Oppenheimer
U.S. Government Trust



Prospectus dated October 23, 2003













As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.






Oppenheimer U.S. Government Trust is a mutual fund.  It seeks high current
income consistent with the preservation of capital. The Fund invests
primarily in debt instruments issued or guaranteed by the U.S. government or
its agencies and instrumentalities, including mortgage-related securities.

      This Prospectus contains important information about the Fund's
objective, its investment policies, strategies and risks. It also contains
important information about how to buy and sell shares of the Fund and other
account features. Please read this Prospectus carefully before you invest and
keep it for future reference about your account.










(logo) OppenheimerFunds
The Right Way to Invest








34

                                      2
CONTENTS


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                    ABOUT THE FUND


                    The Fund's Investment Objective and Principal Investment
                    Strategies
                    Main Risks of Investing in the Fund
                    The Fund's Past Performance
                    Fees and Expenses of the Fund
                    About the Fund's Investments
                    How the Fund is Managed



                    ABOUT YOUR ACCOUNT

                    How to Buy Shares
                    Class A Shares
                    Class B Shares
                    Class C Shares
                    Class N Shares
                    Class Y Shares

                    Special Investor Services
                    AccountLink
                    PhoneLink
                    OppenheimerFunds Internet Website
                    Retirement Plans

                    How to Sell Shares
                    By Mail
                    By Telephone
                    By Checkwriting

                    How to Exchange Shares
                    Shareholder Account Rules and Policies
                    Dividends, Capital Gains and Taxes
                    Financial Highlights

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A B O U T  T H E  F U N D


The Fund's Investment Objective and Principal Investment Strategies


What Is the Fund's Investment Objective? The Fund seeks high current income
consistent with preservation of capital.


What  Does  the  Fund  MAINLY  Invest  In?  The Fund  invests  mainly  in U.S.
government  debt   securities.   These  include  debt  securities   issued  or
guaranteed by the U.S.  Treasury,  such as Treasury bills, notes or bonds, and
securities  issued or  guaranteed by agencies or entities that are referred to
as "instrumentalities" of the U.S. government.


                                        What  is a  "Debt  Security"?  A  debt
                                        security is  essentially a loan by the
                                        buyer  to  the   issuer  of  the  debt
                                        security.  The issuer  promises to pay
                                        back the principal  amount of the loan
                                        and  normally  pays  interest,   at  a
                                        fixed or  variable  rate,  on the debt
                                        while it is outstanding.

o     Under  normal  market  conditions,  the Fund invests at least 80% of its
      net  assets  (plus  borrowings  used for  investment  purposes)  in U.S.
      government securities.
o     The Fund  typically  invests  a  substantial  portion  of its  assets in
      mortgage-related  derivative securities, such as collateralized mortgage
      obligations  (called  CMOs)  and  mortgage  participation  certificates.
      They include  mortgage-related  U.S.  government  securities  as well as
      securities  issued by private  institutions,  such as banks and mortgage
      companies.

      The Fund's share  prices and income  levels will  fluctuate.  The Fund's
share  prices  and  distributions  are not  backed or  guaranteed  by the U.S.
government.  Securities  issued  by  private  issuers  do not  have  any U. S.
government guarantees.

      The securities the Fund buys may pay interest at fixed or floating
rates, or may be "stripped" securities. The Fund can buy securities that have
short-, medium- or long-term maturities, and the average maturity of the
Fund's portfolio can be expected to change over time. The Fund uses
derivative investments, such as interest-only and principal-only securities,
to try to enhance income and to manage investment risks. These investments
are more fully explained in "About the Fund's Investments," below.

How Do the  Portfolio  Managers  Decide  What  Securities  to Buy or Sell?  In
selecting  securities  for the  Fund,  the  portfolio  managers  research  the
universe  of  U.S.   government   securities   and  private   mortgage-related
securities  and weigh yields and relative  values  against  risks.  While this
process and the  inter-relationship  of the factors  used may change over time
and may vary in particular cases, the portfolio managers currently look for:
o     Sectors of the U.S. government debt market that they believe offer high
      relative yields and value,
o     Securities that have high income potential to help cushion total return
      against price volatility, and
o     A mixture of Treasury and private-issue securities that can be adjusted
      as interest rates and market prices change.
Who Is the Fund Designed For?  The Fund is designed primarily for investors
seeking current income from a fund that invests mainly in U.S. government
securities but also buys private-issuer mortgage-related securities to
enhance returns. The Fund is intended to be a long-term investment, not a
short-term trading vehicle. It may be appropriate for moderately conservative
investors seeking current income and may be appropriate for a portion of a
retirement plan investment. Because the Fund's income will fluctuate, it is
not designed for investors needing an assured level of current income. The
Fund is not a complete investment program.

Main Risks of Investing in the Fund

      All investments have risks to some degree.  The Fund's investments in
debt securities are subject to changes in their value from a number of
factors, described below.  There is also the risk that poor security
selection by the Fund's investment Manager, OppenheimerFunds, Inc. will cause
the Fund to underperform other funds having a similar objective.

Interest Rate Risks.  Debt securities are subject to changes in value when
prevailing interest rates change.  When interest rates fall, the values of
outstanding debt securities generally rise. When interest rates rise, the
values of outstanding debt securities generally fall, and those securities
may sell at a discount from their face amount. The magnitude of these
fluctuations is generally greater for securities having longer maturities
than for short-term securities.  However, interest rate changes may have
different effects on the values of mortgage-related securities because of
prepayment risks, discussed below.

      At times, the Fund may buy longer-term debt securities to seek higher
income. When the average maturity of the Fund's portfolio is longer, its
share prices may fluctuate more when interest rates change. The Fund can buy
zero-coupon or "stripped" securities, which are particularly sensitive to
interest rate changes and the rate of principal payments (and prepayments).
These are derivative securities that have prices that may go up or down more
than other types of debt securities in response to interest rate changes.

      The Fund's share prices can go up or down when interest rates change,
because of the effect of the change on the value of the Fund's investments.
Also, if interest rates fall, the Fund's investments in new securities at
lower yields will reduce the Fund's income.

Prepayment Risk.  Mortgage-related securities are subject to the risks of
unanticipated prepayment.  The risk is that when interest rates fall,
borrowers under the mortgages that underlie these securities will prepay
their mortgages more quickly than expected, causing the issuer of the
security to prepay the principal to the Fund prior to the security's expected
maturity.  The Fund may be required to reinvest the proceeds at a lower
interest rate, reducing its income.  Mortgage-related securities subject to
prepayment risk generally offer less potential for gains when prevailing
interest rates fall and have greater potential for loss when prevailing
interest rates rise. The impact of prepayments on the price of a security may
be difficult to predict and may increase the volatility of the price.  If the
Fund buys mortgage-related securities at a premium, accelerated prepayments
on those securities could cause the Fund to lose a portion of its principal
investment represented by the premium.

      If interest rates rise rapidly, prepayments of mortgages may occur at a
slower rate than expected and the expected maturity of long-term or
medium-term mortgage-related securities could lengthen as a result. That
could cause their values, and the prices of the Fund's shares, to fall.

Credit Risk.  Debt securities are subject to credit risk.  Credit risk is the
risk that the issuer of a debt security might not make interest and principal
payments on the security as they become due. Securities directly issued by
the U.S. Treasury and certain agencies that are backed by the full faith and
credit of the U.S. government have little credit risk, and securities issued
by other agencies of the U.S. government generally have low credit risks.
Securities issued by private issuers have greater credit risks. If the issuer
fails to pay interest, the Fund's income may be reduced.

      If the issuer fails to repay principal, the value of that security and
of the Fund's shares may be reduced. A downgrade in an issuer's credit rating
or other adverse news about an issuer can reduce the value of that issuer's
securities.

risks of Using Derivative Investments. The Fund uses derivatives to seek
increased returns or to try to hedge investment and interest rate risks and
preserve capital. In general terms, a derivative investment is an investment
contract whose value depends on (or is derived from) the value of an
underlying asset, interest rate or index. Options, futures, stripped
securities, CMOs, and interest rate swaps are examples of derivatives the
Fund can use.

      If the issuer of the derivative does not pay the amount due, the Fund
can lose money on the investment. Also, the underlying security or investment
on which the derivative is based, and the derivative itself, may not perform
the way the Manager expected it to perform. If that happens, the Fund's share
prices could fall and the Fund could get less income than expected, or its
hedge might be unsuccessful.  Some derivatives may be illiquid, making it
difficult to sell them at an acceptable price. The Fund has limits on the
amount of particular types of derivatives it can hold. However, using
derivatives can cause the Fund to lose money on its investments and/or
increase the volatility of its share prices.

How Risky is the Fund Overall? The risks described above collectively form
the overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance, and the prices of its shares.
Particular investments and investment strategies also have risks. These risks
mean that you can lose money by investing in the Fund. When you redeem your
shares, they may be worth more or less than what you paid for them. There is
no assurance that the Fund will achieve its investment objective.

      Although U.S. government securities that are backed by the full faith
and credit of the U.S. government have little credit risk, they are subject
to interest rate risks. CMOs and other mortgage-related securities are
subject to risks that can affect their values and the income they pay. These
risks can cause the Fund's share prices to fluctuate and can affect its
yield. In the OppenheimerFunds spectrum, the Fund is less aggressive than
bond funds that invest only in corporate debt securities, particularly
lower-grade securities. It is more risky than a money market fund or a fund
that invests only in U.S. Treasury securities.

An investment in the Fund is not a deposit of any bank, and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund's Past Performance


The bar chart and table below show one measure of the risks of investing in
the Fund, by showing changes in the Fund's performance (for its Class A
shares) from year to year for the last 10 calendar years and by showing how
the average annual total returns of the Fund's shares, both before and after
taxes, compare to those of a broad-based market index. The after-tax returns
for the other classes of shares will vary.

      The after-tax returns are shown for Class A shares only and are
calculated using the historical highest individual federal marginal income
tax rates in effect during the periods shown, and do not reflect the impact
of state or local taxes.  In certain cases, the figure representing "Return
After Taxes on Distributions and Sale of Fund Shares" may be higher than the
other return figures for the same period. A higher after-tax return results
when a capital loss occurs upon redemption and translates into an assumed tax
deduction that benefits the shareholder. The after-tax returns are calculated
based on certain assumptions mandated by regulation and your actual after-tax
returns may differ from those shown, depending on your individual tax
situation. The after-tax returns set forth below are not relevant to
investors who hold their fund shares through tax-deferred arrangements such
as 401(k) plans or IRAs or to institutional investors not subject to tax. The
Fund's past investment performance, before and after taxes, is not
necessarily an indication of how the Fund will perform in the future.


Annual Total Returns (Class A) (as of 12/31 each year)

[See appendix to prospectus for data in bar chart showing annual total
returns]


Sales charges and taxes are not included in the calculations of return in
this bar chart, and if those charges and taxes were included, the returns may
be less than those shown.

For the period from 1/1/03 through 9/30/03, the cumulative return (not
annualized) before taxes of Class A shares was 1.86%.
During the period shown in the bar chart,  the highest return (not annualized)
before taxes for a calendar  quarter was 5.45%  (3Qtr02) and the lowest return
(not annualized) before taxes for a calendar quarter was -2.06% (1Qtr94).


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Average Annual Total Returns       1 Year          5 Years           10 Years
for    the    periods    ended                   (or life of       (or life of
December 31, 2002                              class, if less)   class, if less)

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Class  A   Shares   (inception

8/16/85)                           5.44%            5.59%             6.36%
  Return Before Taxes              3.43%            3.24%             3.75%
  Return After Taxes on
  Distributions                    3.29%            3.26%             3.73%
  Return    After   Taxes   on
  Distributions  and  Sale  of
  Fund Shares

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Lehman Bros. U.S. Government
Bond Index (reflects no
deduction for fees, expenses

or taxes)                          11.50%           7.77%             7.56%1

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Class  B   Shares   (inception     4.75%            5.48%             6.57%

7/21/95)
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Class  C   Shares   (inception     8.90%            5.81%             5.90%

12/1/93)
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Class  N   Shares   (inception     9.47%            8.39%              N/A

3/1/01)
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Class  Y   Shares   (inception     11.11%           6.87%              N/A

5/18/98)
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1 From 12/31/92.
The Fund's average annual total returns include the applicable sales charge:
for Class A, the current maximum initial sales charge of 4.75%; for Class B,
the contingent deferred sales charges of 5% (1-year) and 2% (5 years); and
for Class C and Class N the 1% contingent deferred sales charge for the
1-year period. There is no sales charge for Class Y shares. Because Class B
shares convert to Class A shares 72 months after purchase, Class B
"life-of-class" performance does not include any contingent deferred sales
charge and uses Class A performance for the period after conversion. The
Fund's returns measure the performance of a hypothetical account and assume
that all dividends and capital gains distributions have been reinvested in
additional shares.  The performance of the Fund's Class A shares is compared
to the Lehman Brothers U.S. Government Bond Index, an unmanaged
market-weighted index of U.S. government securities with maturities of 1 year
or more.  The index performance includes reinvestment of income but does not
reflect transaction costs, fees, expenses or taxes. The Fund's investments
vary from the securities in the index.


Fees and Expenses of the Fund


The following tables are meant to help you understand the fees and expenses
you may pay if you buy and hold shares of the Fund. The Fund pays a variety
of expenses directly for management of its assets, administration,
distribution of its shares and other services. Those expenses are subtracted
from the Fund's assets to calculate the Fund's net asset values per share.
All shareholders therefore pay those expenses indirectly. Shareholders pay
other expenses directly, such as sales charges and account transaction
charges. The numbers below are based on the Fund's expenses during its fiscal
year ended August 31, 2003.


Shareholder Fees (charges paid directly from your investment):

--------------------------------------------------------------------------------------
                            Class A     Class B     Class C     Class N     Class Y
                            Shares      Shares      Shares      Shares      Shares
--------------------------------------------------------------------------------------
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Maximum Sales Charge         4.75%       None        None        None        None
(Load) on purchases
(as % of offering price)
--------------------------------------------------------------------------------------
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Maximum Deferred Sales
Charge (Load) (as % of
the lower of the             None1        5%2         1%3         1%4        None
original offering price
or redemption proceeds)
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1.    A  contingent   deferred  sales  charge  may  apply  to  redemptions  of
   investments  of $1 million or more  ($500,000 for certain  retirement  plan
   accounts) of Class A shares. See "How to Buy Shares" for details.
2.    Applies to  redemptions  in first year after  purchase.  The  contingent
   deferred  sales charge  declines to 1% in the sixth year and is  eliminated
   after that.
3.    Applies to shares redeemed within 12 months of purchase.
4.    Applies  to shares  redeemed  within 18  months of a  retirement  plan's
   first purchase of Class N shares.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
----------------------------------------------------------------------------------
                           Class A    Class B     Class C   Class N    Class Y
                             Shares     Shares    Shares      Shares   Shares
----------------------------------------------------------------------------------
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Management Fees              0.55%      0.55%      0.55%      0.55%      0.55%

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Distribution        and/or   0.24%      1.00%      1.00%      0.50%       None
Service (12b-1) Fees
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Other Expenses               0.22%      0.23%      0.19%      0.47%      0.04%

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

Total   Annual   Operating   1.01%      1.78%      1.74%      1.52%       0.59%
Expenses

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Expenses may vary in future years. "Other expenses" include transfer agent
fees, custodial fees, and accounting and legal expenses that the Fund pays.
The Transfer Agent has voluntarily undertaken to the Fund to limit the
transfer agent fees to 0.35% of average daily net assets per fiscal year for
all classes. Prior to November 1, 2002, the limit on Class Y shares was
0.25%. That undertaking may be amended or withdrawn at any time. After the
waiver, the actual "Other Expenses" and "Total Annual Operating Expenses" as
percentages of average daily net assets were 0.37% and 1.42%, respectively,
for Class N shares.  For the Fund's fiscal year ended August 31, 2003, the
transfer agent fees did not exceed the expense limitation described above for
the other classes of shares.


Examples.  The following examples are intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in a class of shares of the Fund
for the time periods indicated and reinvest your dividends and distributions.

      The first example assumes that you redeem all of your shares at the end
of those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that
the class's operating expenses remain the same. Your actual costs may be
higher or lower because expenses will vary over time. Based on these
assumptions your expenses would be as follows:







--------------------------------------------------------------------------------
If shares are redeemed:     1 Year        3 Years       5 Years      10 Years
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Class A Shares                    $573          $781        $1,006       $1,653

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

Class B Shares                    $681          $860        $1,164      $1,7051

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

Class C Shares                    $277          $548          $944       $2,052

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

Class N Shares                    $255          $480          $829       $1,813

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

Class Y Shares                     $60          $189          $329         $738

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

--------------------------------------------------------------------------------
   If shares are not        1 Year        3 Years       5 Years      10 Years
       redeemed:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Class A Shares                    $573          $781        $1,006       $1,653

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

Class B Shares                    $181          $560          $964      $1,7051

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

Class C Shares                    $177          $548          $944       $2,052

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

Class N Shares                    $155          $480          $829       $1,813

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

Class Y Shares                     $60          $189          $329         $738

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

 In the first example,  expenses  include the initial sales charge for Class A
 and the  applicable  Class B, Class C and Class N contingent  deferred  sales
 charges.  In the  second  example,  the Class A  expenses  include  the sales
 charge,  but Class B, Class C and Class N expenses do not include  contingent
 deferred sales charges. There is no sales charge on Class Y shares.
 1.  Class B  expenses  for years 7 through  10 are based on Class A  expenses
 since Class B shares automatically  convert to Class A shares 72 months after
 purchase.


About the Fund's Investments


The Fund's Principal Investment Policies and risks. The allocation of the
Fund's portfolio among different investments will vary over time based on the
Manager's evaluation of economic and market trends.  The Fund's portfolio
might not always include all of the different types of investments described
below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.


      The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by not investing too
great a percentage of the Fund's assets in any one type or issue of debt
security (other than direct Treasury obligations, which have little credit
risk). However, changes in the overall market prices of securities and their
yield can occur at any time.


      The share prices and yields of the Fund will change daily based on
changes in market prices of securities and market conditions and in response
to other economic or political events. The Fund does not seek a targeted
duration or average effective portfolio maturity. The Fund can purchase debt
securities with long-, medium- or short-term maturities.


U.S.  Government  Securities.  Not all of the U.S.  government  securities the
Fund buys are backed by the full faith and  credit of the U.S.  government  as
to payment of interest  and  repayment  of  principal.  Some are backed by the
right of the entity to borrow from the U.S.  Treasury.  Others are backed only
by the  credit  of  the  instrumentality.  All of  these  different  types  of
securities  described  below are  generally  referred  to as "U.S.  government
securities" in this Prospectus.
o     U.S. Treasury Obligations. These include Treasury bills (having
      maturities of one year or less when issued), Treasury notes (having
      maturities of more than one year and up to ten years when issued), and
      Treasury bonds (having maturities of more than ten years when issued).
      Treasury securities are backed by the full faith and credit of the
      United States as to timely payments of interest and repayments of
      principal.  The Fund can buy U. S. Treasury securities that have been
      "stripped" of their coupons, zero-coupon U.S. Treasury securities
      described below, and Treasury Inflation Protection Securities.

o     Obligations Issued or Guaranteed by U.S. Government Agencies or
      Instrumentalities. These include direct obligations and
      mortgage-related securities that have different levels of credit
      support from the U.S. government. Some are supported by the full faith
      and credit of the U.S. government, such as Government National Mortgage
      Association ("Ginnie Mae") pass-through mortgage certificates. Some are
      supported by the right of the issuer to borrow from the U.S. Treasury
      under certain circumstances, such as Federal National Mortgage
      Association ("Fannie Mae") bonds. Others are supported only by the
      credit of the entity that issued them, such as Federal Home Loan
      Mortgage Corporation ("Freddie Mac") obligations.

o     Mortgage-Related U.S. Government Securities. These include interests in
      pools of residential or commercial mortgages, in the form of CMOs and
      other "pass-through" mortgage securities. CMOs that are U.S. government
      securities have collateral to secure payment of interest and principal.
      They may be issued in different series with different interest rates
      and maturities. The collateral is either in the form of mortgage
      pass-through certificates issued or guaranteed by a U.S. agency or
      instrumentality or mortgage loans insured by a U.S. government agency.
      The Fund typically invests a significant amount of its assets in
      mortgage-related U.S. government securities.

      The prices and yields of CMOs are determined, in part, by assumptions
      about the cash flows from the rate of payments of the underlying
      mortgages. Changes in interest rates may cause the rate of expected
      prepayments of those mortgages to change. These prepayment risks can
      make the prices of CMOs and other mortgage-related securities very
      volatile when interest rates change. That volatility will affect the
      Fund's share prices.

o     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 at a later date
      at a set price.

      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, or that the counterparty
      might default in its obligation. A substantial portion of the Fund's
      assets may be subject to forward roll transactions at any given time.

Private-Issuer Securities. The Fund can invest up to 20% of its net assets in
      securities issued by private issuers that do not offer any credit
      backing of the U.S. government.  These include multi-class debt or
      pass-through certificates secured by mortgage loans. They may be issued
      by banks, savings and loans, mortgage bankers or special trusts.  The
      Fund can buy other types of asset-backed securities collateralized by
      loans or other assets or receivables.

      Private issuer securities are subject to the credit risks of the
      issuers. There is the risk that the issuers may not make timely payment
      of interest or repay principal when due, although in some cases those
      payment obligations may be supported by insurance or guarantees. The
      Fund limits its investments in private issuer securities to securities
      rated within the four highest rating categories of Moody's Investors
      Service, Inc. or Standard & Poor's Rating Service and unrated
      securities that the Manager deems comparable to rated securities in
      those categories. These are known as "investment-grade" securities.
      The Fund is not automatically required to dispose of a security if its
      rating falls after the Fund buys it.  However, the Manager will
      evaluate those securities to determine whether to keep them in the
      Fund's portfolio.

Zero-Coupon and "Stripped" Securities.  Some of the debt securities the Fund
      buys are zero-coupon bonds that pay no interest.  They are issued at a
      substantial discount from their face value. They may be securities
      issued by the U.S. government or private issuers.

      "Stripped" securities are the separate income or principal components
      of a debt security. Some CMOs or other mortgage-related securities may
      be stripped, with each component having a different proportion of
      principal or interest payments. One class might receive all the
      interest and the other all the principal payments.

      Zero-coupon and stripped securities are subject to greater fluctuations
      in price from interest rate changes than typical interest-bearing debt
      securities. The Fund may have to pay out the imputed income on
      zero-coupon securities without receiving the cash currently.

      Stripped securities are particularly sensitive to changes in interest
      rates. The values of interest-only and principal-only mortgage-related
      securities are very sensitive to changes in interest rates and
      prepayments of underlying mortgages. The market for these securities
      may be limited, making it difficult for the Fund to sell its holdings
      at an acceptable price.

Can the Fund's Investment Objective and Policies Change?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Fundamental policies cannot be changed without the approval
of a majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy. Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the
Statement of Additional Information says that it is.

Other Investment Strategies. To seek its objective, the Fund can also use the
investment techniques and strategies described below.  The Fund might not
always use all of them.  These techniques have risks, although some are
designed to help reduce overall investment or market risks.

Illiquid and Restricted Securities.  Investments may be illiquid because they
      do not have an active trading market, making it difficult to value them
      or dispose of them promptly at an acceptable price. A restricted
      security is one that has a contractual restriction on its resale or
      which cannot be sold publicly until it is registered under the
      Securities Act of 1933. The Fund cannot invest more than 10% of its net
      assets in illiquid or restricted securities (including repurchase
      agreements maturing beyond seven days). Certain restricted securities
      that are eligible for resale to qualified institutional purchasers
      generally are not subject to that limit. The Manager monitors holdings
      of illiquid securities on an ongoing basis to determine whether to sell
      any holdings to maintain adequate liquidity.


Hedging.  The Fund can buy and sell futures contracts, put and call options,
      and interest rate swaps.  These derivative investments are all referred
      to as "hedging instruments."  The Fund does not use hedging instruments
      for speculative purposes, and has limits on its use of them.  The Fund
      is not required to use hedging in seeking its investment objective.


      The Fund can buy and sell options and futures for a number of purposes.
      It might do so to try to manage its exposure to the possibility that
      the prices of its portfolio securities may decline, or to establish a
      position in the securities market as a temporary substitute for
      purchasing individual securities. It might do so to try to manage its
      exposure to changing interest rates.

      There are also special risks in particular hedging strategies.  Options
      trading involves the payment of premiums and can increase portfolio
      turnover. If the Manager used a hedging instrument at the wrong time or
      judged market conditions incorrectly, the strategy could reduce the
      Fund's return.


Portfolio Turnover. The Fund may engage in short-term trading to try to
      achieve its objective. Portfolio turnover may increase the Fund's
      transaction costs and reduce its performance.  However, in most cases
      the Fund does not pay brokerage commissions on debt securities it
      trades, so active trading is not expected to increase Fund expenses
      greatly.  Securities trading can also cause the Fund to realize capital
      gains that are distributed to shareholders as taxable distributions.
      The Financial Highlights table at the end of this Prospectus shows the
      Fund's portfolio turnover rates during recent fiscal years.



