Oppenheimer California Municipal Fund

6803 South Tucson Way, Centennial, Colorado 80112
1.800.225.5677

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

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

Contents                                                                Page

About the Fund
Additional Information About the Fund's Investment Policies and Risks...
    The Fund's Investment Policies......................................
    Other Investment Techniques and Strategies..........................
    Investment Restrictions.............................................
Disclosure of Portfolio Holdings........................................
How the Fund is Managed.................................................
    Organization and History............................................
    Board of Trustees and Oversight Committees..........................
    Trustees and Officers of the Fund...................................
    The Manager.........................................................
Brokerage Policies of the Fund..........................................
Distribution and Service Plans..........................................
Payments to Fund Intermediaries.........................................
Performance of the Fund.................................................

About Your Account
How To Buy Shares.......................................................
How To Sell Shares......................................................
How to Exchange Shares..................................................
Dividends, Capital Gains and Taxes......................................
Additional Information About the Fund...................................

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

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






ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

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

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

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

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

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

|X|   Municipal Bonds. The Fund has classified longer term municipal securities as
"municipal bonds." The principal classifications of long-term municipal bonds are "general
obligation" and "revenue" bonds (including "industrial development" and "private activity"
bonds). They may have fixed, variable or floating rates of interest or may be "zero-coupon"
bonds, as described below.

      Some bonds may be "callable," allowing the issuer to redeem them before their
maturity date. To protect bondholders, callable bonds may be issued with provisions that
prevent them from being called for a period of time. Typically, that is 5 to 10 years from
the issuance date. When interest rates decline, if the call protection on a bond has
expired, it is more likely that the issuer may call the bond. If that occurs, the Fund
might have to reinvest the proceeds of the called bond in bonds that pay a lower rate of
return.

|_|   General Obligation Bonds. The basic security behind general obligation bonds is the
issuer's pledge of its full faith and credit and taxing, if any, power for the repayment of
principal and the payment of interest. Issuers of general obligation bonds include states,
counties, cities, towns, and regional districts. The proceeds of these obligations are used
to fund a wide range of public projects, including construction or improvement of schools,
highways and roads, and water and sewer systems. The rate of taxes that can be levied for
the payment of debt service on these bonds may be limited or unlimited. Additionally, there
may be limits as to the rate or amount of special assessments that can be levied to meet
these obligations.

|_|   Revenue Bonds. The principal security for a revenue bond is generally the net
revenues derived from a particular facility, group of facilities, or, in some cases, the
proceeds of a special excise tax or other specific revenue source, such as a state's or
local government's proportionate share of the Tobacco Master Settlement Agreement. Revenue
bonds are issued to finance a wide variety of capital projects. Examples include electric,
gas, water and sewer systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals.

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

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

|_|   Mello-Roos Bonds. These are bonds issued under the California Mello-Roos Community
Facilities Act. They are used to finance infrastructure projects, such as roads or sewage
treatment plants. In most cases they are secured by real estate taxes levied on property
located in the same community as the project. This type of financing was created in
response to statutory limits on real property taxes that were enacted in California. The
bonds do not constitute an obligation of a municipal government. Timely payment of
principal and interest depends on the ability of the developer of the project or other
property owners to pay their real estate taxes. Therefore these bonds are subject to risks
of nonpayment as a result of a general economic decline or decline in the real estate
market, as well as the credit risk that of the developer.

|_|   Private Activity Bonds. Interest on certain Qualified Private Activity Municipal
Securities is excludable from gross income for federal income tax purposes if certain tests
are met. They are issued by or on behalf of public authorities to raise money to finance
various privately operated facilities for business and manufacturing, housing, sports, and
pollution control. These securities may also be used to finance public facilities such as
airports, mass transit systems, ports, and parking. The payment of the principal and
interest on such municipal securities is dependent solely on the ability of the facility's
user to meet its financial obligations and the pledge, if any, of real and personal
property financed by the security as security for those payments.

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

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

      Interest on certain private activity bonds issued after August 7, 1986, which
continues to be tax-exempt, will be treated as a tax preference item subject to the federal
alternative minimum tax (discussed below) to which certain taxpayers are subject. The Fund
may hold municipal securities the interest on which (and thus a proportionate share of the
exempt-interest dividends paid by the Fund) will be subject to the federal alternative
minimum tax on individuals and corporations.

      The federal alternative minimum tax is designed to ensure that all persons who
receive income pay some tax, even if their regular tax is zero. This is accomplished in
part by including in taxable income certain tax preference items that are used to calculate
alternative minimum taxable income. The Tax Reform Act made tax-exempt interest from
certain private activity bonds a tax preference item for purposes of the alternative
minimum tax on individuals and corporations. Any exempt-interest dividend paid by a
regulated investment company will be treated as interest on a specific private activity
bond to the extent of the proportionate relationship the interest the investment company
receives on such bonds bears to all its exempt interest dividends.

      In addition, corporate taxpayers subject to the alternative minimum tax may, under
some circumstances, have to include exempt-interest dividends in calculating their
alternative minimum taxable income. That could occur in situations where the "adjusted
current earnings" of the corporation exceeds its alternative minimum taxable income.

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

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

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

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

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

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

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

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

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

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

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

      Some municipal lease securities may be deemed to be "illiquid" securities. Their
purchase by the Fund would be limited as described below in "Illiquid Securities." From
time to time the Fund may invest more than 5% of its net assets in municipal lease
obligations that the Manager has determined to be liquid under guidelines set by the Board
of Trustees.

      Those guidelines require the Manager to evaluate:
|_|   the frequency of trades and price quotations for such securities;
|_|   the number of dealers or other potential buyers willing to purchase or sell such
            securities;
|_|   the availability of market-makers; and
|_|   the nature of the trades for such securities.

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

      Municipal leases have special risk considerations. Although lease obligations do not
constitute general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily backed by the municipality's covenant to
budget for, appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase payments in future
years unless money is appropriated for that purpose on a yearly basis. While the obligation
might be secured by the lease, it might be difficult to dispose of that property in case of
a default.

      Projects financed with certificates of participation generally are not subject to
state constitutional debt limitations or other statutory requirements that may apply to
other municipal securities. Payments by the public entity on the obligation underlying the
certificates are derived from available revenue sources. That revenue might be diverted to
the funding of other municipal service projects. Payments of interest and/or principal with
respect to the certificates are not guaranteed and do not constitute an obligation of a
state or any of its political subdivisions.

      In addition to the risk of "non-appropriation," municipal lease securities do not
have as highly liquid a market as conventional municipal bonds. Municipal leases, like
other municipal debt obligations, are subject to the risk of non-payment of interest or
repayment of principal by the issuer. The ability of issuers of municipal leases to make
timely lease payments may be adversely affected in general economic downturns and as
relative governmental cost burdens are reallocated among federal, state and local
governmental units. A default in payment of income would result in a reduction of income to
the Fund. It could also result in a reduction in the value of the municipal lease and that,
as well as a default in repayment of principal, could result in a decrease in the net asset
value of the Fund.

Tobacco Settlement Revenue Bonds.  The Fund may invest a significant portion of its assets
in tobacco settlement revenue bonds.  As of the Fund's fiscal year ended July 31, 2005,
21.3% of the Fund's assets were invested in tobacco revenue settlement bonds.
      Tobacco settlement revenue bonds are secured by an issuing state's proportionate
share in the Master Settlement Agreement ("MSA"). The MSA is an agreement, reached out of
court in November 1998 between 46 states and nearly all of the U.S. tobacco manufacturers
(approximately 99% of the current combined market share of tobacco manufacturers). The MSA
provides for payments annually by the manufacturers to the states and jurisdictions in
perpetuity, in exchange for releasing all claims against the manufacturers and a pledge of
no further litigation. Tobacco manufacturers pay into a master escrow trust based on their
market share, and each state receives a fixed percentage of the payment as set forth in the
MSA.

      A number of states have securitized the future flow of those payments by selling
bonds pursuant to indentures, some through distinct governmental entities created for such
purpose. The bonds are backed by the future revenue flow that is used for principal and
interest payments on the bonds. Annual payments on the bonds, and thus risk to the Fund,
are highly dependent on the receipt of future settlement payments to the state or its
governmental entity, as well as several other factors. The actual amount of future
settlement payments, therefore, is dependent on many factors, including, but not limited
to, annual domestic cigarette shipments, cigarette consumption, inflation and the financial
capability of participating tobacco companies. As a result, payments made by tobacco
manufacturers could be negatively impacted if the decrease in tobacco consumption is
significantly greater than the forecasted decline. A market share loss by the MSA companies
to non-MSA participating tobacco manufacturers would cause a downward adjustment in the
payment amounts. A participating manufacturer filing for bankruptcy also could cause delays
or reductions in bond payments. The MSA itself has been subject to legal challenges and
has, to date, withstood those challenges.

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

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

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

      Lower grade securities (also referred to as "junk bonds") may have a higher yield
than securities rated in the higher rating categories. In addition to having a greater risk
of default than higher-grade securities, there may be less of a market for these
securities. As a result they may be harder to sell at an acceptable price. The additional
risks mean that the Fund may not receive the anticipated level of income from these
securities, and the Fund's net asset value may be affected by declines in the value of
lower-grade securities. However, because the added risk of lower quality securities might
not be consistent with the Fund's policy of preservation of capital, the Fund limits its
investments in lower quality securities.

      Subsequent to its purchase by the Fund, a municipal security may cease to be rated or
its rating may be reduced below the minimum required for purchase by the Fund. Neither
event requires the Fund to sell the security, but the Manager will consider such events in
determining whether the Fund should continue to hold the security. To the extent that
ratings given by Moody's, S&P's, or Fitch change as a result of changes in those rating
organizations or their rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the Fund's investment policies.

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

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

Special Considerations Relating to California Municipal Obligations

  Because the Fund focuses its investments primarily on California municipal securities,
the value of its portfolio investments will be highly sensitive to events affecting the
fiscal stability of the State of California (sometimes referred to in this section as the
"State") and its municipalities, authorities and other instrumentalities that issue
securities.  The following information constitutes only a brief summary, does not purport
to be a complete description, and is based on information available as of the date of this
Statement of Additional Information primarily from official statements and prospectuses
relating to securities offerings of the State, the latest of which is dated August 30,
2005.  Other factors will affect issuers.  While the Fund has not independently verified
such information, it has no reason to believe that such information is not correct in all
material respects.  The creditworthiness of obligations issued by local California issuers
may be unrelated to the creditworthiness of obligations issued by the State, and the State
has no responsibility to make payment on such local obligations.

  There have been a number of political developments, voter initiatives, state
constitutional amendments and legislation in California in recent years that may affect the
ability of the State government and municipal governments to pay interest and repay
principal on the securities they have issued.  In addition, in recent years, the State of
California has derived a significant portion of its revenues from personal income and sales
taxes.  Because the amount collected from these taxes is particularly sensitive to economic
conditions, the State's revenues have been volatile.

  It is not possible to predict the future impact of the legislation and economic
considerations described below on the long-term ability of the State of California or
California municipal issuers to pay interest or repay principal on their obligations.  In
part that is because of possible inconsistencies in the terms of the various laws and
Propositions and the applicability of other statutes to these issues.  The budgets of
California counties and local governments may be significantly affected by state budget
decisions beyond their control.  The information below about these conditions is only a
brief summary, based upon information the Fund has drawn from sources that it believes are
reliable. The information provided below is subject to change without notice, and the
inclusion of such information herein shall not under any circumstances create any
implication that there has been no change in the affairs of the commonwealth of
Pennsylvania since the date hereof.
General Economic Conditions

  The economy of the State of California is the largest among the 50 states and one of the
largest in the world.  This diversified economy has major components in high technology,
trade, entertainment, agriculture, tourism, construction and services. The State's rate of
economic growth could be adversely affected by developments in these or other sectors of
its economy.

  A significant downturn in U.S. stock market prices could adversely affect California's
economy by reducing household spending and business investment, particularly in the
important high technology sector. Moreover, a large and increasing share of the State's
General Fund revenue in the form of income and capital gains taxes is directly related to,
and would be adversely affected by, a significant downturn in the performance of the stock
markets.  For example, the State estimated that stock market related personal income tax
revenue declined from $17.6 billion in fiscal year 2000-01 to $5.2 billion in 2002-03.

  Since early 2001, the State has faced severe financial challenges, which may continue for
several years.  The State experienced an economic recession in 2001 and a sluggish recovery
in 2002 and 2003, weakened exports, and most particularly, large stock market declines.
These adverse fiscal and economic factors resulted in a serious erosion of General Fund tax
revenues. The three largest General Fund tax sources (personal income, sales and use, and
corporate taxes) totaled $72.8 billion in fiscal year 2000-01, $59.7 billion in 2001-02,
$61.9 billion in 2002-03 and $67.2 billion in 2003-04.  As of July 2005, such sources were
projected to be $74.3 billion in 2004-05 and $79.0 billion in 2005-06.

  It is impossible to predict the time, magnitude or location of a major earthquake or its
effect on the California economy. In January 1994, a major earthquake struck the Los
Angeles area, causing significant damage in a four county area.  The possibility exists
that another such earthquake could create a major dislocation of the California economy and
significantly affect State and local governmental budgets.

