Oppenheimer U.S. Government Trust

497 1 sai.htm REVISED SAI Oppenheimer U.S. Government Trust

6803 South Tucson Way, Centennial, Colorado 80112-3924
1.800.CALL OPP (225.5677)

Statement of Additional Information dated November 24, 2006

This Statement of Additional Information ("SAI") is not a Prospectus. This document
contains additional information about the Fund and supplements information in the
Prospectus dated November 24, 2006. 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....................................... 20
Disclosure of Portfolio Holdings.................................... 22
How the Fund is Managed ................................................ 25
Organization and History............................................ 25
Board of Trustees and Oversight Committees.......................... 27
Trustees and Officers of the Fund................................... 29
The Manager......................................................... 38
Brokerage Policies of the Fund.......................................... 43
Distribution and Service Plans.......................................... 45
Payments to Fund Intermediaries......................................... 50
Performance of the Fund................................................. 54

About Your Account
How To Buy Shares....................................................... 60
How To Sell Shares...................................................... 71
How To Exchange Shares.................................................. 77
Dividends, Capital Gains and Taxes...................................... 81
Additional Information About the Fund................................... 85

Financial Information About the Fund
Report of Independent Registered Public Accounting Firm................. 87
Financial Statements.................................................... 88

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

45
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 SAI contains supplemental information about those
policies and risks and the types of securities that the Fund's investment Manager,
OppenheimerFunds, Inc., (the "Manager"), can select for the Fund. Additional information is
also provided about the strategies that the Fund may use to try to achieve its 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.

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.

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 net 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.

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.

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

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

Other Investment Techniques and Strategies. In seeking its 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.

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, or for temporary defensive purposes, as
described in the Prospectus and this SAI.

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.

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.

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." Inverse floaters are a type of derivative security. 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. As interest rates fall, inverse
floaters produce more current income.

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.

|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. The Fund may lend its portfolio securities pursuant to
policies approved by the Fund's Board. It may do so to try to provide income or to raise
cash for liquidity purposes. As a fundamental policy, these loans are limited to not more
than 25% of the value of the Fund's net assets.

The Fund has entered into a Securities Lending Agreement (the "Securities Lending
Agreement") with JPMorgan Chase Bank, N.A. ("JPMorgan Chase"). Under the Securities Lending
Agreement and applicable regulatory requirements (which are subject to change), the
collateral for such loans must, on each business day, be at least equal to the value of the
loaned securities and must consist of cash, bank letters of credit or 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, a bank letter of credit
must obligate the bank to pay to JPMorgan Chase, as agent, amounts demanded by the Fund if
the demand meets the terms of the letter. Both the issuing bank and the terms of the letter
of credit must be satisfactory to JPMorgan Chase and the Fund. The terms of the loans must
also meet applicable tests under the Internal Revenue Code and permit the Fund to reacquire
loaned securities on five business days' notice or in time to vote on any material matters.
The Securities Lending Agreement may be terminated by either JPMorgan Chase or the Fund on
30 days' written notice.

Pursuant to the Securities Lending Agreement, the Fund will receive a percentage of
all annual net income (i.e., net of rebates to the borrower and certain other approved
expenses) from securities lending transactions. Such net income includes earnings from the
investment of any cash collateral received from a borrower and loan fees paid or payable by
a borrower in connection with loans secured by collateral other than cash.

There are some risks in connection with securities lending, including possible delays
in receiving additional collateral from the borrower to secure a loan or delays in
recovering the loaned securities if the borrower defaults. JPMorgan Chase has agreed, in
general, to guarantee the obligations of borrowers to return loaned securities to the Fund
and to be responsible for expenses relating to securities lending. The Fund, however, will
be responsible for risks associated with the investment of cash collateral, including the
risk of a default by the issuer of a security in which cash collateral has been invested.
If that occurs, the Fund may incur additional costs in seeking to obtain the collateral or
may lose the amount of the collateral investment. The Fund may also lose money if the value
of the investments purchased with cash collateral decreases.

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 SAI.

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. Rather, it would put the Fund in a
short futures position.

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.

Buying a put on an investment the Fund does not own (such as an index or future)
permits the Fund to resell the put or to buy the underlying investment and sell it at the
exercise price. The resale price will vary inversely to the price of the underlying
investment. If the market price of the underlying investment is above the exercise price
and, as a result, the put is not exercised, the put will become worthless on its expiration
date.

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

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 interpretations of staff members of the SEC regarding applicable provisions of
the Investment Company Act, when the Fund purchases a future, it must segregate cash or
readily marketable short-term debt instruments in an amount equal to the purchase price of
the future, less the margin deposit applicable to it.

|X| Temporary Defensive and Interim Investments. In times of adverse or unstable market,
economic or political conditions, the Fund can invest up to 100% of its assets in temporary
defensive investments that are inconsistent with the Fund's principal investment
strategies. Generally, they would be:
o high-quality, short-term money market instruments, such as U.S. government
securities,
o highly rated commercial paper,
o short-term corporate debt obligations, and
o bank deposits or repurchase agreements.

The Fund could also hold these types of securities pending the investment of proceeds
from the sale of Fund shares or portfolio securities or to meet anticipated redemptions of
Fund shares. To the extent the Fund invests defensively in these securities, it might not
achieve its investment objective of high current income consistent with preservation of
capital.

Other Investment Restrictions

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 SAI are "fundamental" only if they are identified as such. The
Fund's Board of Trustees can change non-fundamental policies without shareholder approval.
However, significant changes to investment policies will be described in supplements or
updates to the Prospectus or this SAI, as appropriate. The Fund's principal 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 invest 25% or more of its total assets in any one industry. That
limit does not apply to securities issued or guaranteed by the U.S. government or its
agencies and instrumentalities or securities issued by investment companies.

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

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

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

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

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)

Unless the Prospectus or this SAI states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an investment (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 net assets plus borrowings used for investment purposes
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.

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; except that the
Fund may purchase and redeem shares issued by a money market fund in accordance with rule
12d1-1 under the Investment Company Act, as such rule may be amended from time to time.

For purposes of the Fund's policy not to concentrate its investments, the Fund has
adopted the non-fundamental industry classifications set forth in Appendix B to this SAI.

Disclosure of Portfolio Holdings. The Fund has adopted policies and procedures concerning
the dissemination of information about its portfolio holdings by employees, officers and/or
directors of the Manager, Distributor and Transfer Agent. These policies are designed to
assure that non-public information about portfolio securities is distributed only for a
legitimate business purpose, and is done in a manner that (a) conforms to applicable laws
and regulations and (b) is designed to prevent that information from being used in a way
that could negatively affect the Fund's investment program or enable third parties to use
that information in a manner that is harmful to the Fund.

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

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

The Manager and its subsidiaries and affiliates, employees, officers, and directors,
shall neither solicit nor accept any compensation or other consideration (including any
agreement to maintain assets in the Fund or in other investment companies or accounts
managed by the Manager or any affiliated person of the Manager) in connection with the
disclosure of the Fund's non-public portfolio holdings. The receipt of investment advisory
fees or other fees and compensation paid to the Manager and its subsidiaries pursuant to
agreements approved by the Fund's Board shall not be deemed to be "compensation" or
"consideration" for these purposes. It is a violation of the Code of Ethics for any covered
person to release holdings in contravention of portfolio holdings disclosure policies and
procedures adopted by the Fund.

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

Except under special limited circumstances discussed below, month-end lists of the
Fund's complete portfolio holdings may be disclosed no sooner than 30-days after the
relevant month-end, subject to the procedures below. If the Fund's complete portfolio
holdings have not been disclosed publicly, they may be disclosed pursuant to special
requests for legitimate business reasons, provided that:
o The third-party recipient must first submit a request for release of Fund portfolio
holdings, explaining the business reason for the request;
o Senior officers (a Senior Vice President or above) in the Manager's Portfolio and
Legal departments must approve the completed request for release of Fund portfolio
holdings; and
o The third-party recipient must sign the Manager's portfolio holdings non-disclosure
agreement before receiving the data, agreeing to keep information that is not
publicly available regarding the Fund's holdings confidential and agreeing not to
trade directly or indirectly based on the information.

The Fund's complete portfolio holdings positions may be released to the following
categories of entities or individuals on an ongoing basis, provided that such entity or
individual either (1) has signed an agreement to keep such information confidential and not
trade on the basis of such information or (2) is subject to fiduciary obligations, as a
member of the Fund's Board, or as an employee, officer and/or director of the Manager,
Distributor, or Transfer Agent, or their respective legal counsel, not to disclose such
information except in conformity with these policies and procedures and not to trade for
his/her personal account on the basis of such information:
o Employees of the Fund's Manager, Distributor and Transfer Agent who need to have
access to such information (as determined by senior officers of such entity),
o The Fund's certified public accountants and independent registered public accounting
firm,
o Members of the Fund's Board and the Board's legal counsel,
o The Fund's custodian bank,
o A proxy voting service designated by the Fund and its Board,
o Rating/ranking organizations (such as Lipper and Morningstar),
o Portfolio pricing services retained by the Manager to provide portfolio security
prices, and
o Dealers, to obtain bids (price quotations if securities are not priced by the Fund's
regular pricing services).

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

Portfolio holdings information (which may include information on individual
securities positions or multiple securities) may be provided to the entities listed below
(1) by portfolio traders employed by the Manager in connection with portfolio trading, and
(2) by the members of the Manager's Security Valuation Group and Accounting Departments in
connection with portfolio pricing or other portfolio evaluation purposes:
o Brokers and dealers in connection with portfolio transactions (purchases and sales),
o Brokers and dealers to obtain bids or bid and asked prices (if securities held by the
Fund are not priced by the fund's regular pricing services),
o Dealers to obtain price quotations where the fund is not identified as the owner.

Portfolio holdings information (which may include information on the Fund's entire
portfolio or individual securities therein) may be provided by senior officers of the
Manager or attorneys on the legal staff of the Manager, Distributor, or Transfer Agent, in
the following circumstances:
o Response to legal process in litigation matters, such as responses to subpoenas or in
class action matters where the Fund may be part of the plaintiff class (and seeks
recovery for losses on a security) or a defendant,
o Response to regulatory requests for information (the SEC, NASD, state securities
regulators, and/or foreign securities authorities, including without limitation
requests for information in inspections or for position reporting purposes),
o To potential sub-advisers of portfolios (pursuant to confidentiality agreements),
o To consultants for retirement plans for plan sponsors/discussions at due diligence
meetings (pursuant to confidentiality agreements),
o Investment bankers in connection with merger discussions (pursuant to confidentiality
agreements).

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

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

The Chief Compliance Officer (the "CCO") of the Fund and the Manager, Distributor,
and Transfer Agent shall oversee the compliance by the Manager, Distributor, Transfer
Agent, and their personnel with these policies and procedures. At least annually, the CCO
shall report to the Fund's Board on such compliance oversight and on the categories of
entities and individuals to which disclosure of portfolio holdings of the Funds has been
made during the preceding year pursuant to these policies. The CCO shall report to the
Fund's Board any material violation of these policies and procedures during the previous
calendar quarter and shall make recommendations to the Board as to any amendments that the
CCO believes are necessary and desirable to carry out or improve these policies and
procedures.

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

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

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of beneficial interest. The Fund was
organized as a Massachusetts business trust in March 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.

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

The Fund currently has five classes of shares: Class A, Class B, Class C, Class N and
Class Y. All classes invest in the same investment portfolio. Only retirement plans may
purchase Class N shares. Only certain institutional investors may purchase Class Y shares.
Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o will generally have a different net asset value,
o will generally have separate voting rights on matters in which interests of one class
are different from interests of another class, and
o votes as a class on matters that affect that class alone.

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

|X| Meetings of Shareholders. As a Massachusetts business trust, the Fund is not required
to hold, and does not plan to hold, regular annual meetings of shareholders, but may hold
shareholder meetings from time to time on important matters or when required to do so by
the Investment Company Act, or other applicable law. Shareholders have the right, upon a
vote or declaration in writing of two-thirds of the outstanding shares of the Fund, to
remove a Trustee or to take other action described in the Fund's Declaration of Trust.

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

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

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

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

The Board of Trustees has an Audit Committee, a Regulatory & Oversight Committee, a
Governance Committee and a Proxy Committee. Each committee is comprised solely of Trustees
who are not "interested persons" under the Investment Company Act (the "Independent
Trustees"). The members of the Audit Committee are Joel W. Motley (Chairman), Mary F.
Miller, Kenneth A. Randall and Joseph M. Wikler. The Audit Committee held 6 meetings during
the Fund's fiscal year ended August 31, 2006. The Audit Committee furnishes the Board with
recommendations regarding the selection of the Fund's independent registered public
accounting firm (also referred to as the "independent Auditors"). Other main functions of
the Audit Committee outlined in the Audit Committee Charter, include, but are not limited
to: (i) reviewing the scope and results of financial statement audits and the audit fees
charged; (ii) reviewing reports from the Fund's independent Auditors regarding the Fund's
internal accounting procedures and controls; (iii) reviewing reports from the Manager's
Internal Audit Department; (iv) maintaining a separate line of communication between the
Fund's independent Auditors and the Independent Trustees; (v) reviewing the independence of
the Fund's independent Auditors; and (vi) pre-approving the provision of any audit or
non-audit services by the Fund's independent Auditors, including tax services, that are not
prohibited by the Sarbanes-Oxley Act, to the Fund, the Manager and certain affiliates of
the Manager.

The members of the Regulatory & Oversight Committee are Robert G. Galli (Chairman),
Matthew P. Fink, Phillip A. Griffiths, Joel W. Motley and Brian F. Wruble. The Regulatory &
Oversight Committee held 6 meetings during the Fund's fiscal year ended August 31, 2006.
The Regulatory & Oversight Committee evaluates and reports to the Board on the Fund's
contractual arrangements, including the Investment Advisory and Distribution Agreements,
transfer agency and shareholder service agreements and custodian agreements as well as the
policies and procedures adopted by the Fund to comply with the Investment Company Act and
other applicable law, among other duties as set forth in the Regulatory & Oversight
Committee's Charter.

The members of the Governance Committee are, Phillip A. Griffiths (Chairman), Kenneth
A. Randall, Russell S. Reynolds, Jr. and Peter I. Wold. The Governance Committee held 8
meetings during the Fund's fiscal year ended August 31, 2006. The Governance Committee
reviews the Fund's governance guidelines, the adequacy of the Fund's Codes of Ethics, and
develops qualification criteria for Board members consistent with the Fund's governance
guidelines, among other duties set forth in the Governance Committee's Charter.

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

To date, the Governance Committee has been able to identify from its own resources an
ample number of qualified candidates. Nonetheless, under the current policy of the Board,
if the Board determines that a vacancy exists or is likely to exist on the Board, the
Governance Committee will consider candidates for Board membership including those
recommended by the Fund's shareholders. The Governance Committee will consider nominees
recommended by Independent Board members or recommended by any other Board members
including Board members affiliated with the Fund's Manager. The Governance Committee may,
upon Board approval, retain an executive search firm to assist in screening potential
candidates. Upon Board approval, the Governance Committee may also use the services of
legal, financial, or other external counsel that it deems necessary or desirable in the
screening process. Shareholders wishing to submit a nominee for election to the Board may
do so by mailing their submission to the offices of OppenheimerFunds, Inc., Two World
Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008, to the
attention of the Board of Trustees of Oppenheimer U.S. Government Trust, c/o the Secretary
of the Fund.

Submissions should, at a minimum, be accompanied by the following: (1) the name,
address, and business, educational, and/or other pertinent background of the person being
recommended; (2) a statement concerning whether the person is an "interested person" as
defined in the Investment Company Act; (3) any other information that the Fund would be
required to include in a proxy statement concerning the person if he or she was nominated;
and (4) the name and address of the person submitting the recommendation and, if that
person is a shareholder, the period for which that person held Fund shares. Shareholders
should note that a person who owns securities issued by Massachusetts Mutual Life Insurance
Company (the parent company of the Manager) would be deemed an "interested person" under
the Investment Company Act. In addition, certain other relationships with Massachusetts
Mutual Life Insurance Company or its subsidiaries, with registered broker-dealers, or with
the Funds' outside legal counsel may cause a person to be deemed an "interested person."

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

The members of the Proxy Committee are Russell S. Reynolds, Jr. (Chairman), Matthew
P. Fink and Mary F. Miller. The Proxy Committee held 2 meetings during the Fund's fiscal
year ended August 31, 2006. The Proxy Committee provides the Board with recommendations for
the proxy voting of portfolio securities held by the Fund and monitors proxy voting by the
Fund.

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

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

In addition to being a Board member of each of the Board I Funds, Messrs. Galli and
Wruble are directors or trustees of ten other portfolios.

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

Messrs. Bomfim, Caan, Gillespie, Gord, Manioudakis, Murphy, Petersen, Swaney,
Szilagyi, Vandehey, Wixted and Zack and Mss. Bloomberg and Ives, who are officers of the
Fund, hold the same offices with one or more of the other Board I Funds. As of November 3,
2006, the Trustees and officers of the Fund, as a group, owned of record or beneficially
less than 1% of any class of shares of the Fund. The foregoing statement does not reflect
ownership of shares held of record by an employee benefit plan for employees of the
Manager, other than the shares beneficially owned under that plan by the officers of the
Fund listed above. In addition, none of the Independent Trustees (nor any of their
immediate family members) owns securities of either the Manager or the Distributor of the
Board I Funds or of any entity directly or indirectly controlling, controlled by or under
common control with the Manager or the Distributor.

Biographical Information. The Trustees and officers, their positions with the Fund,
length of service in such position(s) and principal occupations and business affiliations
during at least the past five years are listed in the charts below. The charts also include
information about each Trustee's beneficial share ownership in the Fund and in all of the
registered investment companies that the Trustee oversees in the Oppenheimer family of
funds ("Supervised Funds"). Mr. Fink was elected to the Board I Funds in 2005 and did not
hold shares of Board I Funds during the calendar year ended December 31, 2004. The address
of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, Colorado 80112-3924.
Each Trustee serves for an indefinite term, or until his or her resignation, retirement,
death or removal.