How the Fund is Managed

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


      The Manager has been an investment advisor since 1960, and its
subsidiaries and controlled affiliates managed more than $135 billion in
assets as of September 30, 2003, including other Oppenheimer funds with more
than 7 million shareholder accounts. The Manager is located at Two World
Financial Center, 225 Liberty Street-11th Floor, New York, New York 10080.


Portfolio Managers. The Fund is managed by a management team comprised
      of Angelo Manioudakis and other investment professionals selected
      from the Manager's high-grade bond team in its fixed-income
      department. Mr. Manioudakis serves as an officer and portfolio
      manager of other Oppenheimer funds.

      Mr. Manioudakis is a Vice President of the Fund and Senior Vice
      President of the Manager (since April 2002). Prior to joining the
      Manager in April 2002, he was an Executive Director and portfolio
      manager for Miller, Anderson & Sherrerd, a division of Morgan
      Stanley Investment Management (August 1993-March 2002).


Advisory Fees. Under the investment advisory agreement, the Fund pays the
      Manager an advisory fee at an annual rate that declines as the Fund's
      assets grow: 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, 0.50% of the next $1.2
      billion, and 0.475% of average annual net assets over $2.0 billion.
      The Fund's management fee for its last fiscal year ended August 31,
      2003 was 0.55% of average annual net assets for each class of shares.



ABOUT your account

How to Buy Shares

You can buy shares several ways, as described below. The Fund's Distributor,
OppenheimerFunds Distributor, Inc., may appoint servicing agents to accept
purchase (and redemption) orders. The Distributor, in its sole discretion,
may reject any purchase order for the Fund's shares.

Buying Shares Through Your Dealer. You can buy shares through any dealer,
      broker or financial institution that has a sales agreement with the
      Distributor. Your dealer will place your order with the Distributor on
      your behalf.
Buying Shares Through the Distributor. Complete an OppenheimerFunds New
      Account Application and return it with a check payable to
      "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver,
      Colorado 80217. If you don't list a dealer on the application, the
      Distributor will act as your agent in buying the shares. However, we
      recommend that you discuss your investment with a financial advisor
      before you make a purchase to be sure that the Fund is appropriate for
      you.
o     Paying by Federal Funds Wire. Shares purchased through the Distributor
      may be paid for by Federal Funds wire. The minimum investment is
      $2,500. Before sending a wire, call the Distributor's Wire Department
      at 1.800.225.5677 to notify the Distributor of the wire and to receive
      further instructions.
o     Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
      you pay for shares by electronic funds transfers from your bank
      account. Shares are purchased for your account by a transfer of money
      from your bank account through the Automated Clearing House (ACH)
      system. You can provide those instructions automatically, under an
      Asset Builder Plan, described below, or by telephone instructions using
      OppenheimerFunds PhoneLink, also described below. Please refer to
      "AccountLink," below for more details.
o     Buying Shares Through Asset Builder Plans. You may purchase shares of
      the Fund automatically each month from your account at a bank or other
      financial institution under an Asset Builder Plan with AccountLink.
      Details are in the Asset Builder Application and the Statement of
      Additional Information.


WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases, you can buy Fund
shares with a minimum initial investment of $1,000 and make additional
investments at any time with as little as $50. There are reduced minimums
available under the following special investment plans:
   If you establish one of the many types of retirement plan accounts that
      OppenheimerFunds offers, more fully described below under "Special
      Investor Services," you can start your account with as little as $500.
o     By using an Asset Builder Plan or Automatic Exchange Plan (details are
      in the Statement of Additional Information), or government allotment
      plan, you can make subsequent investments (after making the initial
      investment of $500) for as little as $50. For any type of account
      established under one of these plans prior to November 1, 2002, the
      minimum additional investment will remain $25.

o     The minimum investment requirement does not apply to reinvesting
      dividends from the Fund or other Oppenheimer funds (a list of them
      appears in the Statement of Additional Information, or you can ask your
      dealer or call the Transfer Agent), or reinvesting distributions from
      unit investment trusts that have made arrangements with the Distributor.

AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price which
is the net asset value per share plus any initial sales charge that applies.
The offering price that applies to a purchase order is based on the next
calculation of the net asset value per share that is made after the
Distributor receives the purchase order at its offices in Colorado, or after
any agent appointed by the Distributor receives the order.


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


      The net asset value per share is determined by dividing the value of
      the Fund's net assets attributable to a class by the number of shares
      of that class that are outstanding. To determine net asset value, the
      Fund's Board of Trustees has established procedures to value the Fund's
      securities, in general, based on market value. The Board has adopted
      special procedures for valuing illiquid and restricted securities and
      obligations for which market values cannot be readily obtained.

      If, after the close of the principal market on which a security held by
      the Fund is traded, and before the time the Fund's securities are
      priced that day, an event occurs that the Manager deems likely to cause
      a material change in the value of such security, the Fund's Board of
      Trustees has authorized the Manager, subject to the Board's review, to
      ascertain a fair value for such security.  A security's valuation may
      differ depending on the method used for determining value.


The Offering Price. To receive the offering price for a particular day, in
      most cases the Distributor or its designated agent must receive your
      order by the time the Exchange closes that day. If your order is
      received on a day when the Exchange is closed or after it has closed,
      the order will receive the next offering price that is determined after
      your order is received.
Buying Through a Dealer. If you buy shares through a dealer, your dealer must
      receive the order by the close of the Exchange and transmit it to the
      Distributor so that it is received before the Distributor's close of
      business on a regular business day (normally 5:00 P.M.) to receive that
      day's offering price, unless your dealer has made alternative
      arrangements with the Distributor. Otherwise, the order will receive
      the next offering price that is determined.


------------------------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER?  The Fund offers investors five
different classes of shares.  The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject
to different expenses and will likely have different share prices.  When you
buy shares, be sure to specify the class of shares.  If you do not choose a
class, your investment will be made in Class A shares.
------------------------------------------------------------------------------
------------------------------------------------------------------------------

------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge
      (on investments up to $1 million for regular accounts or lesser amounts
      for certain retirement plans). The amount of that sales charge will
      vary depending on the amount you invest. The sales charge rates are
      listed in "How Can You Buy Class A Shares?" below.
------------------------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales charge at the
      time of purchase, but you will pay an annual asset-based sales charge.
      If you sell your shares within 6 years of buying them, you will
      normally pay a contingent deferred sales charge. That contingent
      deferred sales charge varies depending on how long you own your shares,
      as described in "How Can You Buy Class B Shares?" below.
------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the
      time of purchase, but you will pay an annual asset-based sales charge.
      If you sell your shares within 12 months of buying them, you will
      normally pay a contingent deferred sales charge of 1.0%, as described
      in "How Can You Buy Class C Shares?" below.
------------------------------------------------------------------------------
Class N Shares. If you buy Class N shares (available only through certain
      retirement plans), you pay no sales charge at the time of purchase, but
      you will pay an annual asset-based sales charge. If you sell your
      shares within 18 months of the retirement plan's first purchase of
      Class N shares, you may pay a contingent deferred sales charge of 1.0%,
      as described in "How Can You Buy Class N Shares?" below.

Class Y Shares.  Class Y shares are offered only to certain institutional
      investors that have a special agreement with the Distributor.


WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
best suited to your needs depends on a number of factors that you should
discuss with your financial advisor. Some factors to consider are how much
you plan to invest and how long you plan to hold your investment. If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares. The Fund's operating costs that apply to a class of
shares and the effect of the different types of sales charges on your
investment will vary your investment results over time.

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

How Long Do You Expect to Hold Your Investment? While future financial needs
      cannot be predicted with certainty, knowing how long you expect to hold
      your investment will assist you in selecting the appropriate class of
      shares. Because of the effect of class-based expenses, your choice will
      also depend on how much you plan to invest. For example, the reduced
      sales charges available for larger purchases of Class A shares may,
      over time, offset the effect of paying an initial sales charge on your
      investment, compared to the effect over time of higher class-based
      expenses on shares of Class B, Class C or Class N. For retirement plans
      that qualify to purchase Class N shares, Class N shares will generally
      be more advantageous than Class B and Class C shares.


   o  Investing for the Shorter Term. While the Fund is meant to be a
      long-term investment, if you have a relatively short-term investment
      horizon (that is, you plan to hold your shares for not more than six
      years), you should most likely invest in Class A or Class C shares
      rather than Class B shares. That is because of the effect of the Class
      B contingent deferred sales charge if you redeem within six years, as
      well as the effect of the Class B asset-based sales charge on the
      investment return for that class in the short-term. Class C shares
      might be the appropriate choice (especially for investments of less
      than $100,000), because there is no initial sales charge on Class C
      shares, and the contingent deferred sales charge does not apply to
      amounts you sell after holding them one year.


      However, if you plan to invest more than $100,000 for the shorter term,
      then as your investment horizon increases toward six years, Class C
      shares might not be as advantageous as Class A shares. That is because
      the annual asset-based sales charge on Class C shares will have a
      greater impact on your account over the longer term than the reduced
      front-end sales charge available for larger purchases of Class A
      shares.

      And for non-retirement plan investors who invest $1 million or more, in
      most cases Class A shares will be the most advantageous choice, no
      matter how long you intend to hold your shares. For that reason, the
      Distributor normally will not accept purchase orders of $500,000 or
      more of Class B shares or $1 million or more of Class C shares from a
      single investor.

o     Investing for the Longer Term.  If you are investing  less than $100,000
      for the  longer-term,  for example for retirement,  and do not expect to
      need  access to your money for seven  years or more,  Class B shares may
      be appropriate.

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


      Additionally, the dividends payable to Class B, Class C and Class N
      shareholders will be reduced by the additional expenses borne by those
      classes that are not borne by Class A or Class Y shares, such as the
      Class B, Class C and Class N asset-based sales charge described below
      and in the Statement of Additional Information. Share certificates are
      only available for Class A shares. If you are considering using your
      shares as collateral for a loan, that may be a factor to consider.
      Also, checkwriting is not available on accounts subject to a contingent
      deferred sales charge.


How Do Share Classes Affect Payments to Your Broker? A financial advisor may
      receive different compensation for selling one class of shares than for
      selling another class. It is important to remember that Class B, Class
      C and Class N contingent deferred sales charges and asset-based sales
      charges have the same purpose as the front-end sales charge on sales of
      Class A shares: to compensate the Distributor for concessions and
      expenses it pays to dealers and financial institutions for selling
      shares. The Distributor may pay additional compensation from its own
      resources to securities dealers or financial institutions based upon
      the value of shares of the Fund owned by the dealer or financial
      institution for its own account or for its customers.


SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified
retirement plan arrangements or in other special types of transactions. To
receive a waiver or special sales charge rate, you must advise the
Distributor when purchasing shares or the Transfer Agent when redeeming
shares that a special condition applies.


HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales charge.
However, in some cases, described below, purchases are not subject to an
initial sales charge, and the offering price will be the net asset value. In
other cases, reduced sales charges may be available, as described below or in
the Statement of Additional Information. Out of the amount you invest, the
Fund receives the net asset value to invest for your account.

      The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor or allocated
to your dealer as a concession. The Distributor reserves the right to reallow
the entire concession to dealers. The current sales charge rates and
concessions paid to dealers and brokers are as follows:

 ------------------------------------------------------------------------------
 Amount of Purchase       Front-End Sales  Front-End Sales   Concession As
                                           Charge As a
                          Charge As a      Percentage of
                          Percentage of    Net               Percentage of
                          Offering Price   Amount Invested   Offering Price
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Less than $50,000             4.75%             4.98%             4.00%
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $50,000 or more but           4.50%             4.71%             3.75%
 less than $100,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $100,000 or more but          3.50%             3.63%             2.75%
 less than $250,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $250,000 or more but          2.50%             2.56%             2.00%
 less than $500,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $500,000 or more but          2.00%             2.04%             1.60%
 less than $1 million
 ------------------------------------------------------------------------------

Can You Reduce Class A Sales Charges? You may be eligible to buy Class A
      shares at reduced sales charge rates under the Fund's "Right of
      Accumulation" or a Letter of Intent, as described in "Reduced Sales
      Charges" in the Statement of Additional Information.


Class A Contingent Deferred Sales Charge. There is no initial sales charge on
      purchases of Class A shares of any one or more of the Oppenheimer funds
      aggregating $1 million or more, or on purchases of Class A shares of
      any one or more of the Oppenheimer funds by certain retirement plans
      that satisfied certain requirements prior to March 1, 2001
      ("grandfathered retirement accounts").  Qualified retirement plans
      (other than grandfathered retirement accounts, single 401(k) plans, SEP
      IRAs and SIMPLE IRAs) are not permitted to purchase Class A shares
      without an initial sales charge but subject to a Class A contingent
      deferred sales charge, as described below. The Distributor pays dealers
      of record concessions in an amount equal to 1.0% of purchases of $1
      million or more other than by grandfathered retirement accounts. For
      grandfathered retirement accounts, the concession is 0.75% of the first
      $2.5 million of purchases plus 0.25% of purchases in excess of $2.5
      million. In either case, the concession will not be paid on purchases
      of shares by exchange or that were previously subject to a front-end
      sales charge and dealer concession.


      If you redeem any of those shares within an 18-month "holding period"
      measured from the beginning of the calendar month of their purchase, a
      contingent deferred sales charge (called the "Class A contingent
      deferred sales charge") may be deducted from the redemption proceeds.
      That sales charge will be equal to 1.0% of the lesser of:
o     the aggregate net asset value of the redeemed shares at the time of
      redemption (excluding shares purchased by reinvestment of dividends or
      capital gain distributions) or
o     the original net asset value of the redeemed shares.

      The Class A contingent deferred sales charge will not exceed the
      aggregate amount of the concessions the Distributor paid to your dealer
      on all purchases of Class A shares of all Oppenheimer funds you made
      that were subject to the Class A contingent deferred sales charge.

Purchases by Certain Retirement Plans. There is no initial sales charge on
      purchases of Class A shares of any one or more Oppenheimer funds by
      retirement plans that have $10 million or more in plan assets and that
      have entered into a special agreement with the Distributor and by
      retirement plans which are part of a retirement plan product or
      platform offered by certain banks, broker-dealers, financial advisors,
      insurance companies or recordkeepers which have entered into a special
      agreement with the Distributor. The Distributor currently pays dealers
      of record concessions in an amount equal to 0.25% of the purchase price
      of Class A shares by those retirement plans from its own resources at
      the time of sale, subject to certain exceptions as described in the
      Statement of Additional Information. There is no contingent deferred
      sales charge upon the redemption of such shares.

HOW CAN YOU BUY CLASS B SHARES? Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B shares are
redeemed within six years from the beginning of the calendar month of their
purchase, a contingent deferred sales charge will be deducted from the
redemption proceeds. The Class B contingent deferred sales charge is paid to
compensate the Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class B shares.

      The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule for the Class B contingent deferred sales
charge holding period:

--------------------------------------------------------------------------------
Years Since Beginning of Month in       Contingent Deferred Sales Charge on
Which Purchase Order was Accepted       Redemptions in That Year
                                        (As % of Amount Subject to Charge)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
0 - 1                                   5.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1 - 2                                   4.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2 - 3                                   3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3 - 4                                   3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4 - 5                                   2.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5 - 6                                   1.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

More than 6                             None

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

Automatic Conversion of Class B Shares. Class B shares automatically convert
      to Class A shares 72 months after you purchase them.  This conversion
      feature relieves Class B shareholders of the asset-based sales charge
      that applies to Class B shares under the Class B Distribution and
      Service Plan, described below.  The conversion is based on the relative
      net asset value of the two classes, and no sales load or other charge
      is imposed.  When any Class B shares that you hold convert, any other
      Class B shares that were acquired by reinvesting dividends and
      distributions on the converted shares will also convert to Class A
      shares. For further information on the conversion feature and its tax
      implications, see "Class B Conversion" in the Statement of Additional
      Information.

How Can you Buy Class C Shares? Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C shares are
redeemed within a holding period of 12 months from the beginning of the
calendar month of their purchase, a contingent deferred sales charge of 1.0%
will be deducted from the redemption proceeds. The Class C contingent
deferred sales charge is paid to compensate the Distributor for its expenses
of providing distribution-related services to the Fund in connection with the
sale of Class C shares.

HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered for sale to
retirement plans (including IRAs and 403(b) plans) that purchase $500,000 or
more of Class N shares of one or more Oppenheimer funds or to group
retirement plans (which do not include IRAs and 403(b) plans) that have
assets of $500,000 or more or 100 or more eligible participants. See
"Availability of Class N shares" in the Statement of Additional Information
for other circumstances where Class N shares are available for purchase.


      Class N shares are sold at net asset value without an initial sales
charge. A contingent deferred sales charge of 1.0% will be imposed upon the
redemption of Class N shares, if:

o     The group retirement plan 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
o     With respect to an IRA 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.

      Retirement plans that offer Class N shares may impose charges on plan
participant accounts. The procedures for buying, selling, exchanging and
transferring the Fund's other classes of shares (other than the time those
orders must be received by the Distributor or Transfer Agent in Colorado) and
the special account features applicable to purchasers of those other classes
of shares described elsewhere in this Prospectus do not apply to Class N
shares offered through a group retirement plan. Instructions for buying,
selling, exchanging or transferring Class N shares offered through a group
retirement plan must be submitted by the plan, not by plan participants for
whose benefit the shares are held.

Who Can Buy Class Y Shares? Class Y shares are sold at net asset value per
share without a sales charge directly to institutional investors that have
special agreements with the Distributor for this purpose. They may include
insurance companies, registered investment companies and employee benefit
plans. Individual investors cannot buy Class Y shares directly.

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

DISTRIBUTION AND SERVICE (12b-1) PLANS.


Service Plan for Class A Shares. The Fund has adopted a Service Plan for
      Class A shares. It reimburses the Distributor for a portion of its
      costs incurred for services provided to accounts that hold Class A
      shares. Reimbursement is made quarterly at an annual rate of up to
      0.25% of the average annual net assets of Class A shares of the Fund.
      The Distributor currently uses all of those fees to pay dealers,
      brokers, banks and other financial institutions quarterly for providing
      personal service and maintenance of accounts of their customers that
      hold Class A shares. With respect to Class A shares subject to a Class
      A contingent deferred sales charge purchased by grandfathered
      retirement accounts, the Distributor pays the 0.25% service fee to
      dealers in advance for the first year after the shares are sold by the
      dealer and the Distributor retains the first year's service fee paid by
      the Fund. After the shares have been held by grandfathered retirement
      accounts for a year, the Distributor pays the service fee to dealers on
      a quarterly basis.


Distribution and Service Plans for Class B, Class C and Class N Shares. The
      Fund has adopted Distribution and Service Plans for Class B, Class C
      and Class N shares to pay the Distributor for its services and costs in
      distributing Class B, Class C and Class N shares and servicing
      accounts. Under the plans, the Fund pays the Distributor an annual
      asset-based sales charge of 0.75% on Class B and Class C shares and
      0.25% on Class N shares. The Distributor also receives a service fee of
      0.25% per year under the Class B, Class C and Class N plans.

      The asset-based sales charge and service fees increase Class B and
      Class C expenses by 1.0% and increase Class N expenses by 0.50% of the
      net assets per year of the respective class. Because these fees are
      paid out of the Fund's assets on an on-going basis, over time these
      fees will increase the cost of your investment and may cost you more
      than other types of sales charges.


      The Distributor uses the service fees to compensate dealers for
      providing personal services for accounts that hold Class B, Class C or
      Class N shares. The Distributor normally pays the 0.25% service fees to
      dealers in advance for the first year after the shares are sold by the
      dealer. After the shares have been held for a year, the Distributor
      pays the service fees to dealers on a quarterly basis. The Distributor
      retains the service fees for accounts for which it renders the required
      personal services.

      The Distributor currently pays a sales concession of 3.75% of the
      purchase price of Class B shares to dealers from its own resources at
      the time of sale. Including the advance of the service fee, the total
      amount paid by the Distributor to the dealer at the time of sale of
      Class B shares is therefore 4.00% of the purchase price. The
      Distributor normally retains the Class B asset-based sales charge. See
      the Statement of Additional Information for exceptions.

      The Distributor currently pays a sales concession of 0.75% of the
      purchase price of Class C shares to dealers from its own resources at
      the time of sale. Including the advance of the service fee, the total
      amount paid by the Distributor to the dealer at the time of sale of
      Class C shares is therefore 1.0% of the purchase price. The Distributor
      pays the asset-based sales charge as an ongoing concession to the
      dealer on Class C shares that have been outstanding for a year or more.
      The Distributor normally retains the asset-based sales charge on Class
      C shares during the first year after the purchase of Class C shares.
      See the Statement of Additional Information for exceptions.

      The Distributor currently pays a sales concession of 0.75% of the
      purchase price of Class N shares to dealers from its own resources at
      the time of sale. Including the advance of the service fee, the total
      amount paid by the Distributor to the dealer at the time of sale of
      Class N shares is therefore 1.0% of the purchase price. The Distributor
      normally retains the asset-based sales charge on Class N shares. See
      the Statement of Additional Information for exceptions.

      Under certain circumstances, the Distributor will pay the full Class B,
      Class C or Class N asset-based sales charge and service fee to the
      dealer beginning in the first year after purchase of such shares in
      lieu of paying the dealer the sales concession and the advance of the
      first year's service fee at the time of purchase.


Special Investor Services

ACCOUNTLINK. You can use our AccountLink feature to link your Fund account
with an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
    o transmit funds electronically to purchase shares by telephone (through
      a service representative or by PhoneLink) or automatically under Asset
      Builder Plans, or
    o have the Transfer Agent send redemption proceeds or transmit dividends
      and distributions directly to your bank account. Please call the
      Transfer Agent for more information.

      You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1.800.225.5677. The purchase payment
will be debited from your bank account.

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

PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the PhoneLink number, 1.800.225.5677.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by
      phone, by calling 1.800.225.5677. You must have established AccountLink
      privileges to link your bank account with the Fund to pay for these
      purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
      below, you can exchange shares automatically by phone from your Fund
      account to another OppenheimerFunds account you have already
      established by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone automatically by calling
      the PhoneLink number and the Fund will send the proceeds directly to
      your AccountLink bank account. Please refer to "How to Sell Shares,"
      below for details.

CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier).
Please call 1.800.225.5677 for information about which transactions may be
handled this way. Transaction requests submitted by fax are subject to the
same rules and restrictions as written and telephone requests described in
this Prospectus.


OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet website, at
www.oppenheimerfunds.com. Additionally, shareholders listed in the account
------------------------
registration (and the dealer of record) may perform certain account
transactions through a special section of that website. To perform account
transactions or obtain account information online, you must first obtain a
user I.D. and password on that website. If you do not want to have Internet
account transaction capability for your account, please call the Transfer
Agent at 1.800.225.5677. At times, the website may be inaccessible or its
transaction features may be unavailable.


AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis. Please call the Transfer Agent
or consult the Statement of Additional Information for details.


REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to six months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class
B shares on which you paid a contingent deferred sales charge when you
redeemed them. This privilege does not apply to Class C, Class N or Class Y
shares. You must be sure to ask the Distributor for this privilege when you
send your payment.


RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that
individuals and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
      SIMPLE IRAs and rollover IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
      owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
      eligible tax-exempt organizations, such as schools, hospitals and
      charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
      self-employed individuals.
      Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.

How to Sell Shares

You can sell (redeem) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated after your
order is received in proper form (which means that it must comply with the
procedures described below) and is accepted by the Transfer Agent. The Fund
lets you sell your shares by writing a letter, by wire, by using the Fund's
checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. If you have questions
about any of these procedures, and especially if you are redeeming shares in
a special situation, such as due to the death of the owner or from a
retirement plan account, please call the Transfer Agent first, at
1.800.225.5677, for assistance.

Certain Requests Require a Signature Guarantee. To protect you and the Fund
      from fraud, the following redemption requests must be in writing and
      must include a signature guarantee (although there may be other
      situations that also require a signature guarantee):
   o  You wish to redeem more than $100,000 and receive a check
   o  The redemption check is not payable to all shareholders listed on the
      account statement
   o  The redemption check is not sent to the address of record on your
      account statement
   o  Shares are being transferred to a Fund account with a different owner
      or name
   o  Shares are being redeemed by someone (such as an Executor) other than
      the owners.

Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept
      a guarantee of your signature by a number of financial institutions,
      including:
o     a U.S. bank, trust company, credit union or savings association,
o     a foreign bank that has a U.S. correspondent bank,
o     a U.S. registered dealer or broker in securities, municipal securities
      or government securities, or
o     a U.S. national securities exchange, a registered securities
      association or a clearing agency.
      If you are signing on behalf of a corporation, partnership or other
      business or as a fiduciary, you must also include your title in the
      signature.