State Budgets

  Prior Years' Financial Results. Following a severe recession beginning in 1990, the
State's financial condition improved markedly during the fiscal years starting in 1995-96,
due to a combination of better than expected revenues, a slowdown in growth of social
welfare programs, and continued spending restraint based on actions taken in earlier
years.  The State's cash position also improved, and no external deficit borrowing occurred
through the end of the five fiscal years prior to 2001-02. In 2001-02, revenues dropped by
an unprecedented amount compared to the prior year. Revenues from the three largest tax
sources were $59.7 billion, a drop of over $13 billion from 2000-01, the vast bulk of which
was attributable to reduced personal income taxes from stock option and capital gains
activity. Consequently, the Department of Finance estimates that, on a budgetary basis, the
General Fund had a $2.1 billion deficit at June 30, 2002.

  2002 Budget Act.  The 2002 Budget Act initially forecasted $79.2 billion in General Fund
revenues and transfers and $76.7 billion in expenditures.  These revenue estimates proved
to be substantially overstated, as expected economic recovery did not occur.  Despite
mid-year budget adjustment legislation, totaling about $10.4 billion in spending
reductions, deferrals and funding transfers (including a $1.1 billion deferral of K-14
education funding into the 2003-04 fiscal year), California's fiscal condition continued to
deteriorate.  California ended fiscal year 2002-03 with a $7.5 billion negative fund
balance.

  2003 Budget Act. The 2003 Budget Act forecasted $73.4 billion in General Fund revenues
and transfers and $71.1 billion in expenditures.  However, the budget assumed the issuance
of $10.7 billion in fiscal recovery bonds.

  In November 2003, the Governor of the State, Gray Davis, was recalled and replaced by
Arnold Schwarzenegger, who proposed an alternative Economic Recovery Bond measure to
address the budget deficit.  In March 2004, California voters approved both the issuance of
up to $15 billion in Economic Recovery Bonds and a related balanced budget amendment
described under "Economic Recovery Bonds" below.

  According to the 2004 Budget Act, revenues and transfers for 2003-04 were estimated to be
$74.6 billion with $75.6 billion in expenditures. As a result of the sale of the Economic
Recovery Bonds and the use of the deficit recovery fund (see below), California ended the
fiscal year with a reserve of $1.7 billion.

  2004 Budget Act.  The 2004 Budget Act forecasted $77.3 billion in General Fund revenues
and transfers and $80.7 billion in expenditures. The June 30, 2005 reserve was projected to
be $784 million.

  In a September 2004 report, the Legislative Analyst's Office ("LAO") concluded that while
the 2004 Budget Act "includes significant ongoing savings" and "makes some progress toward
resolving the State's ongoing structural budget shortfall," the 2004 Budget Act, like the
2002 Budget Act and 2003 Budget Act, contains a "significant number of one-time or
limited-term solutions" and "obligates additional spending in future years." The LAO stated
that a combination of these factors will likely add to the projected shortfall contained in
the previous LAO May Report, and "that substantial additional actions will be needed to
bring future budgets into balance."

  One-time savings measures contained in the 2004 Budget Act and highlighted in the LAO
September Report included, among others, the use of approximately $2 billion in Economic
Recovery Bonds authorized by Proposition 57, the proposed issuance of $929 million in
pension obligation bonds, the deferral of $1.2 billion in Proposition 42 transportation
spending, the postponement of approximately $200 million of local government mandate
payments, and the diversion of property tax revenue from local governments ($1.3 billion
for each of fiscal years 2004-05 and 2005-06). The out-year spending highlighted by the LAO
September Report included the repayment of $1.3 billion of the vehicle license fee "gap"
loan to local governments due in fiscal year 2006-07, as well as the repayment of
Proposition 98 deferrals and certain transportation loans.

  The LAO updated its projections in a November 2004 report to project an imbalance of
about $6.7 billion between revenues and expenditures for the fiscal year 2005-06 budget,
and a shortfall of nearly $10 billion in fiscal year 2006-07 under the then current-law
spending and revenue policies, absent corrective actions.  The LAO further stated that,
given the size and persistence of this structural budget shortfall, even in the face of an
expanding economy and strengthening revenues, "it is unlikely that California will be able
to simply `grow its way of this shortfall.'"

  According to the 2005 Budget Act, as of July 2005, General Fund revenues and transfers
for fiscal year 2004-05 were projected to be $79.9 billion while expenditures were
projected to be $81.7 billion.

  2005 Budget Act.  The 2005-06 Governor's Budget, released in January 2005, reported that,
in the absence of corrective actions to change existing policies, operating deficits,
estimated at $9.1 billion for 2005-06 would continue to be incurred. This budget projected
General Fund revenues and transfers for 2005-06 of $83.8 billion, an increase of $3.9
billion compared with revised estimates for 2004-05. General Fund expenditures were
projected at $85.7 billion, an increase of $4.0 billion compared with revised estimates for
2004-05.  The budget projected to end fiscal year 2005-06 with a $641 million reserve.

  The 2005-06 Budget included $7.0 billion in program reductions and related cost savings
in 2005-06. In addition, the budget proposed the issuance of an additional $1.7 billion in
Economic Recovery Bonds and a variety of proposals to increase tax revenues by $409 million
without tax increases.

  The 2005-06 Budget also proposed several major budget reforms, including modifying
Proposition 98 (the State's minimum funding requirement for education), imposing
across-the-board budget reductions in the event of fiscal imbalance, consolidating certain
outstanding obligations, terminating the State's right to suspend the automatic transfer of
gas tax revenues to special transportation funds, prohibiting the borrowing of special
funds to cover General Fund imbalances and terminating the State's and local government's
sponsorship of defined benefit retirement plans.  In early April 2005, the Governor
announced that he would not seek, before June 2006, to terminate the State's and local
government's sponsorship of defined benefit retirement plans.

  In its January 12, 2005 report, the LAO observed that while the budget's proposals would
address the 2005-06 shortfall, they fall well short of fully addressing the State's ongoing
structural imbalances and the budget reform proposals would dramatically reduce the ability
of future policy makers to establish budget priorities when addressing future budget
shortfalls.

  In February 2005, the LAO released a more expansive analysis of the budget and the
Governor's reform proposals.  Based on newer data, the LAO projected that revenues would
exceed the 2005-06 Governor's Budget forecast by $1.4 billion in 2004-05 and by $800
million in 2005-06.  Based on these increased revenue projections, and assuming all the
Governor's budget proposals were adopted and nearly all the savings were realized, the LAO
projected that the State would end 2005-06 with a general reserve of $2.9 billion ($2.4
billion more than that assumed in the budget estimate).

  The LAO warned that some of the projected savings in the budget were subject to
considerable risk, including the assumed sale of $765 million in pension obligation bonds,
which is subject to court challenge, $408 million in public employee compensation savings
which are dependent on collective bargaining negotiations, and savings from unallocated
reductions in State operations in most program areas.  The LAO also highlighted other
factors that would perpetuate the State's structural deficit, such as the use of $1.7
billion of Economic Recovery Bond proceeds and the end, in fiscal year 2006-07, of the two
year diversion of local property taxes under Senate Amendment No. 4. (see below).  In the
report, the LAO continued to warn of budget shortfalls in the range of $4 to $4.5 billion,
assuming all the Governor's proposals (or alternative proposals of equal magnitude) were
adopted, or of budget deficits in the range of twice that magnitude if such proposals were
not adopted.

  In May 2005, the Governor released his revision to the budget proposed in January 2005.
This May Revision projected the State will receive about $4.2 billion in additional
revenues (for 2004-05 and 2005-06) from revenues projected in January.  The Governor
proposed to use these increased resources almost exclusively for one-time purposes.  The
May Revision would reduce the amount of budgetary debt by $2.5 billion by not issuing the
$1.7 billion in Economic Recovery Bonds proposed by the January budget and by repaying
approximately $581 million to local governments related to the reduction in Vehicle License
Fee revenue that would have been due in full in 2006-07.  In addition, the May Revision
would increase funding of current programs by a net amount of $1.7 billion by restoring the
Proposition 42 transfer of General Fund sales taxes to transportation special funds (which
the Governor had proposed suspending in the January budget), restoring funding for the
senior citizens' property tax and renters' tax relief programs, and restoring one-time
funds for K-14 education (primarily related to borrowings made in 1995-1996 and
1996-1997).

  The Governor signed the 2005 Budget Act on July 11, 2005 which was substantially in line
with the Governor's proposals in the May Revision.  The 2005 Budget Act forecasted $84.5
billion in General Fund revenues and transfers and $90.0 billion in expenditures. The 2005
Budget Act projected that by utilizing the prior year's $7.5 billion General Fund balance,
the General Fund would end the year with a positive balance of $1.9 billion.   The June 30,
2006 reserve was projected to be $641 million.  The 2005 Budget Act assumed that the State
would not issue Economic Recovery Bonds or raise taxes.

  Constraints on the Budget Process

  Approved in March 2004 with the State's Economic Recovery Bonds, Proposition 58 requires
the State to enact a balanced budget and establish a special reserve in the General Fund
and restricts future borrowing to cover budget deficits. As a result of the provisions
requiring the enactment of a balanced budget and restricting borrowing, the State would, in
some cases, have to take more immediate actions to correct budgetary shortfalls. Beginning
with the budget for fiscal year 2004-05, Proposition 58 requires the Legislature to pass a
balanced budget and provides for mid-year adjustments in the event that the budget falls
out of balance. The balanced budget determination is made by subtracting expenditures from
all available resources, including prior-year balances.

  If the Governor determines that the State is facing substantial revenue shortfalls or
spending deficiencies, the Governor is authorized to declare a fiscal emergency. He or she
would then be required to propose legislation to address the emergency, and call the
Legislature into special session to consider that legislation.  If the Legislature fails to
pass and send to the Governor legislation to address the budget fiscal emergency within 45
days, the Legislature would be prohibited from acting on any other bills or adjourning in
joint recess until such legislation is passed.

  Proposition 58 also requires that a special reserve (the Budget Stabilization Account) be
established in the State's General Fund. Beginning with fiscal year 2006-07, a specified
portion of estimated annual General Fund revenues would be transferred by the Controller
into the Budget Stabilization Account no later than September 30 of each fiscal year. These
transfers would continue until the balance in the Budget Stabilization Account reaches $8
billion or 5 percent of the estimated General Fund revenues for that fiscal year, whichever
is greater. The annual transfer requirement would be in effect whenever the balance falls
below the $8 billion or 5 percent target. The annual transfers could be suspended or
reduced for a fiscal year by an executive order issued by the Governor no later than June 1
of the preceding fiscal year.

  Proposition 58 will also prohibit certain future borrowing to cover budget deficits. This
restriction applies to general obligation bonds, revenue bonds, and certain other forms of
long-term borrowing. The restriction does not apply to certain other types of borrowing,
such as (a) short-term borrowing to cover cash shortfalls in the General Fund (including
revenue anticipation notes or revenue anticipation warrants currently used by the State),
or (b) inter-fund borrowings.

  Future Budgets. It cannot be predicted what actions will be taken in the future by the
State Legislature and the Governor to deal with changing State revenues and expenditures.
The State budget will be affected by national and State economic conditions and other
factors.

State Indebtedness

  General Obligation Bonds. As of July 1, 2005, the State had approximately $47.5 billion
of its general obligation bonds outstanding. General obligation bond authorizations in an
aggregate amount of approximately $35.2 billion remained unissued as of that date.

  Initiative measures to issue $3 billion in bonds (California Stem Cell Research and Cures
Act) and to issue $750 million in bonds (Children's Hospital Projects Bond Act) were
approved by the voters in the November 2004 election.

  The Legislature has approved approximately $600 million of new bond authorization, the
California Reading and Literacy Improvement and Public Library Construction and Renovation
Bond Act of 2006, to be placed on the June 2006 primary election ballot. A $9.95 billion
bond measure for high speed rail projects has been placed on the November 2006 general
election ballot. Additional bond proposals may also be added to the 2006 primary or general
election ballots.

  Ratings.  As of July 25, 2005, the State's general obligation bonds were rated A2 by
Moody's, A by Standard & Poor's, and A by Fitch Ratings.

  Upon the Governor's approval of the 2005 Budget Act, Fitch Ratings raised the rating on
the State's outstanding general obligation bonds to A from A-.  Also upgraded, to A- from
BBB+, were the ratings on bonds issued by several State agencies but supported by State
resources.  At the same time, Moody's upgraded the State's general obligation bonds to A2
from A3, while maintaining the State's positive rating outlook.  The upgrade reflects a
continuing favorable trend of recovery in the State's economy and tax revenues, better than
expected financial performance in 2004-05, and a moderately improved financial outlook for
2005-06 and beyond.  The July 2005 rating action by Fitch Ratings and Moody's affects $36.5
billion of outstanding general obligation bonds, $5.7 billion of General Fund-supported
lease revenue bonds, and $2.5 billion of General Fund-enhanced tobacco settlement bonds.