-------------------------------------------------------------------------------------------
Independent Trustees
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During the Past 5 Dollar Aggregate
Dollar Range
Range of Of Shares
Shares Beneficially
Held with the Fund, Years; Other Trusteeships/Directorships Beneficial Owned in
Length of Service, Held; Number of Portfolios in the Fund Owned in Supervised
Age Complex Currently Overseen the Fund Funds
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
As of December 31, 2005
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Clayton K. Yeutter, Director of American Commercial Lines (barge None Over $100,000
Chairman of the company) (since January 2005); Attorney at
Board of Trustees Hogan & Hartson (law firm) (since June
since 2003, 1993); Director of Covanta Holding Corp.
Trustee since 1993 (waste-to-energy company) (since 2002);
Age: 75 Director of Weyerhaeuser Corp. (1999-April
2004); Director of Caterpillar, Inc.
(1993-December 2002); Director of ConAgra
Foods (1993-2001); Director of Texas
Instruments (1993-2001); Director of FMC
Corporation (1993-2001). Oversees 43
portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Matthew P. Fink, Trustee of the Committee for Economic None Over $100,000
Trustee since 2005 Development (policy research foundation)
Age: 65 (since 2005); Director of ICI Education
Foundation (education foundation) (since
October 1991-August 2006); President of the
Investment Company Institute (trade
association) (October 1991- June 2004);
Director of ICI Mutual Insurance Company
(insurance company) (October 1991- June
2004). Oversees 43 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Robert G. Galli, A director or trustee of other Oppenheimer None Over $100,000
Trustee since 1993 funds. Oversees 53 portfolios in the
Age: 73 OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Phillip A. Distinguished Presidential Fellow for None Over $100,000
Griffiths, International Affairs (since 2002) and
Trustee since 1999 Member (since 1979) of the National Academy
Age: 68 of Sciences;Council on Foreign Relationns
(since 2002); Director of GSI Lumonics Inc.
(precision medical equipment supplier)
(since 2001); Senior Advisor of The Andrew
W. Mellon Foundation (since 2001); Chair of
Science Initiative Group (since 1999);
Member of the American Philosophical Society
(since 1996); Trustee of Woodward Academy
(since 1983); Foreign Associate of Third
World Academy of Sciences; Director of the
Institute for Advanced Study (1991-2004);
Director of Bankers Trust New York
Corporation (1994-1999). Provost at Duke
University (1983-1991). Oversees 43
portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Mary F. Miller, Trustee of the American Symphony Orchestra None Over $100,000
Trustee since 2004 (not-for-profit) (since October 1998); and
Age: 64 Senior Vice President and General Auditor of
American Express Company (financial services
company) (July 1998-February 2003). Oversees
43 portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Joel W. Motley, Director of Columbia Equity Financial Corp. None Over $100,000
Trustee since 2002 (privately-held financial adviser) (since
Age: 54 2002); Managing Director of Carmona Motley,
Inc. (privately-held financial adviser)
(since January 2002); Managing Director of
Carmona Motley Hoffman Inc. (privately-held
financial adviser) (January 1998-December
2001); Member of the Finance and Budget
Committee of the Council on Foreign
Relations, the Investment Committee of the
Episcopal Church of America, the Investment
Committee of Human Rights Watch and the
Investment Committee of Historic Hudson
Valley. Oversees 43 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Kenneth A. Randall, Director of Dominion Resources, Inc. $1 - Over $100,000
Trustee since 1982 (electric utility holding company) (February $10,000
Age: 79 1972-October 2005); Former Director of Prime
Retail, Inc. (real estate investment trust),
Dominion Energy Inc. (electric power and oil
& gas producer), Lumbermens Mutual Casualty
Company, American Motorists Insurance
Company and American Manufacturers Mutual
Insurance Company; Former President and
Chief Executive Officer of The Conference
Board, Inc. (international economic and
business research). Oversees 43 portfolios
in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Russell S. Chairman of The Directorship Search Group, None Over $100,000
Reynolds, Jr., Inc. (corporate governance consulting and
Trustee since 1989 executive recruiting) (since 1993); Life
Age: 74 Trustee of International House (non-profit
educational organization); Founder, Chairman
and Chief Executive Officer of Russell
Reynolds Associates, Inc. (1969-1993);
Banker at J.P. Morgan & Co. (1958-1966); 1st
Lt. Strategic Air Command, U. S. Air Force
(1954-1958). Oversees 43 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Joseph M. Wikler, Director of the following medical device None Over $100,000
Trustee since 2005 companies: Medintec (since 1992) and Cathco
Age: 65 (since 1996); Director of Lakes
Environmental Association (since 1996);
Member of the Investment Committee of the
Associated Jewish Charities of Baltimore
(since 1994-December 2001); 43 portfolios in
the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Peter I. Wold, President of Wold Oil Properties, Inc. (oil None Over $100,000
Trustee since 2005 and gas exploration and production company)
Age: 57 (since 1994); Vice President, Secretary and
Treasurer of Wold Trona Company, Inc. (soda
ash processing and production) (since 1996);
Vice President of Wold Talc Company, Inc.
(talc mining) (since 1999); Managing Member
of Hole-in-the-Wall Ranch (cattle ranching)
(since 1979); Director and Chairman of the
Denver Branch of the Federal Reserve Bank of
Kansas City (1993-1999); and Director of
PacifiCorp. (electric utility) (1995-1999).
Oversees 43 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Brian F. Wruble, General Partner of Odyssey Partners, L.P. None Over $100,000
Trustee since 2005 (hedge fund) (since September 1995);
Age: 63 Director of Special Value Opportunities
Fund, LLC (registered investment company)
(since September 2004); Member of Zurich
Financial Investment Advisory Board (since
October 2004); Board of Governing Trustees
of The Jackson Laboratory (non-profit)
(since August 1990); Trustee of the
Institute for Advanced Study (non-profit
educational institute) (since May 1992);
Special Limited Partner of Odyssey
Investment Partners, LLC (private equity
investment) (January 1999-September 2004);
Trustee of Research Foundation of AIMR
(2000-2002) (investment research,
non-profit); Governor, Jerome Levy Economics
Institute of Bard College (August
1990-September 2001) (economics research);
Director of Ray & Berendtson, Inc. (May
2000-April 2002) (executive search firm).
Oversees 53 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------------

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

-------------------------------------------------------------------------------------------
Interested Trustee and Officer
-------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During the Past 5 Dollar Aggregate
Dollar Range
Range of Of Shares
Shares Beneficially
Held with Fund, Years; Other Trusteeships/Directorships Beneficially Owned in
Length of Held; Number of Portfolios in the Fund Owned in Supervised
Service, Age Complex Currently Overseen the Fund Funds
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
As of December 31, 2005
------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and None Over $100,000
President, Director (since June 2001) and President
Principal (since September 2000) of the Manager;
Executive Officer President and a director or trustee of
and other Oppenheimer funds; President and
Trustee since 2001 Director of Oppenheimer Acquisition Corp.
Age: 57 ("OAC") (the Manager's parent holding
company) and of Oppenheimer Partnership
Holdings, Inc. (holding company subsidiary
of the Manager) (since July 2001); Director
of OppenheimerFunds Distributor, Inc.
(subsidiary of the Manager) (since November
2001); Chairman and Director of Shareholder
Services, Inc. and of Shareholder Financial
Services, Inc. (transfer agent subsidiaries
of the Manager) (since July 2001);
President and Director of OppenheimerFunds
Legacy Program (charitable trust program
established by the Manager) (since July
2001); Director of the following investment
advisory subsidiaries of the Manager: OFI
Institutional Asset Management, Inc.,
Centennial Asset Management Corporation,
Trinity Investment Management Corporation
and Tremont Capital Management, Inc. (since
November 2001), HarbourView Asset
Management Corporation and OFI Private
Investments, Inc. (since July 2001);
President (since November 1, 2001) and
Director (since July 2001) of Oppenheimer
Real Asset Management, Inc.; Executive Vice
President of Massachusetts Mutual Life
Insurance Company (OAC's parent company)
(since February 1997); Director of DLB
Acquisition Corporation (holding company
parent of Babson Capital Management LLC)
(since June 1995); Member of the Investment
Company Institute's Board of Governors
(since October 3, 2003); Chief Operating
Officer of the Manager (September 2000-June
2001); President and Trustee of MML Series
Investment Fund and MassMutual Select Funds
(open-end investment companies) (November
1999-November 2001); Director of C.M. Life
Insurance Company (September 1999-August
2000); President, Chief Executive Officer
and Director of MML Bay State Life
Insurance Company (September 1999-August
2000); Director of Emerald Isle Bancorp and
Hibernia Savings Bank (wholly-owned
subsidiary of Emerald Isle Bancorp) (June
1989-June 1998). Oversees 91 portfolios in
the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------------
Other Officers of the Fund
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Name, Position(s) Held Principal Occupation(s) During Past 5 Years
with Fund, Length of
Service, Age
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Antulio Bomfim, Vice President of the Manager since October 2003; Senior
Vice President and Economist at the Board of Governors of the Federal Reserve
Portfolio Manager System from June 1992 to October 2003. A portfolio manager
since 2003 of 10 portfolios in the OppenheimerFunds complex.
Age: 39
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Geoffrey Caan, Vice President and Portfolio Manager of the Manager since
Vice President and August 2003; Vice President of ABN AMRO NA, Inc. (June
Portfolio Manager 2002-August 2003); Vice President of Zurich Scudder
since 2003 Investments (January 1999-June 2002). A portfolio manager of
Age: 37 10 portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Benjamin J. Gord, Vice President of the Manager (since April 2002), of
Vice President and HarbourView Asset Management Corporation (since April 2002)
Portfolio Manager and of OFI Institutional Asset Management, Inc. (as of June
since 2003 2002); Executive Director and senior fixed income analyst at
Age: 44 Miller Anderson & Sherrerd, a division of Morgan Stanley
Investment Management (April 1992-March 2002). A portfolio
manager of 10 portfolios in the OppenheimerFunds complex..
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Angelo Manioudakis, Senior Vice President of the Manager (since April 2002), of
Vice President and HarbourView Asset Management Corporation (since April, 2002
Portfolio Manager and of OFI Institutional Asset Management, Inc. (since June
since 2002 2002); Executive Director and portfolio manager for Miller,
Age: 40 Anderson & Sherrerd, a division of Morgan Stanley Investment
Management (August 1993-April 2002). An officer of 13
portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Thomas Swaney, Vice President of the Manager (since April 2006); senior
Vice President and analyst, high grade investment team (June 2002-March 2006);
Portfolio Manager senior fixed income analyst at Miller Anderson & Sherrerd, a
since 2002 division of Morgan Stanley Investment Management (May
Age: 34 1998-May 2002). A portfolio manager of 14 portfolios in the
OppenheimerFunds complex.

--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Mark S. Vandehey, Senior Vice President and Chief Compliance Officer of the
Vice President and Manager (since March 2004); Vice President of
Chief Compliance OppenheimerFunds Distributor, Inc., Centennial Asset
Officer since 2004 Management Corporation and Shareholder Services, Inc. (since
Age: 56 June 1983). Former Vice President and Director of Internal
Audit of the Manager (1997-February 2004). An officer of 91
portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer of the Manager (since
Treasurer and March 1999); Treasurer of the following: HarbourView Asset
Principal Financial & Management Corporation, Shareholder Financial Services,
Accounting Officer Inc., Shareholder Services, Inc., Oppenheimer Real Asset
since 1999 Management Corporation, and Oppenheimer Partnership
Age: 46 Holdings, Inc. (since March 1999), OFI Private Investments,
Inc. (since March 2000), OppenheimerFunds International Ltd.
(since May 2000), OppenheimerFunds plc (since May 2000), OFI
Institutional Asset Management, Inc. (since November 2000),
and OppenheimerFunds Legacy Program (charitable trust
program established by the Manager) (since June 2003);
Treasurer and Chief Financial Officer of OFI Trust Company
(trust company subsidiary of the Manager) (since May 2000);
Assistant Treasurer of the following: OAC (since March
1999),Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program
(April 2000-June 2003); Principal and Chief Operating
Officer of Bankers Trust Company-Mutual Fund Services
Division (March 1995-March 1999). An officer of 91
portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian Petersen, Assistant Vice President of the Manager (since August 2002);
Assistant Treasurer Manager/Financial Product Accounting of the Manager
since 2004 (November 1998-July 2002). An officer of 91 portfolios in
Age: 36 the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian C. Szilagyi, Assistant Vice President of the Manager (since July 2004);
Assistant Treasurer Director of Financial Reporting and Compliance of First Data
since 2005 Corporation (April 2003-July 2004); Manager of Compliance of
Age: 36 Berger Financial Group LLC (May 2001-March 2003); Director
of Mutual Fund Operations at American Data Services, Inc.
(September 2000-May 2001). An officer of 91 portfolios in
the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and General
Secretary since 2001 Counsel (since March 2002) of the Manager; General Counsel
Age: 58 and Director of the Distributor (since December 2001);
General Counsel of Centennial Asset Management Corporation
(since December 2001); Senior Vice President and General
Counsel of HarbourView Asset Management Corporation (since
December 2001); Secretary and General Counsel of OAC (since
November 2001); Assistant Secretary (since September 1997)
and Director (since November 2001) of OppenheimerFunds
International Ltd. and OppenheimerFunds plc; Vice President
and Director of Oppenheimer Partnership Holdings, Inc.
(since December 2002); Director of Oppenheimer Real Asset
Management, Inc. (since November 2001); Senior Vice
President, General Counsel and Director of Shareholder
Financial Services, Inc. and Shareholder Services, Inc.
(since December 2001); Senior Vice President, General
Counsel and Director of OFI Private Investments, Inc. and
OFI Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior
Vice President and General Counsel of OFI Institutional
Asset Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003);
Senior Vice President (May 1985-December 2003), Acting
General Counsel (November 2001-February 2002) and Associate
General Counsel (May 1981-October 2001) of the Manager;
Assistant Secretary of the following: Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001), and
OppenheimerFunds International Ltd. (September 1997-November
2001). An officer of 91 portfolios in the OppenheimerFunds
complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and
Assistant Secretary Assistant Secretary (since October 2003) of the Manager;
since 2001 Vice President (since 1999) and Assistant Secretary (since
Age: 41 October 2003) of the Distributor; Assistant Secretary of
Centennial Asset Management Corporation (since October
2003); Vice President and Assistant Secretary of Shareholder
Services, Inc. (since 1999); Assistant Secretary of
OppenheimerFunds Legacy Program and Shareholder Financial
Services, Inc. (since December 2001); Assistant Counsel of
the Manager (August 1994-October 2003). An officer of 91
portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager (since
Assistant Secretary May 2004); First Vice President (April 2001-April 2004),
since 2004 Associate General Counsel (December 2000-April 2004),
Age: 38 Corporate Vice President (May 1999-April 2001) and Assistant
General Counsel (May 1999-December 2000) of UBS Financial
Services Inc. (formerly, PaineWebber Incorporated). An
officer of 91 portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Phillip S. Gillespie, Senior Vice President and Deputy General Counsel of the
Assistant Secretary Manager (since September 2004); Mr. Gillespie held the
since 2004 following positions at Merrill Lynch Investment Management:
Age: 42 First Vice President (2001-September 2004); Director
(2000-September 2004) and Vice President (1998-2000). An
officer of 91 portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------

|X| Remuneration of the Officers and Trustees. The officers and the interested Trustee of
the Fund who are affiliated with the Manager receive no salary or fee from the Fund. The
Independent Trustees' compensation from the Fund, shown below, is for serving as a Trustee
and member of a committee (if applicable), with respect to the Fund's fiscal year ended
August 31, 2006. The total compensation from the Fund and fund complex represents
compensation, including accrued retirement benefits, for serving as a Trustee and member of
a committee (if applicable) of the Boards of the Fund and other funds in the
OppenheimerFunds complex during the calendar year ended December 31, 2005.

--------------------------------------------------------------------------------------
Name and Other Fund Aggregate Retirement Estimated Total
Benefits
Compensation Accrued as Annual Compensation
Position(s) (as From the Part of Fund Benefits Upon From the Fund
applicable) Fund(1) Expenses Retirement(2) and Fund Complex
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Fiscal year ended 8/31/06 Year ended
December 31, 2005
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Clayton K. Yeutter $3,482(3) None $103,146 $173,700
Chairman of the Board
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Matthew P. Fink(4) $2,155 None $9,646 $61,936
Proxy Committee
Member and Regulatory
& Oversight Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Robert G. Galli
Regulatory &
Oversight Committee $2,592 None $107,096(4) $264,812(5)
Chairman
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Phillip A. Griffiths $3,022(6) None $42,876 $150,760
Governance Committee
Chairman and
Regulatory &
Oversight Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Mary F. Miller
Audit Committee
Member and Proxy $2,141 None $11,216 $103,254
Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Joel W. Motley $3,022(7) None $27,099 $150,760
Audit Committee
Chairman and
Regulatory &
Oversight Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Kenneth A. Randall $2,688 None(8) $91,953 $134,080
Audit Committee
Member and Governance
Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Russell S. Reynolds, $2,208 None $72,817 $108,593
Jr.
Proxy Committee
Chairman and
Governance Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Joseph M. Wikler(9) $1,942(10) None $25,656 $60,386(11)
Audit Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Peter I. Wold(9)
Governance Committee $1,942 None $26,121 $60,386(12)
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian F. Wruble(13) $1,842 None $49,899(14) $159,354(15)
Regulatory &
Oversight Committee
Member
--------------------------------------------------------------------------------------
1. "Aggregate Compensation From the Fund" includes fees and deferred compensation, if
any.
2. "Estimated Annual Benefits Upon Retirement" is based on a straight life payment plan
election with the assumption that a Trustee will retire at the age of 75 and is eligible
(after 7 years of service) to receive retirement plan benefits with respect to certain
Board I Funds as described below under "Retirement Plan for Trustees."
3. Includes $871 deferred by Mr. Yeutter under the "Deferred Compensation Plan"
described below.
4. Includes $49,811 estimated benefits to be paid to Mr. Galli for serving as a director
or trustee of 10 other Oppenheimer funds that are not Board I Funds.
5. Includes $135,500 paid to Mr. Galli for serving as a director or trustee of 10 other
Oppenheimer funds (at December 31, 2005) that are not Board I Funds.
6. Includes $3,022 deferred by Mr. Griffiths under the "Deferred Compensation Plan"
described below.
7. Includes $1,209 deferred by Mr. Motley under the "Deferred Compensation Plan"
described below.
8. Due to actuarial considerations, no additional retirement benefits were accrued with
respect to Mr. Randall.
9. Mr. Wikler and Mr. Wold were elected as Board members of 23 of the Board I Funds,
including the Fund as of August 17, 2005. They had served as Board members of 10 other
Board I Funds prior to that date.
10. Includes $939 deferred by Mr. Wikler under the "Deferred Compensation Plan" described
below.
11. Includes $6,686 paid to Mr. Wikler for serving as a director or trustee of one other
Oppenheimer fund (at December 31, 2005) that was not a Board I Fund.
12. Includes $6,686 paid to Mr. Wold for serving as a director or trustee of one other
Oppenheimer fund (at December 31, 2005) that was not a Board I Fund.
13. Mr. Wruble was appointed as Trustee of the Board I Funds effective October 10, 2005.
14. Includes $45,544 estimated benefits to be paid to Mr. Wruble for serving as a
director or trustee of 10 other Oppenheimer funds that are not Board I Funds. Mr.
Wruble's service as a director or trustee of such funds will not be counted towards the
fulfillment of his eligibility requirements for payments under the Board I retirement
plan, described below.
15. Includes $135,500 paid to Mr. Wruble for serving as a director or trustee of 10 other
Oppenheimer funds (at December 31, 2005) that are not Board I Funds.