Retirement Plan Accounts. There are special procedures to sell shares in an
      OppenheimerFunds retirement plan account. Call the Transfer Agent for a
      distribution request form. Special income tax withholding requirements
      apply to distributions from retirement plans. You must submit a
      withholding form with your redemption request to avoid delay in getting
      your money and if you do not want tax withheld. If your employer holds
      your retirement plan account for you in the name of the plan, you must
      ask the plan trustee or administrator to request the sale of the Fund
      shares in your plan account.

Sending Redemption Proceeds by Wire. While the Fund normally sends your money
      by check, you can arrange to have the proceeds of shares you sell sent
      by Federal Funds wire to a bank account you designate. It must be a
      commercial bank that is a member of the Federal Reserve wire system.
      The minimum redemption you can have sent by wire is $2,500. There is a
      $10 fee for each request. To find out how to set up this feature on
      your account or to arrange a wire, call the Transfer Agent at
      1.800.225.5677.

Checkwriting. To write checks against your Fund account, request that
privilege on your account application, or contact the Transfer Agent for
signature cards. They must be signed (with a signature guarantee) by all
owners of the account and returned to the Transfer Agent so that checks can
be sent to you to use. Shareholders with joint accounts can elect in writing
to have checks paid over the signature of one owner. If you previously signed
a signature card to establish checkwriting in another Oppenheimer fund,
simply call 1.800.225.5677 to request checkwriting for an account in this
Fund with the same registration as the other account.
o     Checks can be written to the order of whomever you wish, but may not be
      cashed at the bank the checks are payable through or the Fund's
      custodian bank.
o     Checkwriting privileges are not available for accounts holding shares
      that are subject to a contingent deferred sales charge.

o     Checks must be written for at least $500. Checks written below the
      stated amount on the check will not be accepted. However, if you have
      existing checks indicating a $100 minimum, you may still use them for
      amounts of $100 or more.

o     Checks cannot be paid if they are written for more than your account
      value. Remember, your shares fluctuate in value and you should not
      write a check close to the total account value.
o     You may not write a check that would require the Fund to redeem shares
      that were purchased by check or Asset Builder Plan payments within the
      prior 10 days.
o     Don't use your checks if you changed your Fund account number, until
      you receive new checks.

HOW DO you SELL SHARES BY MAIL? Write a letter of instruction that includes:
   o  Your name
   o  The Fund's name
   o  Your Fund account number (from your account statement)
   o  The dollar amount or number of shares to be redeemed
   o  Any special payment instructions
   o  Any share certificates for the shares you are selling
   o  The signatures of all registered owners exactly as the account is
      registered, and
   o  Any special documents requested by the Transfer Agent to assure proper
      authorization of the person asking to sell the shares.

Use the following address for            Send courier or express mail
requests by mail:                        requests to:

OppenheimerFunds Services                OppenheimerFunds Services
P.O. Box 5270                            10200 E. Girard Avenue, Building D
Denver, Colorado 80217                   Denver, Colorado 80231

HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption
price calculated on a particular regular business day, your call must be
received by the Transfer Agent by the close of the Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds-sponsored qualified retirement plan
account or under a share certificate by telephone.

   o  To redeem shares through a service representative or automatically on
      PhoneLink, call 1.800.225.5677.
      Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that bank account.

Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by
      telephone in any seven-day period. The check must be payable to all
      owners of record of the shares and must be sent to the address on the
      account statement. This service is not available within 30 days of
      changing the address on an account.

Telephone Redemptions Through AccountLink or by Wire. There are no dollar
      limits on telephone redemption proceeds sent to a bank account
      designated when you establish AccountLink. Normally the ACH transfer to
      your bank is initiated on the business day after the redemption. You do
      not receive dividends on the proceeds of the shares you redeemed while
      they are waiting to be transferred.

      If you have requested Federal Funds wire privileges for your account,
      the wire of the redemption proceeds will normally be transmitted on the
      next bank business day after the shares are redeemed. There is a
      possibility that the wire may be delayed up to seven days to enable the
      Fund to sell securities to pay the redemption proceeds. No dividends
      are accrued or paid on the proceeds of shares that have been redeemed
      and are awaiting transmittal by wire.

CAN  YOU  SELL  SHARES  THROUGH  your  DEALER?   The   Distributor   has  made
arrangements  to repurchase  Fund shares from dealers and brokers on behalf of
their  customers.  Brokers or dealers  may  charge for that  service.  If your
shares are held in the name of your dealer,  you must redeem them through your
dealer.

HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase
shares subject to a Class A, Class B, Class C or Class N contingent deferred
sales charge and redeem any of those shares during the applicable holding
period for the class of shares, the contingent deferred sales charge will be
deducted from the redemption proceeds (unless you are eligible for a waiver
of that sales charge based on the categories listed in Appendix C to the
Statement of Additional Information and you advise the Transfer Agent of your
eligibility for the waiver when you place your redemption request.)

      A  contingent  deferred  sales charge will be based on the lesser of the
net  asset  value of the  redeemed  shares  at the time of  redemption  or the
original net asset value.  A contingent  deferred  sales charge is not imposed
on:
o     the amount of your  account  value  represented  by an  increase  in net
      asset value over the initial purchase price,
o     shares  purchased by the  reinvestment  of  dividends  or capital  gains
      distributions, or
o     shares redeemed in the special circumstances  described in Appendix C to
      the Statement of Additional Information.
      To determine whether a contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order:
   1. shares acquired by reinvestment of dividends and capital gains
      distributions,
   2. shares held for the holding period that applies to the class, and
   3. shares held the longest during the holding period.

      Contingent deferred sales charges are not charged when you exchange
shares of the Fund for shares of other Oppenheimer funds. However, if you
exchange them within the applicable contingent deferred sales charge holding
period, the holding period will carry over to the fund whose shares you
acquire. Similarly, if you acquire shares of this Fund by exchanging shares
of another Oppenheimer fund that are still subject to a contingent deferred
sales charge holding period, that holding period will carry over to this Fund.

How to Exchange Shares

Shares of the Fund may be exchanged for shares of certain Oppenheimer funds
at net asset value per share at the time of exchange, without sales charge.
Shares of the Fund can be purchased by exchange of shares of other
Oppenheimer funds on the same basis. To exchange shares, you must meet
several conditions:
   o  Shares of the fund selected for exchange must be available for sale in
      your state of residence.
   o  The prospectuses of both funds must offer the exchange privilege.
   o  You must hold the shares you buy when you establish your account for at
      least seven days before you can exchange them. After the account is
      open seven days, you can exchange shares every regular business day.
   o  You must meet the minimum purchase requirements for the fund whose
      shares you purchase by exchange.
   o  Before exchanging into a fund, you must obtain and read its prospectus.
      Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another fund.
In some cases, sales charges may be imposed on exchange transactions. For tax
purposes, exchanges of shares involve a sale of the shares of the fund you
own and a purchase of the shares of the other fund, which may result in a
capital gain or loss. Please refer to "How to Exchange Shares" in the
Statement of Additional Information for more details.

      You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by calling
a service representative at 1.800.225.5677. That list can change from time to
time.

HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or
by telephone:

Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
      signed by all owners of the account. Send it to the Transfer Agent at
      the address on the back cover. Exchanges of shares held under
      certificates cannot be processed unless the Transfer Agent receives the
      certificates with the request.
Telephone  Exchange  Requests.  Telephone exchange requests may be made either
      by calling a service  representative or by using PhoneLink for automated
      exchanges by calling  1.800.225.5677.  Telephone  exchanges  may be made
      only  between  accounts  that are  registered  with the same name(s) and
      address.  Shares  held  under  certificates  may  not  be  exchanged  by
      telephone.

ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o     Shares are redeemed from one fund and purchased from the other fund in

      the exchange transaction on the same regular business day on which the
      Transfer Agent receives an exchange request that conforms to the
      policies described above. It must be received by the close of the
      Exchange that day, which is normally 4:00 P.M. but may be earlier on
      some days.
o     The interests of the Fund's long-term shareholders and its ability to
      manage its investments may be adversely affected when its shares are
      repeatedly bought and sold in response to short-term market
      fluctuations--also known as "market timing." When large dollar amounts
      are involved, the Fund may have difficulty implementing long-term
      investment strategies, because it cannot predict how much cash it will
      have to invest. Market timing also may force the Fund to sell portfolio
      securities at disadvantageous times to raise the cash needed to buy a
      market timer's Fund shares. These factors may hurt the Fund's
      performance and its shareholders. When the Manager believes frequent
      trading would have a disruptive effect on the Fund's ability to manage
      its investments, the Manager and the Fund may reject purchase orders
      and exchanges into the Fund by any person, group or account that the
      Manager believes to be a market timer. All accounts under common
      ownership or control within the Oppenheimer funds complex may be
      counted together for purposes of determining market timing with respect
      to any exchange involving this Fund.
   o  The Fund may amend, suspend or terminate the exchange privilege at any
      time. The Fund may refuse any exchange order and is currently not
      obligated to provide notice before rejecting an exchange order.

   o  If the Transfer Agent cannot exchange all the shares you request
      because of a restriction cited above, only the shares eligible for
      exchange will be exchanged.

Shareholder Account Rules and Policies


More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained in the Statement of Additional Information.
A $12 annual fee is assessed on any account valued at less than $500. The fee
      is automatically deducted from accounts annually on or about the second
      to last business day of September. See the Statement of Additional
      Information, or existing shareholders may visit the OppenheimerFunds
      website, to learn how you can avoid this fee and for circumstances when
      this fee will not be assessed.

The offering of shares may be suspended during any period in which the
      determination of net asset value is suspended, and the offering may be
      suspended by the Board of Trustees at any time the Board believes it is
      in the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may
      be modified, suspended or terminated by the Fund at any time. The Fund
      will provide you notice whenever it is required to do so by applicable
      law. If an account has more than one owner, the Fund and the Transfer
      Agent may rely on the instructions of any one owner. Telephone
      privileges apply to each owner of the account and the dealer
      representative of record for the account unless the Transfer Agent
      receives cancellation instructions from an owner of the account.
The Transfer Agent will record any telephone calls to verify data concerning
      transactions and has adopted other procedures to confirm that telephone
      instructions are genuine, by requiring callers to provide tax
      identification numbers and other account data or by using PINs, and by
      confirming such transactions in writing. The Transfer Agent and the
      Fund will not be liable for losses or expenses arising out of telephone
      instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
      receives all required documents in proper form. From time to time, the
      Transfer Agent in its discretion may waive certain of the requirements
      for redemptions stated in this Prospectus.
Dealers that perform account transactions for their clients by participating
      in NETWORKING through the National Securities Clearing Corporation are
      responsible for obtaining their clients' permission to perform those
      transactions, and are responsible to their clients who are shareholders
      of the Fund if the dealer performs any transaction erroneously or
      improperly.
The redemption price for shares will vary from day to day because the value
      of the securities in the Fund's portfolio fluctuates. The redemption
      price, which is the net asset value per share, will normally differ for
      each class of shares. The redemption value of your shares may be more
      or less than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by
      check, or through AccountLink or by Federal Funds wire (as elected by
      the shareholder) within seven days after the Transfer Agent receives
      redemption instructions in proper form. However, under unusual
      circumstances determined by the Securities and Exchange Commission,
      payment may be delayed or suspended. For accounts registered in the
      name of a broker-dealer, payment will normally be forwarded within
      three business days after redemption.
The Transfer Agent may delay processing any type of redemption payment as
      described under "How to Sell Shares" for recently purchased shares, but
      only until the purchase payment has cleared. That delay may be as much
      as 10 days from the date the shares were purchased. That delay may be
      avoided if you purchase shares by Federal Funds wire or certified
      check, or arrange with your bank to provide telephone or written
      assurance to the Transfer Agent that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the
      account value has fallen below $200 for reasons other than the fact
      that the market value of shares has dropped. In some cases, involuntary
      redemptions may be made to repay the Distributor for losses from the
      cancellation of share purchase orders.

Shares may be "redeemed in kind" under unusual circumstances (such as a lack
      of liquidity in the Fund's portfolio to meet redemptions). This means
      that the redemption proceeds will be paid with liquid securities from
      the Fund's portfolio. If the Fund redeems your shares in-kind, you may
      bear transaction costs and will bear market risks until such time as
      such securities are converted into cash.
Federal regulations may require the Fund to obtain your name, your date of
      birth (for a natural person), your residential street address or
      principal place of business and your Social Security Number, Employer
      Identification Number or other government issued identification when
      you open an account. Additional information may be required in certain
      circumstances or to open corporate accounts.  The Fund or the Transfer
      Agent may use this information to attempt to verify your identity.  The
      Fund may not be able to establish an account if the necessary
      information is not received.  The Fund may also place limits on account
      transactions while it is in the process of attempting to verify your
      identity.  Additionally, if the Fund is unable to verify your identity
      after your account is established, the Fund may be required to redeem
      your shares and close your account.

"Backup withholding" of federal income tax may be applied against taxable
      dividends, distributions and redemption proceeds (including exchanges)
      if you fail to furnish the Fund your correct, certified Social Security
      or Employer Identification Number when you sign your application, or if
      you under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
      mail only one copy of each prospectus, annual and semi-annual report
      and annual notice of the Fund's privacy policy to shareholders having
      the same last name and address on the Fund's records. The consolidation
      of these mailings, called householding, benefits the Fund through
      reduced mailing expense.

      If you want to receive multiple copies of these materials, you may call
      the Transfer Agent at 1.800.225.5677. You may also notify the Transfer
      Agent in writing. Individual copies of prospectuses, reports and
      privacy notices will be sent to you commencing within 30 days after the
      Transfer Agent receives your request to stop householding.

Dividends, Capital Gains and Taxes

Dividends. The Fund intends to declare dividends separately for each class of
shares from net investment income each regular business day and pay those
dividends to shareholders monthly on a date selected by the Board of
Trustees. Dividends and distributions paid to Class A and Class Y shares will
generally be higher than dividends for Class B, Class C and Class N shares,
which normally have higher expenses than Class A and Class Y shares.

      Daily dividends will not be declared or paid on newly purchased shares
until Federal Funds are available to the Fund from the purchase payment for
shares. The Fund has no fixed dividend rate and cannot guarantee that it will
pay any dividends or distributions.

Capital Gains.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in December of each year. The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year. There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends
and distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all
      dividends and capital gains distributions in additional shares of the
      Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
      distributions (dividends, short-term capital gains or long-term capital
      gains distributions) in the Fund while receiving the other types of
      distributions by check or having them sent to your bank account through
      AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
      dividends and capital gains distributions or have them sent to your
      bank through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
      reinvest all distributions in the same class of shares of another
      OppenheimerFunds account you have established.

Taxes. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state
or local taxes. Dividends paid from short-term capital gains and net
investment income are taxable as ordinary income.  Long-term capital gains
are taxable as long-term capital gains when distributed to shareholders.  It
does not matter how long you have held your shares. Whether you reinvest your
distributions in additional shares or take them in cash, the tax treatment is
the same.

      Mutual fund distributions of interest income from U.S. government
securities are generally free from state and local income taxes. However,
particular states may limit that benefit, and some types of securities, such
as repurchase agreements and asset-backed securities, may not qualify for
that benefit.

      Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information
the Fund sends you after the end of the calendar year..


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

Remember, There May be Taxes on Transactions.  Because the Fund's share
      prices fluctuate, you may have a capital gain or loss when you sell or
      exchange your shares. A capital gain or loss is the difference between
      the price you paid for the shares and the price you received when you
      sold them. Any capital gain is subject to capital gains tax.
Returns of Capital Can Occur.  In certain cases, distributions made by the
      Fund may be considered a non-taxable return of capital to shareholders.
      If that occurs, it will be identified in notices to shareholders.

      This  information  is only a  summary  of  certain  federal  income  tax
information  about your  investment.  You should consult with your tax advisor
about  the  effect  of an  investment  in the  Fund  on  your  particular  tax
situation.

Financial Highlights

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

FINANCIAL HIGHLIGHTS

 Class A            August 31                                 2003          2002        2001        2000          1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                       $ 9.88        $ 9.52      $ 9.19      $ 9.15        $ 9.74
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .28           .54         .51         .58           .56
 Net realized and unrealized gain (loss)                      (.10)          .36         .36         .04          (.59)
                                                            -------------------------------------------------------------
 Total from investment operations                              .18           .90         .87         .62          (.03)
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.28)         (.54)       (.54)       (.57)         (.55)
 Distributions from net realized gain                         (.02)           --          --          --            --
 Tax return of capital distribution                             --            --          --        (.01)         (.01)
                                                            -------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                              (.30)         (.54)       (.54)       (.58)         (.56)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $9.76         $9.88       $9.52       $9.19         $9.15
                                                            =============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 1                           1.85%         9.75%       9.75%       7.03%        (0.40)%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                 $830,310      $853,671    $599,659    $559,194      $579,064
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $906,353      $679,657    $580,177    $542,931      $591,229
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                        2.85%         5.57%       5.46%       6.37%         5.85%
 Total expenses                                               1.01% 3       1.06% 3     0.91% 3     1.12% 3       1.06% 3
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        72%          121%        215%        181%          199%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 21 | OPPENHEIMER U.S. GOVERNMENT TRUST FINANCIAL HIGHLIGHTS Continued

 Class B            August 31                                 2003          2002        2001        2000          1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                       $ 9.87        $ 9.51      $ 9.18      $ 9.14        $ 9.73
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .21           .46         .45         .51           .48
 Net realized and unrealized gain (loss)                      (.10)          .36         .35         .04          (.59)
                                                            -------------------------------------------------------------
 Total from investment operations                              .11           .82         .80         .55          (.11)
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.21)         (.46)       (.47)       (.50)         (.47)
 Distributions from net realized gain                         (.02)           --          --          --            --
 Tax return of capital distribution                             --            --          --        (.01)         (.01)
                                                            -------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                              (.23)         (.46)       (.47)       (.51)         (.48)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $9.75         $9.87       $9.51       $9.18         $9.14
                                                            =============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 1                           1.07%         8.93%       8.92%       6.22%        (1.15)%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                 $370,984      $393,355    $204,576    $140,512      $174,622
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $431,102      $266,559    $169,440    $151,770      $160,782
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                        2.08%         4.74%       4.67%       5.60%         5.09%
 Total expenses                                               1.78% 3       1.82% 3     1.67% 3     1.87% 3       1.81% 3
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        72%          121%        215%        181%          199%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%.

 Class C            August 31                                 2003          2002        2001        2000          1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                       $ 9.87        $ 9.50      $ 9.18      $ 9.14        $ 9.72
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .21           .46         .45         .51           .48
 Net realized and unrealized gain (loss)                      (.10)          .37         .34         .04          (.58)
                                                            -------------------------------------------------------------
 Total from investment operations                              .11           .83         .79         .55          (.10)
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.21)         (.46)       (.47)       (.50)         (.47)
 Distributions from net realized gain                         (.02)           --          --          --            --
 Tax return of capital distribution                             --            --          --        (.01)         (.01)
                                                            -------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                              (.23)         (.46)       (.47)       (.51)         (.48)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $9.75         $9.87       $9.50       $9.18         $9.14
                                                            =============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 1                           1.12%         9.05%       8.81%       6.21%        (1.05)%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                 $192,496      $205,349    $124,542     $91,496       $67,691
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $216,954      $144,852    $109,060     $77,875       $56,943
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                        2.13%         4.76%       4.69%       5.61%         5.11%
 Total expenses                                               1.74% 3       1.81% 3     1.67% 3     1.88% 3       1.81% 3
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        72%          121%        215%        181%          199%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 23 | OPPENHEIMER U.S. GOVERNMENT TRUST FINANCIAL HIGHLIGHTS Continued

 Class N            August 31                                                           2003        2002        2001 1
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                                                 $ 9.88      $ 9.52        $ 9.45
-------------------------------------------------------------------------------------------------------------------------
 Income from investment operations:
 Net investment income                                                                   .24         .50           .25
 Net realized and unrealized gain (loss)                                                (.10)        .39           .07
                                                                                      -----------------------------------
 Total from investment operations                                                        .14         .89           .32
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                                                   (.24)       (.53)         (.25)
 Distributions from net realized gain                                                   (.02)         --            --
 Tax return of capital distribution                                                       --          --            --
                                                                                      -----------------------------------
 Total dividends and/or distributions to shareholders                                   (.26)       (.53)         (.25)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                                        $9.76       $9.88         $9.52
                                                                                      ===================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                                                     1.45%       9.62%         3.50%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                                            $25,947     $13,453          $513
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                                                   $22,027     $ 6,092          $ 90
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income                                                                  2.41%       5.21%         5.54%
 Total expenses                                                                         1.52%       1.31%         0.85%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                                                     1.42%        N/A 4         N/A 4
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                                                  72%        121%          215%

1. For the period from March 1, 2001 (inception of offering) to August 31, 2001. 2. Assumes an 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 24 | OPPENHEIMER U.S. GOVERNMENT TRUST

 Class Y            August 31                                 2003          2002        2001        2000          1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                       $ 9.88        $ 9.52      $ 9.19      $ 9.15        $ 9.74
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .33           .56         .56         .62           .51
 Net realized and unrealized gain (loss)                      (.10)          .36         .34         .03          (.59)
                                                            -------------------------------------------------------------
 Total from investment operations                              .23           .92         .90         .65          (.08)
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.33)         (.56)       (.57)       (.61)         (.50)
 Distributions from net realized gain                         (.02)           --          --          --            --
 Tax return of capital distribution                             --            --          --          -- 1        (.01)
                                                            -------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                              (.35)         (.56)       (.57)       (.61)         (.51)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $9.76         $9.88       $9.52       $9.19         $9.15
                                                            =============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                           2.37%        10.05%      10.10%       7.39%        (0.83)%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                   $2,602        $2,861      $1,522        $333            $1
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                          $3,133        $1,933      $  464        $ 27            $1
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income                                        3.36%         5.80%       5.83%       6.51%         6.19%
 Total expenses                                               0.59%         0.83%       1.06% 4     0.83%         0.69%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                            N/A 5        0.81%       0.61%        N/A 5         N/A 5
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        72%          121%        215%        181%          199%

1. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Added since August 31, 2001 to reflect expenses before reduction to custodian expenses and voluntary waiver of transfer agent fees. 5. Reduction to custodian expenses less than 0.01%. INFORMATION AND SERVICES For More Information on Oppenheimer U.S. Government Trust The following additional information about the Fund is available without charge upon request: STATEMENT OF ADDITIONAL INFORMATION. This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. How to Get More Information You can request the Statement of Additional Information, the Annual and Semi-Annual Reports, the notice explaining the Fund's privacy policy and other information about the Fund or your account: ------------------------------------------------------------------------------ By Telephone: Call OppenheimerFunds Services toll-free: 1.800.CALL OPP (225.5677) ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ By Mail: Write to: OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ On the Internet: You can send us a request by e-mail or read or down-load documents on the OppenheimerFunds website: www.oppenheimerfunds.com ------------------------ ------------------------------------------------------------------------------ Information about the Fund including the Statement of Additional Information can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1.202.942.8090. Reports and other information about the Fund are available on the EDGAR database on the SEC's Internet website at www.sec.gov. Copies may be obtained after payment of a duplicating ----------- fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. The Fund's shares are distributed by: The Fund's SEC File No. 811-3430 PR0220.001.1003 [logo] OppenheimerFunds Distributor, Inc. Printed on recycled paper.

                          Appendix to Prospectus of
                      Oppenheimer U.S. Government Trust


      Graphic material included in the Prospectus of Oppenheimer U.S.
Government Trust under the heading "Annual Total Returns (Class A)(as of
12/31 each year)":

      A bar chart will be included in the Prospectus of Oppenheimer U.S.
Government Trust (the "Fund") depicting the annual total returns of a
hypothetical investment in Class A shares of the Fund for each of the last 10
calendar years, without deducting sales charges or taxes. Set forth below are
the relevant data points that will appear in the bar chart:

Calendar                Annual
Year                    Total
Ended                                           Returns


12/31/93                  8.00%
12/31/94                 -1.28%
12/31/95                14.94%
12/31/96                  4.34%
12/31/97                10.36%
12/31/98                6.26%
12/31/99                -0.67%
12/31/00                10.33%
12/31/01                6.91%
12/31/02                10.69%

--------------------------------------------------------------------------------------------
Oppenheimer U.S. Government Trust
--------------------------------------------------------------------------------------------

6803 S. Tucson Way, Centennial, CO  80112

Statement of Additional Information dated October 23, 2003

This Statement of Additional Information is not a Prospectus.  This document contains
additional information about the Fund and supplements information in the Prospectus dated
October 23, 2003.  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..........................  7
    Other Investment Restrictions.......................................  19
How the Fund is Managed ................................................  21
    Organization and History............................................  21
    Board of Trustees and Oversight Committees..........................  22
    Trustees and Officers of the Fund...................................  23
    The Manager.........................................................  31
Brokerage Policies of the Fund..........................................  34
Distribution and Service Plans..........................................  36
Performance of the Fund.................................................  41

About Your Account
How To Buy Shares.......................................................  47
How To Sell Shares......................................................  57
How To Exchange Shares..................................................  62
Dividends, Capital Gains and Taxes......................................  66
Additional Information About the Fund...................................  69

Financial Information About the Fund
Independent Auditors' Report............................................  70
Financial Statements....................................................  71

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







ABOUT The FUnd

Additional Information About the Fund's Investment Policies and Risks

The investment objective, the principal investment policies and the main risks of the Fund
are described in the Prospectus. This Statement of Additional Information contains
supplemental information about those policies and 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.

o     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|   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|   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. The current portfolio
management team assumed responsibility for management of the Fund in April 2002.  Due to
the team's current management style, the Fund's portfolio turnover rate declined
significantly from fiscal year 2001 to fiscal year 2002.