  It is not presently possible to determine whether, or the extent to which, Moody's, S&P's
or Fitch Ratings will change such ratings in the future. It should be noted that the
creditworthiness of obligations issued by local California issuers may be unrelated to the
creditworthiness of obligations issued by the State, and there is no obligation on the part
of the State to make payment on such local obligations in the event of default.

  Economic Recovery Bonds.  The California Economic Recovery Bond Act ("Proposition 57")
was approved by voters in March 2004. Proposition 57 authorized the issuance of up to $15
billion in Economic Recovery Bonds to finance the negative General Fund reserve balance as
of June 30, 2004, and other General Fund obligations undertaken prior to June 30, 2004.

  Repayment of the Economic Recovery Bonds is secured by a pledge of revenues from a
one-quarter cent increase in the State's sales and use tax starting July 1, 2004. Fifty
percent, or up to $5 billion of future deposits in the reserve fund created by the Balanced
Budget Amendment approved by Proposition 58, may be used to repay the Economic Recovery
Bonds. In addition, as voter-approved general obligation bonds, payment of the Economic
Recovery Bonds is secured by the State's full faith and credit in the event the dedicated
revenue is insufficient to repay the bonds.

  In May and June 2004, the State issued $10.9 billion of Economic Recovery Bonds, which
resulted (due to the sale of bonds at a premium) in the deposit of net proceeds in the
General Fund of approximately $11.3 billion.  The State may issue the remainder of
authorized Economic Recovery Bonds in future fiscal years.

  Commercial Paper Program. Pursuant to the terms of the bank credit agreement presently in
effect supporting the State's general obligation commercial paper program, up to $1.5
billion of general obligation commercial paper notes may be outstanding at any time; this
amount may be increased or decreased in the future. As of July 1, 2005, the legislative
finance committees had authorized the issuance of up to approximately $20.0 billion of
commercial paper notes; as of that date approximately $94 million aggregate principal
amount of general obligation commercial paper notes was outstanding.

  Lease-Purchase Debt. In addition to general obligation bonds, the State builds and
acquires capital facilities through the use of lease-purchase borrowing. As of July 1,
2005, the State had approximately $7.8 billion of outstanding lease purchase debt.

  Non-Recourse Debt. Certain State agencies and authorities issue revenue obligations for
which the General Fund has no liability. Revenue bonds represent obligations payable from
State revenue-producing enterprises and projects, which are not payable from the General
Fund, and conduit obligations payable only from revenues paid by private users of
facilities financed by the revenue bonds. State agencies and authorities had $47.3 billion
aggregate principal amount of revenue bonds and notes which are non-recourse to the General
Fund outstanding as of July 30, 2005.

  Cash Flow Borrowings.  As part of its cash management program, the State has regularly
issued short-term obligations to meet cash flow needs.  The State has issued Revenue
Anticipation Notes ("RANs") in 19 of the last 20 fiscal years to partially fund timing
differences between receipts and disbursements, as the majority of General Fund revenues
are received in the last part of the fiscal year.  The State expected to issue
approximately $3 billion in RANs for the 2005-06 fiscal year.

  Repayment of Energy Loans.  The Department of Water Resources (the "DWR") borrowed money
from the General Fund for DWR's power supply program between January and June 2001.  DWR
has issued approximately $11.25 billion in revenue bonds in several series and in the fall
of 2002 used the net proceeds of the revenue bonds to repay outstanding loans from banks
and commercial lenders in the amount of approximately $3.5 billion and a loan from the
General Fund in the amount of $6.1 billion plus accrued interest of approximately $500
million.  Issuance of the DWR revenue bonds had been delayed since mid-2001 by a number of
factors, including administrative and legal challenges.

  The loans from the General Fund and the banks and commercial lenders financed DWR's power
supply program costs during 2001 that exceeded DWR's revenues from the sale of
electricity.  The general purpose of the power supply program was to provide to customers
of the three major investor-owned electric utilities in the State (the "IOUs") the portion
of their power not provided by the IOUs.  The power supply program has become
self-supporting and no additional loans from the General Fund are authorized.  As of
January 1, 2003, the DWR's authority to enter into new power purchase contracts terminated,
and the IOUs resumed responsibility for obtaining electricity for their customers.

  The primary source of money to pay debt service on the DWR revenue bonds will be revenues
derived from customers of the IOUs resulting from charges set by the California Public
Utilities Commission. The DWR revenue bonds are not a debt or liability of the State and do
not directly, indirectly or contingently obligate the State to levy or to pledge any form
of taxation whatever therefor or to make any appropriation for their payment.

  Enhanced Tobacco Settlement Revenue Bonds. In 1998, the State (together with 45 other
states and certain U.S. jurisdictions) signed a settlement agreement with the four major
cigarette manufacturers. The State agreed to drop its lawsuit and not to sue in the future
for monetary damages. Tobacco manufacturers agreed to billions of dollars in payments and
restrictions on marketing activities. Under the settlement, the companies agreed to pay
California governments approximately $25 billion (subject to adjustments) over a period of
25 years. Payments continue in perpetuity, with current projections of $1.2 billion in
2025, steadily increasing each year to $1.6 billion in 2045. Under a separate Memorandum of
Understanding, half of the money will be paid to the State and half to local governments
(all counties and the cities of San Diego, Los Angeles, San Francisco and San Jose).

  An initial sale of 57.6% of the State's tobacco settlement revenues from July 1, 2003,
onward, producing $2.5 billion in revenue was completed in January 2003. A second sale of
the remaining amount, which produced $2.3 billion in revenue, was completed in September
2003 (Series 2003B).  In August 2005, the Series 2003B bonds were refinanced, retaining all
of the covenants of the original issue.  In return, the State was paid a credit enhancement
fee of $535 million.  The 2003 Budget Act authorizes the Director of Finance to make
allocations with legislative notification if tobacco settlement revenues are insufficient
to cover the cost of the tobacco securitization program. The Legislature is not obligated
to make any such requested appropriation in the future.

  Tobacco settlement revenue bonds are neither general nor legal obligations of the State
or any of its political subdivisions and neither the full faith and credit nor the taxing
power nor any other assets or revenues of the State or of any political subdivision is or
shall be pledged to the payment of any such bonds.

Local Government

  The primary units of local government in California are the counties, ranging in
population from 1,200 (Alpine) to approximately 10 million (Los Angeles). Counties are
responsible for the provision of many basic services, including indigent healthcare,
welfare, courts, jails and public safety in unincorporated areas. There are also 478
incorporated cities and thousands of other special districts formed for education, utility
and other services. The fiscal condition of local governments has been constrained since
the enactment of "Proposition 13" in 1978 and later constitutional amendments, which
reduced and limited the future growth of property taxes and limited the ability of local
governments to impose "special taxes" (those devoted to a specific purpose) without
two-thirds voter approval. Proposition 218, another initiative constitutional amendment
enacted in 1996, further limited the ability of local governments to impose or raise
various taxes, fees, charges and assessments without voter approval. Counties, in
particular, have had fewer options to raise revenues than many other local government
entities, and have been required to maintain many services.

  Some local governments in California have experienced notable financial difficulties,
including Los Angeles County and Orange County, and there is no assurance that any
California issuer will make full or timely payments of principal or interest or remain
solvent.

  According to the State, the 2004 Budget Act, related legislation and the enactment of
Senate Constitutional Amendment No. 4 (described below) will dramatically change the
State-local fiscal relationship. These constitutional and statutory changes implement an
agreement negotiated between the Governor and local governments officials (the "State-local
agreement") in connection with the 2004 Budget Act. One change relates to the reduction of
the vehicle license fee ("VLF") rate from 2 percent to 0.65 percent of the market value of
the vehicle. In order to protect local governments, the reduction in VLF revenue to cities
and counties from this rate change will be replaced by an increase in the amount of
property tax they receive. Under the State-local agreement and implementing legislation,
for fiscal years 2004-05 and 2005-06 only, the replacement property taxes that cities and
counties receive will be reduced by $700 million. In future years, local governments will
receive the full value of the VLF revenue. Also for these two fiscal years, redevelopment
agencies will be required to shift $250 million to schools, and special districts to shift
$350 million, in property tax revenues they would otherwise receive.

  As part of the State-local agreement, Senate Constitutional Amendment No. 4 was enacted
by the Legislature and subsequently approved by the voters at the November 2004 election.
Senate Constitutional Amendment No. 4 amends the State Constitution to, among other things,
reduce the Legislature's authority over local government revenue sources by placing
restrictions on the State's access to local governments' property, sales, and vehicle
license fee revenues as of November 3, 2004. Beginning with fiscal year 2008-09, the State
will be able to borrow up to 8 percent of local property tax revenues, but only if the
Governor proclaims such action is necessary due to a severe State fiscal hardship,
two-thirds of both houses of the Legislature approves the borrowing and the amount borrowed
is required to be paid back within three years. The State also will not be able to borrow
from local property tax revenues for more than two fiscal years within a period of 10
fiscal years. In addition, the State cannot reduce the local sales tax rate or restrict the
authority of the local governments to impose or change the distribution of the statewide
local sales tax.

  Senate Constitutional Amendment No. 4 also prohibits the State from mandating activities
on cities, counties or special districts without providing for the funding needed to comply
with the mandates. Beginning in fiscal year 2005-06, if the State does not provide funding
for an activity that has been determined to be mandated, the requirement on cities,
counties or special districts to abide by the mandate would be suspended. In addition,
Senate Constitutional Amendment No. 4 expands the definition of what constitutes a mandate
to encompass State action that transfers to cities, counties and special districts
financial responsibility for a required program for which the State previously had partial
or complete responsibility. The State mandate provisions of Senate Constitutional Amendment
No. 4 do not apply to schools or community colleges or to mandates relating to employee
rights.

Constitutional, Legislative and Other Factors

  The State is subject to an annual appropriations limit imposed by Article XIII B of the
State Constitution (the "Appropriations Limit"). The Appropriations Limit does not restrict
appropriations to pay debt service on voter-authorized bonds.

  Article XIII B prohibits the State from spending "appropriations subject to limitation"
in excess of the Appropriations Limit.  "Appropriations subject to limitation" are
authorizations to spend "proceeds of taxes," which consist of tax revenues and certain
other funds, including proceeds from regulatory licenses, user charges or other fees to the
extent that such proceeds exceed "the cost reasonably borne by that entity in providing the
regulation, product or service," but "proceeds of taxes" exclude most State subventions to
local governments, tax refunds and some benefit payments such as unemployment insurance. No
limit is imposed on appropriations of funds which are not "proceeds of taxes," such as
reasonable user charges or fees and certain other non-tax funds.  Various types of
appropriations are excluded from the Appropriations Limit.

  The State's Appropriations Limit in each year is based on the Limit for the prior year,
adjusted annually for changes in State per capita personal income and changes in
population, and adjusted, when applicable, for any transfer of financial responsibility for
providing services to or from another unit of government or any transfer of the financial
source for the provisions of services from tax proceeds to non-tax proceeds.

  The Legislature has enacted legislation to implement Article XIII B which defines certain
terms used in Article XIII B and sets forth the methods for determining the Appropriations
Limit. California Government code Section 7912 requires an estimate of the Appropriations
Limit to be included in the Governor's Budget, and thereafter to be subject to the budget
process and established in the Budget Act.

  On November 8, 1988, voters of the State approved Proposition 98, a combined initiative
constitutional amendment and statute called the "Classroom Instructional Improvement and
Accountability Act." Proposition 98 changed State funding of public education below the
university level and the operation of the State appropriations funding, primarily by
guaranteeing K-14 schools a minimum share of General Fund revenues. Proposition 98 permits
the Legislature by two-thirds vote of both houses, with the Governor's concurrence, to
suspend the K-14 schools' minimum funding formula for a one-year period.  Proposition 98
also contains provisions transferring certain State tax revenues in excess of the Article
XIII B limit to K-14 schools.

  Because of the complexities of Article XIII B, the ambiguities and possible
inconsistencies in its terms, the applicability of its exceptions and exemptions and the
impossibility of predicting future appropriations, it is not possible to predict the impact
of this or related legislation on the Bonds in the Fund's portfolio.

  Other Constitutional amendments affecting State and local taxes and appropriations have
been proposed from time to time.  If any such initiatives were adopted, the State could be
pressured to provide additional financial assistance to local Governments or appropriate
revenues as mandated by such initiatives. Propositions such as Proposition 98 and others
that may be adopted in the future may place increasing pressure on the State's budget over
future years, potentially reducing resources available for other State programs, especially
to the extent the Article XIII B spending limit would restrain the State's ability to fund
such other programs by raising taxes.

  Future Initiatives. Articles XIII A, XIII B, XIII C and XIII D were each adopted as
measures that qualified for the ballot pursuant to the State's initiative process.  From
time to time, other initiative measures could be adopted that could effect revenues of the
State or public agencies within the State.

  Effect of other State Laws on Bond Obligations.