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

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

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

|X| Major Shareholders. As of November 3, 2006, the only persons or entities who owned of
record or were known by the Fund to own beneficially 5% or more of any class of the Fund's
outstanding shares were:

Morgan Stanley DW, Attn: Mutual Funds Opperations, Harborside Financial Center Plaza
Two 2nd Floor, Jersey City NJ 07311, which owned 3,920,455.19 Class A shares (6.23%
of the Class A shares then outstanding).

MLPF&S for the sole benefit of its Customers, Attn.: Fund Admin, 4800 Deer Lake Dr.
E., Fl. 3, Jacksonville, FL 32246-6484, which owned 349,084.870 Class N shares (8.46%
of the Class N shares then outstanding).

Oppenheimer Portfolio Series Active Allocation Tact Comp., Attn: FPA Trade Settle
(2-FA), 6803 S. Tucson Way, Centennial, Colorado 80112-3924, which owned
2,501,997.271 Class Y shares (77.43% of the Class Y shares then outstanding).

Taynik & Co., c/o Investors Bank & Trust, FPG90, P.O. Box 9130, Boston, MA 02117-9130
owned 211,049.496 Class Y shares (6.53% of the Class Y shares then outstanding).

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

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

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

|X| Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting Policies and
Procedures, which include Proxy Voting Guidelines, 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 Proxy Voting Guidelines and to maintain
records of such portfolio proxy voting. The Portfolio Proxy Voting Policies and Procedures
include provisions to address conflicts of interest that may arise between the Fund and the
Manager or the Manager's affiliates or business relationships. Such a conflict of interest
may arise, for example, where the Manager or an affiliate of the Manager manages or
administers the assets of a pension plan or other investment account of the portfolio
company soliciting the proxy or seeks to serve in that capacity. The Manager and its
affiliates generally seek to avoid such conflicts by maintaining separate investment
decision making processes to prevent the sharing of business objectives with respect to
proposed or actual actions regarding portfolio proxy voting decisions. Additionally, the
Manager employs the following two procedures: (1) if the proposal that gives rise to the
conflict is specifically addressed in the Proxy Voting Guidelines, the Manager will vote
the portfolio proxy in accordance with the Proxy Voting Guidelines, provided that they do
not provide discretion to the Manager on how to vote on the matter; and (2) if such
proposal is not specifically addressed in the Proxy Voting Guidelines or the Proxy Voting
Guidelines provide discretion to the Manager on how to vote, the Manager will vote in
accordance with the third-party proxy voting agent's general recommended guidelines on the
proposal provided that the Manager has reasonably determined that there is no conflict of
interest on the part of the proxy voting agent. If neither of the previous two procedures
provides an appropriate voting recommendation, the Manager may retain an independent
fiduciary to advise the Manager on how to vote the proposal or may abstain from voting. The
Proxy Voting Guidelines' provisions with respect to certain routine and non-routine proxy
proposals are summarized below:
o The Fund generally votes with the recommendation of the issuer's management on
routine matters, including ratification of the independent registered public
accounting firm, unless circumstances indicate otherwise.
o The Fund evaluates nominees for director nominated by management on a case-by-case
basis, examining the following factors, among others: Composition of the board and
key board committees, attendance at board meetings, corporate governance
provisions and takeover activity, long-term company performance and the nominee's
investment in the company.
o In general, the Fund opposes anti-takeover proposals and supports the elimination, or
the ability of shareholders to vote on the preservation or elimination, of
anti-takeover proposals, absent unusual circumstances.
o The Fund supports shareholder proposals to reduce a super-majority vote requirement,
and opposes management proposals to add a super-majority vote requirement.
o The Fund opposes proposals to classify the board of directors.
o The Fund supports proposals to eliminate cumulative voting.
o The Fund opposes re-pricing of stock options without shareholder approval.
o The Fund generally considers executive compensation questions such as stock option
plans and bonus plans to be ordinary business activity. The Fund analyzes stock
option plans, paying particular attention to their dilutive effect. While the Fund
generally supports management proposals, the Fund opposes plans it considers to be
excessive.

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

|X| The Investment Advisory Agreement. The Manager provides investment advisory and
management services to the Fund under an investment advisory agreement between the Manager
and the Fund. The Manager selects securities for the Fund's portfolio and handles its
day-to-day business. The 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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2004 $6,028,002
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2005 $5,975,866
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2006 $5,327,523
--------------------------------------------------------------------------------

The investment advisory agreement states that in the absence of willful misfeasance,
bad faith, gross negligence in the performance of its duties or reckless disregard of its
obligations and duties under the investment advisory agreement, the Manager is not liable
for any loss the Fund sustains in connection with matters to which the agreement relates.

The agreement permits the Manager to act as 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.

Portfolio Managers. The Fund's portfolio is managed by Angelo Manioudakis, together
with a team of investment professionals comprised of Benjamin J. Gord, Thomas Swaney,
Geoffrey Caan and Antulio N. Bomfim (each is referred to as a "Portfolio Manager" and
collectively they are referred to as the "Portfolio Managers") who are responsible
for the day-to-day management of the Fund's investments.

Other Accounts Managed. In addition to managing the Fund's investments, the
Portfolio Managers also manage other investment portfolios and accounts. The following
table provides information regarding the other portfolios and accounts managed by the
Portfolio Managers as of August 31, 2006. No account has a performance-based advisory fee:

Portfolio Registered Total Other Total Other Total
Assets Assets in
in Other
RegisteredPooled Pooled Assets
Investment InvestmentInvestment Investment in Other )
Companies Companies Vehicles Vehicles AccountsAccounts
Manager Managed Managed(1) Managed Managed(1) Managed Managed(1,2
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Angelo 14 $8,559.8 6 $200 2 $160.8
Manioudakis
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Benjamin J. 11 $8,113 6 $200 1 $40.4
Gord
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Geoffrey Caan 11 $8,113 6 $200 1 $40.4
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Thomas Swaney 11 $8,113 6 $200 1 $40.4
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Antulio N. 11 $8,113 6 $200 1 $40.4
Bomfim
----------------

1. In millions.
2. Does not include personal accounts of portfolio managers and their families, which
are subject to the Code of Ethics.

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

Compensation of the Portfolio Managers. The Fund's Portfolio Managers are
employed and compensated by the Manager, not the Fund. Under the Manager's
compensation program for its portfolio managers and portfolio analysts, their
compensation is based primarily on the investment performance results of the funds
and accounts they manage, rather than on the financial success of the Manager. This
is intended to align the portfolio managers and analysts' interests with the success
of the funds and accounts and their shareholders. The Manager's compensation
structure is designed to attract and retain highly qualified investment management
professionals and to reward individual and team contributions toward creating
shareholder value. As of August 31, 2006, each Portfolio Managers' compensation
consisted of three elements: a base salary, an annual discretionary bonus and
eligibility to participate in long-term awards of options and appreciation rights in
regard to the common stock of the Manager's holding company parent. Senior portfolio
managers may also be eligible to participate in the Manager's deferred compensation
plan.

To help the Manager attract and retain talent, the base pay component of each
portfolio manager is reviewed regularly to ensure that it reflects the performance of
the individual, is commensurate with the requirements of the particular portfolio,
reflects any specific competence or specialty of the individual manager, and is
competitive with other comparable positions. The annual discretionary bonus is
determined by senior management of the Manager and is based on a number of factors,
including a fund's pre-tax performance for periods of up to five years, measured
against an appropriate benchmark selected by management. The Lipper benchmark with
respect to the Fund is Lipper - U.S. Government Funds. Other factors considered
include management quality (such as style consistency, risk management, sector
coverage, team leadership and coaching) and organizational development. The Portfolio
Managers' compensation is not based on the total value of the Fund's portfolio
assets, although the Fund's investment performance may increase those assets. The
compensation structure is also intended to be internally equitable and serve to
reduce potential conflicts of interest between the Fund and other funds and accounts
managed by the Portfolio Managers. The compensation structure of the other funds and
accounts managed by the Portfolio Managers is the same as the compensation structure
of the Fund, described above.

Ownership of Fund Shares. As of August 31, 2006, each Portfolio Manager
beneficially owned shares of the Fund as follows:

----------------------------------------------------------
Portfolio Manager Range of Shares
Beneficially
Owned in the Fund
----------------------------------------------------------
----------------------------------------------------------
Angelo Manioudakis $1-$10,000
----------------------------------------------------------
----------------------------------------------------------
Benjamin J. Gord $1-$10,000
----------------------------------------------------------
----------------------------------------------------------
Thomas Swaney $1-$10,000
----------------------------------------------------------
----------------------------------------------------------
Geoffrey Caan $1-$10,000
----------------------------------------------------------
----------------------------------------------------------
Antulio N. Bomfim $1-$10,000
----------------------------------------------------------

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, 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 for
the services provided. 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, in choosing brokers to execute portfolio
transactions for the Fund, the Manager may select brokers (other than affiliates) that
provide both brokerage and research services to the Fund. The commissions paid to those
brokers may be higher than another qualified broker would charge, if the Manager makes a
good faith determination that the commission is fair and reasonable in relation to the
services provided.

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

The Manager's portfolio traders allocate brokerage based upon recommendations from the
Manager's portfolio managers, together with the portfolio traders' judgment as to the
execution capability of the broker or dealer. 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 accounts 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 accounts 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.
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.

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

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

The investment advisory agreement permits the Manager to allocate brokerage for
research services. The research services provided by a particular broker may be useful both
to the Fund and to one or more of the other accounts advised by the Manager or its
affiliates. Investment research may be supplied to the Manager by the broker or 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, analytical software and similar products and
services. If a research service also assists the Manager in a non-research capacity (such
as bookkeeping or other administrative functions), then only the percentage or component
that provides assistance to the Manager in the investment decision-making process may be
paid in commission dollars.

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

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

During the fiscal years ended August 31, 2004, 2005, and 2006, the Fund paid the
total brokerage commissions indicated in the chart below. During the fiscal year ended
August 31, 2006, the Fund did not execute any transactions through or pay any commissions
to firms that provide research services.

---------------------------------------------------------------------
Fiscal Year Ended 8/31: Total Brokerage Commissions Paid by the
Fund(1)
---------------------------------------------------------------------
---------------------------------------------------------------------
2004 $167,749
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 $149,456
---------------------------------------------------------------------
---------------------------------------------------------------------

2006 $123,604

---------------------------------------------------------------------
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.

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

-------------------------------------------
Fiscal Aggregate Class A
Front-End
Year Front-End Sales Sales Charges
Ended Charges on Retained by
8/31: Class A Shares Distributor(1)
-------------------------------------------
-------------------------------------------
2004 $1,211,224 $336,478
-------------------------------------------
-------------------------------------------
2005 $1,117,996 $311,568
-------------------------------------------
-------------------------------------------
2006 $841,621 $248,354
-------------------------------------------
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: Distributor(1) Distributor(1) Distributor(1) Distributor(1)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2004 $205,282 $991,839 $179,781 $109,521
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2005 $132,114 $630,684 $151,680 $89,711
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2006 $135,165 $449,824 $115,258 $41,127
-----------------------------------------------------------------------------
1. The Distributor advances concession payments to financial intermediaries for certain
sales of Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.

------------------------------------------------------------------------------
Fiscal 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
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2004 $20,150 $1,219,702 $24,984 $35,340
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2005 $5,080 $675,226 $24,853 $33,239
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2006 $14,627 $573,001 $19,140 $22,889
------------------------------------------------------------------------------

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 Trustees(3), cast in person at a meeting
called for the purpose of voting on that plan.

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

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

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

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

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

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

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

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 periodically on those shares. The
advance payment is based on the net asset value of shares sold. Shares purchased by
exchange do not qualify for the advance service fee payment. If Class 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, 2006 payments under the Class A plan totaled
$1,496,748, of which $8,689 was retained by the Distributor under the arrangement described
above, regarding grandfathered retirement accounts, and included $105,071 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 Distribution and Service Plan Fees. Under each plan,
distribution and service fees are computed on the average of the net asset value of shares
in the respective class, determined as of the close of each regular business day during the
period. Each plan provides for the Distributor to be compensated at a flat rate, whether
the Distributor's distribution expenses are more or less than the amounts paid by the Fund
under the plan during the period for which the fee is paid. The types of services that
recipients provide are similar to the services provided under the Class A service plan,
described above.

Each plan permits the Distributor to retain both the asset-based sales charges and
the service fees or to pay recipients the service fee on a periodic basis, without payment
in advance. However, the Distributor currently intends to pay the service fee to recipients
in advance for the first year after Class B, 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 periodically on those shares. The
advance payment is based on the net asset value of shares sold. Shares purchased by
exchange do not qualify for the advance service fee payment. If Class B, 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. Class B, Class C or Class N
shares may not be purchased by a new investor directly from the Distributor without the
investor designating another registered broker-dealer. If a current investor no longer has
another broker-dealer of record for an existing account, the Distributor is automatically
designated as the broker-dealer of record, but solely for the purpose of acting as the
investor's agent to purchase the shares. In those cases, the Distributor retains the
asset-based sales charge paid on Class B, Class C and Class N shares, but does not retain
any service fees as to the assets represented by that account.

The asset-based sales charge and service fees increase Class B and Class C expenses
by 1.00% and the asset-based sales charge and service fees increase Class N expenses by
0.50% of the net assets per year of the respective classes.

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 periodically in lieu
of paying the sales concession and service fee in advance at the time of purchase.

The asset-based sales charge on Class B, 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 charge 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,
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.

During a calendar year, 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 asset-based sales charges paid to
the Distributor by the Fund under the distribution and service plans. Those excess expenses
are carried over on the Distributor's books and may be recouped from asset-based sales
charge payments from the Fund in future years. However, the Distributor has voluntarily
agreed to cap the amount of expenses under the plans that may be carried over from year to
year and recouped that relate to (i) expenses the Distributor has incurred that represent
compensation and expenses of its sales personnel and (ii) other direct distribution costs
it has incurred, such as sales literature, state registration fees, advertising and
prospectuses used to offer Fund shares. The cap on the carry-over of those categories of
expenses is set at 0.70% of annual gross sales of shares of the Fund. If those categories
of expenses exceed the capped amount, the Distributor bears the excess costs. If the Class
B, Class C or Class N plan were to be terminated by the Fund, the Fund's Board of Trustees
may allow the Fund to continue payments of the asset-based sales charge to the Distributor
for distributing shares prior to the termination of the plan.

--------------------------------------------------------------------------------
Distribution and Service Fees Paid to the Distributor for the Fiscal Year
Ended 8/31/06
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 $1,756,659(1) $1,349,039(1) $6,894,329 4.49%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Plan $1,055,178(2) $127,760(2) $2,836,161 2.82%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Plan $195,059(3) $102,428(3) $679,264 1.74%
--------------------------------------------------------------------------------
1. Includes $17,405 paid to an affiliate of the Distributor's parent company.
2. Includes $44,928 paid to an affiliate of the Distributor's parent company.
3. Includes $4,355 paid to an affiliate of the Distributor's parent company.

All payments under the plans are subject to the limitations imposed by the Conduct
Rules of the NASD on payments of asset-based sales charges and service fees.

Payments to Fund Intermediaries

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

Possible types of payments to financial intermediaries include, without limitation,
those discussed below.
o Payments made by the Fund, or by an investor buying or selling shares of the Fund may
include:
o depending on the share class that the investor selects, contingent deferred sales
charges or initial front-end sales charges, all or a portion of which
front-end sales charges are payable by the Distributor to financial
intermediaries (see "About Your Account" in the Prospectus);
o ongoing asset-based payments attributable to the share class selected, including fees
payable under the Fund's distribution and/or service plans adopted under Rule
12b-1 under the Investment Company Act, which are paid from the Fund's assets
and allocated to the class of shares to which the plan relates (see "About
the Fund -- Distribution and Service Plans" above);
o shareholder servicing payments for providing omnibus accounting, recordkeeping,
networking, sub-transfer agency or other administrative or shareholder
services, including retirement plan and 529 plan administrative services
fees, which are paid from the assets of a Fund as reimbursement to the
Manager or Distributor for expenses they incur on behalf of the Fund.

o Payments made by the Manager or Distributor out of their respective resources and
assets, which may include profits the Manager derives from investment advisory
fees paid by the Fund. These payments are made at the discretion of the Manager
and/or the Distributor. These payments, often referred to as "revenue sharing"
payments, may be in addition to the payments by the Fund listed above.
o These types of payments may reflect compensation for marketing support, support
provided in offering the Fund or other Oppenheimer funds through certain
trading platforms and programs, transaction processing or other services;
o The Manager and Distributor each may also pay other compensation to the extent the
payment is not prohibited by law or by any self-regulatory agency, such as
the NASD. Payments are made based on the guidelines established by the
Manager and Distributor, subject to applicable law.

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

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

Revenue sharing payments can pay for distribution-related or asset retention items
including, without limitation,
o transactional support, one-time charges for setting up access for the Fund or other
Oppenheimer funds on particular trading systems, and paying the intermediary's
networking fees;
o program support, such as expenses related to including the Oppenheimer funds in
retirement plans, college savings plans, fee-based advisory or wrap fee programs,
fund "supermarkets", bank or trust company products or insurance companies'
variable annuity or variable life insurance products;
o placement on the dealer's list of offered funds and providing representatives of the
Distributor with access to a financial intermediary's sales meetings, sales
representatives and management representatives.