      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 investment 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 of 1940
(the "Investment Company Act"), are collateralized by the underlying security.  The Fund's
repurchase agreements require that at all times while the repurchase agreement is in
effect, the 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.

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

o     Reverse Repurchase Agreements. The Fund can use reverse repurchase agreements on debt
obligations it owns. Under a reverse repurchase agreement, the Fund sells an underlying
debt obligation and simultaneously agrees to repurchase the same security at an agreed-upon
price at an agreed-upon date. The Fund will identify on its books liquid assets in an
amount sufficient to cover its obligations under reverse repurchase agreements, including
interest, until payment is made to the seller.

      These transactions involve the risk that the market value of the securities sold by
the Fund under a reverse repurchase agreement could decline below the price at which the
Fund is obligated to repurchase them. These agreements are considered borrowings by the
Fund and will be subject to the asset coverage requirement under the Fund's policy on
borrowing discussed below.

      |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|   Borrowing. From time to time, the Fund may borrow from banks or affiliated investment
companies. Such borrowing may be used to fund shareholder redemptions or for other
purposes. Under the requirements of the Investment Company Act, the Fund may borrow only to
the extent that the value of that Fund's total assets, less its liabilities other than
borrowings, is equal to at least 300% of all borrowings including the proposed borrowing.
If the value of the Fund's assets so computed should fail to meet the 300% asset coverage
requirement, the Fund is required within three days to reduce its bank debt to the extent
necessary to meet such requirement. It might have to sell a portion of its investments at a
time when independent investment judgment would not dictate such sale.
      Since substantially all of the Fund's assets fluctuate in value, but borrowing
obligations are fixed, when the Fund has outstanding borrowings, its net asset value per
share correspondingly will tend to increase and decrease more when portfolio assets
fluctuate in value than otherwise would be the case. The Fund will pay interest on its
borrowings. Borrowing may subject the Fund to greater risks and costs than funds that do not
borrow.  These risks may include the possible reduction of income and increased fluctuation
in the Fund's net asset value per share.

      |X|   Loans of Portfolio Securities. To attempt to generate income, the Fund may lend
its portfolio securities to brokers, dealers, and other financial institutions. The Fund
must receive collateral for a loan. 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 and are subject to other conditions described below.

      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. Each type of interest may be shared with
the borrower.  The Fund may also pay reasonable finders', 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|   Interfund Borrowing and Lending Arrangements. Consistent with its fundamental
policies and pursuant to an exemptive order issued by the SEC, the Fund may engage in
borrowing and lending activities with other funds in the OppenheimerFunds complex.
Borrowing money from affiliated funds may afford the Fund the flexibility to use the most
cost-effective alternative to satisfy its borrowing requirements. Lending money to an
affiliated fund may allow the Fund to obtain a higher rate of return than it could from
interest rates on alternative short-term investments.  The interfund lending arrangement is
consistent with applicable regulatory requirements, including the provisions of the SEC
order.

o     Interfund Borrowing. The Fund will not borrow from affiliated funds unless the terms
of the borrowing arrangement are at least as favorable as the terms the Fund could
otherwise negotiate with a third party.  To assure that the Fund will not be disadvantaged
by borrowing from an affiliated fund, certain safeguards have been implemented.  Examples
of these safeguards include the following:
o     the Fund will not borrow money from affiliated funds unless the interest rate is more
               favorable than available bank loan rates;
o     the Fund's borrowing from affiliated funds must be consistent with its investment
               objective and investment policies;
o     the loan rates will be the average of the overnight repurchase agreement rate
               available through the OppenheimerFunds joint repurchase agreement account
               and a pre-established formula based on quotations from independent banks to
               approximate the lowest interest rate at which bank loans would be available
               to the Fund;
o     if the Fund has outstanding borrowings from all sources greater than 10% of its total
               assets, then the Fund must secure each additional outstanding interfund loan
               by segregating liquid assets of the Fund as collateral;
o     the Fund cannot borrow from an affiliated fund in excess of 125% of its total
               redemptions for the preceding seven days;
o     each interfund loan may be repaid on any day by the Fund; and
o     the Trustees will be provided with a report of all interfund loans and the Trustees
               will monitor all such borrowings to ensure that the Fund's participation is
               appropriate.

      There is a risk that a borrowing fund could have a loan called on one days' notice.
In that circumstance, the Fund might have to borrow from a bank at a higher interest cost
if money to lend were not available from another Oppenheimer fund.

o     Interfund Lending. To assure that the Fund will not be disadvantaged by making loans
to affiliated funds, certain safeguards have been implemented. Examples of these safeguards
include the following:

o     the Fund will not lend money to affiliated funds unless the interest rate on such
               loan is determined to be reasonable under the circumstances;
o     the Fund may not make interfund loans in excess of 15% of its net assets;
o     an interfund loan to any one affiliated fund shall not exceed 5% of the Fund's net
               assets;
o     an interfund loan may not be outstanding for more than seven days;
o     each interfund loan may be called on one business day's notice; and
o     the Manager will provide the Trustees reports on all interfund loans demonstrating
               that the Fund's participation is appropriate and that the loan is consistent
               with its investment objectives and policies.

      When the Fund lends  assets to  another  affiliated  fund,  the Fund is subject to the
risk that the borrowing fund might fail to repay the loan.

      |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.

      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 purchase 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     Swaption Transactions. The Fund may enter into a swaption transaction, which is a
contract that grants the holder, in return for payment of the purchase price (the
"premium") of the option, the right, but not the obligation, to enter into an interest rate
swap at a preset rate within a specified period of time, with the writer of the contract.
The writer of the contract receives the premium and bears the risk of unfavorable changes
in the preset rate on the underlying interest rate swap.  Unrealized gains/losses on
swaptions are reflected in investment assets and investment liabilities in the Fund's
statement of financial condition.

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.

Other Investment Restrictions

      |X|   What Are "Fundamental Policies?" Fundamental policies are those policies that
the Fund has adopted to govern its investments that can be changed only by the vote of a
"majority" of the Fund's outstanding voting securities.  Under the Investment Company Act,
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 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.

o     The Fund cannot make loans, except to the extent permitted under the Investment
Company Act, the rules or regulations thereunder or any exemption therefrom that is
applicable to the Fund, as such statute, rules or regulations may be amended or interpreted
from time to time. 1

o     The Fund may not borrow money, except to the extent permitted under the Investment
Company Act, the rules or regulations thereunder or any exemption therefrom that is
applicable to the Fund, as such statute, rules or regulations may be amended or interpreted
from time to time. 2

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.

      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 (except in the case of borrowing and investments in illiquid
securities). 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.

|X|   Does the Fund Have Additional Restrictions That Are Not "Fundamental" Policies?

o     The Fund cannot invest in interests in oil, gas, or other mineral exploration or
development programs.
o     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
Investment Company Act.

      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 C to this
Statement of Additional Information.


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.

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. The Trustees may also take other action as
permitted by the Investment Company Act.

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

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

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

      The Board of Trustees has an Audit Committee, a Regulatory & Oversight  Committee, a
Governance Committee, and a Proxy Committee.  The Audit Committee is comprised solely of
Independent Trustees.  The members of the Audit Committee are Edward Regan (Chairman),
Kenneth Randall and Russell Reynolds..  The Audit Committee held six meetings during the
Fund's fiscal year ended August 31, 2003. The Audit Committee provides the Board with
recommendations regarding the selection of the Fund's independent auditor. The Audit
Committee also reviews the scope and results of audits and the audit fees charged, reviews
reports from the Fund's independent auditor concerning the Fund's internal accounting
procedures, and controls and reviews reports of the Manager's internal auditor, among other
duties as set forth in the Committee's charter.

      The members of the Regulatory & Oversight  Committee are Robert Galli (Chairman),
Joel Motley and Phillip Griffiths. The Regulatory & Oversight  Committee held six meetings
during the Fund's fiscal year ended August 31, 2003.  The Regulatory & Oversight Committee
evaluates and reports to the Board on the Fund's contractual arrangements, including the
Investment Advisory and Distribution Agreements, transfer and shareholder service
agreements and custodian agreements as well as the policies and procedures adopted by the
Fund to comply with the Investment Company Act and other applicable law, among other duties
as set forth in the Committee's charter.

      The members of the Governance Committee are Joel Motley (Acting Chairman), Phillip
Griffiths and Kenneth Randall.  The Governance Committee held one meeting during the Fund's
fiscal year ended August 31, 2003.. The Governance Committee reviews the Fund's governance
guidelines, the adequacy of the Fund's Codes of Ethics, and develops qualification criteria
for Board members consistent with the Fund's governance guidelines, among other duties set
forth in the Committee's charter.

      The members of the Proxy Committee are Edward Regan (Chairman), Russell Reynolds and
John Murphy. The Proxy Committee held two meetings during the Fund's fiscal year ended
August 31, 2003. The Proxy Committee provides the Board with recommendations for proxy
voting and monitors proxy voting by the Fund.

Trustees and Officers of the Fund. Except for Mr. Murphy, each of the Trustees is an
"Independent Trustee," 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.

      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 in the chart below. The information for the Trustees
also includes the dollar range of shares of the Fund as well as the aggregate dollar range
of shares beneficially owned in any of the Oppenheimer funds overseen by the Trustees. All
of the Trustees are also trustees or directors of the following publicly offered
Oppenheimer funds (referred to as "Board I Funds"):

Oppenheimer AMT-Free New York Municipals  Oppenheimer Gold & Special Minerals Fund
Oppenheimer California Municipal Fund     Oppenheimer Growth Fund
Oppenheimer Capital Appreciation Fund     Oppenheimer International Growth Fund
                                          Oppenheimer  International  Small Company
Oppenheimer Capital Preservation Fund     Fund
Oppenheimer Developing Markets Fund       Oppenheimer Money Market Fund, Inc.
Oppenheimer Discovery Fund                Oppenheimer Multiple Strategies Fund
Oppenheimer Emerging Growth Fund          Oppenheimer Multi-Sector Income Trust
Oppenheimer Emerging Technologies Fund    Oppenheimer Multi-State Municipal Trust
Oppenheimer Enterprise Fund               Oppenheimer Municipal Bond Fund
Oppenheimer Global Fund                   Oppenheimer Series Fund, Inc.
Oppenheimer Global Opportunities Fund     Oppenheimer U.S. Government Trust

      In addition to being a trustee or director of the Board I Funds, Mr. Galli is also a
director or trustee of 10 other portfolios in the OppenheimerFunds complex. Present or
former officers, directors, trustees and employees (and their immediate family members) of
the Fund, the Manager and its affiliates, and retirement plans established by them for
their employees are permitted to purchase Class A shares of the Fund and the other
Oppenheimer funds at net asset value without sales charge. The sales charges on Class A
shares is waived for that group because of the economies of sales efforts realized by the
Distributor.

      Messrs. Murphy, Manioudakis, Molleur, Vottiero, Wixted and Zack, and Mses. Bechtolt,
Feld and Ives respectively hold the same offices with one or more of the other Board I
Funds as with the Fund.  As of September 30, 2003 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. In addition, each
Independent Trustee, and his or her family members, do not own securities of either the
Manager or Distributor of the Board I Funds or any person directly or indirectly
controlling, controlled by or under common control with the Manager or Distributor.

|X|   Affiliated Transactions and Material Business Relationships. Mr. Reynolds has
reported he has a controlling interest in The Directorship Group, Inc. ("The Directorship
Search Group"), a director recruiting firm that provided consulting services to
Massachusetts Mutual Life Insurance Company (which controls the Manager) for fees
aggregating $247,500 from January 1, 2001 through December 31, 2002. Mr. Reynolds estimates
that The Directorship Search Group will not provide consulting services to Massachusetts
Mutual Life Insurance Company during the calendar year 2003.

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

     The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, CO
80112-3924. Each Trustee serves for an indefinite term, until his or her resignation,
retirement, death or removal.

-------------------------------------------------------------------------------------
                                Independent Trustees
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Age,        Principal   Occupation(s)   During  Past  5 Dollar      Aggregate
                                                                           Dollar
                                                                          Range of
                                                                         y Shares
                                                                         Beneficially
                                                                          Owned in
                                                              Range of   any of the
                                                              Shares     Oppenheimer
Position(s) Held  Years  /  Other  Trusteeships/Directorships Beneficiall   Funds
with Fund and     Held by Trustee / Number of  Portfolios  in Owned in    Overseen
Length of Service Fund Complex Currently Overseen by Trustee   the Fund  by Trustee
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                                                                As of December 31,
                                                                       2002
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Clayton K.        Of Counsel (since 1993), Hogan & Hartson       None    $50,001-$100,000
Yeutter,          (a law firm). Other directorships:
Chairman of the   Weyerhaeuser Corp. (since 1999) and
Board of          Danielson Holding Corp. (since 2002);
Trustees,         formerly a director of Caterpillar, Inc.
Trustee since     (1993-December 2002). Oversees 25
1991              portfolios in the OppenheimerFunds complex.
Age: 72
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Galli,  A trustee or director of other Oppenheimer  $50,001-      Over
Trustee since     funds. Formerly Trustee (May 2000-2002) of
1993              Research Foundation of AIMR (investment
Age: 70           research, non-profit) and Vice Chairman
                  (October 1995-December 1997) of the
                  Manager. Oversees 35 portfolios in the       $100,000   $100,000
                  OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Phillip A.        A director (since 1991) of the Institute       None       Over
Griffiths,        for Advanced Study, Princeton, N.J., a
Trustee since     director (since 2001) of GSI Lumonics, a
1999              trustee (since 1983) of Woodward Academy,
Age: 65           a Senior Advisor (since 2001) of The
                  Andrew W. Mellon Foundation. A member of:
                  the National Academy of Sciences (since
                  1979), American Academy of Arts and
                  Sciences (since 1995), American
                  Philosophical Society (since 1996) and
                  Council on Foreign Relations (since 2002).              $100,000
                  Formerly a director of Bankers Trust New
                  York Corporation (1994-1999). Oversees 25
                  portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Joel W. Motley,   Director (since 2002) Columbia Equity          None       None
Trustee since     Financial Corp. (privately-held financial
2002              adviser); Managing Director (since 2002)
Age: 51           Carmona Motley, Inc. (privately-held
                  financial adviser); Formerly he held the
                  following positions: Managing Director
                  (January 1998-December 2001), Carmona
                  Motley Hoffman Inc. (privately-held
                  financial adviser); Managing Director
                  (January 1992-December 1997), Carmona
                  Motley & Co. (privately-held financial
                  adviser). Oversees 25 portfolios in the
                  OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kenneth A.        A director of Dominion Resources, Inc.      $1-$10,000    Over
Randall, Trustee  (electric utility holding company) and
since 1985        Prime Retail, Inc. (real estate investment
Age: 76           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                $100,000
                  Manufacturers Mutual Insurance Company.
                  Oversees 29 portfolios in the
                  OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Edward V. Regan,  President, Baruch College, CUNY; a          $1-        $50,001-$100,000
Trustee since     director of RBAsset (real estate manager);
1993              a director of OffitBank; formerly Trustee,
Age: 73           Financial 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.        $10,000
                  Oversees 25 investment companies in the
                  OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Russell S.        Chairman  (since 1993) of The  Directorship    None    $10,001-$50,000
Reynolds, Jr.,    Search Group,  Inc.  (corporate  governance
Trustee since     consulting  and  executive  recruiting);  a
1989              life   trustee   of   International   House
Age: 71           (non-profit educational organization),  and
                  a  trustee  (since  1996) of the  Greenwich
                  Historical Society.  Oversees 25 portfolios
                  in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Donald W. Spiro,  Chairman  Emeritus  (since January 1991) of    None       Over
Vice Chairman of  the Manager.  Formerly a director  (January
the Board of      1969-August 1999) of the Manager.  Oversees
Trustees,         25  portfolios   in  the   OppenheimerFunds
Trustee since     complex.
1985                                                                      $100,000
Age: 77
-------------------------------------------------------------------------------------

      The address of Mr. Murphy in the chart below is Two World Financial Center, 225
Liberty Street-11th Floor, New York, New York 10080. Mr. Murphy serves for an indefinite
term, until his resignation, death or removal.








-------------------------------------------------------------------------------------
                           Interested Trustee and Officer
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Age,         Principal  Occupation(s) During Past 5 Years Dollar    Aggregate
                                                                           Dollar
                                                                Range     Range of
                                                                of         Shares
                                                                Shares   Beneficially
                                                                Beneficia Owned in
Position(s) Held   / Other  Trusteeships/Directorships  Held by Owned    any of the
with Fund and      Trustee  /  Number  of  Portfolios  in  Fund in the   Oppenheimer
Length of Service  Complex Currently Overseen by Trustee          Fund      Funds
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                                                                 As of December 31,
                                                                        2002
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy,    Chairman,   Chief   Executive   Officer  and   None      Over
President and      director  (since  June  2001) and  President
Trustee,           (since   September  2000)  of  the  Manager;
Trustee since      President  and  a  director  or  trustee  of
October 2001       other  Oppenheimer  funds;  President  and a
Age: 54            director  (since  July 2001) of  Oppenheimer
                   Acquisition   Corp.  (the  Manager's  parent
                   holding    company)   and   of   Oppenheimer
                   Partnership   Holdings,   Inc.   (a  holding
                   company   subsidiary  of  the  Manager);   a
                   director    (since    November    2001)   of
                   OppenheimerFunds    Distributor,   Inc.   (a
                   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  and a director
                   (since   July   2001)  of   OppenheimerFunds
                   Legacy  Program (a charitable  trust program
                   established  by the Manager);  a director of
                   the investment advisory  subsidiaries of the
                   Manager:     OFI     Institutional     Asset
                   Management,   Inc.  and   Centennial   Asset
                   Management   Corporation   (since   November
                   2001),    HarbourView    Asset    Management
                   Corporation  and  OFI  Private  Investments,
                   Inc.  (since  July 2001);  President  (since
                   November  1,  2001)  and a  director  (since
                   July   2001)  of   Oppenheimer   Real  Asset
                   Management,    Inc.;   a   director   (since
                   November   2001)   of   Trinity   Investment
                   Management Corp. and Tremont Advisers,  Inc.
                   (investment   advisory   affiliates  of  the
                   Manager);  Executive Vice  President  (since
                   February 1997) of Massachusetts  Mutual Life
                   Insurance   Company  (the  Manager's  parent
                   company);  a director  (since  June 1995) of
                   DLB   Acquisition   Corporation  (a  holding
                   company  that  owns the  shares  of David L.
                   Babson &  Company,  Inc.);  formerly,  Chief
                   Operating   Officer   (September   2000-June
                   2001) of the Manager;  President and trustee           $100,000
                   (November  1999-November 2001) of MML Series
                   Investment      Fund     and      MassMutual
                   Institutional  Funds  (open-end   investment
                   companies);     a    director     (September
                   1999-August  2000)  of C.M.  Life  Insurance
                   Company;  President, Chief Executive Officer
                   and director  (September  1999-August  2000)
                   of MML Bay State Life Insurance  Company;  a
                   director  (June  1989-June  1998) of Emerald
                   Isle  Bancorp and  Hibernia  Savings Bank (a
                   wholly-owned   subsidiary  of  Emerald  Isle
                   Bancorp).  Oversees  73  portfolios  in  the
                   OppenheimerFunds complex.
-------------------------------------------------------------------------------------

     The address of the Officers in the chart below is as follows: Messrs. Manioudakis,
Molleur and Zack and Ms. Feld is Two World Financial Center, 225 Liberty Street-11th Floor,
New York, New York 10080, Messrs. Vottiero and Wixted and Mses. Bechtolt and Ives is 6803
S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until
his or her resignation, death or removal.







-------------------------------------------------------------------------------------
                                Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Age, Position(s)  Principal Occupation(s) During Past 5 Years
Held with Fund and
Length of Service
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Angelo                  Senior Vice President of the Manager (since April 2002); an
Manioudakis,            officer of 12 portfolios in the OppenheimerFunds complex;
Vice    President       formerly Executive Director and portfolio manager for
and                     Miller, Anderson & Sherrerd, a division of Morgan Stanley
Portfolio               Investment Management (August 1993-April 2002).
Manager
(since      April
2002)
Age: 35.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian W. Wixted,        Senior Vice  President and  Treasurer  (since March 1999) of
Treasurer, Principal    the Manager;  Treasurer  (since  March 1999) of  HarbourView
Financial and           Asset Management  Corporation,  Shareholder Services,  Inc.,
Accounting Officer      Oppenheimer Real Asset Management  Corporation,  Shareholder
(since April 1999)      Financial Services,  Inc., Oppenheimer Partnership Holdings,
Age: 43                 Inc.,  OFI Private  Investments,  Inc.  (since  March 2000),
                        OppenheimerFunds  International  Ltd.  and  OppenheimerFunds
                        plc   (since   May   2000)  and  OFI   Institutional   Asset
                        Management,   Inc.  (since  November  2000)  (offshore  fund
                        management  subsidiaries  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);  formerly  Principal and Chief Operating
                        Officer    (March    1995-March    1999),    Bankers   Trust
                        Company-Mutual  Fund  Services  Division.  An  officer of 83
                        portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Connie Bechtolt,        Assistant Vice President of the Manager  (since September
Assistant Treasurer     1998); formerly Manager/Fund Accounting (September
(since October 2002)    1994-September 1998) of the Manager. An officer of 83
Age: 40                 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                        Vice  President/Fund  Accounting of the Manager (since March
Philip Vottiero,        2002); formerly Vice  President/Corporate  Accounting of the
Assistant Treasurer     Manager (July  1999-March  2002) prior to which he was Chief
(since August 2002)     Financial  Officer at Sovlink  Corporation  (April 1996-June
Age: 40                 1999).  An officer of 83 portfolios in the  OppenheimerFunds
                        complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack,         Senior Vice President  (since May 1985) and General  Counsel
Secretary (since        (since February 2002) of the Manager;  General Counsel and a
November 2001)          director   (since   November   2001)   of   OppenheimerFunds
Age: 55                 Distributor,   Inc.;   Senior  Vice  President  and  General
                        Counsel  (since   November   2001)  of   HarbourView   Asset
                        Management  Corporation;   Vice  President  and  a  director
                        (since November 2000) of Oppenheimer  Partnership  Holdings,
                        Inc.; Senior Vice President,  General Counsel and a director
                        (since  November  2001)  of  Shareholder   Services,   Inc.,
                        Shareholder   Financial   Services,    Inc.,   OFI   Private
                        Investments,   Inc.,   Oppenheimer  Trust  Company  and  OFI
                        Institutional   Asset  Management,   Inc.;  General  Counsel
                        (since  November  2001)  of  Centennial   Asset   Management
                        Corporation;   a   director   (since   November   2001)   of
                        Oppenheimer   Real   Asset   Management,   Inc.;   Assistant
                        Secretary   and  a  director   (since   November   2001)  of
                        OppenheimerFunds  International  Ltd.; Vice President (since
                        November   2001)   of   OppenheimerFunds   Legacy   Program;
                        Secretary  (since November 2001) of Oppenheimer  Acquisition
                        Corp.;    formerly   Acting   General   Counsel    (November
                        2001-February  2002)  and  Associate  General  Counsel  (May
                        1981-October  2001) of the Manager;  Assistant  Secretary of
                        Shareholder   Services,   Inc.  (May  1985-November   2001),
                        Shareholder     Financial    Services,     Inc.    (November
                        1989-November  2001);  OppenheimerFunds  International  Ltd.
                        and  OppenheimerFunds  plc (October  1997-November 2001). An
                        officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Katherine P. Feld,      Vice  President and Senior  Counsel (since July 1999) of the
Assistant Secretary     Manager;    Vice    President    (since    June   1990)   of
(since November 2001)   OppenheimerFunds    Distributor,    Inc.;   Director,   Vice
Age: 45                 President  and  Assistant  Secretary  (since  June  1999) of
                        Centennial  Asset  Management  Corporation;  Vice  President
                        (since 1997) of  Oppenheimer  Real Asset  Management,  Inc.;
                        formerly  Vice  President  and  Associate   Counsel  of  the
                        Manager (June  1990-July  1999). An officer of 83 portfolios
                        in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives,       Vice  President  (since June 1998) and Senior Counsel (since
Assistant Secretary     October 2003) of the Manager;  Vice  President  (since 1999)
(since November 2001)   of  OppenheimerFunds  Distributor,  Inc.; Vice President and
Age: 37                 Assistant  Secretary  (since 1999) of Shareholder  Services,
                        Inc.;   Assistant   Secretary   (since   December  2001)  of
                        OppenheimerFunds  Legacy Program and  Shareholder  Financial
                        Services,   Inc.;  formerly  an  Assistant  Counsel  (August
                        1994-October  2003)  and  Assistant  Vice  President  of the
                        Manager   (August   1997-June   1998).   An  officer  of  83
                        portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Denis R. Molleur,       Vice  President  and Senior  Counsel of the  Manager  (since
Assistant Secretary     July 1999);  formerly a Vice President and Associate Counsel
(since November 2001)   of the Manager (September  1995-July 1999). An officer of 74
Age: 45                 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------

|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, 2003. The compensation from
all 31 of the Board I Funds (including the Fund) represents compensation received for
serving as a director or trustee and member of a committee (if applicable) of the boards of
those funds during the calendar year ended December 31, 2002.