  Some of the tax-exempt securities that the Fund can invest in may be obligations payable
solely from the revenues of a specific institution or secured by specific properties.
These are subject to provisions of California law that could adversely affect the holders
of such obligations.  For example, the revenues of California health care institutions may
be adversely affected by State laws, and California law limits the remedies of a creditor
secured by a mortgage or deed of trust on real property.  Debt obligations payable solely
from revenues of health care institutions may also be insured by the State but no guarantee
exists that adequate reserve funds will be appropriated by the State legislature for such
purpose.

  Pending Litigation

  The State of California is a party to numerous legal proceedings, many of which normally
occur in governmental operations.  In addition, the State is involved in certain other
legal proceedings that, if decided against the State might require the State to make
significant future expenditures or impair future revenue sources.  Because of the
prospective nature of these proceedings, it is not presently possible to predict the
outcome of such litigation or estimate the potential impact on the ability of the State to
pay debt service costs on its obligations.

  On July 15, 2005, Enron Corp., the energy trader that filed for bankruptcy protection,
agreed to a settlement with the State to end claims of market manipulation during the
California energy crisis of 2000 and 2001.  After bankruptcy related adjustments, the State
will receive a payment of over $300 million.

      On August 8, 2005, a lawsuit titled California Teachers Association et al. v. Arnold
Schwarzenegger et al. was filed.  Plaintiffs - California Teachers Association, California
Superintendent of Public Instruction Jack O'Connell, and various other individuals - allege
that the California Constitution's minimum school funding guarantee was not followed for
the 2004-2005 fiscal year and the 2005-06 fiscal year in the aggregate amount of
approximately $3.1 billion.  Plaintiffs seek a writ of mandate requiring the State to
recalculate the minimum-funding guarantee in compliance with the California Constitution.

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

|X|   Floating Rate and Variable Rate Obligations. Variable rate obligations may have a
demand feature that allows the Fund to tender the obligation to the issuer or a third party
prior to its maturity. The tender may be at par value plus accrued interest, according to
the terms of the obligations.

      The interest rate on a floating rate demand note is based on a stated prevailing
market rate, such as a bank's prime rate, the 91-day U.S. Treasury Bill rate, or some other
standard, and is adjusted automatically each time such rate is adjusted. The interest rate
on a variable rate demand note is also based on a stated prevailing market rate but is
adjusted automatically at specified intervals of not less than one year. Generally, the
changes in the interest rate on such securities reduce the fluctuation in their market
value. As interest rates decrease or increase, the potential for capital appreciation or
depreciation is less than that for fixed-rate obligations of the same maturity. The Manager
may determine that an unrated floating rate or variable rate demand obligation meets the
Fund's quality standards by reason of being backed by a letter of credit or guarantee
issued by a bank that meets those quality standards.

      The Manager may determine that an unrated floating rate or variable rate demand
obligation meets the Fund's quality standards by reason of being backed by a letter of
credit or guarantee issued by a bank that meets those quality standards.

      Floating rate and variable rate demand notes that have a stated maturity in excess of
one year may have features that permit the holder to recover the principal amount of the
underlying security at specified intervals not exceeding one year and upon no more than 30
days' notice. The issuer of that type of note normally has a corresponding right in its
discretion, after a given period, to prepay the outstanding principal amount of the note
plus accrued interest. Generally the issuer must provide a specified number of days' notice
to the holder. Floating rate or variable rate obligations that do not provide for the
recovery of principal and interest within seven (7) days are subject to the Fund's
limitations on investments in illiquid securities.

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

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

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

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

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

      When such transactions are negotiated the price (which is generally expressed in
yield terms) is fixed at the time the commitment is made. Delivery and payment for the
securities take place at a later date. Normally the settlement date is within six months of
the purchase of municipal bonds and notes. However, the Fund may, from time to time,
purchase municipal securities having a settlement date more than six months and possibly as
long as two years or more after the trade date. The securities are subject to change in
value from market fluctuation during the settlement period. The value at delivery may be
less than the purchase price. For example, changes in interest rates in a direction other
than that expected by the Manager before settlement will affect the value of such
securities and may cause loss to the Fund. No income begins to accrue to the Fund on a
when-issued security until the Fund receives the security at settlement of the trade.

      The Fund will engage in when-issued transactions in order to secure what is
considered to be an advantageous price and yield at the time of entering into the
obligation. When the Fund engages in when-issued or delayed-delivery transactions, it
relies on the buyer or seller, as the case may be, to complete the transaction. Their
failure to do so may cause the Fund to lose the opportunity to obtain the security at a
price and yield it considers advantageous.

      When the Fund engages in when-issued and delayed-delivery transactions, it does so
for the purpose of acquiring or selling securities consistent with its investment objective
and policies for its portfolio or for delivery pursuant to options contracts it has entered
into, and not for the purposes of investment leverage. Although the Fund will enter into
when-issued or delayed-delivery purchase transactions to acquire securities, the Fund may
dispose of a commitment prior to settlement. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition or to dispose of its right to
deliver or receive against a forward commitment, it may incur a gain or loss.

      At the time the Fund makes a commitment to purchase or sell a security on a
when-issued or forward commitment basis, it records the transaction on its books and
reflects the value of the security purchased. In a sale transaction, it records the
proceeds to be received, in determining its net asset value. The Fund will identify on its
books liquid securities at least equal to the value of purchase commitments until the Fund
pays for the investment.

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

|X|   Zero-Coupon Securities. The Fund may buy zero-coupon and delayed interest municipal
securities. Zero-coupon securities do not make periodic interest payments and are sold at a
deep discount from their face value. The buyer recognizes a rate of return determined by
the gradual appreciation of the security, which is redeemed at face value on a specified
maturity date. This discount depends on the time remaining until maturity, as well as
prevailing interest rates, the liquidity of the security and the credit quality of the
issuer. In the absence of threats to the issuer's credit quality, the discount typically
decreases as the maturity date approaches. Some zero-coupon securities are convertible, in
that they are zero-coupon securities until a predetermined date, at which time they convert
to a security with a specified coupon rate.

      Because zero-coupon securities pay no interest and compound semi-annually at the rate
fixed at the time of their issuance, their value is generally more volatile than the value
of other debt securities. Their value may fall more dramatically than the value of
interest-bearing securities when interest rates rise. When prevailing interest rates fall,
zero-coupon securities tend to rise more rapidly in value because they have a fixed rate of
return.

      The Fund's investment in zero-coupon securities may cause the Fund to recognize
income and make distributions to shareholders before it receives any cash payments on the
zero-coupon investment. To generate cash to satisfy those distribution requirements, the
Fund may have to sell portfolio securities that it otherwise might have continued to hold
or to use cash flows from other sources such as the sale of Fund shares.

|X|   Puts and Standby Commitments. The Fund may acquire "stand-by commitments" or "puts"
with respect to municipal securities to enhance portfolio liquidity and to try to reduce
the average effective portfolio maturity. These arrangements give the Fund the right to
sell the securities at a set price on demand to the issuing broker-dealer or bank. However,
securities having this feature may have a relatively lower interest rate.

      When the Fund buys a municipal security subject to a standby commitment to repurchase
the security, the Fund is entitled to same-day settlement from the purchaser. The Fund
receives an exercise price equal to the amortized cost of the underlying security plus any
accrued interest at the time of exercise. A put purchased in conjunction with a municipal
security enables the Fund to sell the underlying security within a specified period of time
at a fixed exercise price.

      The Fund might purchase a standby commitment or put separately in cash or it might
acquire the security subject to the standby commitment or put (at a price that reflects
that additional feature). The Fund will enter into these transactions only with banks and
securities dealers that, in the Manager's opinion, present minimal credit risks. The Fund's
ability to exercise a put or standby commitment will depend on the ability of the bank or
dealer to pay for the securities if the put or standby commitment is exercised. If the bank
or dealer should default on its obligation, the Fund might not be able to recover all or a
portion of any loss sustained from having to sell the security elsewhere.

      Puts and standby commitments are not transferable by the Fund. They terminate if the
Fund sells the underlying security to a third party. The Fund intends to enter into these
arrangements to facilitate portfolio liquidity, although such arrangements might enable the
Fund to sell a security at a pre-arranged price that may be higher than the prevailing
market price at the time the put or standby commitment is exercised. However, the Fund
might refrain from exercising a put or standby commitment if the exercise price is
significantly higher than the prevailing market price, to avoid imposing a loss on the
seller that could jeopardize the Fund's business relationships with the seller.

      A put or standby commitment increases the cost of the security and reduces the yield
otherwise available from the security. Any consideration paid by the Fund for the put or
standby commitment will be reflected on the Fund's books as unrealized depreciation while
the put or standby commitment is held, and a realized gain or loss when the put or
commitment is exercised or expires. Interest income received by the Fund from municipal
securities subject to puts or stand-by commitments may not qualify as tax exempt in its
hands if the terms of the put or stand-by commitment cause the Fund not to be treated as
the tax owner of the underlying municipal securities.

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

      The majority of these transactions run from day to day. Delivery pursuant to resale
typically will occur within one to five days of the purchase. Repurchase agreements having
a maturity beyond seven days are subject to the Fund's limits on holding illiquid
investments. There is no limit on the amount of the Fund's net assets that may be subject
to repurchase agreements 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 collateral's value 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.

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


      [GRAPHIC OMITTED][GRAPHIC OMITTED]  Borrowing for Leverage. The Fund has the ability
to invest borrowed funds in portfolio securities. This speculative investment technique is
known as "leverage." Under its fundamental investment policies, the Fund may not borrow
money, except to the extent permitted under the Investment Company Act, the rules or
regulations thereunder or any exemption therefrom that is applicable to the Fund, as such
statute, rules or regulations may be amended or interpreted from time to time. Currently,
under the Investment Company Act, a mutual fund may borrow only from banks and the maximum
amount it may borrow is up to one-third of its total assets (including the amount borrowed)
less all liabilities and indebtedness other than borrowing. Notwithstanding the preceding
sentence, The Fund may also borrow up to 5% of its total assets for temporary purposes from
any person. Under the Investment Company Act, there is a rebuttable presumption that a loan
is temporary if it is repaid within 60 days and not extended or renewed. If the value of
the Fund's assets fails to meet this 300% asset coverage requirement, the Fund will reduce
its bank debt within three days to meet the requirement. To do so, the Fund might have to
sell a portion of its investments at a disadvantageous time.


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

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

      Illiquid Securities and Restricted Securities. The Fund has percentage limitations
that apply to purchases of illiquid securities, as stated in the Prospectus. The Fund has
limitations that apply to purchases of restricted securities, as stated in the Prospectus.
Those percentage restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers under Rule 144A of the Securities
Act of 1933, if those securities have been determined to be liquid by the Manager under
Board-approved guidelines. Those guidelines take into account the trading activity for such
securities and the availability of reliable pricing information, among other factors.  If
there is a lack of trading interest in a particular Rule 144A security, the Fund's holdings
of that security may be considered to be illiquid. Illiquid securities include repurchase
agreements maturing in more than seven days. Under the policies and procedures established
by the Fund's Board of Trustees, the Manager determines the liquidity of certain of the
Fund's investments and monitors holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to meet percentage restrictions. To enable the Fund
to sell its holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered.  The expenses of
registering restricted securities may be negotiated by the Fund with the issuer at the time
the Fund buys the securities. When the Fund must arrange registration because the Fund
wishes to sell the security, a considerable period may elapse between the time the decision
is made to sell the security and the time the security is registered so that the Fund could
sell it. The Fund would bear the risks of any downward price fluctuation during that
period.

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

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

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

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

o     Other Derivative Investments. Certain derivatives, such as options, futures, indexed
securities and entering into swap agreements, can be used to increase or decrease the
Fund's exposure to changing security prices, interest rates or other factors that affect
the value of securities. However, these techniques could result in losses to the Fund, if
the Manager judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's other investments. These techniques can cause losses if the
counterparty does not perform its promises. An additional risk of investing in municipal
securities that are derivative investments is that their market value could be expected to
vary to a much greater extent than the market value of municipal securities that are not
derivative investments but have similar credit quality, redemption provisions and
maturities.



|X|   Hedging. The Fund may use hedging to attempt to protect against declines in the
market value of its portfolio, to permit the Fund to retain unrealized gains in the value
of portfolio securities that have appreciated, or to facilitate selling securities for
investment reasons. To do so, the Fund may:
|_|   sell interest rate futures or municipal bond index futures,
|_|   buy puts on such futures or securities, or
         |_|      write covered calls on securities, broadly-based municipal bond indices,
            interest rate futures or municipal bond index futures. Covered calls may also
            be written on debt securities to attempt to increase the Fund's income, but
            that income would not be tax-exempt. Therefore it is unlikely that the Fund
            would write covered calls for that purpose.

      The Fund may also use hedging to establish a position in the debt securities market
as a temporary substitute for purchasing individual debt securities. In that case the Fund
will normally seek to purchase the securities, and then terminate that hedging position.
For this type of hedging, the Fund may:
|_|   buy interest rate futures or municipal bond index futures, or
|_|   buy calls on such futures or on securities.