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

For the year ended December 31, 2005, the following financial intermediaries that are
broker-dealers offering shares of the Oppenheimer funds, and/or their respective
affiliates, received revenue sharing or similar distribution-related payments from the
Manager or Distributor for marketing or program support:

Advantage Capital Corp./Financial Advest, Inc.
Services Corp.
Aegon USA Aetna Retirement Services, Inc.
A.G. Edwards & Sons, Inc. AIG Life
Allianz Life Insurance Company Allmerica Financial Life Insurance
and Annuity Co.
Allstate Financial Advisors American Enterprise Life Insurance
American General Securities, Inc. American General Annuity
Ameriprise Financial Services, Inc. American Portfolio Financial
Services, Inc.
Ameritas Life Insurance Corporation Annuity Investors Life
Associated Securities AXA Advisors
Banc One Securities Corp. BNY Investment Center, Inc.
Cadaret Grant & Co. Inc. Charles Schwab - Great West Life
Chase Investment Services Corp. CitiCorp Investment Services, Inc.
Citigroup Global Markets, Inc. (SSB) CitiStreet
Citizens Bank of Rhode Island CJM Planning Corp.
Columbus Life Insurance Company Commonwealth Financial Network
CUNA Brokerage Services, Inc. CUSO Financial Services, L.P.
Federal Kemper Life Assurance Company Financial Network (ING)
First Global Capital GE Financial Assurance - GE Life &
Annuity
Glenbrook Life and Annuity Co. Hartford
HD Vest HSBC Brokerage (USA) Inc.
ING Financial Advisers ING Financial Partners
Jefferson Pilot Life Insurance Company Jefferson Pilot Securities Corp.
John Hancock Life Insurance Co. Kemper Investors Life Insurance Co.
Legend Equities Corp. Legg Mason
Lincoln Benefit Life Lincoln Financial
Lincoln Investment Planning, Inc. Lincoln National Life
Linsco Private Ledger MassMutual Financial Group and
affiliates
McDonald Investments, Inc. Merrill Lynch & Co. and affiliates
MetLife and affiliates Minnesota Life Insurance Company
Mony Life Insurance Co. Morgan Stanley Dean Witter, Inc.
Multi-Financial (ING) Mutual Service Corporation
National Planning Holdings, Inc. Nationwide and affiliates
NFP New York Life Securities, Inc.
Park Avenue Securities LLC PFS Investments, Inc.
Prime Capital Services, Inc. Primevest Financial Services, Inc.
(ING)
Protective Life Insurance Co. Prudential Investment Management
Services LLC
Raymond James & Associates Raymond James Financial Services
RBC Dain Rauscher Inc. Royal Alliance
Securities America Inc. Security Benefit Life Insurance Co.
Sentra Securities Signator Investments
Sun Life Assurance Company of Canada SunAmerica Securities, Inc.
SunTrust Securities Thrivent
Travelers Life & Annuity Co., Inc. UBS Financial Services Inc.
Union Central Life Insurance Company United Planners
Valic Financial Advisors, Inc. Wachovia Securities LLC
Walnut Street Securities (Met Life Waterstone Financial Group
Network)
Wells Fargo Investments, LLC

For the year ended December 31, 2005, the following firms, which in some cases are
broker-dealers, received payments from the Manager or Distributor for administrative or
other services provided (other than revenue sharing arrangements), as described above:

ABN AMRO Financial Services Inc. ACS HR Solutions LLC
Administrative Management Group ADP Broker/Dealer Inc.
Aetna Financial Services Alliance Benefit Group
American Stock Transfer & Trust Co Ameriprise Financial Services, Inc.
Baden Retirement Plan Services LLC Banc One Securities Corp.
BCG Securities Benefit Administration Company LLC
Benefit Administration Inc. Benefit Plans Administrative
Services
Benetech Inc. Bisys Retirement Services
Boston Financial Data Services Inc. Ceridian Retirement Plan Services
Charles Schwab & Co Inc. Charles Schwab Trust Company
Circle Trust Company Citigroup Global Markets Inc.
CitiStreet City National Bank
Columbia Funds Distributor Inc. CPI Qualified Plan Consultants Inc.
Daily Access.Com Inc. Digital Retirement Solutions
DST Systems Inc. Dyatech LLC
Edgewood/Federated Investments ERISA Administrative Services Inc.
Expert Plan Inc. FASCorp
FBD Consulting Inc. Fidelity Institutional Operations
Co.
Fidelity Investments First National Bank of Omaha
First Trust Corp. First Trust-Datalynx
Franklin Templeton Geller Group LTD
GoldK Inc. Great West Life & Annuity Ins Co.
Hartford Life Insurance Co Hewitt Associates LLC
ICMA-RC Services LLC Independent Plan Coordinators Inc.
ING Ingham Group
Interactive Retirement Systems Invesco Retirement Plans
Invesmart InWest Pension Management
John Hancock Life Insurance Co. JPMorgan Chase & Co
JPMorgan Chase Bank July Business Services
Kaufman & Goble Leggette & Company Inc.
Lincoln National Life MassMutual Financial Group and
affiliates
Matrix Settlement & Clearance Services Mellon HR Solutions
Mercer HR Services Merrill Lynch & Co., Inc.
Metavante 401(k) Services Metlife Securities Inc.
MFS Investment Management Mid Atlantic Capital Corp.
Milliman Inc. Morgan Stanley Dean Witter Inc.
National City Bank National Financial Services Corp.
Nationwide Investment Service Corp. New York Life Investment Management
Northeast Retirement Services Northwest Plan Services Inc.
Pension Administration and Consulting PFPC Inc.
Plan Administrators Inc. PlanMember Services Corporation
Princeton Retirement Group Inc. Principal Life Insurance Co
Programs for Benefit Plans Inc. Prudential Retirement Insurance &
Annuity Co.
Prudential Retirement Services PSMI Group
Putnam Investments Quads Trust Company
RSM McGladrey Retirement Resources SAFECO
Standard Insurance Co Stanley Hunt DuPree Rhine
Stanton Group Inc. State Street Bank & Trust
Strong Capital Management Inc. Symetra Investment Services Inc.
T Rowe Price Associates Taylor Perky & Parker LLC
Texas Pension Consultants The 401(K) Company
The Chicago Trust Company The Retirement Plan Company LLC
The Vanguard Group TruSource
Unified Fund Services Inc. Union Bank & Trust Co. (Nebraska)
USI Consulting Group (CT) Valic Retirement Services Co
Wachovia Bank NA Web401k.com
Wells Fargo Bank NA Wilmington Trust Company
WySTAR Global Retirement Solutions

Performance of the Fund

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

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

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

o Yields and total returns measure the performance of a hypothetical account in the
Fund over various periods and do not show the performance of each shareholder's
account. Your account's performance will vary from the model performance data if
your dividends are received in cash, or you buy or sell shares during the period,
or you bought your shares at a different time and price than the shares used in
the model.
o The Fund's performance returns may not reflect the effect of taxes on dividends and
capital gains distributions.
o An investment in the Fund is not insured by the FDIC or any other government agency.
o The principal value of the Fund's shares, 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 SEC, 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 8/31/06
--------------------------------------------------------------------
--------------------------------------------------------------------
Class of Standardized Yield Dividend Yield
Shares
--------------------------------------------------------------------
--------------------------------------------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
--------------------------------------------------------------------
--------------------------------------------------------------------
Class A 4.72% 4.49% 4.46% 4.25%
--------------------------------------------------------------------
--------------------------------------------------------------------
Class B 3.97% N/A 3.71% N/A
--------------------------------------------------------------------
--------------------------------------------------------------------
Class C 3.97% N/A 3.71% N/A
--------------------------------------------------------------------
--------------------------------------------------------------------
Class N 4.47% N/A 4.21% N/A
--------------------------------------------------------------------
--------------------------------------------------------------------
Class Y 5.04% N/A 4.78% 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) are 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:

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

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

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

o Total Returns at Net Asset Value. From time to time the Fund may also quote a
cumulative or an average annual total return "at net asset value" (without deducting sales
charges) for 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 8/31/06
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Shares Returns
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1-Year 5-Years 10-Years
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
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 67.02% 75.35% -3.65% 1.16% 3.42% 4.43% 5.26% 5.78%
A(1)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class
B(2) 67.72% 67.72% -4.43% 0.41% 3.30% 3.65% 5.31% 5.31%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class
C(3) 62.77% 62.77% -0.46% 0.51% 3.68% 3.68% 4.99% 4.99%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class
N(4) 26.86%(4)26.86%(4) -0.06% 0.91% 4.15% 4.15% 4.42%(4) 4.42%(4)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class 52.89%(5)52.89%(5) 1.75% 1.75% 4.87% 4.87% 5.26%(5) 5.26%(5)
Y(5)
---------------------------------------------------------------------------------
1. Inception of Class A: 08/16/85
2. Inception of Class B: 07/21/95
3. Inception of Class C: 12/01/93
4. Inception of Class N: 03/01/01
5. Inception of Class Y: 05/18/98

-------------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares (After Sales Charge)
For the Periods Ended 8/31/06
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
1-Year 5-Years 10-Years
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
After Taxes on Distributions -5.18% 1.76% 3.14%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
After Taxes on -2.39% 1.93% 3.17%
Distributions and
Redemption of Fund Shares
-------------------------------------------------------------------------------

Other Performance Comparisons. The Fund compares its performance annually to that of an
appropriate broadly-based market index in its Annual Report to shareholders. You can obtain
that information by contacting the Transfer Agent at the addresses or telephone numbers
shown on the cover of this SAI. The Fund may also compare its performance to that of other
investments, including other mutual funds, or use rankings of its performance by
independent ranking entities. 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., ("Morningstar"), an independent
mutual fund monitoring service. Morningstar rates mutual funds in their specialized market
sector. The Fund is rated among intermediate-term bond funds.

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

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

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

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

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

ABOUT YOUR ACCOUNT

How to Buy Shares

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

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

AccountLink. When shares are purchased through AccountLink, each purchase must be at least
$50 and shareholders must invest at least $500 before an Asset Builder Plan (described
below) can be established on a new account. Accounts established prior to November 1, 2002
will remain at $25 for additional purchases. Shares will be purchased on the regular
business day the Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased with the
proceeds of ACH transfers on the business day the Fund receives Federal Funds for the
purchase through the ACH system before the close of the New York Stock Exchange (the
"NYSE"). The NYSE normally closes at 4:00 p.m., but may close earlier on certain days. If
Federal Funds are received on a business day after the close of the NYSE, the shares will
be purchased and dividends will begin to accrue on the next regular business day. The
proceeds of ACH transfers are normally received by the Fund three days after the transfers
are initiated. If the proceeds of the ACH transfer are not received on a timely basis, the
Distributor reserves the right to cancel the purchase order. The Distributor and the Fund
are not responsible for any delays in purchasing shares resulting from delays in ACH
transmissions.

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

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

Oppenheimer AMT-Free Municipals Oppenheimer MidCap Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer New Jersey Municipal Fund
Oppenheimer Balanced Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer California Municipal Fund Oppenheimer Portfolio Series:
Oppenheimer Capital Appreciation Fund Active Allocation Fund
Oppenheimer Capital Income Fund Aggressive Investor Fund
Oppenheimer Champion Income Fund Conservative Investor Fund
Oppenheimer Convertible Securities Fund Moderate Investor Fund
Oppenheimer Principal Protected Main
Oppenheimer Core Bond Fund Street Fund
Oppenheimer Principal Protected Main
Oppenheimer Developing Markets Fund Street Fund II
Oppenheimer Principal Protected Main
Oppenheimer Discovery Fund Street Fund III
Oppenheimer Dividend Growth Fund Oppenheimer Quest Balanced Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Emerging Growth Fund Inc.
Oppenheimer Quest International Value
Oppenheimer Emerging Technologies Fund Fund, Inc.
Oppenheimer Enterprise Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Equity Fund, Inc. Oppenheimer Quest Value Fund, Inc.
Oppenheimer Global Fund Oppenheimer Real Asset Fund
Oppenheimer Global Opportunities Fund Oppenheimer Real Estate Fund
Oppenheimer Rochester Massachusetts
Oppenheimer Gold & Special Minerals Fund Municipal Fund
Oppenheimer Rochester Michigan
Oppenheimer Growth Fund Municipal Fund
Oppenheimer Rochester Minnesota
Oppenheimer International Bond Fund Municipal Fund
Oppenheimer International Diversified Oppenheimer Rochester National
Fund Municipals
Oppenheimer Rochester Ohio Municipal
Oppenheimer International Growth Fund Fund
Oppenheimer International Small Company Oppenheimer Rochester Virginia
Fund Municipal Fund
Oppenheimer International Value Fund Oppenheimer Select Value Fund
Oppenheimer Limited Term California
Municipal Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Limited-Term Government Fund Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer Limited Term Municipal Fund Oppenheimer Strategic Income Fund
Oppenheimer Main Street Fund Oppenheimer U.S. Government Trust
Oppenheimer Main Street Opportunity Fund Oppenheimer Value Fund
Oppenheimer Main Street Small Cap Fund Limited-Term New York 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
Oppenheimer Institutional Money Market
Fund 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. Under certain
circumstances described in this SAI, redemption proceeds of certain money market fund
shares may be subject to a contingent deferred sales charge.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If you make payments from your bank account to purchase shares of the Fund, your bank
account will be debited automatically. Normally the debit will be made two business days
prior to the investment dates you selected on your application. Neither the Distributor,
the Transfer Agent 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 charges or at reduced sales charge rates, as described in Appendix C to
this SAI. 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 $1 million in
assets invested in applicable investments (other than assets invested in money market
funds), then the retirement plan may purchase only Class C shares of the Oppenheimer funds.
If on the date the plan sponsor signed the Merrill Lynch record keeping service agreement
the plan has $1 million or more in assets but less than $5 million in assets invested in
applicable investments (other than assets invested in money market funds), then the
retirement plan may purchase only Class N shares of the Oppenheimer funds. If on the date
the plan sponsor signed the Merrill Lynch record keeping service agreement the plan has $5
million or more in assets invested in applicable investments (other than assets invested in
money market funds), then the retirement plan may purchase only Class A shares of the
Oppenheimer funds.

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

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

|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 SAI) 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 Retirement Plans with at least 100 eligible employees or $500,000 or more in plan
assets,
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).

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

Listed below are certain cases in which the Fund has elected, in its discretion, not
to assess the Fund Account Fees. These exceptions are subject to change:
o A fund account whose shares were acquired after September 30th of the prior year;
o A fund account that has a balance below $500 due to the automatic conversion of
shares from Class B to Class A shares. However, once all Class B shares held in
the account have been converted to Class A shares the new account balance may
become subject to the Minimum Balance Fee;
o Accounts of shareholders who elect to access their account documents electronically
via eDoc Direct;
o A fund account that has only certificated shares and, has a balance below $500 and is
being escheated;
o Accounts of shareholders that are held by broker-dealers under the NSCC Fund/SERV
system;
o Accounts held under the Oppenheimer Legacy Program and/or holding certain Oppenheimer
Variable Account Funds;
o Omnibus accounts holding shares pursuant to the Pinnacle, Ascender, Custom Plus,
Recordkeeper Pro and Pension Alliance Retirement Plan programs; and
o A fund account that falls below the $500 minimum solely due to market fluctuations
within the 12-month period preceding the date the fee is deducted.

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

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

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

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

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 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, 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, 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 on the valuation date. If not,
the value shall be the closing bid price on the principal exchange on the valuation date.
If the put, call or future is not traded on an exchange, 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 SAI. 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 NYSE
on a regular business day, it will be processed at that day's net asset value if the order
was received by the dealer or broker from its customers prior to the time the NYSE closes.
Normally, the NYSE closes at 4:00 p.m., but may do so earlier on some days.

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 SAI).

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 SAI.

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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

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

The following funds do not offer Class Y shares:
Limited Term New York Municipal Fund Oppenheimer Quest International Value
Fund, Inc.
Oppenheimer AMT-Free Municipals Oppenheimer Pennsylvania Municipal Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer Principal Protected Main
Street Fund
Oppenheimer Balanced Fund Oppenheimer Principal Protected Main
Street Fund II
Oppenheimer California Municipal Fund Oppenheimer Rochester Arizona Municipal
Fund
Oppenheimer Capital Income Fund Oppenheimer Rochester Maryland Fund
Oppenheimer Cash Reserves Oppenheimer Rochester Massachusetts
Municipal
Oppenheimer Convertible Securities Fund Oppenheimer Rochester Michigan Municipal
Fund
Oppenheimer Dividend Growth Fund Oppenheimer Rochester Minnesota
Municipal Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Rochester National Municipals
Oppenheimer Limited Term California Oppenheimer Rochester North Carolina
Municipal Fund Municipal Fund
Oppenheimer Limited Term Municipal Fund Oppenheimer Rochester Ohio Municipal Fund
Oppenheimer New Jersey Municipal Fund Oppenheimer Rochester Virginia Municipal
Fund
Oppenheimer Principal Protected Main
Street Fund III
Oppenheimer Quest Capital Value Fund,
Inc.

o Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y shares.
o Class B and Class C shares of Oppenheimer Cash Reserves are generally available only
by exchange from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds-sponsored 401(k) plans.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for
Class A shares of other Oppenheimer funds. They may not be acquired by exchange of
shares of any class of any other Oppenheimer funds except Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves acquired by exchange
of Class M shares.
o Class A shares of Oppenheimer funds may be exchanged at net asset value for shares of
any money market fund offered by the Distributor. Shares of any money market fund
purchased without a sales charge may be exchanged for shares of Oppenheimer funds
offered with a sales charge upon payment of the sales charge.
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 the same class of any of the Oppenheimer funds into which you may
exchange shares.
o Shares of Oppenheimer Principal Protected Main Street Fund may be exchanged at net
asset value for shares of the same class of any of the other Oppenheimer funds into
which you may exchange shares. However, shareholders are not permitted to exchange
shares of other Oppenheimer funds for shares of Oppenheimer Principal Protected Main
Street Fund until after the expiration of the warranty period (8/5/2010).
o Shares of Oppenheimer Principal Protected Main Street Fund II may be exchanged at net
asset value for shares of the same class of any of the other Oppenheimer funds into
which you may exchange shares. However, shareholders are not permitted to exchange
shares of other Oppenheimer funds for shares of Oppenheimer Principal Protected Main
Street Fund II until after the expiration of the warranty period (3/3/2011).
o Shares of Oppenheimer Principal Protected Main Street Fund III may be exchanged at
net asset value for shares of the same class of any of the other Oppenheimer funds
into which you may exchange shares. However, shareholders are not permitted to
exchange shares of other Oppenheimer funds for shares of Oppenheimer Principal
Protected Main Street Fund III until after the expiration of the warranty period
(12/16/2011).
o Class A, Class B, Class C and Class N shares of each of Oppenheimer Developing
Markets Fund and Oppenheimer International Small Company Fund may be acquired by
exchange only with a minimum initial investment of $50,000. An existing shareholder
of each fund may make additional exchanges into that fund with as little as $50.

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

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

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

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

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

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

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

o 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.

|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 that are available in the new fund (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.

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 SAI, 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 and 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 SAI is based on tax law in effect on
the date of the Prospectus and this SAI. 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). Any tax withheld by the Fund is remitted
by the Fund to the U.S. Treasury and all income and any tax withheld is identified in
reports mailed to shareholders in January of each year with a copy sent to the IRS.

|X| Tax Effects of Redemptions of Shares. If a shareholder redeems all or a portion of
his/her shares, the shareholder will recognize a gain or loss on the redeemed shares in an
amount equal to the difference between the proceeds of the redeemed shares and the
shareholder's adjusted tax basis in the shares. All or a portion of any loss recognized in
that manner may be disallowed if the shareholder purchases other shares of the Fund within
30 days before or after the redemption.

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. Any tax withheld by the Fund is remitted by the Fund to the U.S. Treasury
and all income and any tax withheld is identified in reports mailed to shareholders in
March of each year with a copy sent to the IRS.

If the ordinary income dividends from the Fund are effectively connected with the
conduct of a U.S. trade or business, then the foreign person may claim an exemption from
the U.S. tax described above provided the Fund obtains a properly completed and signed
Certificate of Foreign Status. If the foreign person fails to provide a certification of
his/her foreign status, the Fund will be required to withhold U.S. tax at a rate of 28% on
ordinary income dividends, capital gains distributions and the proceeds of the redemption
of shares, paid to any foreign person. Any tax withheld by the Fund is remitted by the Fund
to the U.S. Treasury and all income and any tax withheld is identified in reports mailed to
shareholders in January of each year with a copy sent to the IRS.