------------------------------------------------------------------------------------
Trustee Name and        Aggregate     Retirement     Estimated          Total
                                                                    Compensation
                                                                      From All
                                                       Annual        Oppenheimer
                                       Benefits      Retirement    Funds For Which
Other Fund                            Accrued as    Benefits to      Individual
Position(s)           Compensation   Part of Fund   be Paid Upon      Serves As
(as applicable)        From Fund1      Expenses     Retirement2   Trustee/Director
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Clayton K. Yeutter       $8,1703        $1,949        $36,372          $71,792
Chairman of the Board
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Robert G. Galli          $7,204         $2,943        $55,6785        $198,3866
Regulatory &
Oversight Committee
Chairman
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Phillip Griffiths
Regulatory &
Oversight Committee
Member and               $4,1356         $702         $10,256          $60,861
Governance Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Leon Levy7               $5,604           $0          $113,352        $173,700
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Benjamin Lipstein7       $7,267          $945         $115,270        $150,152
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Joel W. Motley
Governance
Committee  Acting
Chairman and             $3,6728          $8             $0            $14,453
Regulatory &
Oversight Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Elizabeth Moynihan7      $6,824         $3,576        $57,086         $105,760
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Kenneth A. Randall
Audit Committee
Member and               $6,260          $750         $74,471          $97,012
Governance Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Edward V. Regan          $6,192         $1,884        $46,313          $95,960
Audit Committee
Chairman and Proxy
Committee Chairman
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Russell S. Reynolds,     $4,633         $2,087        $48,991          $71,792
Jr.
Proxy Committee
Member and Audit
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Donald Spiro             $4,135          $863         $9,3969          $64,080
------------------------------------------------------------------------------------
1.    Aggregate Compensation From Fund includes fees and deferred compensation,  if any, for
   a Trustee.
2.    Estimated  Annual  Retirement  Benefits  to be Paid  Upon  Retirement  is  based  on a
   straight  life payment plan election  with the  assumption  that a Trustee will retire at
   the age of 75 and is  eligible  (after 7 years of  service)  to receive  retirement  plan
   benefits as described below under "Retirement Plan for Trustees."
3.    Includes  $2,043  deferred  by  Mr.  Yeutter  under  the  Deferred  Compensation  Plan
   described below.
4.    Includes  $24,989  estimated  to be paid to Mr.  Galli for  serving  as a  trustee  or
   director of 10 other Oppenheimer funds that are not Board I Funds.
5.    Includes  $92,626  paid to Mr.  Galli for  serving as trustee or  director of 10 other
   Oppenheimer funds that are not Board I Funds.
6.    Includes  $4,135  deferred  by Mr.  Griffiths  under the  Deferred  Compensation  Plan
   described below.
7.    Messrs.  Levy and Lipstein and Ms. Moynihan retired as Trustees from the Board I Funds
   effective January 1, 2003, March 31, 2003 and July 31, 2003, respectively.
8.    Includes $367 deferred by Mr. Motley under the Deferred  Compensation  Plan  described
   below.
9.    The  amount for Mr.  Spiro is based on the  assumption  that he will  retire at age 82
   when he becomes eligible to receive retirement plan benefits (after 7 years of service).

|X|   Retirement Plan for Trustees. The Fund has adopted a retirement plan that provides
for payments to retired Independent Trustees. Payments are up to 80% of the average
compensation paid during a Trustee's five years of service in which the highest
compensation was received. A Trustee must serve as trustee for any of the Board I Funds for
at least seven years in order to be eligible for retirement plan benefits and must serve
for at least 15 years to be eligible for the maximum benefit. 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 is 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 September 30, 2003, 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., Attn: Wrap Processing OH1-1244, 1111 Polaris Pkwy, Ste.
      J-2, Columbus, OH 43240-2050 which owned 5,987,107.240 Class A shares (7.28% of the
      then-outstanding Class A shares) and 3,861,145.771 Class C shares (20.92% of the
      then-outstanding Class C shares), for the benefit of its customers.

      RPSS TR State Bank of India 401K Plan Attn: Arun Bisaria,  460 Park Ave., New York, NY
      10022-1906,  which owned  154,462.586  Class N shares  (5.69% of the  then-outstanding
      Class N shares of the Fund).

      IBT & CO CUST  OppenheimerFunds  Cap Accum Plan, Attn:  MML037,  200 Clarendon St., Fl
      16,  Boston,  MA  02116-5021,  who owned  200,304.333  Class N shares  (78.28%  of the
      then-outstanding Class N shares of the Fund).

      The New York Yacht Club Pension Plan, C/O  Oppenheimer  Trust Co, 498 7th Ave., Fl 14,
      New  York NY  10018-6798,  which  owned  55,471.260  Class  Y  shares  (21.67%  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, a global, diversified
insurance and financial services organization.

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

      The Code of Ethics is an exhibit to the Fund's registration statement filed with the
SEC and can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
You can obtain information about the hours of operation of the Public Reference Room by
calling the SEC at 1.202.942.8090. The Code of Ethics can also be viewed as part of the
Fund's registration statement on the SEC's EDGAR database at the SEC's Internet website at
www.sec.gov. Copies may be obtained, after paying a duplicating fee, by electronic request
-----------
at the following E-mail address: publicinfo@sec.gov., or by writing to the SEC's Public
                                 -------------------
Reference Section, Washington, D.C. 20549-0102.
|X|   Portfolio Proxy Voting.  The Fund has adopted Portfolio Proxy Voting Policies and
Procedures under which the Fund votes proxies relating to securities ("portfolio proxies")
held by the Fund. The Fund's primary consideration in voting portfolio proxies is the
financial interests of the Fund and its shareholders. The Fund has retained an unaffiliated
third-party as its agent to vote portfolio proxies in accordance with the Fund's Portfolio
Proxy Voting Guidelines and to maintain records of such portfolio proxy voting. The Proxy
Voting Guidelines include provisions to address conflicts of interest that may arise
between the fund and OFI where an OFI directly-controlled affiliate manages or administers
the assts of a pension plan of a company soliciting the proxy. The Fund's Portfolio Proxy
Voting Guidelines on routine and non-routine proxy proposals are summarized below.

o     The Fund votes with the recommendation of the issuer's management on routine matters,
            including election of directors nominated by management and ratification of auditors,
            unless circumstances indicate otherwise.
o     In general, the Fund opposes anti-takeover proposals and supports elimination of
            anti-takeover proposals, absent unusual circumstances.
o     The Fund supports shareholder proposals to reduce a super-majority vote requirement,
            and opposes management proposals to add a super-majority vote requirement.
o     The Fund opposes proposals to classify the board of directors.
o     The Fund support proposals to eliminate cumulative voting.
o     The Fund opposes re-pricing of stock options.
o     The Fund generally considers executive compensation questions such as stock option
            plans and bonus plans to be ordinary business activity. The Fund analyzes stock
            option plans, paying particular attention to their dilutive effect. While the Fund
            generally supports management proposals, the Fund opposes plans it considers to be
            excessive.

      The Fund will be required to file new Form N-PX, with its complete proxy voting
record for the 12 months ended June 30th, no later than August 31st of each year. The first
such filing is due no later than August 31, 2004, for the twelve months ended June 30,
2004. Once filed, the Fund's Form N-PX filing will be available (i) without charge, upon
request, by calling the Fund toll-free at  1.800.225.5677 and (ii) on the SEC's website at
www.sec.gov.
-----------

      |X|   The Investment Advisory Agreement.  The Manager provides investment advisory
and management services to the Fund under an investment advisory agreement between the
Manager and the Fund. The Manager selects securities for the Fund's portfolio and handles
its day-to-day business. 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. The management fees paid by the Fund to the Manager
during its last three fiscal years were:


--------------------------------------------------------------------------------
Fiscal Year ended 8/31:          Management Fees Paid to OppenheimerFunds, Inc.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2001                                    $4,959,210
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2002                                    $6,158,108
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2003                                    $8,708,123
--------------------------------------------------------------------------------

      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 of Trustees,
including a majority of the Independent Trustees 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 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 Trustees, 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.

      After careful deliberation, the Board, including the Independent Trustees, concluded
that it was in the best interest of shareholders to continue the investment advisory
agreement for another year. 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 investment advisory
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 commissions 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
commissions paid to such brokers may be higher than another qualified broker would charge,
if the Manager makes a good faith determination that the commission is fair and reasonable
in relation to the services provided. Subject to those 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
   ---------------------------------------------------------------------
   ---------------------------------------------------------------------
            2001                             $420,485
   ---------------------------------------------------------------------
   ---------------------------------------------------------------------
            2002                             $704,505
   ---------------------------------------------------------------------
   ---------------------------------------------------------------------
            2003                             $209,380
   ---------------------------------------------------------------------
1.    Amounts do not include  spreads or  commissions  on  principal  transactions  on a net
   trade basis.

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    Aggregate        Class A
                           Front-End
Year      Front-End Sales  Sales Charges
Ended     Charges on       Retained by
8/31:     Class A Shares   Distributor1
-------------------------------------------
-------------------------------------------
  2001       $1,925,920       $352,247
-------------------------------------------
-------------------------------------------
  2002       $2,373,874       $661,495
-------------------------------------------
-------------------------------------------
  2003       $3,750,127       $791,915
-------------------------------------------
1.    Includes amounts  retained by a broker-dealer  that is an affiliate or a parent of the
    Distributor.
-----------------------------------------------------------------------------
Fiscal    Concessions on   Concessions on  Concessions on   Concessions on
Year      Class A Shares   Class B Shares  Class C Shares   Class N Shares
Ended     Advanced by      Advanced by     Advanced by      Advanced by
8/31:     Distributor1     Distributor1    Distributor1     Distributor1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2001        $823,070       $2,578,825        $263,714         $1,2892
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2002        $342,807       $4,151,432        $654,358         $133,470
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2003       $1,317,951      $3,956,516        $542,151         $212,758
-----------------------------------------------------------------------------
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    Class A          Class B         Class C           Class N
          Contingent       Contingent                        Contingent
Year      Deferred Sales   Deferred Sales  Contingent        Deferred Sales
Ended     Charges          Charges         Deferred Sales    Charges
8/31      Retained by      Retained by     Charges Retained  Retained by
          Distributor      Distributor     by Distributor    Distributor
------------------------------------------------------------------------------
------------------------------------------------------------------------------
  2003        $40,961        $1,852,281        $112,066          $110,391
------------------------------------------------------------------------------

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 Trustees3, 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 72 months
after purchase, the Fund must obtain the approval of both Class A and Class B shareholders
for a proposed material amendment to the Class A Plan that would materially increase
payments under the Plan. That approval must be by a "majority" (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.

|X|   Class A Service Plan Fees. Under the Class A service plan, the Distributor currently
uses the fees it receives from the Fund to pay brokers, dealers and other financial
institutions (they are referred to as "recipients") for personal services and account
maintenance services they provide for their customers who hold Class A shares. The services
include, among others, answering customer inquiries about the Fund, assisting in
establishing and maintaining accounts in the Fund, making the Fund's investment plans
available and providing other services at the request of the Fund or the Distributor. The
Class A service plan permits reimbursements to the Distributor at a rate of up to 0.25% of
average annual net assets of Class A shares. The Board has set the rate at that level.
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, except in the case of
the special arrangement described below. 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.

      With respect to purchases of Class A shares subject to a contingent deferred sales
charge by certain retirement plans that purchased such shares prior to March 1, 2001
("grandfathered retirement accounts"), the Distributor currently intends to pay the service
fee to Recipients in advance for the first year after the shares are purchased. During the
first year the shares are sold, the Distributor retains the service fee to reimburse itself
for the costs of distributing the shares. After the first year shares are outstanding, the
Distributor makes service fee payments to Recipients 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 A shares purchased by grandfathered
retirement accounts 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.

      For the fiscal year ended August 31, 2003 payments under the Class A Plan totaled
$2,198,600, of which $24,802 was retained by the Distributor under the arrangement
described above, and included $142,068 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.

|X|   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. 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 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, Class C and Class N shares are purchased.
After the first year Class B, Class C or Class N 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, Class C or Class N 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. In cases where the Distributor is the
broker of record for Class B, Class C and Class N shares, i.e. shareholders without the
services of a broker directly invest in the Fund, the Distributor will retain the
asset-based sales charge and service fee for Class B, Class C and Class N shares

      The asset-based sales charge and service fees increase Class B and Class C expenses
by 1.00% and 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
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.

      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 8/31/03
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class:        Total Payments   Amount          Distributor's    Distributor's
                                               Aggregate        Unreimbursed
                                               Unreimbursed     Expenses as %
                               Retained by     Expenses Under   of Net Assets
              Under Plan       Distributor     Plan             of Class
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Plan     $4,311,570      $3,503,7242     $11,051,062         2.98%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Plan     $2,169,872       $666,737        $2,188,523         1.14%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Plan      $109,966         $94,911         $444,148          1.71%
--------------------------------------------------------------------------------
1.    Includes $34,338 paid to an affiliate of the Distributor's parent company.
2.    Includes $32,761 paid to an affiliate of the Distributor's parent company.
3.    Includes $366 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, 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 debt 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 ]
                          ------
                           cd

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

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

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

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

      The maximum offering price for Class A shares includes the current maximum initial
sales charge.  The maximum offering price for Class B, 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 8/31/03
--------------------------------------------------------------------
--------------------------------------------------------------------
Class of        Standardized Yield            Dividend Yield
Shares
--------------------------------------------------------------------
--------------------------------------------------------------------
            Without       After        Without        After
            Sales         Sales        Sales          Sales
            Charge        Charge       Charge         Charge
--------------------------------------------------------------------
--------------------------------------------------------------------
Class A         2.95%        2.81%         2.78%          2.65%
--------------------------------------------------------------------
--------------------------------------------------------------------
Class B         2.15%         N/A          1.98%           N/A
--------------------------------------------------------------------
--------------------------------------------------------------------
Class C         2.18%         N/A          2.01%           N/A
--------------------------------------------------------------------
--------------------------------------------------------------------
Class N         2.47%         N/A          2.30%           N/A
--------------------------------------------------------------------
--------------------------------------------------------------------
Class Y         3.39%         N/A          3.21%           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 1.0% contingent deferred
sales charge is deducted for returns for the one-year period. For Class N shares, the 1.0%
contingent deferred sales charge is deducted for returns for the one-year period, and total
returns for the periods prior to 03/01/01 (the inception date for Class N shares) is based
on the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1 fees. 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
  P

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

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

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

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

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

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

o     Total Returns at Net Asset Value. From time to time the Fund may also quote a
cumulative or an average annual total return "at net asset value" (without deducting sales
charges) for 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 8/31/03
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of  Cumulative Total              Average Annual Total Returns
             Returns (10
Shares        years or
           life-of-class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                 1-Year            5-Year           10-Year
                                                (or life of       (or life of
                                                   class)           class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          After    Without  After    Without  After    Without After    Without
          Sales    Sales    Sales    Sales    Sales    Sales   Sales    Sales
          Charge   Charge   Charge   Charge   Charge   Charge  Charge   Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A1    70.78%   79.31%   -2.99%    1.85%    4.49%   5.51%    5.50%    6.01%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B    59.92%2  59.92%2   -3.87%    1.07%    4.38%   4.72%   5.96%2   5.96%2
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C    66.96%3  66.96%3    0.13%    1.12%    4.75%   4.75%   5.40%3   5.40%3
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N    15.10%4  15.10%4    0.47%    1.45%   5.79%4  5.79%4      N/A      N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class Y5       N/A   35.83%      N/A    2.37%      N/A   5.72%      N/A   5.96%5
---------------------------------------------------------------------------------
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

--------------------------------------------------------------------------
  Average Annual Total Returns for Class A Shares (After Sales Charge)
                     For the Periods Ended 08/31/03
--------------------------------------------------------------------------
--------------------------------------------------------------------------
                                 1-Year        5-Years       10-Years1
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on Distributions     -4.03%         2.36%          3.03%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on                   -1.95%         2.47%          3.09%
Distributions and
Redemption of Fund Shares
--------------------------------------------------------------------------
   1. Inception of Class A: 8/16/85


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

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

|X|   Morningstar Ratings. From time to time the Fund may publish the star rating of the
performance of its classes of shares by Morningstar, Inc., an independent mutual fund
monitoring service. Morningstar rates mutual funds in their specialized market sector. The
Fund is rated among the intermediate government fund category.

      Morningstar proprietary star ratings reflect historical risk-adjusted total
investment return. For each fund with at least a three-year history, Morningstar calculates
a Morningstar Rating(TM)based on a Morningstar Risk-Adjusted Return measure that accounts for
variation in a fund's monthly performance (including the effects of sales charges, loads,
and redemption fees), placing more emphasis on downward variations and rewarding consistent
performance.  The top 10% of funds in each category receive 5 stars, the next 22.5% receive
4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10%
receive 1 star. (Each share class is counted as a fraction of one fund within this scale
and rated separately, which may cause slight variations in the distribution percentages.)
The Overall Morningstar Rating for a fund is derived from a weighted average of the
performance figures associated with its three-, five-and ten-year (if applicable)
Morningstar Rating metrics.

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

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

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

      From time to time the Fund may include in its advertisements and sales literature the
total return performance of a hypothetical investment account that includes shares of the
Fund and other Oppenheimer funds. The combined account may be part of an illustration of an
asset allocation model or similar presentation. The account performance may combine total
return performance of the Fund and the total return performance of other Oppenheimer funds
included in the account. Additionally, from time to time, the Fund's advertisements and
sales literature may include, for illustrative or comparative purposes, statistical data or
other information about general or specific market and economic conditions. That may
include, for example,

o     information about the performance of certain securities or commodities markets or
         segments of those markets,
o     information about the performance of the economies of particular countries or
         regions,
o     the earnings of companies included in segments of particular industries, sectors,
         securities markets, countries or regions,
o     the availability of different types of securities or offerings of securities,
o     information relating to the gross national or gross domestic product of the United
         States or other countries or regions,
o     comparisons of various market sectors or indices to demonstrate performance, risk, or
         other characteristics of the Fund.


ABOUT your account

How to Buy Shares

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

AccountLink. When shares are purchased through AccountLink, each purchase must be at least
$50 and shareholders must invest at least $500 before an Asset Builder Plan (described
    ---
below) can be established on a new account. Accounts established prior to November 1, 2002
will remain at $25 for additional purchases. Shares will be purchased on the regular
business day the Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased with the
proceeds of ACH transfers on the business day the Fund receives Federal Funds for the
purchase through the ACH system before the close of The New York Stock Exchange ("the
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. If the proceeds of the ACH transfer are not received on a timely
basis, the Distributor reserves the right to cancel the purchase order. The Distributor and
the Fund are not responsible for any delays in purchasing shares resulting from delays in
ACH transmissions.

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

|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,
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.

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

Oppenheimer AMT-Free New York Municipals  Oppenheimer Main Street Fund
Oppenheimer Bond Fund                     Oppenheimer Main Street Opportunity Fund
Oppenheimer California Municipal Fund     Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Appreciation Fund     Oppenheimer MidCap Fund
Oppenheimer Capital Preservation Fund     Oppenheimer Multiple Strategies Fund
Oppenheimer Capital Income Fund           Oppenheimer Municipal Bond Fund
Oppenheimer Champion Income Fund          Oppenheimer New Jersey Municipal Fund
Oppenheimer Convertible Securities Fund   Oppenheimer Pennsylvania Municipal Fund
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Developing Markets Fund       Street Fund
Oppenheimer Disciplined Allocation Fund   Oppenheimer Quest Balanced Value Fund
                                          Oppenheimer  Quest  Capital  Value Fund,
Oppenheimer Discovery Fund                Inc.
                                          Oppenheimer  Quest  International  Value
Oppenheimer Emerging Growth Fund          Fund, Inc.
Oppenheimer Emerging Technologies Fund    Oppenheimer Quest Opportunity Value Fund
Oppenheimer Enterprise Fund               Oppenheimer Quest Value Fund, Inc.
Oppenheimer Equity Fund, Inc.             Oppenheimer Real Asset Fund
Oppenheimer Global Fund                   Oppenheimer Real Estate Fund
                                          Oppenheimer      Rochester      National
Oppenheimer Global Opportunities Fund     Municipals
Oppenheimer Gold & Special Minerals Fund  Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund                   Oppenheimer Small Cap Value Fund
Oppenheimer High Yield Fund               Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund       Oppenheimer Total Return Bond Fund
Oppenheimer International Growth Fund     Oppenheimer U.S. Government Trust
Oppenheimer  International  Small Company
Fund                                      Oppenheimer Value Fund
Oppenheimer Limited-Term Government Fund  Limited-Term New York Municipal Fund
Oppenheimer Limited Term Municipal Fund   Rochester Fund Municipals
And the following money market funds:

Oppenheimer Cash Reserves                 Centennial Government Trust
Oppenheimer Money Market Fund, Inc.       Centennial Money Market Trust
Centennial America Fund, L. P.            Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust    Centennial Tax Exempt Trust

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

Letters of Intent. Under a Letter of Intent ("Letter"), 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. Letters
do not consider Class C or Class N shares you purchase or may have purchased.

      A Letter 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 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 period, when added to the value (at
offering price) of the investor's holdings of shares on the last day of that period, do not
equal or exceed the intended purchase amount, the investor agrees to pay the additional
amount of sales charge applicable to such purchases. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor from time to time). The
investor agrees that shares equal in value to 5% of the intended purchase amount will be
held in escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional Information
and the application used for a Letter. If those terms are amended, as they may be from time
to time by the Fund, the investor agrees to be bound by the amended terms and that those
amendments will apply automatically to existing Letters.


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

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

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

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

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

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

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

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

5.    The shares eligible for purchase under the Letter (or the holding of which may be
counted toward completion of a Letter) include:
(a)   Class A shares sold with a front-end sales charge or subject to a Class A contingent
            deferred sales charge,
(b)   Class B 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. As explained in the Prospectus, you must initially establish your
account with $500. Subsequently, you can establish an Asset Builder Plan to automatically
purchase additional shares directly from a bank account for as little as $50. For those
accounts established prior to November 1, 2002 and which have previously established Asset
Builder Plans, additional purchases will remain at $25. Shares purchased by Asset Builder
Plan payments from bank accounts are subject to the redemption restrictions for recent
purchases described in the Prospectus. Asset Builder Plans are available only if your bank
is an ACH member. Asset Builder Plans may not be used to buy shares for OppenheimerFunds
employer-sponsored qualified retirement accounts. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use their fund account to make monthly
automatic purchases of shares of up to four other Oppenheimer funds.

      If you make payments from your bank account to purchase shares of the Fund, your bank
account will be debited automatically. Normally the debit will be made two business days
prior to the investment dates you selected on your application. Neither the Distributor,
the Transfer Agent nor the Fund shall be responsible for any delays in purchasing shares
that result from delays in ACH transmissions.

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

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.

      OppenheimerFunds has entered into arrangements with certain record keepers whereby
the Transfer Agent compensates the record keeper for its record keeping and account
servicing functions that it performs on behalf of the participant level accounts of a
retirement plan. While such compensation may act to reduce the record keeping fees charged
by the retirement plan's record keeper, that compensation arrangement may be terminated at
any time, potentially affecting the record keeping fees charged by the retirement plan's
record keeper.

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 at net asset value whether or not 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 Class A 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
72 months after purchase is not treated as a taxable event for the shareholder. If those
laws or the IRS interpretation of those laws should change, the automatic conversion
feature may be suspended. In that event, no further conversions of Class B shares would
occur while that suspension remained in effect. Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the two classes,
without the imposition of a sales charge or fee, such exchange could constitute a taxable
event for the shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.

      |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 (including SEP IRAs and SIMPLE IRAs),
o     to all rollover contributions made to Individual 401(k) plans, Profit-Sharing Plans
            and Money Purchase Pension Plans,
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, and
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.

      No sales concessions will be paid to the broker-dealer of record, as described in the
Prospectus, on sales of Class N 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.

      |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).