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

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

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

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

      Upon entering into a futures transaction, the Fund will be required to deposit an
initial margin payment in cash or U.S. government securities with the futures commission
merchant (the "futures broker"). Initial margin payments will be deposited with the Fund's
custodian bank in an account registered in the futures broker's name. However, the futures
broker can gain access to that account only under certain specified conditions. As the
future is marked to market (that is, its value on the Fund's books is changed) to reflect
changes in its market value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker daily.

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

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

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

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

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

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

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

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

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

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

|_|   Purchasing Puts and Calls. The Fund may buy calls only on securities, broadly-based
municipal bond indices, municipal bond index futures and interest rate futures. It may also
buy calls to close out a call it has written, as discussed above. Calls the Fund buys must
be listed on a securities or commodities exchange, or quoted on NASDAQ, or traded in the
over-the-counter market. A call or put option may not be purchased if the purchase would
cause the value of all the Fund's put and call options to exceed 5% of its total assets.

      When the Fund purchases a call (other than in a closing purchase transaction), it
pays a premium. For calls on securities that the Fund buys, it has the right to buy the
underlying investment from a seller of a corresponding call on the same investment during
the call period at a fixed exercise price. The Fund benefits only if (1) the call is sold
at a profit or (2) the call is exercised when the market price of the underlying investment
is above the sum of the exercise price plus the transaction costs and premium paid for the
call. If the call is not either exercised or sold (whether or not at a profit), it will
become worthless at its expiration date. In that case the Fund will lose its premium
payment and the right to purchase the underlying investment.

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

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

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

|X|   Risks of Hedging with Options and Futures. The use of hedging instruments requires
special skills and knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a hedging instrument at the
wrong time or judges market conditions incorrectly, hedging strategies may reduce the
Fund's returns.

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

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

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

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

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

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

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

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

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

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

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

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

      Transactions in options by the Fund are subject to limitations established by the
option exchanges. The exchanges limit the maximum number of options that may be written or
held by a single investor or group of investors acting in concert. Those limits apply
regardless of whether the options were written or purchased on the same or different
exchanges, or are held in one or more accounts or through one or more different exchanges
or through one or more brokers. Thus, the number of options that the Fund may write or hold
may be affected by options written or held by other entities, including other investment
companies having the same adviser as the Fund (or an adviser that is an affiliate of the
Fund's adviser). The exchanges also impose position limits on futures transactions. An
exchange may order the liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.

      Under interpretations of staff members of the SEC regarding applicable provisions of
the Investment Company Act, when the Fund purchases an interest rate future or municipal
bond index future, it must segregate cash or readily marketable short-term debt instruments
in an amount equal to the purchase price of the future, less the margin deposit applicable
to it. The account must be a segregated account or accounts held by its custodian bank.

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

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

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

      The Fund ordinarily does not trade securities to achieve short-term capital gains,
because they would not be tax-exempt income. To a limited degree, the Fund may engage in
short-term trading to attempt to take advantage of short-term market variations. It may
also do so to dispose of a portfolio security prior to its maturity. That might be done if,
on the basis of a revised credit evaluation of the issuer or other considerations, the Fund
believes such disposition advisable or it needs to generate cash to satisfy requests to
redeem Fund shares. In those cases, the Fund may realize a capital gain or loss on its
investments. The Fund's annual portfolio turnover rate normally is not expected to exceed
100%. The Financial Highlights table at the end of the Prospectus shows the Fund's
portfolio turnover rates during the past five fiscal years.

|X|   Taxable Investments. While the Fund can invest up to 20% of its total assets in
investments that generate income subject to income taxes, it does not anticipate investing
substantial amounts of its assets in taxable investments under normal market conditions or
as part of its normal trading strategies and policies. To the extent it invests in taxable
securities, the Fund would not be able to meet its objective of providing tax exempt income
to its shareholders. Taxable investments include, for example, hedging instruments,
repurchase agreements, and many of the types of securities the Fund would buy for temporary
defensive purposes. The Fund can invest in short-term municipal securities for defensive
purposes.

Investment Restrictions

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

|_|   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
|_|   more than 50% of the outstanding shares.

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

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

|_|   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.

|_|   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.

|_|   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. Nor does that
limit apply to municipal securities in general or to California Municipal Securities.

|_|   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.

|_|   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.

|_|   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.

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

Non-Diversification of the Fund's Investments. The Fund is "non-diversified" as defined in
the Investment Company Act. Funds that are diversified have restrictions against investing
too much of their assets in the securities of any one "issuer." That means that the Fund
can invest more of its assets in the securities of a single issuer than a fund that is
diversified.

      Being non-diversified poses additional investment risks, because if the Fund invests
more of its assets in fewer issuers, the value of its shares is subject to greater
fluctuations from adverse conditions affecting any one of those issuers. However, the Fund
does limit its investments in the securities of any one issuer to qualify for tax purposes
as a "regulated investment company" under the Internal Revenue Code. By qualifying, it does
not have to pay federal income taxes if more than 90% of its earnings are distributed to
shareholders. To qualify, the Fund must meet a number of conditions. First, not more than
25% of the market value of the Fund's total assets may be invested in the securities of a
single issuer. Second, with respect to 50% of the market value of its total assets, (1) no
more than 5% of the market value of its total assets may be invested in the securities of a
single issuer, and (2) the Fund must not own more than 10% of the outstanding voting
securities of a single issuer.

      The identification of the issuer of a municipal security depends on the terms and
conditions of the security. When the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from those of the government
creating it and the security is backed only by the assets and revenues of the subdivision,
agency, authority or instrumentality, the latter would be deemed to be the sole issuer.
Similarly, if an industrial development bond is backed only by the assets and revenues of
the non-governmental user, then that user would be deemed to be the sole issuer. However,
if in either case the creating government or some other entity guarantees a security, the
guarantee would be considered a separate security and would be treated as an issue of such
government or other entity.

Applying the Restriction Against Concentration. To implement its policy not to concentrate
its investments, the Fund has adopted the industry classifications set forth in Appendix B
to this Statement of Additional Information. Those industry classifications are not a
fundamental policy.

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

|X|   Does the Fund Have Any Other Restrictions That Are Not Fundamental?  The Fund has the
additional operating policies which are stated below, that are not "fundamental," and which
can be changed by the Board of Trustees without shareholder approval.

|_|   The Fund cannot invest in securities of other investment companies, except to the
extent permitted under the Investment Company Act, the rules and regulations thereunder or
any exemption therefrom, as such statute, rules and regulations may be amended or
interpreted from time to time.

Disclosure of Portfolio Holdings.  The Fund has adopted policies and procedures concerning
the dissemination of information by employees, officers and/or directors of the Investment
Advisor, 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 Fund, 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 their subsidiaries
pursuant to agreements approved by the Fund's Board shall not be deemed to be
"compensation" or "consideration" for these purposes.  It is a violation of the Code of
Ethics for any covered person to release holdings in contravention of portfolio holdings
disclosure policies and procedures adopted by the Fund.

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

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

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

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

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

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


How the Fund is Managed

Organization and History. The Fund is an open-end, non-diversified management investment
company with an unlimited number of authorized shares of beneficial interest. The Fund was
organized as a Massachusetts business trust in July 1988.

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

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

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

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

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

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

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

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

      The Board of Trustees has an Audit Committee, a Regulatory & Oversight Committee, a
Governance Committee and a Proxy Committee. Each committee is comprised solely of Trustees
who are not "interested persons" under the Investment Company Act (the "Independent
Trustees"). The members of the Audit Committee are Joel W. Motley (Chairman), Mary F.
Miller, Kenneth A. Randall and Joseph M. Wikler. The Audit Committee held 6 meetings during
the Fund's fiscal year ended July 31, 2005. The Audit Committee furnishes the Board with
recommendations regarding the selection of the Fund's independent registered public
accounting firm (also referred to as the "independent Auditors"). Other main functions of
the Audit Committee outlined in the Audit Committee Charter, include, but are not limited
to: (i) reviewing the scope and results of financial statement audits and the audit fees
charged; (ii) reviewing reports from the Fund's independent Auditors regarding  the Fund's
internal accounting procedures and controls; (iii)  reviewing reports from the Manager's
Internal Audit Department: (iv) maintaining a separate line of communication between the
Fund's independent Auditors and the Independent Trustees; (v) reviewing the independence of
the Fund's independent Auditors; and (vi) pre-approving the provision of any audit or
non-audit services by the Fund's independent Auditors, including tax services, that are not
prohibited by the Sarbanes-Oxley Act, to the Fund, the Manager and certain affiliates of
the Manager.

      The members of the Regulatory & Oversight Committee are Robert G. Galli (Chairman),
Matthew P. Fink, Phillip A. Griffiths, Joel W. Motley and Brian F. Wruble. The Regulatory &
Oversight Committee held 6 meetings during the Fund's fiscal year ended July 31, 2005. The
Regulatory & Oversight Committee evaluates and reports to the Board on the Fund's
contractual arrangements, including the Investment Advisory and Distribution Agreements,
transfer agency and shareholder service agreements and custodian agreements as well as the
policies and procedures adopted by the Fund to comply with the Investment Company Act and
other applicable law, among other duties as set forth in the Regulatory & Oversight
Committee's Charter.

      The members of the Governance Committee are, Phillip A. Griffiths (Chairman), Kenneth
A. Randall, Russell S. Reynolds, Jr. and Peter I. Wold. The Governance Committee held 7
meetings during the Fund's fiscal year ended July 31, 2005. The Governance Committee
reviews the Fund's governance guidelines, the adequacy of the Fund's Codes of Ethics, and
develops qualification criteria for Board members consistent with the Fund's governance
guidelines, among other duties set forth in the Governance Committee's Charter.

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

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

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

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

      The members of the Proxy Committee are Russell S. Reynolds Jr. (Chairman), Matthew P.
Fink and Mary F. Miller. The Proxy Committee held 1 meeting during the Fund's fiscal year
ended July 31, 2005. The Proxy Committee provides the Board with recommendations for 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 trustees or directors of the following
Oppenheimer funds (referred to as "Board I Funds"):


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

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

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

      Messrs. Fielding, Loughran, Cottier, Willis, Gillespie, Murphy, Petersen, Vandehey,
Vottiero, Wixted and Zack, and Mss. Bloomberg and Ives, who are officers of the Fund, hold
the same offices with one or more of the other Board I Funds. As of October 31, 2005, the
Trustees and officers of the Fund, as a group, owned of record or beneficially less than 1%
of each class of shares of the Fund. The foregoing statement does not reflect ownership of
shares of the Fund held of record by an employee benefit plan for employees of the Manager,
other than the shares beneficially owned under the plan by the officers of the Fund listed
above. In addition, none of the Independent Trustees (nor any of their immediate family
members), owns securities of either the Manager or Distributor of the Board I Funds or any
entity directly or indirectly controlling, controlled by or under common control with the
Manager or Distributor.

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

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

      Biographical Information. The Trustees and officers, their positions with the Fund,
length of service in such position(s) and principal occupations and business affiliations
during at least the past five years are listed in the charts below. The charts also include
information about each Trustee's beneficial share ownership in the Fund and in all of the
registered investment companies that the Trustee oversees in the Oppenheimer family of
funds ("Supervised Funds"). The address of each Trustee in the chart below is 6803 S.
Tucson Way, Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until
his or her resignation, retirement, death or removal.