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

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

Additional Information About the Fund

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

The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a division of
the Manager. It is responsible for maintaining the Fund's shareholder registry and
shareholder accounting records, and for paying dividends and distributions to shareholders.
It also handles shareholder servicing and administrative functions. It serves as the
Transfer Agent for an annual per account fee. It also acts as shareholder servicing agent
for the other Oppenheimer funds. Shareholders should direct inquiries about their accounts
to the Transfer Agent at the address and toll-free numbers shown on the back cover.

The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The custodian's
responsibilities include safeguarding and controlling the Fund's portfolio securities and
handling the delivery of such securities to and from the Fund. It is the practice of the
Fund to deal with the custodian in a manner uninfluenced by any banking relationship the
custodian may have with the Manager and its affiliates. The Fund's cash balances with the
custodian in excess of $100,000 are not protected by federal deposit insurance. Those
uninsured balances at times may be substantial.

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

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

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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, 2006, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

      We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of August 31, 2006, 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, 2006, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.


KPMG LLP

Denver, Colorado
October 16, 2006






STATEMENT OF INVESTMENTS  August 31, 2006
--------------------------------------------------------------------------------

                                                                                 PRINCIPAL               VALUE
                                                                                    AMOUNT          SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--6.1%
---------------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 5.385%, 4/20/08 1                                     $  1,350,000      $    1,351,025
---------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates,
Series 2004-W8, Cl. A2, 5.804%, 5/25/34 1                                        6,800,000           6,833,790
---------------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust, Automobile Asset-Backed Securities,
Series 2004-2, Cl. A3, 3.58%, 1/15/09                                            4,780,000           4,704,715
---------------------------------------------------------------------------------------------------------------
Conseco Finance Securitizations Corp., Manufactured Housing Contract Sr.
Sub. Pass-Through Certificates, Series 2000-4, Cl. M1, 8.73%, 5/1/32 2           1,000,917              27,809
---------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-16, Asset-Backed Certificates,
Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 1                                      1,480,000           1,476,626
---------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates:
Series 2005-17, Cl. 1AF1, 5.524%, 5/25/36 1                                      2,347,662           2,350,543
Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 1                                        980,000             977,390
---------------------------------------------------------------------------------------------------------------
Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts.,
Series 2000-A, Cl. B, 8/15/25 2,3                                                4,550,157              45,502
---------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust, Mtg. Pass-Through Certificates:
Series 2005-FF10, Cl. A3, 5.534%, 11/25/35 1                                     6,310,000           6,316,839
Series 2006-FF5, Cl.2A1, 5.374%, 5/15/36 1                                       1,858,723           1,860,006
Series 2006-FF10, Cl. A3, 5.414%, 7/25/36 1                                      2,730,000           2,731,680
---------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates,
Series 2005-B, Cl. A2, 3.78%, 9/15/07                                               38,827              38,820
---------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates, Series 2005-4, Cl. 2A1B,
5.17%, 10/25/35                                                                  2,390,440           2,378,706
---------------------------------------------------------------------------------------------------------------
Morgan Stanley ABS Capital I, Mtg. Pass-Through Certificates,
Series 2005-WMC6, Cl. A2B, 5.584%, 7/25/35 1                                     1,670,000           1,674,017
---------------------------------------------------------------------------------------------------------------
Option One Mortgage Loan Trust, Asset-Backed Certificates, Series 2006-2,
Cl. 2A2, 5.424%, 7/1/36 1                                                        4,570,000           4,572,814
---------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust, Mtg. Pass-Through Certificates:
Series 2005-1, Cl. AF2, 3.914%, 5/25/35 1                                          950,000             941,978
Series 2005-6, Cl. A3, 5.68%, 1/25/36 1                                          1,550,000           1,547,870
---------------------------------------------------------------------------------------------------------------
RAMP Series 2006-RS4 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-RS4, Cl. A1, 5.404%, 7/25/36 1                                       1,769,881           1,770,974
---------------------------------------------------------------------------------------------------------------
Residential Asset Securities Corp., Home Equity Asset-Backed Pass-Through
Certificates, Series 2006-KS7, Cl. A2, 5.43%, 9/25/36 1                          3,420,000           3,419,350
---------------------------------------------------------------------------------------------------------------
Structured Asset Investment Loan Trust, Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1, 5.384%, 4/25/36 1                                         2,045,555           2,046,951
---------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Interest-Only Stripped Pass-Through
Certificates, Series 2002-AL1, Cl. AIO, 15.967%, 2/25/32 4                      18,371,819           2,388,171
---------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Pass-Through Certificates, Series 2002-AL1,
Cl. B2, 3.45%, 2/25/32                                                           3,907,676           3,432,070
---------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Asset-Backed Securities 2006-2 Trust,
Home Equity Asset-Backed Certificates, Series 2006-2,
Cl. A2, 5.485%, 7/25/36 1                                                        2,710,000           2,711,668
                                                                                                ---------------
Total Asset-Backed Securities (Cost $60,509,873)                                                    55,599,314


                     22 | OPPENHEIMER U.S. GOVERNMENT TRUST

                                                                                 PRINCIPAL               VALUE
                                                                                    AMOUNT          SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--79.1%
---------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--65.9%
---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--64.5%
Fannie Mae Whole Loan, CMO Pass-Through Certificates, Trust 2004-W9,
Cl. 2A2, 7%, 2/25/44                                                          $  5,416,522      $    5,579,117
---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 7/1/19                                                                    2,919,330           2,806,441
5%, 7/1/33-6/1/34                                                               16,961,648          16,327,028
6%, 7/1/24-9/1/24                                                                9,073,682           9,163,569
6%, 7/1/20 5                                                                     7,212,656           7,294,724
6.50%, 4/1/18-3/1/29                                                             8,345,776           8,494,813
7%, 8/1/16-3/1/32                                                               11,975,874          12,336,184
7.50%, 9/1/12-4/1/36                                                             8,185,343           8,508,921
8%, 4/1/16                                                                       1,798,046           1,904,205
9%, 8/1/22-5/1/25                                                                  431,387             462,843
11.50%, 6/1/20-11/17/20                                                            332,455             366,159
12.50%, 7/1/19                                                                     123,411             135,282
13%, 8/1/15                                                                         98,247             108,154
14%, 1/1/11                                                                         35,476              39,842
---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Multiclass Mtg.
Participation Certificates:
Series 3057, Cl. LG, 5%, 10/15/35                                                5,000,000           4,618,411
Series 3138, Cl. PA, 5.50%, 2/15/27                                             14,408,391          14,449,302
Series 3153, Cl. FJ, 5.71%, 5/15/36 1                                            1,780,973           1,780,464
---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates:
Series 1644, Cl. S, 5.54%, 12/15/23 1                                            4,842,285           4,859,312
Series 2055, Cl. ZM, 6.50%, 5/15/28                                              2,040,097           2,083,699
Series 2080, Cl. Z, 6.50%, 8/15/28                                               1,326,848           1,354,327
Series 2220, Cl. PD, 8%, 3/15/30                                                   480,950             510,268
Series 2326, Cl. ZP, 6.50%, 6/15/31                                              1,284,632           1,319,482
Series 2368, Cl. PR, 6.50%, 10/15/31                                             5,037,796           5,177,711
Series 2387, Cl. PD, 6%, 4/15/30                                                   975,548             977,156
Series 2392, Cl. PV, 6%, 12/15/20                                                9,952,000          10,029,006
Series 2500, Cl. FD, 5.83%, 3/15/32 1                                            1,005,452           1,015,634
Series 2526, Cl. FE, 5.73%, 6/15/29 1                                            1,440,520           1,441,222
Series 2530, Cl. FD, 5.83%, 2/15/32 1                                            2,004,108           2,010,261
Series 2551, Cl. EA, 4%, 12/15/12                                                   58,865              58,768
Series 2551, Cl. FD, 5.73%, 1/15/33 1                                            1,131,160           1,143,945
Series 2583, Cl. KA, 5.50%, 3/15/22                                              1,514,043           1,511,574
Series 2939, Cl. PE, 5%, 2/15/35                                                 8,458,000           7,842,928
---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Interest-Only Stripped
Mtg.-Backed Security:
Series 2005-87, Cl. SG, 12.157%, 10/25/35 4                                     13,814,460             743,152
Series 3004, Cl. SB, 9.414%, 7/15/35 4                                          15,199,379             412,356
---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Pass-Through Participation
Certificates, Series 151, Cl. F, 9%, 5/15/21                                       108,102             107,786


                     23 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

                                                                                 PRINCIPAL               VALUE
                                                                                    AMOUNT          SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 192, Cl. IO, 15.207%, 2/1/28 4                                         $    583,538      $      127,145
Series 195, Cl. IO, 7.848%, 4/1/28 4                                             8,190,635           1,961,327
Series 200, Cl. IO, 14.051%, 1/1/29 4                                              697,317             157,876
Series 205, Cl. IO, 10.721%, 9/1/29 4                                            3,661,602             851,138
Series 206, Cl. IO, (12.913)%, 12/1/29 4                                         1,025,646             246,684
Series 217, Cl. IO, 6.828%, 1/1/32 4                                             1,353,562             313,500
Series 2003-118, Cl. S, 10.072%, 12/25/33 4                                      8,809,615             997,970
Series 2074, Cl. S, 1.598%, 7/17/28 4                                              765,614              71,800
Series 2079, Cl. S, 0.699%, 7/17/28 4                                            1,193,555             116,054
Series 2122, Cl. S, 6.197%, 2/15/29 4                                            5,465,738             501,438
Series 2304, Cl. SK, 5.01%, 6/15/29 4                                            4,905,288             390,130
Series 2493, Cl. S, 5.93%, 9/15/29 4                                             1,083,390              81,932
Series 2526, Cl. SE, 2.543%, 6/15/29 4                                           1,907,888             101,727
Series 2819, Cl. S, (1.761)%, 6/15/34 4                                         16,153,973           1,152,583
Series 2920, Cl. S, (2.806)%, 1/15/35 4                                         10,053,317             457,990
Series 3000, Cl. SE, (3.951)%, 7/15/25 4                                        11,569,120             382,473
---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/1/19                                                                    2,754,100           2,650,198
5%, 2/1/18-11/1/33                                                              31,300,799          30,297,262
5%, 5/1/18-9/1/36 5                                                             55,392,966          53,717,805
5.50%, 1/1/33-1/1/34                                                            62,796,774          61,856,932
5.50%, 9/1/21-9/1/36 5                                                          40,012,000          39,440,384
6%, 6/1/30-5/1/33                                                               26,125,515          26,249,232
6%, 9/1/21 5                                                                    22,328,000          22,579,190
6.50%, 6/1/17-9/1/32                                                            39,405,995          40,180,338
6.50%, 9/1/36 5                                                                 17,380,000          17,646,123
7%, 11/1/17-3/1/36                                                              19,865,160          20,480,748
7.50%, 2/1/27-8/1/33                                                            20,879,532          21,678,811
8%, 12/1/22                                                                         65,524              69,306
8.50%, 7/1/32                                                                      184,541             198,883
11%, 7/1/16                                                                         60,370              66,443
11.50%, 11/1/15                                                                     52,018              57,115
13%, 11/1/12                                                                         5,794               5,989
---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust, CMO Interest-Only
Stripped Mtg.-Backed Security, Trust 2001-T4, Cl. IO, 3.78%, 7/25/41 4           7,928,050             148,233
---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust CMO, Trust 2001-T6,
Cl. B, 6.088%, 5/25/11                                                          10,000,000          10,383,333
---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1992-34, Cl. G, 8%, 3/25/22                                                  148,076             149,960
Trust 1992-161, Cl. H, 7.50%, 9/25/22                                            9,043,976           9,509,276
Trust 2001-42, Cl. QF, 6.304%, 9/25/31 1                                         6,289,625           6,459,163
Trust 2001-50, Cl. NE, 6%, 8/25/30                                                 536,080             537,088
Trust 2001-51, Cl. OD, 6.50%, 10/25/31                                           4,727,410           4,824,728
Trust 2001-70, Cl. LR, 6%, 9/25/30                                               2,666,838           2,673,804
Trust 2001-72, Cl. NH, 6%, 4/25/30                                                 346,927             346,617


                     24 | OPPENHEIMER U.S. GOVERNMENT TRUST

                                                                                 PRINCIPAL               VALUE
                                                                                    AMOUNT          SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates: Continued
Trust 2001-74, Cl. PD, 6%, 5/25/30                                            $    142,157      $      141,846
Trust 2002-9, Cl. PC, 6%, 3/25/17                                                3,939,708           3,991,402
Trust 2002-52, Cl. FD, 5.824%, 9/25/32 1                                         1,363,257           1,369,048
Trust 2002-59, Cl. F, 5.724%, 9/25/32 1                                          3,622,382           3,655,745
Trust 2002-77, Cl. WF, 5.73%, 12/18/32 1                                         1,696,900           1,711,873
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23                                            3,128,000           3,057,709
Trust 2003-84, Cl. PW, 3%, 6/25/22                                               3,500,000           3,418,500
Trust 2003-89, Cl. XF, 5.724%, 11/25/32 1                                        2,084,601           2,101,589
Trust 2003-116, Cl. FA, 5.724%, 11/25/33 1                                         944,786             949,067
Trust 2004-101, Cl. BG, 5%, 1/25/20                                              4,060,000           3,950,672
Trust 2005-31, Cl. PB, 5.50%, 4/25/35                                            2,280,000           2,217,252
Trust 2005-100, Cl. BQ, 5.50%, 11/25/25                                          2,490,000           2,391,333
Trust 2006-44, Cl. OA, 5.50%, 12/25/26                                           6,910,000           6,926,870
Trust 2006-50, Cl. KS, 4.677%, 6/25/36 1                                         3,815,935           3,516,886
Trust 2006-50, Cl. SA, 4.677%, 6/25/36 1                                         2,619,039           2,519,177
Trust 2006-50, Cl. SK, 4.677%, 6/25/36 1                                           173,028             167,632
Trust 2006-57, Cl. PA, 5.50%, 8/25/27                                            9,565,675           9,577,071
---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Interest-Only Stripped
Mtg.-Backed Security:
Trust 2002-28, Cl. SA, 0.239%, 4/25/32 4                                         1,002,128              73,408
Trust 2002-38, Cl. SO, (4.226)%, 4/25/32 4                                       1,440,106              81,332
Trust 2002-39, Cl. SD, (2.28)%, 3/18/32 4                                        1,522,053             110,072
Trust 2002-48, Cl. S, 0.616%, 7/25/32 4                                          1,659,731             130,025
Trust 2002-52, Cl. SL, 0.60%, 9/25/32 4                                          1,025,702              81,418
Trust 2002-53, Cl. SK, (1.861)%, 4/25/32 4                                         949,411              78,863
Trust 2002-56, Cl. SN, 1.627%, 7/25/32 4                                         2,267,899             178,573
Trust 2002-77, Cl. IS, 0.953%, 12/18/32 4                                        2,453,514             196,413
---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Interest-Only Stripped
Mtg.-Backed Security, Trust 340, Cl. 2, 8.345%, 9/1/33 4                         1,941,869             481,005
---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Trust 221, Cl. 2, 11.899%, 5/1/23 4                                              2,979,204             690,630
Trust 240, Cl. 2, 22.31%, 9/1/23 4                                               1,964,084             446,976
Trust 252, Cl. 2, 11.813%, 11/1/23 4                                             1,390,098             348,087
Trust 303, Cl. IO, 12.091%, 11/1/29 4                                            1,052,696             257,254
Trust 321, Cl. 2, 11.308%, 4/1/32 4                                              4,797,143           1,133,399
Trust 322, Cl. 2, 16.609%, 4/1/32 4                                              1,547,714             361,901
Trust 324, Cl. 2, 6.764%, 7/1/32 4                                               3,719,253             879,781
Trust 329, Cl. 2, 10.456%, 1/1/33 4                                              2,654,971             650,500
Trust 334, Cl. 12, 5.78%, 2/1/33 4                                               7,410,975           1,679,226
Trust 344, Cl. 2, 9.289%, 12/1/33 4                                              9,595,821           2,286,381
Trust 362, Cl. 12, 4.55%, 8/1/35 4                                               3,484,975             769,239
Trust 362, Cl. 13, 4.571%, 8/1/35 4                                              1,935,016             438,540
Trust 2001-61, Cl. SH, 10.297%, 11/18/31 4                                       5,417,631             516,722
Trust 2001-63, Cl. SD, 3.209%, 12/18/31 4                                        1,765,934             172,623
Trust 2001-68, Cl. SC, 3.072%, 11/25/31 4                                        1,252,221             112,495


                     25 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

                                                                                 PRINCIPAL               VALUE
                                                                                    AMOUNT          SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security: Continued
Trust 2001-81, Cl. S, 3.411%, 1/25/32 4                                       $  1,246,516      $       91,531
Trust 2002-9, Cl. MS, 0.057%, 3/25/32 4                                          1,855,473             148,830
Trust 2002-41, Cl. S, 14.052%, 7/25/32 4                                         4,826,548             426,784
Trust 2002-52, Cl. SD, (2.472)%, 9/25/32 4                                       1,363,257             105,494
Trust 2002-77, Cl. SH, 3.647%, 12/18/32 4                                        1,488,723             146,440
Trust 2003-4, Cl. S, 10.798%, 2/25/33 4                                          2,960,965             319,520
Trust 2003-33, Cl. SP, 13.214%, 5/25/33 4                                        4,507,262             516,659
Trust 2005-40, Cl. SB, 0.988%, 5/25/35 4                                         6,763,685             274,564
Trust 2005-71, Cl. SA, 3.446%, 8/25/25 4                                         7,351,742             385,450
Trust 2006-33, Cl. SP, 13.778%, 5/25/36 4                                        7,096,185             537,730
---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped
Mtg.-Backed Security:
Trust 327, Cl. 1, 5.033%, 9/1/32 6                                               1,033,256             806,620
Trust 340, Cl. 1, 5.056%, 9/1/33 6                                               1,941,869           1,393,681
Trust 344, Cl. 1, 12/1/33 5,6                                                    1,535,809           1,178,019
                                                                                                ---------------
                                                                                                   587,242,631

