 6803 S. Tucson Way, Englewood, CO 80112-3924.
5 Each Trustee serves for an indefinite term, until his or her resignation, death or removal.
6 The address of each Officer is 498 Seventh Avenue, New York, NY 10018 except for Mr. Wixted and Ms. Ives, whose
address is 6803 S. Tucson Way, Englewood, CO 80112-3924.
7 Each Officer serves for an annual term or until his or her resignation, death or removal.

8. 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.
1 Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund.
2 In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered closed-end fund, references to
contingent deferred sales charges mean the Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3 An "employee benefit plan" means any plan or arrangement, whether or not it is "qualified" under the Internal
Revenue Code, under which Class 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.
4 The term "Group Retirement Plan" means any qualified or non-qualified retirement plan for employees of a
corporation or sole proprietorship, members and employees of a partnership or association or other organized group
of persons (the members of which may include other groups), if the group has made special arrangements with the
Distributor and all members of the group participating in (or who are eligible to participate in) the plan purchase
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.
5 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.
6 This provision does not apply to IRAs.
7 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.
8 The distribution must be requested prior to Plan termination or the elimination of the Oppenheimer funds as an
investment option under the Plan.
9 This provision does not apply to IRAs.
10 This provision does not apply to loans from 403(b)(7) custodial plans.
11 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.