Account Fees. As stated in the Prospectus, a $12 annual fee is assessed on any account
valued at less than $500. This fee will not be assessed on the following accounts:
o     Accounts that have balances below $500 due to the automatic conversion of shares from
         Class B to Class A shares;
o     Accounts with an active Asset Builder Plan, payroll deduction plan or a military
         allotment plan;
o     OppenheimerFunds-sponsored group retirement accounts that are making continuing
         purchases;
o     Certain accounts held by broker-dealers through the National Securities Clearing
         Corporation; and
o     Accounts that fall below the $500 threshold due solely to market fluctuations within
         the 12-month period preceding the date the fee is deducted.

      The fee is automatically deducted from qualifying accounts annually on or about the
second to last business day of September. This annual fee is waived for any shareholders
who elect to access their account documents through electronic document delivery rather
than in paper copy and who elect to utilize the Internet or PhoneLink as their primary
source for their general servicing needs. To sign up to access account documents
electronically via eDocs Direct, please visit the Service Center on our website at
www.oppenheimerfunds.com or call 1.888.470.0862 for instructions.
------------------------

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 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., Eastern time, but may close earlier
on some other days (for example, in case of weather emergencies or on days falling before a
U.S. holiday). All references to time in this Statement of Additional Information mean
"Eastern time." The Exchange's most recent annual announcement (which is subject to change)
states that it will close on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
It may also close on other days.

      |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(R)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 United Missouri Bank (the "Bank") for clearance,
the Bank will ask the Fund to redeem a sufficient number of full and fractional shares in
the shareholder's account to cover the amount of the check. This enables the shareholder to
continue receiving dividends on those shares until the check is presented to the Fund.
Checks may not be presented for payment at the offices of the Bank or the Fund's custodian
bank. This limitation does not affect the use of checks for the payment of bills or to
obtain cash at other banks. The Fund reserves the right to 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, SEP-IRAs, SIMPLE 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 plan sponsors) 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
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 $50. Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange Shares" in the
Prospectus and below in this Statement of Additional Information.

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

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

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

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

      The amount and the interval of disbursement payments and the address to which checks
are to be mailed or AccountLink payments are to be sent may be changed at any time by the
Planholder by writing to the Transfer Agent. The Planholder should allow at least two
weeks' time after mailing such notification for the requested change to be put in effect.
The Planholder may, at any time, instruct the Transfer Agent by written notice to redeem
all, or any part of, the shares held under the Plan. That notice must be in proper form in
accordance with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset value per
share in effect and will mail a check for the proceeds to the Planholder.
      The Planholder may terminate a Plan at any time by writing to the Transfer Agent. The
Fund may also give directions to the Transfer Agent to terminate a Plan. The Transfer Agent
will also terminate a Plan upon its receipt of evidence satisfactory to it that the
Planholder has died or is legally incapacitated. Upon termination of a Plan by the Transfer
Agent or the Fund, shares that have not been redeemed will be held in uncertificated form
in the name of the Planholder. The account will continue as a dividend-reinvestment,
uncertificated account unless and until proper instructions are received from the
Planholder, his or her executor or guardian, or another authorized person.

      To use Class A 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 New York Tax Exempt
                                            Trust
      Centennial California Tax Exempt      Centennial Tax Exempt Trust
      Trust
      Centennial Government Trust           Oppenheimer Money Market Fund, Inc.
      Centennial Money Market Trust

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

      The following funds do not offer Class Y shares:
      Oppenheimer AMT-Free New York          Oppenheimer Multiple Strategies Fund
      Municipals
      Oppenheimer California Municipal Fund  Oppenheimer Municipal Bond Fund
      Oppenheimer Capital Income Fund        Oppenheimer New Jersey Municipal Fund
      Oppenheimer Cash Reserves              Oppenheimer Pennsylvania Municipal Fund
      Oppenheimer Champion Income Fund       Oppenheimer Principal Protected Main
                                             Street Fund
      Oppenheimer Convertible Securities     Oppenheimer Quest Capital Value Fund,
      Fund                                   Inc.
      Oppenheimer Disciplined Allocation     Oppenheimer Quest International Value
      Fund                                   Fund, Inc.
      Oppenheimer Developing Markets Fund    Oppenheimer Rochester National
                                             Municipals
      Oppenheimer Gold & Special Minerals    Oppenheimer Senior Floating Rate Fund
      Fund
      Oppenheimer International Bond Fund    Oppenheimer Small Cap Value Fund
      Oppenheimer International Growth Fund  Oppenheimer Total Return Bond Fund
      Oppenheimer International Small        Limited Term New York Municipal Fund
      Company Fund
      Oppenheimer Limited Term 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.
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.
o     Shares of Oppenheimer Principal Protected Main Street Fund may be exchanged at net
      asset value for shares of any of the Oppenheimer funds. However, shareholders are not
      permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
      Principal Protected Main Street Fund until after the expiration of the warranty
      period (8/5/2010).

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

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

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

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

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

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

o     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     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 or Class N contingent deferred sales charge will be followed in
determining the order in which the shares are exchanged. Before exchanging shares,
shareholders should take into account how the exchange may affect any contingent deferred
sales charge that might be imposed in the subsequent redemption of remaining shares.

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

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

      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 12 months after the close of the taxable year, will be
considered distributions of income and gains for the taxable year and will therefore count
toward satisfaction of the above-mentioned requirement.

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

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

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

      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 a long-term capital gain and will be properly identified in
reports sent to shareholders in January of each year. Such treatment will apply no matter
how long the shareholder has held his or her shares or whether that gain was recognized by
the Fund before the shareholder acquired his or her shares.

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

      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 28% 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 not limited to, a nonresident alien individual, a foreign trust, a
foreign estate, a foreign corporation, or a foreign partnership) primarily depends on
whether the foreign person's income from the Fund is effectively connected with the conduct
of a U.S. trade or business. Typically, ordinary income dividends paid 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
his/her foreign status, the Fund will be required to withhold U.S. tax at a rate of 28% 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, 2003, 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, 2003, 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, 2003, 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 22, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-03430 OPPENHEIMER U.S. GOVERNMENT TRUST (Exact name of registrant as specified in charter) 6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924 (Address of principal executive offices) (Zip code) Robert G. Zack, Esq. OppenheimerFunds, Inc. 498 Seventh Avenue, New York, New York 10018 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (303) 768-3200 -------------- Date of fiscal year end: August 31 Date of reporting period: September 1, 2002 - August 31, 2003 ITEM 1. REPORTS TO STOCKHOLDERS. FUND PERFORMANCE DISCUSSION

How has the Fund performed? Below is a discussion by OppenheimerFunds, Inc., of the Fund’s performance during its fiscal year ended August 31, 2003, followed by a graphical comparison of the Fund’s performance to an appropriate broad-based market index.

Management’s Discussion of Fund Performance. For the fiscal year that ended August 31, 2003, two key factors positively impacted Oppenheimer U.S. Government Trust’s performance, specifically during the last few months of the period. First, our decision to maintain slightly less duration, or interest-rate sensitivity, than many of our peers, proved to significantly benefit performance once rates began rising in June.

        Second, the fact that we maintained our overweighted exposure to higher-coupon mortgage-backed securities (MBSs) through the end of the period also boosted performance. As rates began to increase, MBSs as a whole--which were generally comprised of lower-coupon mortgages at that time--underperformed other non-Treasury securities significantly because the market expected these lower-coupon securities to prepay much more slowly. As a result, the duration of lower-coupon MBSs increased, which means that their sensitivity and risk to interest rates increased, making them less attractive overall to investors.

        All of these conditions made higher-coupon mortgage-backed securities more appealing to investors, and demand increased, helping them outperform their lower-coupon counterparts. Since we maintained our relative overweighted exposure to these securities, Fund performance benefited substantially.

        Finally, we achieved a modest addition to performance throughout the bulk of the period by our overall exposure to non-Treasury securities, such as agencies and asset-backed securities. Specifically, we had exposure to very short-term, high quality asset-backed securities with durations of a year or less. These “spread products,” which generally tend to offer a yield advantage over Treasuries, outperformed Treasuries during the first half of the Fund’s fiscal year and, consequently, our holdings in this area added to performance. In particular, the fact that we favored Fannie Mae securities within the mortgage arena also helped, as these securities slightly outperformed Freddie Mac securities. 1

1. Freddie Mac (Federal Home Loan Mortgage Corporation) is a Congressionally chartered corporation that purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and securitizes these mortgages for sale in the capital markets. Federal National Mortgage Association (Fannie Mae) is publicly owned, government-sponsored corporation chartered to purchase mortgages from lenders and resell them to investors. Known by the nickname Fannie Mae, it packages mortgages backed by the Federal Housing Administration, but also sells some nongovernment-backed mortgages. 5 | OPPENHEIMER U.S. GOVERNMENT TRUST FUND PERFORMANCE DISCUSSION

        Conversely, one of the very same factors that added to performance at the end of the period actually proved to significantly detract from it throughout the first half of the year. The fact that we held less interest-rate sensitivity than many peer funds hurt the Fund’s performance as rates continued to slide until June. The good news was that once rates reversed direction in June, the rebound was so significant, we generally regained the performance we lost up until that point. Likewise, while our emphasis on higher-coupon mortgage securities substantially added to performance in the last few months of the period, it somewhat detracted from returns in the beginning of the year. Fortunately, once again, the gains we enjoyed in the last few months of the fiscal year from our higher-coupon mortgage-backed holdings were substantial enough to balance out the losses we suffered earlier in the year. The Fund’s holdings, strategies and management are subject to change. Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each class of shares of the Fund held until August 31, 2003. In the case of Class A shares, performance is measured over a ten-year period. In the case of Class B shares, performance is measured from the inception of the Class on July 21, 1995, and in the case of Class C shares, from the inception of the Class on December 1, 1993. In the case of Class N shares, performance is measured from inception of the Class on March 1, 2001. In the case of Class Y shares, performance is measured from the inception of the Class on May 18, 1998. The Fund’s performance reflects the deduction of the current maximum initial sales charge on Class A shares, the applicable contingent deferred sales charge for Class B, Class C and Class N shares, and reinvestment of all dividends and capital gains distributions. Class Y shares are offered only to certain institutional shareholders under special arrangement with the Distributor and are not subject to a sales charge.

        The Fund’s performance is compared to that of the Lehman Brothers U.S. Government Bond Index, an unmanaged index including all U.S. Treasury issues, publicly-issued debt of U.S. Government agencies and quasi-public corporations and U.S. Government guaranteed corporate debt, and is widely regarded as a general measurement of the performance of the U.S. Government bond market. Index performance reflects the reinvestment of dividends but does not consider the effect of capital gains or transaction costs, and none of the data shows the effect of taxes. Also, the Fund’s performance reflects the effect of Fund operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities in any one index.

6 | OPPENHEIMER U.S. GOVERNMENT TRUST Class A Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer U.S. Government Trust (Class A) Lehman Brothers U.S. Government Bond Index [LINE CHART] Value of Investment Lehman Brothers U.S. Date In Fund Government Bond Index 06/30/1993 9,525 10,000 09/30/1993 9,719 10,325 12/31/1993 9,709 10,290 03/31/1994 9,509 9,980 06/30/1994 9,413 9,866 09/30/1994 9,514 9,908 12/31/1994 9,585 9,943 03/31/1995 10,103 10,411 06/30/1995 10,470 11,056 09/30/1995 10,657 11,252 12/31/1995 11,016 11,766 03/31/1996 10,918 11,500 06/30/1996 10,983 11,555 08/31/1996 1 11,029 11,558 11/30/1996 11,582 12,217 02/28/1997 11,606 12,122 05/31/1997 11,834 12,272 08/31/1997 12,181 12,636 11/30/1997 12,590 13,115 02/28/1998 12,858 13,413 05/31/1998 13,020 13,651 08/31/1998 13,309 14,187 11/30/1998 13,433 14,525 02/28/1999 13,354 14,293 05/31/1999 13,339 14,256 08/31/1999 13,256 14,206 11/30/1999 13,435 14,325 02/29/2000 13,506 14,455 05/31/2000 13,709 14,677 08/31/2000 14,188 15,307 11/30/2000 14,587 15,802 02/28/2001 15,022 16,464 05/31/2001 15,014 16,407 08/31/2001 15,571 17,088 11/30/2001 15,952 17,434 02/28/2002 16,135 17,555 05/31/2002 16,276 17,688 08/31/2002 17,088 18,692 11/30/2002 17,175 18,813 02/28/2003 17,670 19,531 05/31/2003 17,905 20,073 08/31/2003 17,404 19,250 Average Annual Total Returns of Class A Shares of the Fund at 8/31/03 2 1-Year -2.99% 5-Year 4.49% 10-Year 5.50% Class B Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer U.S. Government Trust (Class B) Lehman Brothers U.S. Government Bond Index [LINE CHART] Value of Investment Lehman Brothers U.S. Date In Fund Government Bond Index 07/21/1995 10,000 10,000 09/30/1995 10,230 10,215 12/31/1995 10,563 10,681 03/31/1996 10,438 10,440 06/30/1996 10,480 10,490 08/31/1996 1 10,509 10,492 11/30/1996 11,015 11,091 02/28/1997 11,018 11,005 05/31/1997 11,214 11,141 08/31/1997 11,521 11,471 11/30/1997 11,886 11,906 02/28/1998 12,116 12,177 05/31/1998 12,246 12,392 08/31/1998 12,494 12,879 11/30/1998 12,587 13,186 02/28/1999 12,489 12,976 05/31/1999 12,451 12,942 08/31/1999 12,350 12,897 11/30/1999 12,493 13,004 02/29/2000 12,535 13,122 05/31/2000 12,700 13,324 08/31/2000 13,119 13,896 11/30/2000 13,448 14,345 02/28/2001 13,839 14,946 05/31/2001 13,805 14,895 08/31/2001 14,308 15,513 11/30/2001 14,658 15,827 02/28/2002 14,826 15,937 05/31/2002 14,955 16,057 08/31/2002 15,702 16,969 11/30/2002 15,781 17,079 02/28/2003 16,236 17,730 05/31/2003 16,452 18,223 08/31/2003 15,992 17,475 Average Annual Total Returns of Class B Shares of the Fund at 8/31/03 2 1-Year -3.87% 5-Year 4.38% Since Inception 5.96% 1. The Fund changed its fiscal year end from June 30 to August 31. 2. See Notes on page 10 for further details. The performance information for the Lehman Brothers U.S. Government Bond Index in the graphs begins on 6/30/93 for Class A, 7/31/95 for Class B, 11/30/93 for Class C, 2/28/01 for Class N and 5/31/98 for Class Y. Past performance cannot guarantee future results. Graphs are not drawn to same scale. 7 | OPPENHEIMER U.S. GOVERNMENT TRUST FUND PERFORMANCE DISCUSSION Class C Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer U.S. Government Trust (Class C) Lehman Brothers U.S. Government Bond Index [LINE CHART] Value of Investment Lehman Brothers U.S. Date In Fund Government Bond Index 12/01/1993 10,000 10,000 12/31/1993 10,040 10,039 03/31/1994 9,787 9,737 06/30/1994 9,678 9,625 09/30/1994 9,761 9,666 12/31/1994 9,815 9,700 03/31/1995 10,323 10,156 06/30/1995 10,676 10,786 09/30/1995 10,835 10,978 12/31/1995 11,190 11,479 03/31/1996 11,057 11,220 06/30/1996 11,114 11,273 08/31/1996 1 11,146 11,276 11/30/1996 11,684 11,919 02/28/1997 11,687 11,826 05/31/1997 11,896 11,972 08/31/1997 12,222 12,327 11/30/1997 12,610 12,794 02/28/1998 12,853 13,086 05/31/1998 12,991 13,317 08/31/1998 13,241 13,841 11/30/1998 13,353 14,170 02/28/1999 13,234 13,944 05/31/1999 13,209 13,908 08/31/1999 13,101 13,859 11/30/1999 13,237 13,975 02/29/2000 13,295 14,102 05/31/2000 13,471 14,319 08/31/2000 13,915 14,933 11/30/2000 14,264 15,416 02/28/2001 14,663 16,062 05/31/2001 14,643 16,007 08/31/2001 15,141 16,671 11/30/2001 15,483 17,008 02/28/2002 15,632 17,126 05/31/2002 15,754 17,256 08/31/2002 16,511 18,236 11/30/2002 16,549 18,354 02/28/2003 16,998 19,054 05/31/2003 17,211 19,583 08/31/2003 16,696 18,780 Average Annual Total Returns of Class C Shares of the Fund at 8/31/03 2 1-Year 0.13% 5-Year 4.75% Since Inception 5.40% Class N Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer U.S. Government Trust (Class N) Lehman Brothers U.S. Government Bond Index [LINE CHART] Value of Investment Lehman Brothers U.S. Date In Fund Government Bond Index 03/01/2001 10,000 10,000 05/31/2001 9,980 9,965 08/31/2001 10,350 10,379 11/30/2001 10,590 10,589 02/28/2002 10,726 10,662 05/31/2002 10,812 10,743 08/31/2002 11,346 11,353 11/30/2002 11,391 11,427 02/28/2003 11,713 11,863 05/31/2003 11,854 12,192 08/31/2003 11,511 11,692 Average Annual Total Returns of Class N Shares of the Fund at 8/31/03 2 1-Year 0.47% Since Inception 5.79% 1. The Fund changed its fiscal year end from June 30 to August 31. 2. See Notes on page 10 for further details. 8 | OPPENHEIMER U.S. GOVERNMENT TRUST Class Y Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer U.S. Government Trust (Class Y) Lehman Brothers U.S. Government Bond Index [LINE CHART] Value of Investment Lehman Brothers U.S. Date In Fund Government Bond Index 05/18/1998 10,000 10,000 05/31/1998 10,041 10,000 08/31/1998 10,282 10,393 11/30/1998 10,316 10,640 02/28/1999 10,238 10,471 05/31/1999 10,235 10,443 08/31/1999 10,198 10,407 11/30/1999 10,342 10,494 02/29/2000 10,400 10,589 05/31/2000 10,570 10,752 08/31/2000 10,951 11,213 11/30/2000 11,255 11,576 02/28/2001 11,612 12,061 05/31/2001 11,613 12,019 08/31/2001 12,056 12,518 11/30/2001 12,356 12,772 02/28/2002 12,490 12,860 05/31/2002 12,623 12,957 08/31/2002 13,268 13,693 11/30/2002 13,363 13,782 02/28/2003 13,746 14,307 05/31/2003 13,958 14,705 08/31/2003 13,582 14,102 Average Annual Total Returns of Class Y Shares of the Fund at 8/31/03 2 1-Year 2.37% 5-Year 5.72% Since Inception 5.96%

The performance information for the Lehman Brothers U.S. Government Bond Index in the graphs begins on 6/30/93 for Class A, 7/31/95 for Class B, 11/30/93 for Class C, 2/28/01 for Class N and 5/31/98 for Class Y.

Past performance cannot guarantee future results. Graphs are not drawn to same scale.

9 | OPPENHEIMER U.S. GOVERNMENT TRUST NOTES

In reviewing performance and rankings, please remember that past performance cannot guarantee future results. Investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Because of ongoing market volatility, the Fund’s performance may be subject to substantial fluctuations, and current performance may be more or less than the results shown. For updates on the Fund’s performance, visit our website at www.oppenheimerfunds.com.

Total returns and the ending account values in the graph includes changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns shown do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. For more complete information about the Fund, including charges, expenses and risks, please refer to the prospectus. To obtain a copy, call your financial advisor, call OppenheimerFunds Distributor, Inc. at 1.800.CALL OPP (1.800.225.5677). Read the prospectus carefully before you invest or send money.

Class A shares of the Fund were first publicly offered on 8/16/85. Class A returns include the current maximum initial sales charge of 4.75%.

Class B shares of the Fund were first publicly offered on 7/21/95. Class B returns include the applicable contingent deferred sales charge of 5% (1-year) and 2% (5-year). Class B shares are subject to an annual 0.75% asset-based sales charge. Because Class B shares convert to Class A shares 72 months after purchase, Class B performance does not include contingent deferred sales charge and uses Class A performance for the period after conversion.

Class C shares of the Fund were first publicly offered on 12/1/93. Class C returns include the contingent deferred sales charge of 1% for the 1-year period. Class C shares are subject to an annual 0.75% asset-based sales charge.

Class N shares of the Fund were first publicly offered on 3/1/01. Class N shares are offered only through retirement plans. Unless otherwise noted, Class N returns include the contingent deferred sales charge of 1% for the 1-year period. Class N shares are subject to an annual 0.25% asset-based sales charge.

Class Y shares of the Fund were first publicly offered on 5/18/98. Class Y shares are offered only to certain institutional investors under special agreements with the Distributor.

An explanation of the calculation of performance is in the Fund’s Statement of Additional Information.

10 | OPPENHEIMER U.S. GOVERNMENT TRUST STATEMENT OF INVESTMENTS August 31, 2003

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

 Asset-Backed Securities--12.3%

 Ameriquest Mortgage Securities, Inc., Home Equity
 Mtg. Obligations, Series 2001-3, Cl. M1, 2.09%, 2/25/32 1                    $  4,000,000 $    4,030,846
------------------------------------------------------------------------------------------------------------
 AQ Finance NIM Trust, Home Equity Collateralized Mtg. Obligations:
 Series 2001-3A, Cl. Note, 8.835%, 2/25/32 2                                       214,952        215,513
 Series 2002-1, Cl. Note, 9.50%, 6/25/32 3                                         482,605        479,589
------------------------------------------------------------------------------------------------------------
 Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.,
 Series 2002-4, Cl. A2B, 1.74%, 1/17/05 3                                        5,726,054      5,737,523
------------------------------------------------------------------------------------------------------------
 Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates:
 Series 2002-A, Cl. MF2, 6.54%, 1/25/32                                          5,000,000      5,213,502
 Series 2003-B, Cl. AF1, 1.64%, 2/25/18 3                                        3,814,271      3,809,981
------------------------------------------------------------------------------------------------------------
 Chase Funding Mortgage Loan Asset-Backed Certificates, Home
 Equity Mtg. Obligations, Series 2003-4, Cl. 1A1, 1.23%, 9/25/17 1              11,480,000     11,477,130
------------------------------------------------------------------------------------------------------------
 Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through
 Certificates, Series 2003-B, Cl. A2, 1.287%, 3/15/06                            5,160,000      5,148,700
------------------------------------------------------------------------------------------------------------
 CitiFinancial Mortgage Securities, Inc., Home Equity Collateralized
 Mtg. Obligations:
 Series 2002-1, Cl. AF1, 2.474%, 9/25/32                                         3,761,807      3,777,876
 Series 2003-2, Cl. AF1, 1.21%, 5/25/33 1,3                                      7,001,436      6,999,216
------------------------------------------------------------------------------------------------------------
 Conseco Finance Securitizations Corp., Home Equity Loan Pass-Through
 Certificates, Series 2000-4, Cl. M1, 8.73%, 5/1/32 3                            5,000,000      1,653,125
------------------------------------------------------------------------------------------------------------
 DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates,
 Series 2002-B, Cl. A2, 2.20%, 4/6/05                                            3,626,063      3,636,963
------------------------------------------------------------------------------------------------------------
 Embarcadero Aircraft Securitization Trust, Airplane Collateral Obligations,
 Series 2000-A, Cl. B, 2.21%, 8/15/25 1,3,8                                      4,550,157         22,751
------------------------------------------------------------------------------------------------------------
 Ford Credit Auto Owner Trust, Automobile Loan Certificates,
 Series 2002-D, Cl. A2A, 2.10%, 3/15/05                                          8,793,113      8,822,647
------------------------------------------------------------------------------------------------------------
 Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.:
 Series 2002-2, Cl. A1, 1.91%, 4/16/07                                           9,217,398      9,249,346
 Series 2003-3, Cl. A1, 1.50%, 1/15/08                                          15,030,000     15,006,516
------------------------------------------------------------------------------------------------------------
 Honda Auto Receivables Owner Trust, Automobile Receivables
 Obligations, Series 2002-3, Cl. A2, 2.26%, 12/18/04                             4,650,531      4,663,326
------------------------------------------------------------------------------------------------------------
 Household Automotive Trust, Automobile Loan Certificates,
 Series 2002-2, Cl. A2, 2.15%, 12/19/05                                          4,320,315      4,333,339
------------------------------------------------------------------------------------------------------------
 Lehman ABS Manufactured Housing Contract, Commercial Mtg.
 Pass-Through Certificates, Series 2001-B, Cl. A4, 5.27%, 9/15/18                6,578,757      6,821,612
------------------------------------------------------------------------------------------------------------
 M&I Auto Loan Trust, Automobile Loan Certificates, Series 2002-1,
 Cl. A2, 1.95%, 7/20/05                                                          3,071,968      3,078,641
------------------------------------------------------------------------------------------------------------
 MMCA Auto Lease Trust, Auto Retail Installment Contracts,
 Series 2002-A, Cl. A2, 1.28%, 5/16/05 1,2                                       5,462,206      5,466,565
------------------------------------------------------------------------------------------------------------
 MSF Funding LLC, Collateralized Mtg. Obligations, Series 2000-1,
 Cl. A, 3.61%, 7/25/07 1,3                                                       1,477,644      1,108,233
------------------------------------------------------------------------------------------------------------
 NC Finance Trust, Collateralized Mtg. Obligations, Series 2002-I,
 Cl. ECFD, 9.25%, 3/25/32 3                                                        574,123        568,740
------------------------------------------------------------------------------------------------------------
 Nissan Auto Receivables Owner Trust, Auto Receivable Nts.:
 Series 2002-C, Cl. A2, 1.94%, 9/15/04                                           5,965,245      5,974,553
 Series 2003-B, Cl. A2, 1.20%, 11/15/05                                         16,000,000     15,980,526