---------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--1.4%
Government National Mortgage Assn.:
5.375%, 4/20/17 1                                                                   39,742              39,788
6.50%, 11/15/23-12/15/23                                                           142,318             145,641
7%, 1/15/28-1/20/30                                                                938,133             967,352
7.50%, 2/15/22-11/15/26                                                            733,686             765,445
8%, 9/15/07-8/15/28                                                                183,128             193,649
8.25%, 4/15/08                                                                       2,941               2,998
8.50%, 8/15/17-12/15/17                                                            707,101             754,877
9%, 9/15/08-5/15/09                                                                  4,406               4,543
9.50%, 7/15/18-12/15/19                                                             42,673              46,685
10%, 8/15/17-8/15/19                                                                84,433              93,796
10.50%, 8/15/13-5/15/21                                                            406,704             452,933
11%, 10/20/19-7/20/20                                                              340,778             376,737
11.50%, 2/15/13                                                                     11,941              13,073
12%, 12/15/12-3/15/14                                                                6,251               7,085
12.50%, 1/15/14-11/15/14                                                            88,607              98,658
13%, 4/15/11-12/15/14                                                               11,299              12,380
13.50%, 5/15/11-1/15/13                                                              9,353              10,545
14%, 6/15/11                                                                         3,854               4,352
---------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Series 1999-32,
Cl. ZB, 8%, 9/16/29                                                              7,550,946           8,132,111


                     26 | OPPENHEIMER U.S. GOVERNMENT TRUST

                                                                                 PRINCIPAL               VALUE
                                                                                    AMOUNT          SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED Continued
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 1998-6, Cl. SA, (1.35)%, 3/16/28 4                                     $  1,486,180      $      129,103
Series 1998-19, Cl. SB, 0.409%, 7/16/28 4                                        2,405,459             233,140
Series 2006-47, Cl. SA, 17.104%, 8/16/36 4                                       8,710,000             482,504
                                                                                                ---------------
                                                                                                    12,967,395

---------------------------------------------------------------------------------------------------------------
NON-AGENCY--13.2%
---------------------------------------------------------------------------------------------------------------
COMMERCIAL--11.2%
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1996-MD6, Cl. A2, 7.644%, 11/13/29 1                                      3,000,000           3,064,391
Series 1997-MD7, Cl. A1B, 7.41%, 1/13/30                                         4,115,765           4,141,054
---------------------------------------------------------------------------------------------------------------
Banc of America Commercial Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates, Series 2005-3, Cl. A2, 4.501%, 7/10/43                4,590,000           4,477,195
---------------------------------------------------------------------------------------------------------------
Banc of America Funding Corp., CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32                                           3,976,002           4,021,079
---------------------------------------------------------------------------------------------------------------
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates:
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32                                           2,982,234           2,999,009
Series 2005-E, Cl. 2A2, 4.976%, 6/25/35 1                                          461,415             460,265
---------------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series 1997-CTL1, 6.633%, 6/22/24 4                  40,634,444           1,546,949
---------------------------------------------------------------------------------------------------------------
ChaseFlex Trust, CMO Pass-Through Certificates, Series 2006-2,
Cl. A1B, 5.43%, 8/25/08 1                                                        2,910,000           2,910,000
---------------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Commercial Mtg.
Pass-Through Certificates, Series 2001-SP GA, Cl. B, 6.662%, 8/13/18            10,767,000          11,426,325
---------------------------------------------------------------------------------------------------------------
Deutsche Alt-A Securities, Inc. Mortgage Loan Trust, CMO,
Series 2006-AB2, Cl. A7, 5.961%, 6/25/36                                         4,065,112           4,058,191
---------------------------------------------------------------------------------------------------------------
Deutsche Alt-B Securities, Inc. Mortgage Loan Trust, CMO,
Series 2006-AB3, Cl. A7, 6.36%, 4/25/08                                          1,886,483           1,889,238
---------------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations,
Series 2005-C3, Cl. A2, 4.853%, 7/10/45                                          2,610,000           2,576,289
---------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg.
Pass-Through Certificates, Series 1997-C1, Cl. A3, 6.869%, 7/15/29               1,148,937           1,158,427
---------------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp., Commercial Mtg.
Pass-Through Certificates, Series 2005-G G5, Cl. A2, 5.117%, 4/10/37             2,960,000           2,945,276
---------------------------------------------------------------------------------------------------------------
Heller Financial Commercial Mortgage Asset Corp., Interest-Only
Commercial Mtg. Obligations, Series2000-PH1, Cl. X, 7.88%, 1/17/34 4           164,264,888           2,245,008
---------------------------------------------------------------------------------------------------------------
JP Morgan Commercial Mortgage Finance Corp., Commercial Mtg.
Obligations, Series 2000-C9, Cl. A2, 7.77%, 10/15/32                             9,963,254          10,551,587
---------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42                                        1,120,000           1,094,324
Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42                                        3,790,000           3,723,532


                     27 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

                                                                                 PRINCIPAL               VALUE
                                                                                    AMOUNT          SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
COMMERCIAL Continued
LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through
Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30                         $  3,140,000      $    3,106,880
---------------------------------------------------------------------------------------------------------------
Lehman Structured Securities Corp., CMO, Series 2002-GE1,
Cl. A, 2.514%, 7/26/24 3                                                           523,730             382,323
---------------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34                                             4,496,574           4,463,475
Series 2004-9, Cl. A3, 4.70%, 8/25/34 1                                          2,659,362           2,639,295
---------------------------------------------------------------------------------------------------------------
PNC Mortgage Acceptance Corp., Commercial Mtg. Obligations,
Series 2001-C1, Cl. A2, 6.36%, 3/12/34                                          10,000,000          10,423,529
---------------------------------------------------------------------------------------------------------------
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           8,769,072
---------------------------------------------------------------------------------------------------------------
Residential Asset Securitization Trust, CMO, Series 2006-A9CB,
Cl. A5, 6%, 7/20/36                                                              4,268,785           4,255,979
---------------------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR5 Trust,
CMO Mtg. Pass-Through Certificates, Series 2005-AR5, Cl. A1,
4.673%, 5/25/35 1                                                                2,170,152           2,163,713
---------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2004-DD Trust, CMO Mtg.
Pass-Through Certificates, Series 2004-DD, Cl. 2A1, 4.511%, 1/25/35 1              542,979             540,890
                                                                                                ---------------
                                                                                                   102,033,295

---------------------------------------------------------------------------------------------------------------
OTHER--0.5%
JP Morgan Mortgage Trust, CMO Pass-Through Certificates,
Series 2005-S2, Cl. 3A1, 6.746%, 2/25/32 1                                       3,494,571           3,522,837
---------------------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR8 Trust,
CMO Mtg. Pass-Through Certificates, Series 2005-AR8, Cl. 2AB1,
5.574%, 7/25/45 1                                                                1,468,498           1,472,120
                                                                                                ---------------
                                                                                                     4,994,957

---------------------------------------------------------------------------------------------------------------
RESIDENTIAL--1.5%
Countrywide Alternative Loan Trust, CMO, Series 2005-J1, Cl. 3A1,
6.50%, 8/25/32                                                                   7,093,124           7,148,542
---------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates, Series 2005-10,
Cl. 2A3B, 5.55%, 1/25/36                                                         2,397,481           2,377,764
---------------------------------------------------------------------------------------------------------------
Salomon Smith Barney RV Trust, Recreational Vehicles Mtg. Obligations,
Series 2001-1, Cl. B, 6.64%, 4/15/18                                             2,500,000           2,506,901
---------------------------------------------------------------------------------------------------------------
Vendee Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security,
Series 1995-2B, Cl. 2IO, 7.527%, 6/15/25 4                                      10,917,847             258,990
---------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Loan Trust, CMO Mtg. Pass-Through
Certificates, Series 2000-1, Cl. M3, 7.074%, 1/25/40 1                             973,838             979,674
                                                                                                ---------------
                                                                                                    13,271,871
                                                                                                ---------------
Total Mortgage-Backed Obligations (Cost $722,763,147)                                              720,510,149


                     28 | OPPENHEIMER U.S. GOVERNMENT TRUST

                                                                                 PRINCIPAL               VALUE
                                                                                    AMOUNT          SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--20.5%
---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
4.125%, 7/12/10                                                               $ 15,772,000      $   15,287,563
5.125%, 4/18/11                                                                 16,995,000          17,072,939
6%, 6/15/11                                                                      1,580,000           1,645,532
6.625%, 9/15/09                                                                 18,340,000          19,162,219
---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4.75%, 12/15/10 7                                                                3,270,000           3,237,578
6%, 5/15/11                                                                     20,772,000          21,620,972
6.625%, 9/15/09 7                                                                6,890,000           7,204,653
7.25%, 1/15/10                                                                  54,848,000          58,642,878
---------------------------------------------------------------------------------------------------------------
Resolution Funding Corp. Bonds, Residual Funding STRIPS, 5.921%, 1/15/21 8      25,656,000          12,356,879
---------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds, Series A, 6.79%, 5/23/12                      18,578,000          20,184,421
---------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 4.50%, 2/15/36                                                455,000             428,376
---------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 5.125%, 6/30/11                                              9,805,000           9,981,938
                                                                                                ---------------
Total U.S. Government Obligations (Cost $188,025,812)                                              186,825,948

---------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--9.2%
---------------------------------------------------------------------------------------------------------------
Undivided interest of 6.78% in joint repurchase agreement (Principal Amount/
Value $1,235,729,000, with a maturity value of $1,235,908,181) with UBS
Warburg LLC, 5.22%, dated 8/31/06, to be repurchased at $83,806,150
on 9/1/06, collateralized by Federal National Mortgage Assn., 6%-7%,
3/1/36-8/1/36, with a value of $1,262,388,232 (Cost $83,794,000)                83,794,000          83,794,000
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,055,092,832)                                    114.9%      1,046,729,411
---------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS                                                (14.9)       (135,912,891)
                                                                              ---------------------------------
NET ASSETS                                                                           100.0%     $  910,816,520
                                                                              =================================

FOOTNOTES TO STATEMENT OF INVESTMENTS

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

2. Issue is in default. Non-income producing. See Note 1 of accompanying Notes.

3. Illiquid security. The aggregate value of illiquid securities as of August
31, 2006 was $427,825, which represents 0.05% of the Fund's net assets. See Note
8 of accompanying Notes.

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 $31,607,238 or 3.47% of the Fund's net assets
as of August 31, 2006.

5. When-issued security or forward commitment to be delivered and settled after
August 31, 2006. See Note 1 of accompanying Notes.


                     29 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

FOOTNOTES TO STATEMENT OF INVESTMENTS Continued

6. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $3,378,320 or 0.37% of the Fund's net assets as of
August 31, 2006.

7. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $7,208,510. See Note 5 of accompanying Notes.

8. Zero coupon bond reflects effective yield on the date of purchase.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     30 | OPPENHEIMER U.S. GOVERNMENT TRUST

STATEMENT OF ASSETS AND LIABILITIES  August 31, 2006
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
Investments, at value (cost $1,055,092,832)--see
  accompanying statement of investments                         $ 1,046,729,411
--------------------------------------------------------------------------------
Cash                                                                    487,004
--------------------------------------------------------------------------------
Receivables and other assets:
Investments sold on a when-issued basis or forward
  commitment                                                         32,988,613
Interest and principal paydowns                                       5,973,102
Shares of beneficial interest sold                                    1,181,720
Futures margins                                                         256,769
Other                                                                    53,921
                                                                ----------------
Total assets                                                      1,087,670,540

--------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------
Unrealized depreciation on swap contracts                                19,744
--------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued basis or
  forward commitment                                                174,023,086
Shares of beneficial interest redeemed                                1,480,742
Dividends                                                               452,389
Distribution and service plan fees                                      366,909
Trustees' compensation                                                  189,950
Transfer and shareholder servicing agent fees                           183,222
Shareholder communications                                               84,263
Other                                                                    53,715
                                                                ----------------
Total liabilities                                                   176,854,020

--------------------------------------------------------------------------------
NET ASSETS                                                      $   910,816,520
                                                                ================

--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
--------------------------------------------------------------------------------
Par value of shares of beneficial interest                      $        96,796
--------------------------------------------------------------------------------
Additional paid-in capital                                          942,317,623
--------------------------------------------------------------------------------
Accumulated net investment loss                                        (596,718)
--------------------------------------------------------------------------------
Accumulated net realized loss on investments                        (23,225,766)
--------------------------------------------------------------------------------
Net unrealized depreciation on investments                           (7,775,415)
                                                                ----------------
NET ASSETS                                                      $   910,816,520
                                                                ================


                     31 | 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 $596,293,502 and 63,350,569 shares of
beneficial interest outstanding)                                         $ 9.41
Maximum offering price per share (net asset value plus
sales charge of 4.75% of offering price)                                 $ 9.88
--------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $153,680,714 and 16,347,962
shares of beneficial interest outstanding)                               $ 9.40
--------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $100,629,986 and 10,708,305
shares of beneficial interest outstanding)                               $ 9.40
--------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $38,997,109 and 4,143,648
shares of beneficial interest outstanding)                               $ 9.41
--------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per
share (based on net assets of $21,215,209 and 2,245,596
shares of beneficial interest outstanding)                               $ 9.45

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     32 | OPPENHEIMER U.S. GOVERNMENT TRUST

STATEMENT OF OPERATIONS  For the Year Ended August 31, 2006
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------
Interest                                                        $    46,723,039
--------------------------------------------------------------------------------
Fee income                                                            2,278,885
--------------------------------------------------------------------------------
Other income                                                             30,214
--------------------------------------------------------------------------------
Portfolio lending fees                                                   17,399
                                                                ----------------
Total investment income                                              49,049,537

--------------------------------------------------------------------------------
EXPENSES
--------------------------------------------------------------------------------
Management fees                                                       5,327,523
--------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                               1,496,748
Class B                                                               1,756,659
Class C                                                               1,055,178
Class N                                                                 195,059
--------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                               1,351,546
Class B                                                                 443,003
Class C                                                                 249,981
Class N                                                                 167,372
Class Y                                                                   5,342
--------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                 133,981
Class B                                                                  60,486
Class C                                                                  26,407
Class N                                                                   4,938
--------------------------------------------------------------------------------
Custodian fees and expenses                                               6,933
--------------------------------------------------------------------------------
Trustees' compensation                                                    4,717
--------------------------------------------------------------------------------
Other                                                                    99,177
                                                                ----------------
Total expenses                                                       12,385,050
Less reduction to custodian expenses                                       (621)
Less waivers and reimbursements of expenses                          (1,653,014)
                                                                ----------------
Net expenses                                                         10,731,415

--------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                38,318,122


                     33 | OPPENHEIMER U.S. GOVERNMENT TRUST

STATEMENT OF OPERATIONS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
--------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments                                                     $    (9,813,710)
Closing and expiration of futures contracts                            (475,093)
Swap contracts                                                           41,709
                                                                ----------------
Net realized loss                                                   (10,247,094)
--------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments                                                         (22,131,324)
Futures contracts                                                     1,199,491
Swap contracts                                                          (74,480)
                                                                ----------------
Net change in unrealized depreciation                               (21,006,313)

--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS            $     7,064,715
                                                                ================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     34 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

YEAR ENDED AUGUST 31,                                                                 2006               2005
--------------------------------------------------------------------------------------------------------------
OPERATIONS
--------------------------------------------------------------------------------------------------------------
Net investment income                                                      $    38,318,122    $    40,665,000
--------------------------------------------------------------------------------------------------------------
Net realized gain (loss)                                                       (10,247,094)         6,909,017
--------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)                           (21,006,313)        (7,711,516)
                                                                           -----------------------------------
Net increase in net assets resulting from operations                             7,064,715         39,862,501

--------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                                        (28,474,486)       (28,761,551)
Class B                                                                         (6,781,036)        (8,224,269)
Class C                                                                         (4,072,710)        (4,322,159)
Class N                                                                         (1,700,449)        (1,537,304)
Class Y                                                                           (589,439)          (116,040)
--------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A                                                                                 --         (7,292,104)
Class B                                                                                 --         (2,596,070)
Class C                                                                                 --         (1,300,111)
Class N                                                                                 --           (384,795)
Class Y                                                                                 --            (24,917)
--------------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A                                                                                 --         (1,560,900)
Class B                                                                                 --           (539,636)
Class C                                                                                 --           (284,161)
Class N                                                                                 --            (88,929)
Class Y                                                                                 --             (5,876)

--------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
--------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Class A                                                                        (42,850,282)       (30,234,986)
Class B                                                                        (48,959,213)       (47,615,648)
Class C                                                                        (13,297,248)       (17,745,157)
Class N                                                                           (763,357)         7,623,862
Class Y                                                                         18,992,362            365,439

--------------------------------------------------------------------------------------------------------------
NET ASSETS
--------------------------------------------------------------------------------------------------------------
Total decrease                                                                (121,431,143)      (104,782,811)
--------------------------------------------------------------------------------------------------------------
Beginning of period                                                          1,032,247,663      1,137,030,474
                                                                           -----------------------------------
End of period (including accumulated net investment loss
of $596,718 and $699,671, respectively)                                    $   910,816,520    $ 1,032,247,663
                                                                           ===================================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     35 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

CLASS A         YEAR ENDED AUGUST 31,                   2006           2005              2004              2003              2002
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     9.74     $     9.89        $     9.76        $     9.88        $     9.52
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .40 1          .40 1             .38               .28               .54
Net realized and unrealized gain (loss)                 (.30)            --               .14              (.10)              .36
                                                  --------------------------------------------------------------------------------
Total from investment operations                         .10            .40               .52               .18               .90
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.43)          (.42)             (.37)             (.28)             (.54)
Distributions from net realized gain                      --           (.11)             (.02)             (.02)               --
Tax return of capital distribution                        --           (.02)               --                --                --
                                                  --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.43)          (.55)             (.39)             (.30)             (.54)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     9.41     $     9.74        $     9.89        $     9.76        $     9.88
                                                  ================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      1.16%          4.15%             5.47%             1.85%             9.75%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $  596,294     $  661,163        $  702,064        $  830,310        $  853,671
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $  618,102     $  670,487        $  746,658        $  906,353        $  679,657
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   4.26%          4.07%             3.80%             2.85%             5.57%
Total expenses                                          1.05%          1.06%             1.06%             1.01%             1.06%
Expenses after payments and waivers
and reduction to custodian expenses                     0.90%          0.90%             0.98%             1.01%             1.06%
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                   74% 4          95% 4             84% 4             72%              121%

1. Per share amounts calculated based on the average shares outstanding during
the period.

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. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:

                                PURCHASE TRANSACTIONS     SALE TRANSACTIONS
---------------------------------------------------------------------------
Year Ended August 31, 2006             $3,476,956,717        $3,692,200,123
Year Ended August 31, 2005              5,959,020,148         6,246,681,163
Year Ended August 31, 2004              5,578,633,006         5,998,603,295

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     36 | OPPENHEIMER U.S. GOVERNMENT TRUST