-----------------------------------------------------------------------------------
                               Independent Trustees
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Name,                Principal Occupation(s) During the      Dollar    Aggregate
                                                                       Dollar
                                                                       Range Of
                     Past 5 Years;                           Range of  Shares
Position(s) Held     Other Trusteeships/Directorships Held   Shares    Beneficially
with Fund,           by Trustee ;                            BeneficialOwned in
Length of Service,   Number of Portfolios in Fund Complex    Owned in  Supervised
Age                  Currently Overseen by Trustee           the Fund  Funds
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
                                                              As of December 31,
                                                                     2004
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Clayton K. Yeutter,  Director of American Commercial Lines   None      Over
Chairman of the      (barge company) (since January 2005);             $100,000
Board of Trustees    Attorney at Hogan & Hartson (law firm)
since 2003;          (since June 1993); Director of Covanta
Trustee since 1993   Holding Corp. (waste-to-energy
Age: 74              company) (since 2002); 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 38 portfolios in
                     the OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Matthew P. Fink,     Trustee of the Committee for Economic   None      None
Trustee since 2005   Development (policy research
Age: 64              foundation) (since 2005); Director of
                     ICI Education Foundation (education
                     foundation) (since October 1991);
                     President of the Investment Company
                     Institute (trade association)
                     (1991-2004); Director of ICI Mutual
                     Insurance Company (insurance company)
                     (1991-2004). Oversees 38 portfolios in
                     the OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Robert G. Galli,     A director or trustee of other          None      Over
Trustee since 1993   Oppenheimer funds. Oversees 48                    $100,000
Age: 72              portfolios in the OppenheimerFunds
                     complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Phillip A.           Director of GSI Lumonics Inc.           None      Over
Griffiths, Trustee,  (precision medical equipment supplier)            $100,000
since 1999           (since 2001); Trustee of Woodward
Age: 67              Academy (since 1983); Senior Advisor
                     of The Andrew W. Mellon Foundation
                     (since 2001); Member of the National
                     Academy of Sciences (since 1979);
                     Member of the American Philosophical
                     Society (since 1996); Council on
                     Foreign Relations (since 2002);
                     Director of the Institute for Advanced
                     Study (1991-2004); Director of Bankers
                     Trust New York Corporation
                     (1994-1999). Oversees 38 portfolios in
                     the OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Mary F. Miller,      Trustee of the American Symphony        None      None
Trustee since 2004   Orchestra (not-for-profit) (since
Age: 63              October 1998); and Senior Vice
                     President and General Auditor of
                     American Express Company (financial
                     services company) (July 1998-February
                     2003). Oversees 38 portfolios in the
                     OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Joel W. Motley,      Director of Columbia Equity Financial   None      Over
Trustee since 2002   Corp. (privately-held financial                   $100,000
Age: 53              adviser) (since 2002); Managing
                     Director of Carmona Motley, Inc.
                     (privately-held financial adviser)
                     (since January 2002); Managing
                     Director of Carmona Motley Hoffman
                     Inc. (privately-held financial
                     adviser) (January 1998-December 2001);
                     Member of the Finance and Budget
                     Committee of the Council on Foreign
                     Relations, the Investment Committee of
                     the Episcopal Church of America, the
                     Investment Committee of Human Rights
                     Watch and the Investment Committee of
                     Historic Hudson Valley. Oversees 38
                     portfolios in the OppenheimerFunds
                     complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Kenneth A. Randall,  Director of Dominion Resources, Inc.    None      Over
Trustee since 1988   (electric utility holding company)                $100,000
Age: 78              (since February 1972); 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 38 portfolios in
                     the OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Russell S.           Chairman of The Directorship Search     None      Over
Reynolds, Jr.,       Group, Inc. (corporate governance                 $100,000
Trustee since 1989   consulting and executive recruiting)
Age: 73              (since 1993); Life Trustee of
                     International House (non-profit
                     educational organization); Former
                     Trustee of The Historical Society of
                     the Town of Greenwich. Oversees 38
                     portfolios in the OppenheimerFunds
                     complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Joseph M. Wikler,    Director of the following medical       None      $50,001-$100,000
Trustee since        device companies: Medintec (since
August 2005          1992) and Cathco (since 1996);
Age: 64              Director of Lakes Environmental
                     Association (since 1996); Member of
                     the Investment Committee of the
                     Associated Jewish Charities of
                     Baltimore (since 1994); Director of
                     Fortis/Hartford mutual funds
                     (1994-December 2001). Oversees 39
                     portfolios in the OppenheimerFunds
                     complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Peter I. Wold,       President of Wold Oil Properties, Inc.  None      Over
Trustee since        (oil and gas exploration and                      $100,000
August 2005          production company) (since 1994); Vice
Age: 57              President, Secretary and Treasurer of
                     Wold Trona Company, Inc. (soda ash
                     processing and production) (since
                     1996); Vice President of Wold Talc
                     Company, Inc. (talc mining) (since
                     1999); Managing Member of
                     Hole-in-the-Wall Ranch (cattle
                     ranching) (since 1979); Director and
                     Chairman of the Denver Branch of the
                     Federal Reserve Bank of Kansas City
                     (1993-1999); and Director of
                     PacifiCorp. (electric utility)
                     (1995-1999). Oversees 39 portfolios in
                     the OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Brian F. Wruble,     General Partner of Odyssey Partners,    None      Over
Trustee since 2005   L.P. (hedge fund) (since September                $100,000
Age: 62              1995); Director of Special Value
                     Opportunities Fund, LLC (registered
                     investment company) (since September
                     2004); Director of Zurich Financial
                     Investment Advisory Board (affiliate
                     of the Manager's parent company)
                     (since October 2004); Board of
                     Governing Trustees of The Jackson
                     Laboratory (non-profit) (since August
                     1990); Trustee of the Institute for
                     Advanced Study (non-profit educational
                     institute) (since May 1992); Special
                     Limited Partner of Odyssey Investment
                     Partners, LLC (private equity
                     investment) (January 1999-September
                     2004); Trustee of Research Foundation
                     of AIMR (2000-2002) (investment
                     research, non-profit); Governor,
                     Jerome Levy Economics Institute of
                     Bard College (August 1990-September
                     2001) (economics research); Director
                     of Ray & Berendtson, Inc. (May
                     2000-April 2002) (executive search
                     firm). Oversees 48 portfolios in the
                     OppenheimerFunds complex.
-----------------------------------------------------------------------------------

      The address of Mr. Murphy is Two World Financial Center, 225 Liberty Street, 11th
Floor, New York, NY 10281-1008. Mr. Murphy serves as Trustee for an indefinite term and as
an officer for an annual term, or until his resignation, retirement, death or removal. Mr.
Murphy is an "Interested Trustee" because he is affiliated with the Manager by virtue of
his positions as an officer and director of the Manager and as a shareholder of its parent
company.

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

      The addresses of the officers in the chart below are as follows: for Messrs.
Fielding, Loughran, Cottier, Willis, Gillespie and Zack and Ms. Bloomberg, Two World
Financial Center, 225 Liberty Street, 11th Floor, New York, NY 10281-1008, for Messrs.
Petersen, Vandehey, Vottiero, and Wixted and Ms. Ives, 6803 S. Tucson Way, Centennial, CO
80112-3924. Each Officer serves for an annual term or until his or her resignation,
retirement, death or removal.

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

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


------------------------------------------------------------------------------------
Trustee Name and Other    Aggregate      Retirement     Estimated        Total
                                          Benefits        Annual      Compensation
                                         Accrued as      Benefits    From the Fund
Fund Position(s)         Compensation   Part of Fund       Upon         and Fund
(as applicable)          From Fund(1)     Expenses    Retirement(2)     Complex
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Clayton K. Yeutter        $2,390(3)         $597         $86,171        $173,700
Chairman of the Board
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
                             $518            $0           $2,641          None
Matthew P. Fink(4)
Proxy Committee Member
and Regulatory &
Oversight  Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------

Robert G. Galli
Regulatory & Oversight      $1,779           $0        $100,824(5)    $237,312(6)
Committee Chairman
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Phillip A. Griffiths
Governance Committee
Chairman and              $2,063(7)        $2,063        $34,972        $142,092
Regulatory & Oversight
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Mary F. Miller(8)
Audit Committee Member
and Proxy Committee         $1,176           $0           $7,128         $8,532
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Joel W. Motley
Audit Committee
Chairman and              $2,074(9)         $830         $23,945        $150,760
Regulatory & Oversight
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Kenneth A. Randall          $1,844         $0(10)        $85,944        $134,080
Audit Committee Member
and Governance
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Edward V. Regan(11)         $1,517           $0          $70,977        $118,788

------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Russell S. Reynolds,        $1,472           $0          $66,602        $106,792
Jr.
Proxy Committee
Chairman and
Governance Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Donald W. Spiro(12)          $220            $0             $0          $64,080
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Joseph M. Wikler(13)          $0             $0             -           $23,000
Audit Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Peter I. Wold(13)             $0             $0             -           $20,500
Governance Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Brian F. Wruble(14)           $0             $0        $22,238(15)    $111,000(16)
Regulatory & Oversight
Committee Member
------------------------------------------------------------------------------------

1.    "Aggregate Compensation From the Fund" includes fees and deferred compensation, if
   any.
2.    "Estimated Annual Benefits Upon Retirement" is based on a straight life payment plan
   election with the assumption that a Trustee will retire at the age of 75 and is eligible
   (after 7 years of service) to receive retirement plan benefits as described below under
   "Retirement Plan for Trustees."
3.    Includes $597 deferred by Mr. Yeutter under the "Deferred Compensation Plan"
   described below.
4.    Mr. Fink was appointed as a Director or Trustee of 10 of the Board I Funds effective
   January 1, 2005 and was elected as Director or Trustee of all of the other Board I Funds
   during 2005.
5.    Includes $45,840 estimated to be paid to Mr. Galli for serving as a Trustee or
   Director of 10 other Oppenheimer funds that are not Board I Funds.
6.    Includes $111,000 for serving as a trustee or director of 10 other Oppenheimer funds
   (at December 31, 2004) that are not Board I Funds.
7.    Includes $2,063 deferred by Mr. Griffiths under the "Deferred Compensation Plan"
   described below.
8.    Ms. Miller was appointed as Director or Trustee of 13 of the Board I Funds effective
   August13, 2004 and of 9 of the Board I Funds effective October 26, 2004. She was elected
   as Director or Trustee of all of the other Board I Funds during 2005.
9.    Includes $830 deferred by Mr. Motley under the "Deferred Compensation Plan" described
   below.
10.   Due to actuarial considerations, no additional retirement benefits were accrued with
   respect to Mr. Randall.
11.   Mr. Regan retired as a Trustee of the Board I funds effective June 30, 2005.
12.   Mr. Spiro retired as Trustee of the Board I funds effective October 31, 2004.
13.   Mr. Wold and Mr. Wikler were elected as Board members of 23 of the Board I Funds,
   including the Fund as of August 17, 2005. They had served as Board members of the other
   11 Board IV Funds prior to that date.
14.   Mr. Wruble was appointed as Trustee of the Board I Funds effective October 10, 2005.
15.   Estimated benefits to be paid to Mr. Wruble for serving as a director or trustee of
   10 other Oppenheimer funds that are not Board I Funds. Mr. Wruble's service as a
   director or trustee of such funds will not be counted towards the fulfillment of his
   eligibility requirements for payments under the Board I retirement plan, described below.
16.   For serving as a director or trustee of 10 other Oppenheimer funds (at December 31,
   2004) that are not Board I Funds.


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

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

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

|X|   Major Shareholders. As of October 31, 2005, the only persons or entities who owned of
record or were known by the Fund to own beneficially 5% or more of any class of the Fund's
outstanding shares:

      Citigroup Global Markets Inc., Attn Cindy Tempesta, 7th Floor, 333 West 34th Street,
      New York, NY 10001-2483, which owned 6,537,732.661 Class A shares (representing
      approximately 9.77% of the Fund's then outstanding Class A shares), 1,087,698.004
      Class B shares (representing approximately 20.35% of the Fund's then outstanding
      Class B shares) and 873,131.833 Class C shares (representing approximately 8.70% of
      the Fund's then outstanding Class C shares).

      Merrill Lynch Pierce Fenner & Smith, Inc. for the Sole Benefit of its Customers, 4800
      Deer Lake Drive East, Floor 3, Jacksonville, Florida 32246-6484, which owned
      410,121.921 Class B shares (representing approximately 7.67% of the Fund's then
      outstanding Class B shares) and 1,897,263.914 Class C shares (representing
      approximately 18.91% of the Fund's then outstanding Class C shares).

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
http://www.sec.gov. Copies may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: publicinfo@sec.gov., or by writing to the SEC's
Public Reference Section, Washington, D.C. 20549-0102.

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

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

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

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

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


--------------------------------------------------------------------------------
Fiscal Year ended 7/31                Management Fees Paid to the Manager
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2003                                 $3,001,975
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2004                                 $2,821,557
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2005                                 $3,115,304
--------------------------------------------------------------------------------

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

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

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

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

   -------------------------------------------------------------------------------
   Portfolio Manager RegisteredTotal      Other        Total    Other   Total
                                                     Assets in
                               Assets in               Other
                               Registered Pooled      Pooled             Assets
                     InvestmentInvestment InvestmentInvestment          in Other
                     Companies Companies  Vehicles   Vehicles   AccountsAccounts
                      Managed   Managed*   Managed   Managed*   Managed Managed*
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Ronald  H.          10                  None      $0          18     $193
    Fielding                     $19,636.8
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Daniel G.           10                  None      $0          10     $0.466
    Loughran                     $19,636.8
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Scott Cottier       10                  None      $0           7     $0.240
                                 $19,636.8
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    TroyWillis          10                  None      $0           2     $0.104
                                 $19,636.8
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Mark DeMitry        10                  None      $0           6     $0.122
                                 $19,636.8
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Marcus Franz        10                  None      $0          10     $0.170
                                 $19,636.8
   -------------------------------------------------------------------------------
       *  In millions.

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

     Compensation of the Portfolio Managers.  The Fund's Portfolio Managers are employed
and compensated by the Manager, not the Fund. Under the Manager's compensation program for
its portfolio managers and portfolio analysts, their compensation is based primarily on the
investment performance results of the funds and accounts they manage, rather than on the
financial success of the Manager. This is intended to align the portfolio managers' and
analysts' interests with the success of the funds and accounts and their investors.  The
Manager's compensation structure is designed to attract and retain highly qualified
investment management professionals and to reward individual and team contributions toward
creating shareholder value.  As of July 31, 2005, the Portfolio Managers' compensation
consisted of three elements: a base salary, an annual discretionary bonus and eligibility
to participate in long-term awards of options and appreciation rights in regard to the
common stock of the Manager's holding company parent.  Senior portfolio managers may also
be eligible to participate in the Manager's deferred compensation plan.