11 | OPPENHEIMER U.S. GOVERNMENT TRUST STATEMENT OF INVESTMENTS Continued

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

 Asset-Backed Securities Continued

 Providian Master Trust, Sub. Collateralized Mtg. Obligations,
 Series 2000-2, Cl. C, 7.98%, 4/15/09 2                                       $  3,000,000 $    3,013,758
------------------------------------------------------------------------------------------------------------
 Residential Funding Mortgage Securities II, Inc., Home Equity Loan
 Pass-Through Certificates, Series 2002-HS1, Cl. M2,
 6.46%, 1/25/27 3                                                                3,000,000      3,067,319
------------------------------------------------------------------------------------------------------------
 Toyota Auto Receivables Owner Trust, Automobile Mtg.-Backed
 Obligations, Series 2002-B, Cl. A3, 3.76%, 6/15/06                              4,545,000      4,626,115
------------------------------------------------------------------------------------------------------------
 USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.:
 Series 2002-1, Cl. A2, 1.95%, 3/15/05                                           1,501,685      1,504,203
 Series 2003-1, Cl. A2, 1.22%, 4/17/06                                           9,600,000      9,585,070
------------------------------------------------------------------------------------------------------------
 Volkswagen Auto Loan Enhanced Trust, Automobile Loan Receivables,
 Series 2003-1, Cl. A2, 1.11%, 12/20/05                                         20,000,000     19,956,008
                                                                                           -----------------
 Total Asset-Backed Securities (Cost $182,681,849)                                            175,029,232

------------------------------------------------------------------------------------------------------------
 Mortgage-Backed Obligations--70.7%
------------------------------------------------------------------------------------------------------------
 Government Agency--63.6%
------------------------------------------------------------------------------------------------------------
 FHLMC/FNMA/Sponsored--62.5%
 FHLMC Structured Pass-Through Securities, Collateralized Mtg. Obligations:
 Series H003, Cl. A2, 1.88%, 1/15/07                                             8,154,032      8,196,276
 Series H006, Cl. A1, 1.724%, 4/15/08 3                                          5,573,624      5,487,463
------------------------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp.:
 7.50%, 9/1/12-2/1/32                                                            4,205,725      4,480,428
 8%, 4/1/16                                                                      6,076,616      6,572,209
 9%, 8/1/22-5/1/25                                                               1,355,904      1,510,125
 9.50%, 10/1/03-11/1/03                                                                111            113
 11.50%, 6/1/20                                                                    111,142        125,692
 12.50%, 7/1/19                                                                    329,990        376,569
 13%, 8/1/15                                                                       294,005        337,554
 14%, 1/1/11                                                                        78,478         90,625
------------------------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp., Gtd. Mtg. Pass-Through
 Participation Certificates, Series 151, Cl. F, 9%, 5/15/21                        347,933        352,143
------------------------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment
 Conduit Multiclass Pass-Through Certificates:
 Series 2368, Cl. PN, 6.50%, 7/15/28                                             8,021,138      8,096,846
 Series 2368, Cl. PR, 6.50%, 10/15/31                                           10,000,000     10,301,026
 Series 2392, Cl. PV, 6%, 12/15/20                                               9,952,000     10,099,630
 Series 2410, Cl. NE, 6.50%, 9/15/30                                             7,850,000      8,255,407
 Series 2420, Cl. BC, 6.50%, 7/15/26                                             1,248,846      1,250,119
 Series 2423, Cl. PD, 6.50%, 11/15/30                                           10,000,000     10,243,059
 Series 2500, Cl. FD, 1.607%, 6/15/32 1                                          5,183,952      5,219,591
 Series 2526, Cl. FE, 1.51%, 6/15/29 1                                           5,816,129      5,855,861
 Series 2551, Cl. FD, 1.51%, 1/15/33 1                                           5,166,786      5,183,722
------------------------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp., Interest-Only Stripped
 Mtg.-Backed Security:
 Series 206, Cl. IO, (24.008)%, 12/15/29 4                                       4,815,905        896,927
 Series 2410, Cl. PI, (99.99)%, 2/15/26 3,4                                         99,134            319

12 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

 FHLMC/FNMA/Sponsored Continued
 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 $    6,058,795
------------------------------------------------------------------------------------------------------------
 Federal National Mortgage Assn.:
 5%, 9/1/33 5                                                                   20,298,000     19,644,648
 5.50%, 9/1/33 5                                                                93,890,000     93,508,619
 6%, 9/25/33 5                                                                  94,602,000     96,198,409
 6.50%, 11/1/28-5/1/31                                                          11,278,132     11,683,188
 6.50%, 9/1/33 5                                                               128,913,000    133,304,035
 7%, 8/1/29-4/1/30                                                               1,925,896      2,032,041
 7%, 9/25/33 5                                                                 359,038,000    378,224,273
 8%, 12/1/22                                                                       235,769        256,297
 8.50%, 7/1/32                                                                   1,994,878      2,147,136
 11%, 7/1/16                                                                       163,360        183,972
 11.50%, 11/1/15-11/17/20                                                          842,047        954,569
 13%, 11/1/12                                                                       13,333         14,985
------------------------------------------------------------------------------------------------------------
 Federal National Mortgage Assn. Grantor Trust, Commercial Mtg.
 Obligations, Trust 2001-T6, Cl. B, 6.088%, 5/25/11                             10,000,000     10,866,601
------------------------------------------------------------------------------------------------------------
 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                                                 589,589        625,830
 Trust 1993-202, Cl. PH, 6.50%, 2/25/22                                            888,421        896,901
 Trust 1994-27, Cl. PH, 6.50%, 9/25/22                                           2,412,021      2,453,697
 Trust 2001-38, Cl. CD, 6.50%, 5/25/29                                           6,024,587      6,046,903
 Trust 2001-44, Cl. ML, 6.50%, 6/25/29                                           4,300,818      4,330,452
 Trust 2001-50, Cl. LD, 6.50%, 5/25/30                                          10,000,000     10,247,041
 Trust 2002-52, Cl. FD, 1.61%, 9/25/32 1                                         6,991,869      7,015,311
 Trust 2002-77, Cl. WF, 1.51%, 12/18/32 1                                        8,703,053      8,728,155
------------------------------------------------------------------------------------------------------------
 Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment
 Conduit Pass-Through Certificates Interest-Only Stripped Mtg.-Backed
 Security, Trust 2001-T4, Cl. IO, (14.211)%, 7/25/28 3,4                        22,567,073        507,759
                                                                                           -----------------
                                                                                              888,861,321

------------------------------------------------------------------------------------------------------------
 GNMA/Guaranteed--1.1%
 Government National Mortgage Assn.:
 4.375%, 4/20/17                                                                    87,463         89,847
 6.50%, 11/15/23-12/15/23                                                          473,869        495,438
 7%, 1/15/28-1/20/30                                                             4,209,838      4,448,092
 7.25%, 12/15/05                                                                     2,666          2,767
 7.50%, 10/15/06-11/15/26                                                        3,614,010      3,865,015
 8%, 3/15/05-8/15/28                                                             1,238,409      1,336,062
 8.25%, 4/15/08                                                                     24,351         26,251
 8.50%, 1/15/06-12/15/17                                                         1,964,984      2,165,048
 9%, 9/15/08-5/15/09                                                                57,185         62,231
 9.50%, 7/15/18-12/15/19                                                           148,966        165,562
 10%, 8/15/17-8/15/19                                                              281,105        315,819
 10.50%, 2/15/13-5/15/21                                                         1,073,649      1,212,052
 11%, 10/20/19-7/20/20                                                             648,948        732,667
 11.50%, 2/15/13                                                                    18,014         20,359
 12%, 12/15/12-3/15/14                                                               7,658          8,805
 12.50%, 1/15/14-6/15/19                                                           171,033        197,030
 13%, 4/15/11-12/15/14                                                              34,899         40,325

13 | OPPENHEIMER U.S. GOVERNMENT TRUST STATEMENT OF INVESTMENTS Continued

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

 GNMA/Guaranteed Continued
 Government National Mortgage Assn.: Continued
 13.50%, 5/15/11-1/15/13                                                      $     19,156 $       22,369
 14%, 6/15/11                                                                       12,531         14,699
                                                                                           -----------------
                                                                                               15,220,438

------------------------------------------------------------------------------------------------------------
 Private--7.1%
------------------------------------------------------------------------------------------------------------
 Commercial--4.6%
 Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
 Series 1996-MD6, Cl. A2, 7.312%, 11/13/29 1                                     3,000,000      3,264,275
 Series 1997-MD7, Cl. A1B, 7.41%, 1/13/30                                        5,000,000      5,438,559
------------------------------------------------------------------------------------------------------------
 Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
 Pass-Through Certificates, Series 1997-CTL1, 9.227%,
 6/22/24 2,4                                                                    55,920,624      2,041,209
------------------------------------------------------------------------------------------------------------
 Commercial Mortgage Acceptance Corp., Interest-Only Stripped
 Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 53.541%,
 12/25/20 3,4                                                                    5,077,472            793
------------------------------------------------------------------------------------------------------------
 CS First Boston Mortgage Securities Corp., Commercial Mtg. Pass-Through
 Certificates, Series 2001-SPGA, Cl. B, 6.662%, 8/13/18 3                       10,767,000     11,540,415
------------------------------------------------------------------------------------------------------------
 Heller Financial Commercial Mortgage Asset Corp., Interest-Only
 Commercial Mtg. Obligations, Series 2000-PH1, Cl. X, 9.244%,
 1/17/34 3,4                                                                   190,408,284      3,818,600
------------------------------------------------------------------------------------------------------------
 J.P. Morgan Commercial Mortgage Finance Corp., Commercial Mtg.
 Obligations, Series 2000-C9, Cl. A2, 7.77%, 10/15/32                           10,000,000     11,552,905
------------------------------------------------------------------------------------------------------------
 Lehman Structured Securities Corp., Collateralized Mtg. Obligations,
 Series 2002-GE1, Cl. A, 2.514%, 7/26/24 1,3                                     1,864,242      1,826,957
------------------------------------------------------------------------------------------------------------
 Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates,
 Series 1996-WF1, Cl. A2, 7.385%, 11/15/28 1,2                                   2,565,829      2,581,429
------------------------------------------------------------------------------------------------------------
 PNC Mortgage Acceptance Corp., Commercial Mtg. Obligations,
 Series 2001-C1, Cl. A2, 6.36%, 3/12/34                                         10,000,000     10,886,811
------------------------------------------------------------------------------------------------------------
 Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through
 Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15                   8,181,000      9,246,151
------------------------------------------------------------------------------------------------------------
 Structured Asset Securities Corp., Collateralized Mtg. Obligations,
 Interest-Only Mtg. Pass-Through Certificates, Series 2002-AL1, Cl. AIO,
 7.631%, 3/25/33 3,4                                                            30,127,187      3,613,536
                                                                                           -----------------
                                                                                               65,811,640

------------------------------------------------------------------------------------------------------------
 Residential--2.5%
 ARC Net Interest Margin Trust, Collateralized Mtg. Obligations,
 Series 2001-6A, Cl. A, 7.25%, 10/27/31 3                                          227,940        225,661
------------------------------------------------------------------------------------------------------------
 Citicorp Mortgage Securities, Inc., Collateralized Mtg. Obligations,
 Series 2002-2, Cl. 2A3, 6%, 2/25/32                                            10,000,000     10,234,119
------------------------------------------------------------------------------------------------------------
 Countrywide Funding Corp., Mtg. Pass-Through Certificates,
 Series 1993-12, Cl. B1, 6.625%, 2/25/24 6                                         521,194        521,117
------------------------------------------------------------------------------------------------------------
 Granite Mortgages plc, Mtg.-Backed Obligations, Series 2002-2,
 Cl. 1A1, 1.479%, 1/21/17 1,3                                                    1,805,135      1,805,063
------------------------------------------------------------------------------------------------------------
 Salomon Smith Barney RV Trust, Recreational Vehicles Mtg. Obligations,
 Series 2001-1, Cl. B, 6.64%, 4/15/18 3                                          2,500,000      2,545,735
------------------------------------------------------------------------------------------------------------
 Structured Asset Securities Corp., Collateralized Mtg. Obligations
 Pass-Through Certificates, Series 2002-AL1, Cl. B2, 3.45%,
 2/25/32                                                                         4,628,807      4,136,433
------------------------------------------------------------------------------------------------------------
 Vendee Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security,
 Series 1995-2B, Cl. 2IO, (13.586)%, 6/15/25 4                                  30,524,926        505,645

14 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

 Residential Continued
 Washington Mutual Finance Corp., Collateralized Mtg. Obligations,
 Series 2000-1, Cl. M3, 2.86%, 1/25/40 1                                      $  2,738,944 $    2,837,803
------------------------------------------------------------------------------------------------------------
 Washington Mutual Mortgage Securities Corp., Collateralized Mtg.
 Obligations Pass-Through Certificates:
 Series 2003-AR3, Cl. A1A, 1.675%, 4/25/33 1                                       364,891        365,104
 Series 2003-AR7, Cl. A1, 1.507%, 8/25/33 1                                     12,665,096     12,654,297
                                                                                           -----------------
                                                                                               35,830,977
                                                                                           -----------------
 Total Mortgage-Backed Obligations (Cost $996,458,493)                                      1,005,724,376

------------------------------------------------------------------------------------------------------------
 U.S. Government Obligations--67.2%

 Federal Home Loan Mortgage Corp. Unsec. Nts.:
 2.375%, 4/15/06                                                                29,000,000     28,824,608
 4.875%, 3/15/07                                                                 4,800,000      5,073,264
 6.25%, 7/15/32                                                                 26,650,000     28,029,058
------------------------------------------------------------------------------------------------------------
 Federal National Mortgage Assn. Unsec. Nts.:
 4.25%, 7/15/07                                                                 72,770,000     75,154,018
 5.25%, 6/15/06                                                                 46,200,000     49,390,988
 5.50%, 2/15/06                                                                 54,180,000     58,069,636
 6.375%, 6/15/09                                                                57,600,000     64,224,058
 7.25%, 1/15/10                                                                 41,900,000     48,695,929
 7.25%, 5/15/30 6                                                               25,715,000     30,469,523
------------------------------------------------------------------------------------------------------------
 Freddie Mac Unsec. Reference Nts., 6.25%, 1/15/06                              72,000,000     76,697,856
------------------------------------------------------------------------------------------------------------
 Resolution Funding Corp. Federal Book Entry Principal Strips,
 6.28%, 1/15/21 7                                                               18,500,000      6,740,974
------------------------------------------------------------------------------------------------------------
 Tennessee Valley Authority Bonds:
 4.75%, 7/15/04                                                                  1,680,000      1,725,059
 5.375%, 11/13/08                                                               16,600,000     17,727,671
------------------------------------------------------------------------------------------------------------
 U.S. Treasury Bonds:
 5.50%, 8/15/28                                                                 33,922,000     34,520,961
 6.125%, 11/15/27                                                               12,448,000     13,705,447
 6.25%, 5/15/30                                                                 11,699,000     13,207,995
 6.875%, 8/15/25                                                                82,940,000     99,054,993
 9.25%, 2/15/16                                                                 49,850,000     70,411,181
 11.25%, 2/15/15                                                                 1,450,000      2,292,021
 STRIPS, 4.90%, 2/15/16 7                                                       24,460,000     12,795,980
 STRIPS, 5.91%, 11/15/24 7                                                      14,690,000      4,406,075
------------------------------------------------------------------------------------------------------------
 U.S. Treasury Nts.:
 1.625%, 3/31/05                                                                41,534,000     41,525,901
 2.625%, 5/15/08                                                                15,822,000     15,328,812
 3%, 11/15/07                                                                   11,010,000     10,957,967
 5%, 2/15/11                                                                     8,450,000      8,926,969
 5.75%, 8/15/10                                                                 11,626,000     12,859,449
 6%, 8/15/09                                                                    48,400,000     54,230,700
 6.50%, 2/15/10                                                                 61,785,000     71,031,063
                                                                                           -----------------
 Total U.S. Government Obligations (Cost $956,840,287)                                        956,078,156

------------------------------------------------------------------------------------------------------------
 Total Investments, at Value (Cost $2,135,980,629)                                  150.2%  2,136,831,764
------------------------------------------------------------------------------------------------------------
 Liabilities in Excess of Other Assets                                               (50.2)  (714,492,552)
                                                                              ------------------------------
 Net Assets                                                                         100.0% $1,422,339,212
                                                                              ==============================

15 | OPPENHEIMER U.S. GOVERNMENT TRUST STATEMENT OF INVESTMENTS Continued Footnotes to Statement of Investments 1. Represents the current interest rate for a variable or increasing rate security. 2. 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 $13,318,474 or 0.94% of the Fund's net assets as of August 31, 2003. 3. Identifies issues considered to be illiquid. See Note 6 of Notes to Financial Statements. 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 $11,384,788 or 0.80% of the Fund's net assets as of August 31, 2003. 5. When-issued security to be delivered and settled after August 31, 2003. See Note 1 of Notes to Financial Statements. 6. Securities with an aggregate market value of $7,924,171 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 5 of Notes to Financial Statements. 7. Zero coupon bond reflects effective yield on the date of purchase. 8. Issuer is in default. See accompanying Notes to Financial Statements. 16 | OPPENHEIMER U.S. GOVERNMENT TRUST STATEMENT OF ASSETS AND LIABILITIES August 31, 2003 -------------------------------------------------------------------------------- Assets Investments, at value (cost $2,135,980,629)--see accompanying statement $2,136,831,764 -------------------------------------------------------------------------------- Receivables and other assets: Interest and principal paydowns 17,438,923 Shares of beneficial interest sold 1,557,471 Futures margins 573,829 Other 5,720 --------------- Total assets 2,156,407,707 -------------------------------------------------------------------------------- Liabilities Bank overdraft 5,292,344 -------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased on a when-issued basis 722,237,842 Shares of beneficial interest redeemed 4,830,596 Distribution and service plan fees 624,327 Dividends 342,800 Transfer and shareholder servicing agent fees 276,926 Trustees' compensation 173,150 Shareholder reports 172,958 Other 117,552 --------------- Total liabilities 734,068,495 -------------------------------------------------------------------------------- Net Assets $1,422,339,212 =============== -------------------------------------------------------------------------------- Composition of Net Assets Par value of shares of beneficial interest $ 145,742 -------------------------------------------------------------------------------- Additional paid-in capital 1,418,948,164 -------------------------------------------------------------------------------- Undistributed net investment income 3,381,556 -------------------------------------------------------------------------------- Accumulated net realized gain on investment transactions 762,190 -------------------------------------------------------------------------------- Net unrealized depreciation on investments (898,440) --------------- Net Assets $1,422,339,212 =============== 17 | OPPENHEIMER U.S. GOVERNMENT TRUST STATEMENT OF ASSETS AND LIABILITIES Continued -------------------------------------------------------------------------------- Net Asset Value Per Share Class A Shares: Net asset value and redemption price per share (based on net assets of $830,310,463 and 85,032,140 shares of beneficial interest outstanding) $ 9.76 Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $10.25 -------------------------------------------------------------------------------- Class B Shares:

  Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $370,984,247 and 38,041,367 shares of beneficial

interest outstanding) $ 9.75 -------------------------------------------------------------------------------- Class C Shares:

  Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $192,496,345 and 19,745,025 shares of beneficial

interest outstanding) $ 9.75 -------------------------------------------------------------------------------- Class N Shares:

  Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $25,946,615 and 2,657,324 shares of beneficial

interest outstanding) $ 9.76 -------------------------------------------------------------------------------- Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $2,601,542 and 266,465 shares of beneficial interest outstanding) $ 9.76 See accompanying Notes to Financial Statements. 18 | OPPENHEIMER U.S. GOVERNMENT TRUST STATEMENT OF OPERATIONS For the Year Ended August 31, 2003 ------------------------------------------------------------------------------- Investment Income Interest $ 60,269,842 Fee income 722,820 -------------- Total income 60,992,662 ------------------------------------------------------------------------------- Expenses Management fees 8,708,123 -------------------------------------------------------------------------------

        Distribution and service plan fees:

Class A 2,198,600 Class B 4,311,570 Class C 2,169,872 Class N 109,966 -------------------------------------------------------------------------------

        Transfer and shareholder servicing agent fees:

Class A 1,664,519 Class B 834,852 Class C 314,973 Class N 93,875 ------------------------------------------------------------------------------- Shareholder reports 312,830 ------------------------------------------------------------------------------- Trustees' compensation 79,804 ------------------------------------------------------------------------------- Custodian fees and expenses 18,410 ------------------------------------------------------------------------------- Other 126,609 -------------- Total expenses 20,944,003 Less reduction to custodian expenses (15,780) Less voluntary waiver of transfer and shareholder servicing agent fees--Class N (21,853) -------------- Net expenses 20,906,370 ------------------------------------------------------------------------------- Net Investment Income 40,086,292 ------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss)

        Net realized gain (loss) on:

Investments 27,674,865 Closing of futures contracts (729,797) -------------- Net realized gain 26,945,068 -------------------------------------------------------------------------------

        Net change in unrealized depreciation on:

Investments (40,547,040) Futures contracts (1,594,255) -------------- Net change in unrealized depreciation (42,141,295) ------------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $24,890,065 ============== See accompanying Notes to Financial Statements. 19 | OPPENHEIMER U.S. GOVERNMENT TRUST STATEMENTS OF CHANGES IN NET ASSETS

 Year Ended August 31,                                                                2003                  2002
------------------------------------------------------------------------------------------------------------------

 Operations

 Net investment income                                                      $   40,086,292        $   57,818,683
------------------------------------------------------------------------------------------------------------------
 Net realized gain                                                              26,945,068            21,432,038
------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation)                          (42,141,295)           25,431,490
                                                                            --------------------------------------
 Net increase in net assets resulting from operations                           24,890,065           104,682,211

------------------------------------------------------------------------------------------------------------------
 Dividends and/or Distributions to Shareholders

 Dividends from net investment income:
 Class A                                                                       (25,847,338)          (37,850,699)
 Class B                                                                        (8,971,265)          (12,641,929)
 Class C                                                                        (4,631,361)           (6,896,952)
 Class N                                                                          (530,810)             (317,090)
 Class Y                                                                          (105,183)             (112,098)
------------------------------------------------------------------------------------------------------------------
 Distributions from net realized gain:
 Class A                                                                        (1,948,171)                   --
 Class B                                                                          (936,453)                   --
 Class C                                                                          (466,417)                   --
 Class N                                                                           (45,634)                   --
 Class Y                                                                            (6,797)                   --

------------------------------------------------------------------------------------------------------------------
 Beneficial Interest Transactions

 Net increase (decrease) in net assets resulting from beneficial interest
 transactions:
 Class A                                                                       (12,386,022)          225,972,091
 Class B                                                                       (17,645,395)          177,038,753
 Class C                                                                       (10,392,807)           74,202,150
 Class N                                                                        12,896,822            12,553,724
 Class Y                                                                          (224,999)            1,249,048

------------------------------------------------------------------------------------------------------------------
 Net Assets

 Total increase (decrease)                                                     (46,351,765)          537,879,209
------------------------------------------------------------------------------------------------------------------
 Beginning of period                                                         1,468,690,977           930,811,768
                                                                            --------------------------------------
 End of period [including undistributed net investment income
 of $3,381,556 and $1,176,928, respectively]                                $1,422,339,212        $1,468,690,977
                                                                            ======================================

See accompanying Notes to Financial Statements. 20 | OPPENHEIMER U.S. GOVERNMENT TRUST FINANCIAL HIGHLIGHTS

 Class A            August 31                                 2003          2002        2001        2000          1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                       $ 9.88        $ 9.52      $ 9.19      $ 9.15        $ 9.74
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .28           .54         .51         .58           .56
 Net realized and unrealized gain (loss)                      (.10)          .36         .36         .04          (.59)
                                                            -------------------------------------------------------------
 Total from investment operations                              .18           .90         .87         .62          (.03)
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.28)         (.54)       (.54)       (.57)         (.55)
 Distributions from net realized gain                         (.02)           --          --          --            --
 Tax return of capital distribution                             --            --          --        (.01)         (.01)
                                                            -------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                              (.30)         (.54)       (.54)       (.58)         (.56)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $9.76         $9.88       $9.52       $9.19         $9.15
                                                            =============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 1                           1.85%         9.75%       9.75%       7.03%        (0.40)%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                 $830,310      $853,671    $599,659    $559,194      $579,064
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $906,353      $679,657    $580,177    $542,931      $591,229
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                        2.85%         5.57%       5.46%       6.37%         5.85%
 Total expenses                                               1.01% 3       1.06% 3     0.91% 3     1.12% 3       1.06% 3
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        72%          121%        215%        181%          199%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 21 | OPPENHEIMER U.S. GOVERNMENT TRUST FINANCIAL HIGHLIGHTS Continued