CLASS B         YEAR ENDED AUGUST 31,                   2006           2005              2004              2003              2002
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     9.73     $     9.88        $     9.75        $     9.87        $     9.51
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .33 1          .32 1             .31               .21               .46
Net realized and unrealized gain (loss)                 (.30)           .01               .14              (.10)              .36
                                                  --------------------------------------------------------------------------------
Total from investment operations                         .03            .33               .45               .11               .82
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.36)          (.35)             (.30)             (.21)             (.46)
Distributions from net realized gain                      --           (.11)             (.02)             (.02)               --
Tax return of capital distribution                        --           (.02)               --                --                --
                                                  --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.36)          (.48)             (.32)             (.23)             (.46)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     9.40     $     9.73        $     9.88        $     9.75        $     9.87
                                                  ================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      0.41%          3.37%             4.67%             1.07%             8.93%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $  153,681     $  209,494        $  261,065        $  370,984        $  393,355
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $  175,707     $  231,801        $  301,926        $  431,102        $  266,559
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   3.50%          3.33%             3.01%             2.08%             4.74%
Total expenses                                          1.86%          1.84%             1.86%             1.78%             1.82%
Expenses after payments and waivers
and reduction to custodian expenses                     1.65%          1.65%             1.76%             1.78%             1.82%
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                   74% 4          95% 4             84% 4             72%              121%

1. Per share amounts calculated based on the average shares outstanding during
the period.

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. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:

                                PURCHASE TRANSACTIONS     SALE TRANSACTIONS
---------------------------------------------------------------------------
Year Ended August 31, 2006             $3,476,956,717        $3,692,200,123
Year Ended August 31, 2005              5,959,020,148         6,246,681,163
Year Ended August 31, 2004              5,578,633,006         5,998,603,295

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     37 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

CLASS C         YEAR ENDED AUGUST 31,                   2006           2005              2004              2003              2002
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     9.72     $     9.88        $     9.75        $     9.87        $     9.50
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .33 1          .32 1             .31               .21               .46
Net realized and unrealized gain (loss)                 (.29)            --               .14              (.10)              .37
                                                  --------------------------------------------------------------------------------
Total from investment operations                         .04            .32               .45               .11               .83
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.36)          (.35)             (.30)             (.21)             (.46)
Distributions from net realized gain                      --           (.11)             (.02)             (.02)               --
Tax return of capital distribution                        --           (.02)               --                --                --
                                                  --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.36)          (.48)             (.32)             (.23)             (.46)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     9.40     $     9.72        $     9.88        $     9.75        $     9.87
                                                  ================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      0.51%          3.27%             4.69%             1.12%             9.05%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $  100,630     $  117,783        $  137,480        $  192,496        $  205,349
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $  105,608     $  122,062        $  156,925        $  216,954        $  144,852
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   3.51%          3.33%             3.04%             2.13%             4.76%
Total expenses                                          1.83%          1.82%             1.81%             1.74%             1.81%
Expenses after payments and waivers
and reduction to custodian expenses                     1.65%          1.65%             1.74%             1.74%             1.81%
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                   74% 4          95% 4             84% 4             72%              121%

1. Per share amounts calculated based on the average shares outstanding during
the period.

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. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:

                                PURCHASE TRANSACTIONS     SALE TRANSACTIONS
---------------------------------------------------------------------------
Year Ended August 31, 2006             $3,476,956,717        $3,692,200,123
Year Ended August 31, 2005              5,959,020,148         6,246,681,163
Year Ended August 31, 2004              5,578,633,006         5,998,603,295

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     38 | OPPENHEIMER U.S. GOVERNMENT TRUST

CLASS N         YEAR ENDED AUGUST 31,                   2006           2005              2004              2003              2002
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     9.74     $     9.89        $     9.76        $     9.88        $     9.52
----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income                                    .38 1          .37 1             .34               .24               .50
Net realized and unrealized gain (loss)                 (.30)            --               .15              (.10)              .39
                                                  --------------------------------------------------------------------------------
Total from investment operations                         .08            .37               .49               .14               .89
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.41)          (.39)             (.34)             (.24)             (.53)
Distributions from net realized gain                      --           (.11)             (.02)             (.02)               --
Tax return of capital distribution                        --           (.02)               --                --                --
                                                  --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.41)          (.52)             (.36)             (.26)             (.53)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     9.41     $     9.74        $     9.89        $     9.76        $     9.88
                                                  ================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      0.91%          3.89%             5.13%             1.45%             9.62%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $   38,997     $   41,127        $   34,067        $   25,947        $   13,453
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $   39,069     $   38,200        $   29,034        $   22,027        $    6,092
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets 3
Net investment income                                   4.01%          3.82%             3.52%             2.41%             5.21%
Total expenses                                          1.51%          1.53%             1.59%             1.52%             1.31%
Expenses after payments and waivers
and reduction to custodian expenses                     1.15%          1.15%             1.29%             1.42%             1.31%
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                   74% 4          95% 4             84% 4             72%              121%

1. Per share amounts calculated based on the average shares outstanding during
the period.

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. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:

                                PURCHASE TRANSACTIONS     SALE TRANSACTIONS
---------------------------------------------------------------------------
Year Ended August 31, 2006             $3,476,956,717        $3,692,200,123
Year Ended August 31, 2005              5,959,020,148         6,246,681,163
Year Ended August 31, 2004              5,578,633,006         5,998,603,295

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     39 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

CLASS Y         YEAR ENDED AUGUST 31,                   2006           2005              2004              2003              2002
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     9.74     $     9.89        $     9.76        $     9.88        $     9.52
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .43 1          .43 1             .42               .33               .56
Net realized and unrealized gain (loss)                 (.27)            --               .14              (.10)              .36
                                                  --------------------------------------------------------------------------------
Total from investment operations                         .16            .43               .56               .23               .92
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.45)          (.45)             (.41)             (.33)             (.56)
Distributions from net realized gain                      --           (.11)             (.02)             (.02)               --
Tax return of capital distribution                        --           (.02)               --                --                --
                                                  --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.45)          (.58)             (.43)             (.35)             (.56)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     9.45     $     9.74        $     9.89        $     9.76        $     9.88
                                                  ================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      1.75%          4.48%             5.88%             2.37%            10.05%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $   21,215     $    2,681        $    2,354        $    2,602        $    2,861
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $   12,688     $    2,524        $    2,377        $    3,133        $    1,933
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   4.58%          4.40%             4.20%             3.36%             5.80%
Total expenses                                          0.61%          0.58%             0.58%             0.59%             0.83%
Expenses after payments and waivers
and reduction to custodian expenses                     0.61%          0.58%             0.58%             0.59%             0.81%
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                   74% 4          95% 4             84% 4             72%              121%

1. Per share amounts calculated based on the average shares outstanding during
the period.

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. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:

                                PURCHASE TRANSACTIONS     SALE TRANSACTIONS
---------------------------------------------------------------------------
Year Ended August 31, 2006             $3,476,956,717        $3,692,200,123
Year Ended August 31, 2005              5,959,020,148         6,246,681,163
Year Ended August 31, 2004              5,578,633,006         5,998,603,295

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     40 | 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, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, 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. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ(R) are valued based on the
closing price provided by NASDAQ prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the closing "bid" and
"asked" prices, and if not, at the closing bid price. Securities traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its


                     41 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

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

trading session ending at, or most recently prior to, the time when the Fund's
assets are valued. Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value. Foreign and
domestic securities whose values have been materially affected by what the
Manager identifies as a significant event occurring before the Fund's assets are
valued but after the close of their respective exchanges will be fair valued.
Fair value is determined in good faith using consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).

--------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of August 31, 2006, the Fund had purchased
$174,023,086 of securities issued on a when-issued basis or forward commitment
and sold $32,988,613 of securities issued on a when-issued basis or forward
commitment.

      In connection with its ability to purchase or sell 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 Fund
records the incremental difference between the forward purchase and sale of each
forward roll as realized gain (loss) on investments or as fee income in the case
of such transactions that have an associated fee in lieu of a difference in the
forward purchase and sale price.

      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 at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.


                     42 | OPPENHEIMER U.S. GOVERNMENT TRUST

--------------------------------------------------------------------------------
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, 2006, securities with an
aggregate market value of $73,311, representing 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. 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 provisions are
required, however, during the year ended August 31, 2006, the Fund paid federal
excise tax of $14,134.

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


                     43 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

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

                                                                  NET UNREALIZED
                                                                    DEPRECIATION
                                                                BASED ON COST OF
                                                                  SECURITIES AND
      UNDISTRIBUTED   UNDISTRIBUTED             ACCUMULATED    OTHER INVESTMENTS
      NET INVESTMENT      LONG-TERM                    LOSS   FOR FEDERAL INCOME
      INCOME                   GAIN  CARRYFORWARD 1,2,3,4,5         TAX PURPOSES
      --------------------------------------------------------------------------
      $435,867                  $--             $18,924,285           $8,669,555

1. As of August 31, 2006, the Fund had $12,404,454 of net capital loss
carryforward available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of August 31, 2006, details
of the capital loss carryforward were as follows:

                         EXPIRING
                         ----------------------------
                         2014             $12,404,454

2. As of August 31, 2006, the Fund had $6,382,650 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2015.

3. The Fund had $137,181 of straddle losses which were deferred.

4. During the fiscal year ended August 31, 2006, the Fund did not utilize any
capital loss carryforward.

5. During the fiscal year ended August 31, 2005, the Fund did not utilize any
capital loss carryforward.

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

Accordingly, the following amounts have been reclassified for August 31, 2006.
Net assets of the Fund were unaffected by the reclassifications.

           REDUCTION TO               REDUCTION TO           INCREASE TO
           PAID-IN                 ACCUMULATED NET       ACCUMULATED NET
           CAPITAL                 INVESTMENT LOSS   LOSS ON INVESTMENTS
           -------------------------------------------------------------
           $14,134                    $  3,402,951          $  3,388,817

The tax character of distributions paid during the years ended August 31, 2006
and August 31, 2005 was as follows:

                                            YEAR ENDED        YEAR ENDED
                                       AUGUST 31, 2006   AUGUST 31, 2005
           -------------------------------------------------------------
           Distributions paid from:
           Ordinary income               $  41,618,120     $  53,442,425
           Long-term capital gain                   --         1,116,895
           Return of capital                        --         2,479,502
                                         -------------------------------
           Total                         $  41,618,120     $  57,038,822
                                         ===============================

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of August 31, 2006 are noted below. The primary
difference between


                     44 | OPPENHEIMER U.S. GOVERNMENT TRUST

book and tax appreciation or depreciation of securities and other investments,
if applicable, is attributable to the tax deferral of losses or tax realization
of financial statement unrealized gain or loss.

            Federal tax cost of securities           $  1,055,364,672
            Federal tax cost of other investments         (26,166,356)
                                                     -----------------
            Total federal tax cost                   $  1,029,198,316
                                                     =================

            Gross unrealized appreciation            $      8,577,345
            Gross unrealized depreciation                 (17,246,900)
                                                     -----------------
            Net unrealized depreciation              $     (8,669,555)
                                                     =================

--------------------------------------------------------------------------------
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, 2006, the Fund's projected benefit obligations were decreased by $21,403 and
payments of $14,347 were made to retired trustees, resulting in an accumulated
liability of $135,671 as of August 31, 2006.

      The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of the annual compensation they are entitled to receive from the Fund.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the Plan.

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

--------------------------------------------------------------------------------
INVESTMENT INCOME. 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.

--------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian fees and expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption


                     45 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

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

activity. The Fund pays interest to its custodian on such cash overdrafts, to
the extent they are not offset by positive cash balances maintained by the Fund,
at a rate equal to the Federal Funds Rate plus 0.50%. The "Reduction to
custodian expenses" line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings.

--------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.

--------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.

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

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

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

                                      YEAR ENDED AUGUST 31, 2006        YEAR ENDED AUGUST 31, 2005
                                       SHARES             AMOUNT          SHARES            AMOUNT
---------------------------------------------------------------------------------------------------
CLASS A
Sold                               14,257,373    $   134,270,797      18,201,396    $  177,730,859
Dividends and/or
distributions reinvested            2,563,009         24,143,007       3,316,201        32,315,297
Redeemed                          (21,365,041)      (201,264,086)    (24,577,442)     (240,281,142)
                                  -----------------------------------------------------------------
Net decrease                       (4,544,659)   $   (42,850,282)     (3,059,845)   $  (30,234,986)
                                  =================================================================

---------------------------------------------------------------------------------------------------
CLASS B
Sold                                2,176,199    $    20,461,713       3,431,412    $   33,508,152
Dividends and/or
distributions reinvested              630,332          5,934,004       1,012,781         9,855,570
Redeemed                           (7,999,351)       (75,354,930)     (9,322,282)      (90,979,370)
                                  -----------------------------------------------------------------
Net decrease                       (5,192,820)   $   (48,959,213)     (4,878,089)   $  (47,615,648)
                                  =================================================================


                     46 | OPPENHEIMER U.S. GOVERNMENT TRUST

                                      YEAR ENDED AUGUST 31, 2006        YEAR ENDED AUGUST 31, 2005
                                       SHARES             AMOUNT          SHARES            AMOUNT
---------------------------------------------------------------------------------------------------
CLASS C
Sold                                2,272,098    $    21,351,324       2,869,464    $   27,940,960
Dividends and/or
distributions reinvested              371,557          3,495,322         522,828         5,085,042
Redeemed                           (4,050,077)       (38,143,894)     (5,194,614)      (50,771,159)
                                  -----------------------------------------------------------------
Net decrease                       (1,406,422)   $   (13,297,248)     (1,802,322)   $  (17,745,157)
                                  =================================================================

---------------------------------------------------------------------------------------------------
CLASS N
Sold                                1,467,459    $    13,821,685       2,185,762    $   21,313,658
Dividends and/or
distributions reinvested              166,474          1,567,918         197,014         1,919,111
Redeemed                           (1,714,094)       (16,152,960)     (1,602,483)      (15,608,907)
                                  -----------------------------------------------------------------
Net increase (decrease)               (80,161)   $      (763,357)        780,293    $    7,623,862
                                  =================================================================

---------------------------------------------------------------------------------------------------
CLASS Y
Sold                               10,762,543    $   101,810,143         264,048    $    2,550,959
Dividends and/or
distributions reinvested               59,746            564,609          14,987           145,986
Redeemed                           (8,852,114)       (83,382,390)       (241,605)       (2,331,506)
                                  -----------------------------------------------------------------
Net increase                        1,970,175    $    18,992,362          37,430    $      365,439
                                  =================================================================

--------------------------------------------------------------------------------
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, 2006, were as
follows:

                                                PURCHASES            SALES
      --------------------------------------------------------------------
      Investment securities                $  513,775,265   $  360,802,001
      U.S. government and
      government agency obligations            98,223,758      402,067,458
      To Be Announced (TBA)
      mortgage-related securities           3,476,956,717    3,692,200,123

--------------------------------------------------------------------------------
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
average annual rate as shown in the following table:

      FEE SCHEDULE
      ------------------------------------------------
      Up to $300 million of net assets          0.600%
      Next $100 million of net assets           0.570
      Next $400 million of net assets           0.550
      Next $1.2 billion of net assets           0.500
      Over $2 billion of net assets             0.475


                     47 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

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

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, 2006, the Fund paid
$2,212,981 to OFS for services to the Fund.

      Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum 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.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.

--------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
periodically 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 periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
periods. Fees incurred by the Fund under the plan are detailed in the Statement
of Operations.

--------------------------------------------------------------------------------
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 compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 0.25% per year under each plan. If either the Class B, Class C or
Class N plan is terminated by the Fund or by the shareholders of a class, the
Board of Trustees and its independent trustees must determine whether the
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor's aggregate
uncompensated expenses under the plan at August 31, 2006 for Class B, Class C
and Class N shares were $6,894,329, $2,836,161 and $679,264, respectively. Fees
incurred by the Fund under the plans are detailed in the Statement of
Operations.

--------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the


                     48 | OPPENHEIMER U.S. GOVERNMENT TRUST

CDSC retained by the Distributor on the redemption of shares is shown in the
following table for the period indicated.

                                          CLASS A         CLASS B         CLASS C         CLASS N
                          CLASS A      CONTINGENT      CONTINGENT      CONTINGENT      CONTINGENT
                        FRONT-END        DEFERRED        DEFERRED        DEFERRED        DEFERRED
                    SALES CHARGES   SALES CHARGES   SALES CHARGES   SALES CHARGES   SALES CHARGES
                      RETAINED BY     RETAINED BY     RETAINED BY     RETAINED BY     RETAINED BY
YEAR ENDED            DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR
--------------------------------------------------------------------------------------------------
August 31, 2006          $248,354         $14,627        $558,256         $25,154         $22,860
--------------------------------------------------------------------------------------------------

WAIVERS AND REIMBURSEMENTS OF EXPENSES. Effective March 1, 2004, the Manager has
voluntarily undertaken to limit the "Total Annual Operating Expenses" for all
classes of shares so that "Total Annual Operating Expenses," as a percentage of
average daily net assets will not exceed the following annual rates: 0.90% for
the Class A shares; 1.65% for Class B and Class C shares, respectively; 1.15%
for the Class N shares and 0.65% for the Class Y shares. During the year ended
August 31, 2006, the Manager reimbursed the Fund $953,104, $365,445, $193,081
and $110,748 for Class A, Class B, Class C and Class N shares, respectively. The
Manager may modify or terminate that undertaking at any time without notice to
shareholders.

      OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class.
During the year ended August 31, 2006, OFS waived $30,636 for Class N shares.
This undertaking may be amended or withdrawn at any time.

--------------------------------------------------------------------------------
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 stocks 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 securities.

      Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or 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


                     49 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

--------------------------------------------------------------------------------
5. FUTURES CONTRACTS Continued

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 in the Statement of Operations at
the closing and expiration of futures contracts. The net change in unrealized
appreciation and depreciation is reported in 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, 2006, the Fund had outstanding futures contracts as follows:

                                                            VALUATION       UNREALIZED
                             EXPIRATION   NUMBER OF             AS OF     APPRECIATION
CONTRACT DESCRIPTION              DATES   CONTRACTS   AUGUST 31, 2006    (DEPRECIATION)
---------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds                12/19/06       1,472     $ 163,484,000      $ 1,026,255
U.S. Treasury Nts., 5 yr.      12/29/06         182        19,129,906           39,312
                                                                           ------------
                                                                             1,065,567
                                                                           ------------

CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr.      12/29/06         758       154,892,563         (220,491)
U.S. Treasury Nts., 10 yr.     12/19/06         502        53,902,250         (237,326)
                                                                           ------------
                                                                              (457,817)
                                                                           ------------
                                                                           $   607,750
                                                                           ============

--------------------------------------------------------------------------------
6. INTEREST RATE SWAP CONTRACTS

The Fund may enter into an interest rate swap transaction to maintain a total
return or yield spread on a particular investment, or portion of its portfolio,
or for other non-speculative purposes. Interest rate swaps involve the exchange
of commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The coupon payments are based on an agreed
upon principal amount and a specified index. Because the principal amount is not
exchanged, it represents neither an asset nor a liability to either
counterparty, and is referred to as notional. The Fund records an increase or
decrease to unrealized gain (loss) on the notional amount of the swap in an
amount equal to the daily change in such valuation. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss).