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

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

Brokerage Policies of the Fund

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

      Under the investment advisory agreement, in choosing brokers to execute portfolio
transactions for the Fund, the Manager may select brokers (other than affiliates) that
provide brokerage and/or research services to the Fund and/or the other accounts over which
the Manager or its affiliates have investment discretion. The commissions paid to those
brokers may be higher than another qualified broker would charge, if the Manager makes a
good faith determination that the commission is fair and reasonable in relation to the
services provided.

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

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

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

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

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

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

      Investment research services include information and analyses on particular companies
and industries as well as market or economic trends and portfolio strategy, market
quotations for portfolio evaluations, analytical software and similar products and
services. If a research service also assists the Manager in a non-research capacity (such
as bookkeeping or other administrative functions), then only the percentage or component
that provides assistance to the Manager in the investment decision-making process may be
paid in commission dollars.

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







----------------------------------------------------------------
Fiscal Year Ended 7/31 Total Brokerage Commissions Paid by the
                                       Fund(1)
----------------------------------------------------------------
----------------------------------------------------------------
         2003                             $0
----------------------------------------------------------------
----------------------------------------------------------------
         2004                             $0
----------------------------------------------------------------
----------------------------------------------------------------
         2005                           $0(2)
----------------------------------------------------------------
1.    Amounts do not include spreads or commissions on principal amounts on a net trade
   basis.
2.    In the fiscal year ended 7/31/05, there were no transactions directed to brokers for
   research services.

Distribution and Service Plans

The Distributor. Under its General Distributor's Agreement with the Fund, the Distributor
acts as the Fund's principal underwriter in the continuous public offering of the Fund's
classes of shares. The Distributor bears the expenses normally attributable to sales,
including advertising and the cost of printing and mailing prospectuses, other than those
furnished to existing shareholders. The Distributor is not obligated to sell a specific
number of shares.

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

-------------------------------------------------------------------------------
Fiscal    Aggregate    Class A       Concessions    Concessions  Concessions
          Front-End    Front-End
Year      Sales        Sales         on Class A     on Class B   on Class C
Ended     Charges      Charges       Shares         Shares       Shares
7/31:     on Class A   Retained by   Advanced by    Advanced by  Advanced by
          Shares       Distributor(1)Distributor(2) Distributor(2Distributor(2)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
  2003      $782,068     $162,029       $35,397       $537,278     $141,244
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
  2004      $777,423     $167,669       $33,892       $153,000      $95,876
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
  2005     $2,882,694    $565,644       $242,662      $349,059     $467,268
-------------------------------------------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent of the
   Distributor.
2. The Distributor advances concession payments to financial intermediaries for certain
   sales of Class A shares and for sales of Class B and Class C shares from its own
   resources at the time of sale.

-------------------------------------------------------------------------------
Fiscal Year  Class A Contingent    Class B Contingent    Class C Contingent
             Deferred Sales        Deferred Sales        Deferred Sales
             Charges Retained by   Charges Retained by   Charges Retained by
Ended 7/31:  Distributor           Distributor           Distributor
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
    2003            $30,270              $432,617               $14,447
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
    2004            $12,704              $311,082               $12,774
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
    2005            $16,065              $127,684               $12,567
-------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

      For the fiscal year ended July 31, 2005 payments under the Class A plan totaled
$1,139,564, all of which all was paid by the Distributor to recipients, and included
$42,791 paid to an affiliate of the Distributor's parent company. Any unreimbursed expenses
the Distributor incurs with respect to Class A shares for any fiscal year may not be
recovered in subsequent years. The Distributor may not use payments received under the
Class A plan to pay any of its interest expenses, carrying charges, other financial costs,
or allocation of overhead.

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

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

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

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

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

      During a calendar year, the Distributor's actual expenses in selling Class B and
Class C shares may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and from the asset-based sales charges paid to the
Distributor by the Fund under the distribution and service plans. Those excess expenses are
carried over on the Distributor's books and may be recouped from asset-based sales charge
payments from the Fund in future years. However, the Distributor has voluntarily agreed to
cap the amount of expenses under the plans that may be carried over from year to year and
recouped that relate to (i) expenses the Distributor has incurred that represent
compensation and expenses of its sales personnel and (ii) other direct distribution costs
it has incurred, such as sales literature, state registration fees, advertising and
prospectuses used to offer Fund shares. The cap on the carry-over of those categories of
expenses is set at 0.70% of annual gross sales of shares of the Fund. If those categories
of expenses exceed the capped amount, the Distributor may not carry the excess over to
subsequent fiscal years. If the Class B or Class C plan were to be terminated by the Fund,
the Fund's Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to the Distributor for distributing shares prior to the termination of the
plan.

---------------------------------------------------------------------------------
Distribution and Service Fees Paid to the Distributor for the Fiscal Year Ended
                                    7/31/05
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
   Class:         Total          Amount        Distributor's     Distributor's
                                                                  Unreimbursed
                                                 Aggregate       Expenses as %
                 Payments     Retained by      Unreimbursed      of Net Assets
                Under Plan    Distributor   Expenses Under Plan     of Class
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B Plan     $610,171     $467,852(1)       $2,131,461           3.58%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C Plan     $432,616      $58,643(2)       $1,323,815           1.66%
---------------------------------------------------------------------------------
1.    Includes $597 paid to an affiliate of the Distributor's parent company.
2.    Includes $8,345 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 National Association of Securities Dealers, Inc. on payments of asset-based
sales charges and service fees.


Payments to Fund Intermediaries

      Financial intermediaries may receive various forms of compensation or reimbursement
from the Fund in the form of 12b-1 plan payments as described in the preceding section of
this SAI. They may also receive reallowance of commissions from the Distributor, derived
from sales charges paid by the clients of the financial intermediary, also as described in
this 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 as sales commissions (see "About Your Account" in the
              Prospectus);
o     ongoing asset-based payments attributable to the share class selected, including fees
              payable under the Fund's distribution and/or service plans adopted under Rule
              12b-1 under the Investment Company Act, which are paid from the Fund's assets
              and allocated to the class of shares to which the plan relates (see "About
              the Fund -- Distribution and Service Plans" above);
o     shareholder servicing payments for providing omnibus accounting, recordkeeping,
              networking, sub-transfer agency or other administrative or shareholder
              services, including retirement plan and 529 plan administrative services
              fees, which are paid from the assets of a Fund as reimbursement to the
              Manager or Distributor for expenses they incur on behalf of the Fund.

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

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

      These payments may provide an incentive to financial intermediaries to actively
market or promote the sale of shares of the Fund or other Oppenheimer funds, or to support
the marketing or promotional efforts of the Distributor in offering shares of the Fund or
other Oppenheimer funds. In addition, some types of payments may provide a financial
intermediary with an incentive to recommend the Fund or a particular share class. Financial
intermediaries may earn profits on these payments, since the amount of the payment may
exceed the cost of providing the service. Certain of these payments are subject to
limitations under applicable law. Financial intermediaries may categorize and disclose
these arrangements to their clients and to members of the public in a manner different from
the disclosures in the Fund's prospectus and this 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, 2004, the following financial intermediaries that are
broker-dealers offering shares of the Oppenheimer funds, and/or their respective
affiliates, received revenue sharing or similar distribution-related payments from the
Manager or Distributor for marketing or program support:

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

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

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


Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to illustrate its
performance. These terms include "standardized yield," "tax-equivalent yield," "dividend
yield," "average annual total return," "cumulative total return," "average annual total
return at net asset value" and "total return at net asset value." An explanation of how
yields and total returns are calculated is set forth below. The charts below show the
Fund's performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1.800.525.7048 or by
visiting the OppenheimerFunds Internet website at www.oppenheimerfunds.com.

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

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

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

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

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

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

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

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

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

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

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

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

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

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


--------------------------------------------------------------------------------
            The Fund's Yields for the 30-Day Periods Ended 07/31/05
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class of    Standardized Yield      Dividend Yield       Tax-Equivalent Yield
                                                           (41.05%Combined
                                                        Federal/City/State Tax
Shares                                                         Bracket)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
          Without     After      Without    After      Without      After
          Sales       Sales      Sales      Sales                   Sales
          Charge      Charge     Charge     Charge     Sales Charge Charge
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A      5.42%      5.16%      4.65%      4.43%       7.88%        7.51%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B      4.53%       N/A       3.88%       N/A        6.58%         N/A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C      4.53%       N/A       3.86%       N/A        6.54%         N/A
--------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

-----------------------------------------------------------------------------------
              The Fund's Total Returns for the Periods Ended 7/31/05
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Class of  Cumulative Total               Average Annual Total Returns
               Returns
            (10 Years or
           life-of-class,
Shares        if less)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
                                 1-Year            5-Years           10-Years
                                                                   (or life of
                                                                 class, if less)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
          After    Without  After     Without After     Without  After    Without
          Sales    Sales    Sales     Sales   Sales     Sales    Sales    Sales
           Charge   Charge   Charge   Charge   Charge    Charge   Charge   Charge
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Class      83.20%   92.33%   12.58%   18.20%    7.29%    8.34%    6.24%    6.76%
A(1)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Class      83.87%   83.87%   12.40%   17.40%    7.23%    7.54%    6.28%    6.28%
B(2)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Class      72.15%   72.15%   16.33%   17.33%    7.53%    7.53%    5.73%    5.73%
C(3)
-----------------------------------------------------------------------------------
1. Inception of Class A:      11/03/88
2. Inception of Class B:      05/03/93
3. Inception of Class C:      11/01/95

---------------------------------------------------------------------------
   Average Annual Total Returns for Class A Shares (After Sales Charge)
                      For the Periods Ended 7/31/05
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                1-Year         5-Years        10-Years
                                                             (or life of
                                                           class, if less)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
After Taxes on Distributions    12.58%          7.29%           6.22%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
After Taxes on                  10.24%          7.02%           6.10%
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 Statement of Additional Information. The Fund may also compare
its performance to that of other investments, including other mutual funds, or use rankings
of its performance by independent ranking entities. Examples of these performance
comparisons are set forth below.

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

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

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

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

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

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

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

ABOUT YOUR ACCOUNT

How to Buy Shares

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

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

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

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

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

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



                                          Oppenheimer Portfolio Series:
                                            Active Allocation Fund
                                            Aggressive Investor Fund
Oppenheimer   Limited   Term   California   Conservative Investor Fund
Municipal Fund                              Moderate Investor Fund
Oppenheimer Limited-Term Government Fund
And the following money market funds:

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

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

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

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

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

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

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

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

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

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

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



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


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


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


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

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


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

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

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

Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's shares (for
example, when a purchase check is returned to the Fund unpaid) causes a loss to be incurred
when the net asset values of the Fund's shares on the cancellation date is less than on the
purchase date. That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The investor is responsible
for that loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the Distributor may seek
other redress.

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

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

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

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

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

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

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

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

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

      Listed below are certain cases in which the Fund has elected, in its discretion, not
to assess the Fund Account Fees. These exceptions are subject to change:
o     A fund account whose shares were acquired after September 30th of the prior year;
o     A fund account that has a balance below $500 due to the automatic conversion of
      shares from Class B to Class A shares. However, once all Class B shares held in the
      account have been converted to Class A shares the new account balance may become
      subject to the Minimum Balance Fee;
o     Accounts of shareholders who elect to access their account documents electronically
      via eDoc Direct;
o     A fund account that has only certificated shares and, has a balance below $500 and is
      being escheated;
o     Accounts of shareholders that are held by broker-dealers under the NSCC Fund/SERV
      system;
o     Accounts held under the Oppenheimer Legacy Program and/or holding certain Oppenheimer
      Variable Account Funds;
o     Omnibus accounts holding shares pursuant to the Pinnacle, Ascender, Custom Plus,
      Recordkeeper Pro and Pension Alliance Retirement Plan programs; and
o     A fund account that falls below the $500 minimum solely due to market fluctuations
      within the 12-month period preceding the date the fee is deducted.
.
      To access account documents electronically via eDocs Direct, please visit the Service
Center on our website at www.oppenheimerfunds.com or call 1.888.470.0862 for instructions.

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

Determination of Net Asset Values Per Share. The net asset values per share of each class
of shares of the Fund are determined as of the close of business of the NYSE on each day
that the NYSE is open. The calculation is done by dividing the value of the Fund's net
assets attributable to a class by the number of shares of that class that are outstanding.
The NYSE normally closes at 4:00 p.m., Eastern time, but may close earlier on some other
days (for example, in case of weather emergencies or on days falling before a U.S.
holiday).  All references to time in this Statement of Additional Information mean "Eastern
time." The NYSE's most recent annual announcement regarding holidays and days when the
market may close early is available on the NYSE's website at www.nyse.com.