 Class B            August 31                                 2003          2002        2001        2000          1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                       $ 9.87        $ 9.51      $ 9.18      $ 9.14        $ 9.73
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .21           .46         .45         .51           .48
 Net realized and unrealized gain (loss)                      (.10)          .36         .35         .04          (.59)
                                                            -------------------------------------------------------------
 Total from investment operations                              .11           .82         .80         .55          (.11)
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.21)         (.46)       (.47)       (.50)         (.47)
 Distributions from net realized gain                         (.02)           --          --          --            --
 Tax return of capital distribution                             --            --          --        (.01)         (.01)
                                                            -------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                              (.23)         (.46)       (.47)       (.51)         (.48)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $9.75         $9.87       $9.51       $9.18         $9.14
                                                            =============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 1                           1.07%         8.93%       8.92%       6.22%        (1.15)%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                 $370,984      $393,355    $204,576    $140,512      $174,622
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $431,102      $266,559    $169,440    $151,770      $160,782
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                        2.08%         4.74%       4.67%       5.60%         5.09%
 Total expenses                                               1.78% 3       1.82% 3     1.67% 3     1.87% 3       1.81% 3
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        72%          121%        215%        181%          199%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 22 | OPPENHEIMER U.S. GOVERNMENT TRUST

 Class C            August 31                                 2003          2002        2001        2000          1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                       $ 9.87        $ 9.50      $ 9.18      $ 9.14        $ 9.72
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .21           .46         .45         .51           .48
 Net realized and unrealized gain (loss)                      (.10)          .37         .34         .04          (.58)
                                                            -------------------------------------------------------------
 Total from investment operations                              .11           .83         .79         .55          (.10)
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.21)         (.46)       (.47)       (.50)         (.47)
 Distributions from net realized gain                         (.02)           --          --          --            --
 Tax return of capital distribution                             --            --          --        (.01)         (.01)
                                                            -------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                              (.23)         (.46)       (.47)       (.51)         (.48)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $9.75         $9.87       $9.50       $9.18         $9.14
                                                            =============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 1                           1.12%         9.05%       8.81%       6.21%        (1.05)%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                 $192,496      $205,349    $124,542     $91,496       $67,691
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $216,954      $144,852    $109,060     $77,875       $56,943
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                        2.13%         4.76%       4.69%       5.61%         5.11%
 Total expenses                                               1.74% 3       1.81% 3     1.67% 3     1.88% 3       1.81% 3
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        72%          121%        215%        181%          199%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 23 | OPPENHEIMER U.S. GOVERNMENT TRUST FINANCIAL HIGHLIGHTS Continued

 Class N            August 31                                                           2003        2002        2001 1
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                                                 $ 9.88      $ 9.52        $ 9.45
-------------------------------------------------------------------------------------------------------------------------
 Income from investment operations:
 Net investment income                                                                   .24         .50           .25
 Net realized and unrealized gain (loss)                                                (.10)        .39           .07
                                                                                      -----------------------------------
 Total from investment operations                                                        .14         .89           .32
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                                                   (.24)       (.53)         (.25)
 Distributions from net realized gain                                                   (.02)         --            --
 Tax return of capital distribution                                                       --          --            --
                                                                                      -----------------------------------
 Total dividends and/or distributions to shareholders                                   (.26)       (.53)         (.25)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                                        $9.76       $9.88         $9.52
                                                                                      ===================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                                                     1.45%       9.62%         3.50%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                                            $25,947     $13,453          $513
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                                                   $22,027     $ 6,092          $ 90
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income                                                                  2.41%       5.21%         5.54%
 Total expenses                                                                         1.52%       1.31%         0.85%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                                                     1.42%        N/A 4         N/A 4
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                                                  72%        121%          215%

1. For the period from March 1, 2001 (inception of offering) to August 31, 2001. 2. Assumes an 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 24 | OPPENHEIMER U.S. GOVERNMENT TRUST

 Class Y            August 31                                 2003          2002        2001        2000          1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                       $ 9.88        $ 9.52      $ 9.19      $ 9.15        $ 9.74
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .33           .56         .56         .62           .51
 Net realized and unrealized gain (loss)                      (.10)          .36         .34         .03          (.59)
                                                            -------------------------------------------------------------
 Total from investment operations                              .23           .92         .90         .65          (.08)
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.33)         (.56)       (.57)       (.61)         (.50)
 Distributions from net realized gain                         (.02)           --          --          --            --
 Tax return of capital distribution                             --            --          --          -- 1        (.01)
                                                            -------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                              (.35)         (.56)       (.57)       (.61)         (.51)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $9.76         $9.88       $9.52       $9.19         $9.15
                                                            =============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                           2.37%        10.05%      10.10%       7.39%        (0.83)%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                   $2,602        $2,861      $1,522        $333            $1
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                          $3,133        $1,933      $  464        $ 27            $1
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income                                        3.36%         5.80%       5.83%       6.51%         6.19%
 Total expenses                                               0.59%         0.83%       1.06% 4     0.83%         0.69%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                            N/A 5        0.81%       0.61%        N/A 5         N/A 5
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        72%          121%        215%        181%          199%

1. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Added since August 31, 2001 to reflect expenses before reduction to custodian expenses and voluntary waiver of transfer agent fees. 5. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 25 | 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 and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities (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 using consistently applied procedures under the supervision of the Board of Trustees. Short-term “money market type” debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value).

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

  Securities on a When-Issued Basis. 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 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 basis may increase the volatility of the Fund’s net asset value to the extent

26 | OPPENHEIMER U.S. GOVERNMENT TRUST --------------------------------------------------------------------------------

  the Fund makes such purchases while remaining substantially fully invested. As of August 31, 2003, the Fund had entered into when-issued purchase commitments of $722,237,842.

  In connection with its ability to purchase securities on a when-issued basis, the Fund may enter into forward roll transactions with respect to mortgage-related securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The forward roll may not extend for a period of greater than one year. The Fund records the incremental difference between the forward purchase and sale of each forward roll as interest income.

  Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Fund to receive inferior securities to what was sold to the counterparty at redelivery; counterparty credit risk; and the potential pay down speed variance between the mortgage-related pools.

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

  Security Credit Risk. The Fund invests in high-yield securities, which may be subject to a greater degree of credit risk, market fluctuations and loss of income and principal, and may be more sensitive to economic conditions than lower-yielding, higher-rated fixed-income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of August 31, 2003, securities with an aggregate market value of $22,751, representing less than 0.01% of the Fund’s net assets, were in default.

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

  Joint Repurchase Agreements. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. Secured by U.S. government securities, these balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings.

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

  Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

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

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

27 | OPPENHEIMER U.S. GOVERNMENT TRUST NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued

  The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of investment for federal income tax purposes.

                                                                                  Net Unrealized
                                                                                    Appreciation
     Undistributed         Undistributed                Accumulated             Based on Cost of
     Net Investment            Long-Term                       Loss       Securities for Federal
     Income                         Gain           Carryforward 1,2          Income Tax Purposes
     -------------------------------------------------------------------------------------------

     $2,887,599                      $--                 $1,135,763                     $833,576



 1. As of August 31, 2003, the Fund had $1,135,763 of net capital loss
 carryforwards available to offset future realized capital gains, if any, and
 thereby reduce future taxable gain distributions. As of August 31, 2003,
 details of the capital loss carryforward were as follows:

                              Expiring
                              ------------------------------
                              2011                $1,135,763

 2. During the fiscal year August 31, 2003, the Fund did not utilize any capital
 loss carryforwards. During the fiscal year August 31, 2002, the Fund utilized
 $32,569,144 of capital loss carryforward to offset capital gains realized in
 that fiscal year.

 Net investment income (loss) and net realized gain (loss) may differ for
 financial statement and tax purposes. The character of dividends and
 distributions made during the fiscal year from net investment income or net
 realized gains may differ from their ultimate characterization for federal
 income tax purposes. Also, due to timing of dividends and distributions, the
 fiscal year in which amounts are distributed may differ from the fiscal year in
 which the income or net realized gain was recorded by the Fund. Accordingly,
 the following amounts have been reclassified for August 31, 2003. Net assets of
 the Fund were unaffected by the reclassifications.

            To                      From                                    Net
            Ordinary             Capital          Tax Return         Investment
            Income                  Gain          of Capital               Loss
            --------------------------------------------------------------------
            $2,204,293        $2,204,293                 $--                $--

 The tax character of distributions paid during the years ended August 31, 2003
 and August 31, 2002 was as follows:
                                            Year Ended               Year Ended
                                       August 31, 2003          August 31, 2002
       -------------------------------------------------------------------------
       Distributions paid from:
       Ordinary income                     $40,085,957              $57,818,768
       Long-term capital gain                3,403,472                       --
                                           -------------------------------------
       Total                               $43,489,429              $57,818,768
                                           =====================================

 The aggregate cost of investments and the composition of unrealized
 appreciation and depreciation of investments for federal income tax purposes as
 of August 31, 2003 are noted below. The primary difference between book and tax
 appreciation or depreciation of investments, if applicable, is attributable to
 the tax deferral of losses or tax realization of financial statement unrealized
 gain or loss.



28  |  OPPENHEIMER U.S. GOVERNMENT TRUST

                 Federal tax cost                              $2,134,248,613
                                                               ==============

                 Gross unrealized appreciation                 $   29,392,854
                 Gross unrealized depreciation                   (28,559,278)
                                                               --------------
                 Net unrealized appreciation                   $      833,576
                                                               ==============

-------------------------------------------------------------------------------- Trustees' Compensation. The Fund has adopted an unfunded retirement plan for the Fund's independent trustees. Benefits are based on years of service and fees paid to each trustee during the years of service. During the year ended August 31, 2003, the Fund's projected benefit obligations were increased by $15,707 and payments of $12,126 were made to retired trustees, resulting in an accumulated liability of $162,298 as of August 31, 2003. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or are invested in other selected Oppenheimer 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. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- Investment Income. 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. -------------------------------------------------------------------------------- Expense Offset Arrangement. The reduction of custodian fees represents earnings on cash balances maintained by the Fund. -------------------------------------------------------------------------------- Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. -------------------------------------------------------------------------------- Other. The preparation of financial statements in conformity with 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. 29 | OPPENHEIMER U.S. GOVERNMENT TRUST NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:

                                           Year Ended August 31, 2003           Year Ended August 31, 2002
                                            Shares             Amount           Shares              Amount
------------------------------------------------------------------------------------------------------------

 Class A
 Sold                                   56,652,571      $ 564,246,786       51,158,977       $ 492,319,270
 Dividends and/or
 distributions reinvested                2,381,759         23,695,252        3,285,846          31,517,309
 Redeemed                              (60,388,778)      (600,328,060)     (31,048,388)       (297,864,488)
                                       ---------------------------------------------------------------------
 Net increase (decrease)                (1,354,448)     $ (12,386,022)      23,396,435       $ 225,972,091
                                       =====================================================================

------------------------------------------------------------------------------------------------------------
 Class B
 Sold                                   20,228,243      $ 201,205,017       28,240,126       $ 271,878,767
 Dividends and/or
 distributions reinvested                  805,769          8,009,852        1,009,466           9,672,641
 Redeemed                              (22,848,238)      (226,860,264)     (10,910,447)       (104,512,655)
                                       ---------------------------------------------------------------------
 Net increase (decrease)                (1,814,226)     $ (17,645,395)      18,339,145       $ 177,038,753
                                       =====================================================================

------------------------------------------------------------------------------------------------------------
 Class C
 Sold                                   10,172,062      $ 101,135,131       13,565,886       $ 130,250,103
 Dividends and/or
 distributions reinvested                  433,362          4,305,775          613,993           5,880,095
 Redeemed                              (11,673,080)      (115,833,713)      (6,470,186)        (61,928,048)
                                       ---------------------------------------------------------------------
 Net increase (decrease)                (1,067,656)     $ (10,392,807)       7,709,693       $  74,202,150
                                       =====================================================================

------------------------------------------------------------------------------------------------------------
 Class N
 Sold                                    2,734,977      $  27,196,182        1,861,890       $  17,830,379
 Dividends and/or
 distributions reinvested                   56,283            559,905           32,852             314,778
 Redeemed                               (1,495,408)       (14,859,265)        (587,177)         (5,591,433)
                                       ---------------------------------------------------------------------
 Net increase                            1,295,852      $  12,896,822        1,307,565       $  12,553,724
                                       =====================================================================

------------------------------------------------------------------------------------------------------------
 Class Y
 Sold                                      194,270      $   1,933,455          198,277       $   1,903,907
 Dividends and/or
 distributions reinvested                   11,213            111,561           11,662             111,903
 Redeemed                                 (228,630)        (2,270,015)         (80,212)           (766,762)
                                       ---------------------------------------------------------------------
 Net increase (decrease)                   (23,147)     $    (224,999)         129,727       $   1,249,048
                                       =====================================================================

-------------------------------------------------------------------------------- 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, 2003, were $1,392,021,467 and $1,408,427,356, respectively.

30 | OPPENHEIMER U.S. GOVERNMENT TRUST -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates

  Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.65% 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, 0.50% of the next $1.2 billion, and 0.475% of average annual net assets over $2.0 billion.

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

  Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended August 31, 2003, the Fund paid $2,920,206 to OFS for services to the Fund.

  Additionally, Class Y shares are subject to minimum fees of $5,000 for assets of less than $10 million and $10,000 for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees.

  OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees up to an annual rate of 0.35% of average annual net assets for all classes. This undertaking may be amended or withdrawn at any time.

-------------------------------------------------------------------------------- Distribution and Service Plan (12b-1) Fees. Under its General Distributor's Agreement with the Manager, OppenheimerFunds Distributor, Inc. (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       Concessions      Concessions       Concessions      Concessions
                        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, 2003       $3,750,127          $791,915        $1,317,951       $3,956,516          $542,151         $212,758

1. The Distributor advances concession 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, 2003               $40,961        $1,852,281                $112,066               $110,391

31 | OPPENHEIMER U.S. GOVERNMENT TRUST NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Continued

  Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A Shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. For the year ended August 31, 2003, expense under the Class A Plan totaled $2,198,600, all of which were paid by the Distributor to recipients, which included $24,802 retained by the Distributor and $142,068 which was 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.

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

  Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B shares and on Class C shares and the Fund pays the Distributor an annual asset-based sales charge of 0.25% per year on Class N shares. The Distributor also receives a service fee of 0.25% per year under each plan.

  Distribution fees paid to the Distributor for the year ended August 31, 2003, 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               $4,311,570                   $3,503,724          $11,051,062                   2.98%
 Class C Plan                2,169,872                      666,737            2,188,523                   1.14
 Class N Plan                  109,966                       94,911              444,148                   1.71

-------------------------------------------------------------------------------- 5. Futures Contracts

  A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. 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 protection from 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 as a 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.

32 | OPPENHEIMER U.S. GOVERNMENT TRUST

  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 has expired.

  Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. 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. The net change in unrealized appreciation and depreciation is reported on the Statement of Operations.

  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, 2003, the Fund had outstanding futures contracts as follows:

                                                                                               Unrealized
                                   Expiration       Number of      Valuation as of           Appreciation
 Contract Description                   Dates       Contracts      August 31, 2003         (Depreciation)
----------------------------------------------------------------------------------------------------------

 Contracts to Purchase
 U.S. Treasury Nts., 5 yr.           12/19/03              85         $  9,338,047           $    30,228
                                                                                             -------------
 Contracts to Sell
 U.S. Long Bonds                     12/19/03           1,134          120,204,000            (1,489,284)
 U.S. Treasury Nts., 2 yr.           12/29/03             439           93,527,578              (129,475)
 U.S. Treasury Nts., 2 yr.            9/29/03             696          149,357,250               438,947
 U.S. Treasury Nts., 10 yr.          12/19/03           1,079          118,386,531              (599,992)
                                                                                             -------------
                                                                                              (1,779,804)
                                                                                             -------------
                                                                                             $(1,749,576)
                                                                                             =============

-------------------------------------------------------------------------------- 6. Illiquid Securities

  As of August 31, 2003, 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, 2003 was $54,818,778, which represents 3.85% of the Fund’s net assets.

33 | OPPENHEIMER U.S. GOVERNMENT TRUST NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 7. Borrowing and Lending Arrangements

  The Fund entered into an “interfund borrowing and lending arrangement” with other funds in the Oppenheimer funds complex, to allow funds to borrow for liquidity purposes. The arrangement was initiated pursuant to exemptive relief granted by the Securities and Exchange Commission to allow these affiliated funds to lend money to, and borrow money from, each other, in an attempt to reduce borrowing costs below those of bank loan facilities. Under the arrangement the Fund may lend money to other Oppenheimer funds and may borrow from other Oppenheimer funds at a rate set by the Fund’s Board of Trustees, based upon a recommendation by the Manager. The Fund’s borrowings, if any, are subject to asset coverage requirements under the Investment Company Act and the provisions of the SEC order and other applicable regulations. If the Fund borrows money, there is a risk that the loan could be called on one day’s notice, in which case the Fund might have to borrow from a bank at higher rates if a loan were not available from another Oppenheimer fund. If the Fund lends money to another fund, it will be subject to the risk that the other fund might not repay the loan in a timely manner, or at all.

  The Fund had no interfund borrowings or loans outstanding during the year ended or at August 31, 2003.

34 | 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 Products
Air Freight & Couriers               Industrial Conglomerates
Airlines                             Insurance
Auto Components                      Internet & Catalog Retail
Automobiles                          Internet Software & Services
Beverages                            IT Services
Biotechnology                        Leisure Equipment & Products
Building Products                    Machinery
Chemicals                            Marine
Consumer Finance                     Media
Commercial Banks                     Metals & Mining
Commercial Services & Supplies       Multiline Retail
Communications Equipment             Multi-Utilities
Computers & Peripherals              Office Electronics
Construction & Engineering           Oil & Gas
Construction Materials               Paper & Forest Products
Containers & Packaging               Personal Products
Distributors                         Pharmaceuticals
Diversified Financial Services       Real Estate
Diversified Telecommunication        Road & Rail
Services
Electric Utilities                   Semiconductors and Semiconductor
                                     Equipment
Electrical Equipment                 Software
Electronic Equipment & Instruments   Specialty Retail
Energy Equipment & Services          Textiles, Apparel & Luxury Goods
Food & Staples Retailing             Thrifts & Mortgage Finance
Food Products                        Tobacco
Gas Utilities                        Trading Companies & Distributors
Health Care Equipment & Supplies     Transportation Infrastructure
Health Care Providers & Services     Water Utilities
Hotels Restaurants & Leisure         Wireless Telecommunication Services
Household Durables









                                            C-12
                                         Appendix C

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

In certain cases, the initial sales charge that applies to purchases of Class A shares1 of
the Oppenheimer funds or the contingent deferred sales charge that may apply to Class A,
Class B or Class C shares may be waived.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 adviser that has made
            special arrangements with the Distributor for those purchases, or
         2) by a direct rollover of a distribution from a qualified Retirement Plan if the
            administrator of that Plan has made special arrangements with the Distributor
            for those purchases.
|_|   Purchases of Class A shares by Retirement Plans that have any of the following
      record-keeping arrangements:
         1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc.
            ("Merrill Lynch") on a daily valuation basis for the Retirement Plan. On the
            date the plan sponsor signs the record-keeping service agreement with Merrill
            Lynch, the Plan must have $3 million or more of its assets invested in (a)
            mutual funds, other than those advised or managed by Merrill Lynch Investment
            Management, L.P. ("MLIM"), that are made available under a Service Agreement
            between Merrill Lynch and the mutual fund's principal underwriter or
            distributor, and  (b)  funds advised or managed by MLIM (the funds described in
            (a) and (b) are referred to as "Applicable Investments").
         2) The record keeping for the Retirement Plan is performed on a daily valuation
            basis by a record keeper whose services are provided under a contract or
            arrangement between the Retirement Plan and Merrill Lynch. On the date the plan
            sponsor signs the record keeping service agreement with Merrill Lynch, the Plan
            must have $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).
II.






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

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

Class A shares purchased by the following investors are not subject to any Class A sales
charges (and no concessions are paid by the Distributor on such purchases):
|_|   The Manager or its affiliates.
|_|   Present or former officers, directors, trustees and employees (and their "immediate
      families") of the Fund, the Manager and its affiliates, and retirement plans
      established by them for their employees. The term "immediate family" refers to one's
      spouse, children, grandchildren, grandparents, parents, parents-in-law, brothers and
      sisters, sons- and daughters-in-law, a sibling's spouse, a spouse's siblings, aunts,
      uncles, nieces and nephews; relatives by virtue of a remarriage (step-children,
      step-parents, etc.) are included.
|_|   Registered management investment companies, or separate accounts of insurance
      companies having an agreement with the Manager or the Distributor for that purpose.
|_|   Dealers or brokers that have a sales agreement with the Distributor, if they purchase
      shares for their own accounts or for retirement plans for their employees.
|_|   Employees and registered representatives (and their spouses) of dealers or brokers
      described above or financial institutions that have entered into sales arrangements
      with such dealers or brokers (and which are identified as such to the Distributor) or
      with the Distributor. The purchaser must certify to the Distributor at the time of
      purchase that the purchase is for the purchaser's own account (or for the benefit of
      such employee's spouse or minor children).
|_|   Dealers, brokers, banks or registered investment advisors that have entered into an
      agreement with the Distributor providing specifically for the use of shares of the
      Fund in particular investment products made available to their clients. Those clients
      may be charged a transaction fee by their dealer, broker, bank or advisor for the
      purchase or sale of Fund shares.
|_|   Investment advisors and financial planners who have entered into an agreement for
      this purpose with the Distributor and who charge an advisory, consulting or other fee
      for their services and buy shares for their own accounts or the accounts of their
      clients.
|_|   "Rabbi trusts" that buy shares for their own accounts, if the purchases are made
      through a broker or agent or other financial intermediary that has made special
      arrangements with the Distributor for those purchases.
|_|   Clients of investment advisors or financial planners (that have entered into an
      agreement for this purpose with the Distributor) who buy shares for their own
      accounts may also purchase shares without sales charge but only if their accounts are
      linked to a master account of their investment advisor or financial planner on the
      books and records of the broker, agent or financial intermediary with which the
      Distributor has made such special arrangements . Each of these investors may be
      charged a fee by the broker, agent or financial intermediary for purchasing shares.
|_|   Directors, trustees, officers or full-time employees of OpCap Advisors or its
      affiliates, their relatives or any trust, pension, profit sharing or other benefit
      plan which beneficially owns shares for those persons.
|_|   Accounts for which Oppenheimer Capital (or its successor) is the investment advisor
      (the Distributor must be advised of this arrangement) and persons who are directors
      or trustees of the company or trust which is the beneficial owner of such accounts.
|_|   A unit investment trust that has entered into an appropriate agreement with the
      Distributor.
|_|   Dealers, brokers, banks, or registered investment advisers that have entered into an
      agreement with the Distributor to sell shares to defined contribution employee
      retirement plans for which the dealer, broker or investment adviser provides
      administration services.
|-|





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

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. The death or disability must have
      occurred after the account was established, and for disability you must provide
      evidence of a determination of disability by the Social Security Administration.
|_|   The contingent deferred sales charges are generally not waived following the death or
      disability of a grantor or trustee for a trust account. The contingent deferred sales
      charges will only be waived in the limited case of the death of the trustee of a
      grantor trust or revocable living trust for which the trustee is also the sole
      beneficiary. The death or disability must have occurred after the account was
      established, and for disability you must provide evidence of a determination of
      disability 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

|X|





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

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

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

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

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

Shareholders of Oppenheimer 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
--------------------------------------------------------------------------------------------

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








Oppenheimer U.S. Government Trust

Internet Website:
      www.oppenheimerfunds.com
      ------------------------

Investment Advisor
      OppenheimerFunds, Inc.
      Two World Financial Center,
      225 Liberty Street-11th Floor
      New York, New York 10080

Distributor
      OppenheimerFunds Distributor, Inc.
      Two World Financial Center,
      225 Liberty Street-11th Floor
      New York, New York 10080

Transfer Agent
      OppenheimerFunds Services
      P.O. Box 5270
      Denver, Colorado 80217
      1.800.CALL OPP(225.5677)

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 LLP
      1675 Broadway
      New York, New York 10019


1234

PX220.001.1003

--------
1 Currently, the Investment Company Act permits (a) lending of securities, (b) purchasing
debt securities or similar evidences of indebtedness, (c) repurchase agreements and (d)
interfund lending consistent with the Fund's exemptive order..
2 Currently, the Investment Company 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.  Interfund borrowing must be consistent with the Fund's exemptive order.
3 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 and loans from the
OppenheimerFunds-sponsored Single K retirement plan.
11 This provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.