      Interest rate swaps are subject to credit risk (if the counterparty fails
to meet its obligations) and interest rate risk. The Fund could be obligated to
pay more under its swap agreements than it receives under them, as a result of
interest rate changes.

      As of August 31, 2006, the Fund had no outstanding interest rate swap
agreements.


                     50 | OPPENHEIMER U.S. GOVERNMENT TRUST

--------------------------------------------------------------------------------
7. TOTAL RETURN SWAP CONTRACTS

The Fund may enter into a total return swap transaction to maintain a total
return on a particular investment, or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. The unrealized gain (loss) related to the daily change
in the valuation of the notional amount of the swap, as well as the amount due
to (owed by) the Fund at termination or settlement, is combined and separately
disclosed as an asset (liability). The Fund also records any periodic payments
received from (paid to) the counterparty, including at termination, under such
contracts as realized gain (loss). Total return swaps are subject to risks (if
the counterparty fails to meet its obligations).

As of August 31, 2006, the Fund had entered into the following total return swap
agreements:

SWAP                                                                        NOTIONAL   TERMINATION     UNREALIZED
COUNTERPARTY             SWAP DESCRIPTION                                     AMOUNT         DATES   DEPRECIATION
-----------------------------------------------------------------------------------------------------------------
                         Received or paid monthly. The Counterparty
                         pays the Fund a Floating Payment which is
                         the sum of the Notional Amount, the
                         Lehman Brothers CMBS Index Spread and the
                         Financial Spread on the initial Notional
                         Amount for the Swap Interest Accrual Period.
                         In addition, the Counterparty, pays the Fund
                         the Total Return Amount if it is a positive
                         value for a given Index Period. If it is a
                         negative, the Fund pays the Counterparty
                         the absolute value of the Total Return
                         Amount for a given Index Period,
Deutsche Bank AG         on each Payment Date.                           $10,000,000       12/1/06       $ 10,151
-----------------------------------------------------------------------------------------------------------------
                         Received or paid monthly. If the Carry
                         Amount, plus the Spread Return Amount
                         (Spread Change times Duration times
                         Notional Amount), is positive, the
                         Counterparty pays the Fund. The payment is
                         based on the Carry Amount which is the
                         Spread on the Lehman Brothers CMBS AAA
                         8.5+ Index as of the close of one Business
                         Day prior to the Period End Day plus 15 basis
                         points times the Notional Amount times the
                         Day Count Basis. If it is negative, the Fund
Lehman Brothers          pays the Counterparty the absolute value of
Special Financing, Inc.  the Spread Return Amount.                         9,450,000       12/1/06          9,593
                                                                                                         --------
                                                                                                         $ 19,744
                                                                                                         ========

Abbreviation is as follows:
CMBS                     Commercial Mortgage Backed Securities


                     51 | OPPENHEIMER U.S. GOVERNMENT TRUST

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

--------------------------------------------------------------------------------
8. ILLIQUID SECURITIES

As of August 31, 2006, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.

--------------------------------------------------------------------------------
9. SECURITIES LENDING

The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value of the loaned
securities is determined at the close of business each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. If the borrower defaults on its obligation
to return the securities loaned because of insolvency or other reasons, the Fund
could experience delays and cost in recovering the securities loaned or in
gaining access to the collateral. The Fund continues to receive the economic
benefit of interest or dividends paid on the securities loaned in the form of a
substitute payment received from the borrower.

      As of August 31, 2006, the Fund had no securities on loan.

--------------------------------------------------------------------------------
10. RECENT ACCOUNTING PRONOUNCEMENT

In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
August 31, 2006, the Manager is evaluating the implications of FIN 48. Its
impact in the Fund's financial statements has not yet been determined.


                     52 | OPPENHEIMER U.S. GOVERNMENT TRUST

--------------------------------------------------------------------------------
11. LITIGATION

A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.

      In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.

      The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.


                     53 | OPPENHEIMER U.S. GOVERNMENT TRUST

A-7
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. ("Moody's")

LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS

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

C: Bonds and preferred stock 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.

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.

PRIME RATING SYSTEM (SHORT-TERM RATINGS - TAXABLE DEBT)
These ratings are opinions of the ability of issuers to honor senior financial obligations
and contracts. Such obligations generally have an original maturity not exceeding one year,
unless explicitly noted.

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

LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based in varying degrees, on the following considerations:
o Likelihood of payment-capacity and willingness of the obligor to meet its financial
commitment on an obligation in accordance with the terms of the obligation;
o Nature of and provisions of the obligation; and
o Protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
The issue ratings definitions are expressed in terms of default risk. As such, they
pertain to senior obligations of an entity. Junior obligations are typically rated lower
than senior obligations, to reflect the lower priority in bankruptcy, as noted above.

AAA: An obligation rated "AAA" 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: An obligation 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: An obligation rated "A" are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated categories.
However, the obligor's capacity to meet its financial commitment on the obligation is still
strong.

BBB: An obligation rated "BBB" 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
An obligation rated `BB', `B', `CCC', `CC', and `C' are regarded as having significant
speculative characteristics. `BB' indicates the least degree of speculation and `C' the
highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major exposures to
adverse conditions.

BB: An obligation rated "BB" are less vulnerable to nonpayment than other speculative
issues. However, they 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: An obligation rated "B" are more vulnerable to nonpayment than obligations rated "BB",
but the obligor currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment on the obligation.

CCC: An obligation rated "CCC" are currently vulnerable to nonpayment, and are dependent
upon favorable business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet its financial
commitment on the obligation.

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

C: Subordinated debt or preferred stock obligations rated "C" are 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 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: An obligation rated "D" are in payment default. The "D" rating category is used when
payments on an obligation are not made on the date due even if the applicable grace period
has not expired, unless Standard & Poor's believes that such payments will be made during
such grace period. The "D" rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are jeopardized.

The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.

c: The `c' subscript is used to provide additional information to investors that the bank
may terminate its obligation to purchase tendered bonds if the long-term credit rating of
the issuer is below an investment-grade level and/or the issuer's bonds are deemed taxable.

p: The letter `p' indicates that the rating is provisional. A provisional rating assumes
the successful completion of the project financed by the debt being rated and indicates
that payment of debt service requirements is largely or entirely dependent upon the
successful, timely completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the likelihood of or
the risk of default upon failure of such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.

Continuance of the ratings is contingent upon Standard & Poor's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and cash flows.

r: The `r' highlights derivative, hybrid, and certain other obligations that Standard &
Poor's believes may experience high volatility or high variability in expected returns as a
result of noncredit risks. Examples of such obligations are securities with principal or
interest return indexed to equities, commodities, or currencies; certain swaps and options;
and interest-only and principal-only mortgage securities. The absence of an `r' symbol
should not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.

N.R. Not rated.

Debt obligations of issuers outside the United States and its territories are rated on the
same basis as domestic corporate and municipal issues. The ratings measure the
creditworthiness of the obligor but do not take into account currency exchange and related
uncertainties.

Bond Investment Quality Standards

Under present commercial bank regulations issued by the Comptroller of the Currency, bonds
rated in the top four categories (`AAA', `AA', `A', `BBB', commonly known as
investment-grade ratings) generally are regarded as eligible for bank investment. Also, the
laws of various states governing legal investments impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies, insurance
companies, and fiduciaries in general

SHORT-TERM ISSUE CREDIT RATINGS
Short-term ratings are generally assigned to those obligations considered short-term in the
relevant market. In the U.S., for example, that means obligations with an original maturity
of no more than 365 days-including commercial paper.

A-1: A short-term obligation rated "A-1" is rated in the highest category by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitment on these obligations
is extremely strong.

A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial commitment on the
obligation is satisfactory.
A-3: A short-term obligation rated "A-3" exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.

B: A short-term obligation rated "B" is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial commitment on
the obligation; however, it faces major ongoing uncertainties which could lead to the
obligor's inadequate capacity to meet its financial commitment on the obligation.

C: A short-term obligation rated "C" is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.

D: A short-term obligation rated "D" is in payment default. The "D" rating category is used
when payments on an obligation are not made on the date due even if the applicable grace
period has not expired, unless Standard & Poor's believes that such payments will be made
during such grace period. The "D" rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are jeopardized.

NOTES:
A Standard & Poor's note rating reflects the liquidity factors and market access risks
unique to notes. Notes due in three years or less will likely receive a note rating. Notes
maturing beyond three years will most likely receive a long-term debt rating. The following
criteria will be used in making that assessment:
o Amortization schedule-the larger the final maturity relative to other maturities, the
more likely it will
be treated as a note; and
o Source of payment-the more dependent the issue is on the market for its refinancing,
the more likely
it will be treated as a note.

SP-1: Strong capacity to pay principal and interest. An issue with a very strong capacity
to pay debt service is given a (+) designation.

SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to
adverse financial and economic changes over the term of the notes.

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

Fitch, Inc.
International credit ratings assess the capacity to meet foreign currency or local currency
commitments. Both "foreign currency" and "local currency" ratings are internationally
comparable assessments. The local currency rating measures the probability of payment
within the relevant sovereign state's currency and jurisdiction and therefore, unlike the
foreign currency rating, does not take account of the possibility of foreign exchange
controls limiting transfer into foreign currency.

INTERNATIONAL LONG-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency ratings.

Investment Grade:

AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of credit risk.
They are assigned only in the case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of credit risk.
They indicate a very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.

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

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

Speculative Grade:

BB: Speculative. "BB" ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time. However,
business or financial alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.

B: Highly Speculative. "B" ratings indicate that significant credit risk is present, but a
limited margin of safety remains. Financial commitments are currently being met. However,
capacity for continued payment is contingent upon a sustained, favorable business and
economic environment.

CCC, CC C: High Default Risk. Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon sustained, favorable business or economic developments.
A "CC" rating indicates that default of some kind appears probable. "C" ratings signal
imminent default.

DDD, DD, and D: Default. The ratings of obligations in this category are based on their
prospects for achieving partial or full recovery in a reorganization or liquidation of the
obligor. While expected recovery values are highly speculative and cannot be estimated with
any precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-100% of outstanding amounts and accrued
interest. "DD" indicates potential recoveries in the range of 50%-90%, and "D" the lowest
recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their obligations.
Entities rated "DDD" have the highest prospect for resumption of performance or continued
operation with or without a formal reorganization process. Entities rated "DD" and "D" are
generally undergoing a formal reorganization or liquidation process; those rated "DD" are
likely to satisfy a higher portion of their outstanding obligations, while entities rated
"D" have a poor prospect for repaying all obligations.

Plus (+) and minus (-) signs may be appended to a rating symbol to denote relative status
within the major rating categories. Plus and minus signs are not added to the "AAA"
category or to categories below "CCC," nor to short-term ratings other than "F1" (see
below).

INTERNATIONAL SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency ratings. A
short-term rating has a time horizon of less than 12 months for most obligations, or up to
three years for U.S. public finance securities, and thus places greater emphasis on the
liquidity necessary to meet financial commitments in a timely manner.

F1: Highest credit quality. Strongest capacity for timely payment of financial commitments.
May have an added "+" to denote any exceptionally strong credit feature.

F2: Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of higher ratings.

F3: Fair credit quality. Capacity for timely payment of financial commitments is adequate.
However, near-term adverse changes could result in a reduction to non-investment grade.

B: Speculative. Minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

C: High default risk. Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic environment.

D: Default. Denotes actual or imminent payment default.

B-1
Appendix B

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-11
Appendix C

OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class A shares(4)
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.(5) That is because of the economies of sales
efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as
the "Distributor"), or by dealers or other financial institutions that offer those shares
to certain classes of investors. Not all waivers apply to all funds.

For the purposes of some of the waivers described below and in the Prospectus and SAI of
the applicable Oppenheimer funds, the term "Retirement Plan" refers to the following types
of plans:
1) plans created or qualified under Sections 401(a) or 401(k) of the Internal
Revenue Code,
2) non-qualified deferred compensation plans,
3) employee benefit plans(6)
4) Group Retirement Plans(7)
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."(8) This waiver provision
applies to:
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases of Class A shares by a Retirement Plan that was permitted to purchase such
shares at net asset value but subject to a contingent deferred sales charge prior
to March 1, 2001. That included plans (other than IRA or 403(b)(7) Custodial
Plans) that: 1) bought shares costing $500,000 or more, 2) had at the time of
purchase 100 or more eligible employees or total plan assets of $500,000 or more,
or 3) certified to the Distributor that it projects to have annual plan purchases
of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases are made:
1) through a broker, dealer, bank or registered investment adviser that has made
special arrangements with the Distributor for those purchases, or
2) by a direct rollover of a distribution from a qualified Retirement Plan if the
administrator of that Plan has made special arrangements with the Distributor
for those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of the following
record-keeping arrangements:
1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc.
("Merrill Lynch") on a daily valuation basis for the Retirement Plan. On the
date the plan sponsor signs the record-keeping service agreement with Merrill
Lynch, the Plan must have $3 million or more of its assets invested in (a)
mutual funds, other than those advised or managed by Merrill Lynch Investment
Management, L.P. ("MLIM"), that are made available under a Service Agreement
between Merrill Lynch and the mutual fund's principal underwriter or
distributor, and (b) funds advised or managed by MLIM (the funds described in
(a) and (b) are referred to as "Applicable Investments").
2) The record keeping for the Retirement Plan is performed on a daily valuation
basis by a record keeper whose services are provided under a contract or
arrangement between the Retirement Plan and Merrill Lynch. On the date the plan
sponsor signs the record keeping service agreement with Merrill Lynch, the Plan
must have $5 million or more of its assets (excluding assets invested in money
market funds) invested in Applicable Investments.
3) The record keeping for a Retirement Plan is handled under a service agreement
with Merrill Lynch and on the date the plan sponsor signs that agreement, the
Plan has 500 or more eligible employees (as determined by the Merrill Lynch
plan conversion manager).
II.

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

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

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

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

1. Class A shares issued or purchased in the following transactions are not subject to
sales charges (and no concessions are paid by the Distributor on such purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or other distributions reinvested
from the Fund or other Oppenheimer funds or unit investment trusts for which
reinvestment arrangements have been made with the Distributor.
|_| Shares purchased by certain Retirement Plans that are part of a retirement plan or
platform offered by banks, broker-dealers, financial advisors or insurance
companies, or serviced by recordkeepers.
|_| Shares purchased by the reinvestment of loan repayments by a participant in a
Retirement Plan for which the Manager or an affiliate acts as sponsor.
|_| Shares purchased in amounts of less than $5.

2. Class A shares issued and purchased in the following transactions are not subject to
sales charges (a dealer concession at the annual rate of 0.25% is paid by the
Distributor on purchases made within the first 6 months of plan establishment):
|_| Retirement Plans that have $5 million or more in plan assets.
|_| Retirement Plans with a single plan sponsor that have $5 million or more in aggregate
assets invested in Oppenheimer funds.

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

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be waived for
redemptions of shares in the following cases:
|_| Shares redeemed involuntarily, as described in "Shareholder Account Rules and
Policies," in the applicable Prospectus.
|_| Redemptions from accounts other than Retirement Plans following the death or
disability of the last surviving shareholder. The death or disability must have
occurred after the account was established, and for disability you must provide
evidence of a determination of disability by the Social Security Administration.
|_| The contingent deferred sales charges are generally not waived following the death or
disability of a grantor or trustee for a trust account. The contingent deferred
sales charges will only be waived in the limited case of the death of the trustee
of a grantor trust or revocable living trust for which the trustee is also the
sole beneficiary. The death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability (as defined in the Internal Revenue Code).
|_| Distributions from accounts for which the broker-dealer of record has entered into a
special agreement with the Distributor allowing this waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records are maintained
on a daily valuation basis by Merrill Lynch or an independent record keeper under
a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of
clients of financial institutions that have entered into a special arrangement
with the Distributor for this purpose.
|_| Redemptions of Class C shares of an Oppenheimer fund in amounts of $1 million or more
requested in writing by a Retirement Plan sponsor and submitted more than 12
months after the Retirement Plan's first purchase of Class C shares, if the
redemption proceeds are invested to purchase Class N shares of one or more
Oppenheimer funds.
|_| Distributions(11) 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.(12)
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.(13)
9) On account of the participant's separation from service.(14)
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 1/1/2, 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 SAI of the Oppenheimer funds are modified as
described below for certain persons who were shareholders of the former Quest for Value
Funds. To be eligible, those persons must have been shareholders on November 24, 1995, when
OppenheimerFunds, Inc. became the investment advisor to those former Quest for Value Funds.
Those funds include:
Oppenheimer Quest Value Fund, Inc. Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer Quest Balanced Fund Oppenheimer Quest International Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund

These arrangements also apply to shareholders of the following funds when they merged
(were reorganized) into various Oppenheimer funds on November 24, 1995:
Quest for Value U.S. Government Income Fund Quest for Value New York Tax-Exempt Fund
Quest for Value Investment Quality Income Fund Quest for Value National Tax-Exempt Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt Fund

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but Prior to
November 24, 1995. In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund into the fund
or by exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into
which such Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
o redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social Security
Administration);
o withdrawals under an automatic withdrawal plan (but only for Class B or Class C
shares) where the annual withdrawals do not exceed 10% of the initial value of
the account value; adjusted annually, and
o liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum account value.

A shareholder's account will be credited with the amount of any contingent deferred
sales charge paid on the redemption of any Class A, Class B or Class C shares of the
Oppenheimer fund described in this section if the proceeds are invested in the same Class
of shares in that fund or another Oppenheimer fund within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who
Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
--------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this section) may
sell Class M shares at net asset value without any initial sales charge to the classes of
investors listed below who, prior to March 11, 1996, owned shares of the Fund's
then-existing Class A and were permitted to purchase those shares at net asset value
without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and their "immediate
families" as defined in the Fund's SAI) 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 Fund

Internet Website
www.oppenheimerfunds.com

Investment Advisor
OppenheimerFunds, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008

Distributor
OppenheimerFunds Distributor, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008

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

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

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

Legal Counsel
Mayer, Brown, Rowe & Maw LLP
1675 Broadway
New York, New York 10019
1234
PX0220.001.1106

(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
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. A fund may borrow, if any, up to 5% of its total assets for temporary purposes
from any person. Interfund borrowing must be consistent with the Fund's exemptive order and
its other investment policies.
(3) In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent
Trustees" in this SAI 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.
(4) Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund.
(5) 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.
(6) 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.
(7) 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.
(8) 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.
(9) This provision does not apply to IRAs.
(10) This provision only applies to qualified retirement plans and 403(b)(7) custodial
plans after your separation from service in or after the year you reached age 55.
(11) The distribution must be requested prior to Plan termination or the elimination of the
Oppenheimer funds as an investment option under the Plan.
(12) This provision does not apply to IRAs.
(13) This provision does not apply to loans from 403(b)(7) custodial plans and loans from
the OppenheimerFunds-sponsored Single K retirement plan.
(14) This provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.