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

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

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

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

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

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

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

How to Sell Shares

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

Checkwriting. When a check is presented to United Missouri Bank (the "Bank") for clearance,
the Bank will ask the Fund to redeem a sufficient number of full and fractional shares in
the shareholder's account to cover the amount of the check. This enables the shareholder to
continue receiving dividends on those shares until the check is presented to the Fund.
Checks may not be presented for payment at the offices of the Bank or the Fund's custodian.
This limitation does not affect the use of checks for the payment of bills or to obtain
cash at other banks. The Fund reserves the right to amend, suspend or discontinue offering
checkwriting privileges at any time. The Fund will provide you notice whenever it is
required to do so by applicable law.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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

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

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

o     Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y shares.
o     Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for shares of any
      other fund.
o     Class B and Class C shares of Oppenheimer Cash Reserves are generally available only
      by exchange from the same class of shares of other Oppenheimer funds or through
      OppenheimerFunds-sponsored 401(k) plans.
o     Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for
      Class A shares of other Oppenheimer funds. They may not be acquired by exchange of
      shares of any class of any other Oppenheimer funds except Class A shares of
      Oppenheimer Money Market Fund or Oppenheimer Cash Reserves acquired by exchange of
      Class M shares.
o     Class A shares of Oppenheimer funds may be exchanged at net asset value for shares of
      any money market fund offered by the Distributor. Shares of any money market fund
      purchased without a sales charge may be exchanged for shares of Oppenheimer funds
      offered with a sales charge upon payment of the sales charge. They may also be used
      to purchase shares of Oppenheimer funds subject to an early withdrawal charge or
      contingent deferred sales charge.
o     Shares of the Fund acquired by reinvestment of dividends or distributions from any of
      the other Oppenheimer funds or from any unit investment trust for which reinvestment
      arrangements have been made with the Distributor may be exchanged at net asset value
      for shares of any of the Oppenheimer funds.
o     Shares of Oppenheimer Principal Protected Main Street Fund may be exchanged at net
      asset value for shares of any of the Oppenheimer funds. However, shareholders are not
      permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
      Principal Protected Main Street Fund until after the expiration of the warranty
      period (8/5/2010).
o     Shares of Oppenheimer Principal Protected Main Street Fund II may be exchanged at net
      asset value for shares of any of the Oppenheimer funds. However, shareholders are not
      permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
      Principal Protected Main Street Fund II until after the expiration of the warranty
      period (2/4/2011).
o     Shares of Oppenheimer Principal Protected Main Street Fund III may be exchanged at
      net asset value for shares of any of the Oppenheimer funds. However, shareholders are
      not permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
      Principal Protected Main Street Fund III until after the expiration of the warranty
      period (12/16/2011).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Dividends, Capital Gains and Taxes

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

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

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

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

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

Tax Status of the Fund's Dividends, Distributions and Redemptions of Shares. The federal
tax treatment of the Fund's distributions is briefly highlighted in the Prospectus. The
following is only a summary of certain additional tax considerations generally affecting
the Fund and its shareholders.

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

|X|   Qualification as a Regulated Investment Company. The Fund has elected to be taxed as
a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. As a regulated investment company, the Fund is not subject to federal income tax
on the portion of its net investment income (that is, taxable interest, dividends, and
other taxable ordinary income, net of expenses) and capital gain net income (that is, the
excess of net long-term capital gains over net short-term capital losses) that it
distributes to shareholders.

      If the Fund qualifies as a "regulated investment company" under the Internal Revenue
Code, it will not be liable for federal income tax on amounts it pays as dividends and
other distributions. That qualification enables the Fund to "pass through" its income and
realized capital gains to shareholders without having to pay tax on them. The Fund
qualified as a regulated investment company in its last fiscal year and intends to qualify
in future years, but reserves the right not to qualify. The Internal Revenue Code contains
a number of complex tests to determine whether the Fund qualifies. The Fund might not meet
those tests in a particular year. If it does not qualify, the Fund will be treated for tax
purposes as an ordinary corporation and will receive no tax deduction for payments of
dividends and other distributions made to shareholders. In such an instance, all of the
Fund's dividends would be taxable to shareholders.

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

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

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

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

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

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

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

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

      The Fund's dividends will not be eligible for the dividends-received deduction for
corporations. Shareholders receiving Social Security or railroad retirement benefits should
be aware that exempt-interest dividends are a factor in determining whether (and the extent
to which) such benefits are subject to federal income tax. Losses realized by shareholders
on the redemption of Fund shares within six months of purchase will be disallowed for
federal income tax purposes to the extent of exempt-interest dividends received on such
shares.

      In any year in which the Fund  qualifies as a regulated  investment  company under the
Internal  Revenue Code, the Fund will also be exempt from  California  corporate  income and
franchise  taxes.  It will also be qualified  under  California  law to pay exempt  interest
dividends that will be exempt from California  personal  income tax. That exemption  applies
to the extent that the Fund's  distributions  are  attributable  to  interest on  California
municipal  securities and  qualifying  obligations  of the United States  government,  if at
least  50% of the  Fund's  assets  are  invested  in such  obligations  at the close of each
quarter in its tax year.  Distributions  from the Fund  attributable  to income from sources
other than California  municipal  securities and U.S. government  obligations will generally
be subject to California income tax as ordinary income.

      Distributions  by the Fund from  investment  income and long- and  short-term  capital
gains will  generally  not be  excludable  from  taxable  income in  determining  California
corporate   franchise   tax  or  income  tax  for  corporate   shareholders   of  the  Fund.
Additionally,  certain  distributions  paid to  corporate  shareholders  of the  Fund may be
includable in income subject to the California alternative minimum tax.

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

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

      Distributions by the Fund will be treated in the manner described above regardless of
whether the distributions are paid in cash or reinvested in additional shares of the Fund
(or of another fund). Shareholders receiving a distribution in the form of additional
shares will be treated as receiving a distribution in an amount equal to the fair market
value of the shares received, determined as of the reinvestment date.

      The Fund will be required in certain cases to withhold 28% of ordinary income
dividends (not including "exempt-interest dividends"), capital gains distributions and the
proceeds of the redemption of shares, paid to any shareholder (1) who has failed to provide
a correct taxpayer identification number or to properly certify that number when required,
(2) who is subject to backup withholding for failure to report the receipt of interest or
dividend income properly, or (3) who has failed to certify to the Fund that the shareholder
is not subject to backup withholding or is an "exempt recipient" (such as a corporation).
Any tax withheld by the Fund is remitted by the Fund to the U.S. Treasury and 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 (not  including
exempt-interest  dividends  paid  by the  Fund)  from  a  mutual  fund  are  not  considered
"effectively connected" income.

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

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

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

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

Additional Information About the Fund

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

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

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

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



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

--------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER CALIFORNIA MUNICIPAL FUND:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer California Municipal Fund, including the statement of investments,
as of July 31, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

      We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of July 31, 2005, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer California Municipal Fund as of July 31, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.


KPMG LLP

Denver, Colorado
September 13, 2005



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

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES--115.0%
--------------------------------------------------------------------------------------------------------------------------
CALIFORNIA--104.6%
$    25,000     ABAG Finance Authority for NonProfit Corporations
                (Channing House)                                                5.500%        02/15/2029     $      25,995
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     ABAG Finance Authority for NonProfit Corporations
                (Schools of Sacred Heart) 1                                     6.450         06/01/2030         1,071,430
--------------------------------------------------------------------------------------------------------------------------
     90,000     ABAG Finance Authority for NonProfit
                Corporations COP                                                6.000         08/15/2020            91,977
--------------------------------------------------------------------------------------------------------------------------
    450,000     ABAG Finance Authority for NonProfit Corporations
                COP (American Baptist Homes of the West)                        5.750         10/01/2017           455,238
--------------------------------------------------------------------------------------------------------------------------
    250,000     ABAG Finance Authority for NonProfit Corporations
                COP (Lytton Gardens)                                            6.000         02/15/2019           265,143
--------------------------------------------------------------------------------------------------------------------------
    440,000     ABAG Finance Authority for NonProfit Corporations
                COP (O'Connor Woods)                                            6.200         11/01/2029           468,164
--------------------------------------------------------------------------------------------------------------------------
  4,300,000     ABAG Finance Authority for NonProfit Corporations
                COP(Redwood Senior Homes & Services) 1                          6.125         11/15/2032         4,631,831
--------------------------------------------------------------------------------------------------------------------------
     55,000     Adelanto Improvement Agency, Series B                           5.500         12/01/2023            55,469
--------------------------------------------------------------------------------------------------------------------------
  5,295,000     Agua Mansa Industrial Growth Association Special Tax 1          6.500         09/01/2033         5,551,702
--------------------------------------------------------------------------------------------------------------------------
    200,000     Alameda Public Financing Authority                              5.450         09/02/2014           204,230
--------------------------------------------------------------------------------------------------------------------------
  1,695,000     American Canyon Financing Authority
                (American Canyon Road East) 2                                   5.100         09/02/2035         1,689,491
--------------------------------------------------------------------------------------------------------------------------
  4,000,000     Anaheim Public Financing Authority RITES 3                     10.520 4       12/28/2018         4,779,440
--------------------------------------------------------------------------------------------------------------------------
  3,255,000     Apple Valley Redevel. Agency Tax Allocation                     5.000         06/01/2035         3,350,404
--------------------------------------------------------------------------------------------------------------------------
     25,000     Aztec Shops Auxiliary Organization
                (San Diego State University)                                    6.000         09/01/2031            26,277
--------------------------------------------------------------------------------------------------------------------------
  2,500,000     Azusa Special Tax Community Facilities District
                (Mountain Cove)                                                 6.000         09/01/2032         2,604,400
--------------------------------------------------------------------------------------------------------------------------
     75,000     Bay Area Governments Association (Windmere Ranch)               6.150         09/02/2029            84,419
--------------------------------------------------------------------------------------------------------------------------
  1,500,000     Beaumont Financing Authority, Series A                          5.750         09/01/2034         1,538,880
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Beaumont Financing Authority, Series B                          5.350         09/01/2028           996,660
--------------------------------------------------------------------------------------------------------------------------
  1,490,000     Beaumont Financing Authority, Series B                          5.400         09/01/2035         1,482,237
--------------------------------------------------------------------------------------------------------------------------
  5,000,000     Beaumont Financing Authority, Series B                          6.000         09/01/2034         5,216,900
--------------------------------------------------------------------------------------------------------------------------
  1,500,000     Beaumont Financing Authority, Series B                          6.000         09/01/2034         1,569,810
--------------------------------------------------------------------------------------------------------------------------
  2,875,000     Beaumont Financing Authority, Series D                          5.800         09/01/2035         2,961,394
--------------------------------------------------------------------------------------------------------------------------
    400,000     Berkeley GO                                                     5.625         09/01/2027           408,844
--------------------------------------------------------------------------------------------------------------------------
    500,000     Blythe Community Facilities District Special Tax
                (Hidden Beaches)                                                5.300         09/01/2035           490,030
--------------------------------------------------------------------------------------------------------------------------
     30,000     Blythe Redevel. Agency
                (Redevel. Project No. 1 Tax Allocation)                         5.650         05/01/2029            30,572
--------------------------------------------------------------------------------------------------------------------------
  1,595,000     CA County Tobacco Securitization Agency (TASC)                  5.750         06/01/2027         1,679,009
--------------------------------------------------------------------------------------------------------------------------
  4,000,000     CA County Tobacco Securitization Agency (TASC)                  5.750         06/01/2029         4,210,680
--------------------------------------------------------------------------------------------------------------------------
  6,230,000     CA County Tobacco Securitization Agency (TASC)                  5.875         06/01/2027         6,562,246
--------------------------------------------------------------------------------------------------------------------------
  9,125,000     CA County Tobacco Securitization Agency (TASC)                  5.875         06/01/2035         9,587,364


                   21 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
CALIFORNIA Continued
$   240,000     CA County Tobacco Securitization Agency (TASC)                  5.875%        06/01/2043     $     252,233
--------------------------------------------------------------------------------------------------------------------------
  1,250,000     CA County Tobacco Securitization Agency (TASC)                  5.875         06/01/2043         1,324,100
--------------------------------------------------------------------------------------------------------------------------
    140,000     CA County Tobacco Securitization Agency (TASC)                  5.875         06/01/2043           147,136
--------------------------------------------------------------------------------------------------------------------------
 10,400,000     CA County Tobacco Securitization Agency (TASC) 1                6.000         06/01/2035        10,999,664
--------------------------------------------------------------------------------------------------------------------------
 21,875,000     CA County Tobacco Securitization Agency (TASC)                  6.000         06/01/2042        23,140,250
--------------------------------------------------------------------------------------------------------------------------
 10,025,000     CA County Tobacco Securitization Agency (TASC)                  6.125         06/01/2038        10,676,625
--------------------------------------------------------------------------------------------------------------------------
    100,000     CA Department of Veterans Affairs Home Purchase                 5.100         12/01/2019           100,074
--------------------------------------------------------------------------------------------------------------------------
     25,000     CA Department of Veterans Affairs Home Purchase                 5.200         12/01/2027            25,017
--------------------------------------------------------------------------------------------------------------------------
     65,000     CA Department of Veterans Affairs Home Purchase                 5.500         12/01/2019            68,891
--------------------------------------------------------------------------------------------------------------------------
    190,000     CA Educational Facilities Authority
                (Carnegie Institution of Washington)                            5.600         10/01/2023           190,863
--------------------------------------------------------------------------------------------------------------------------
     25,000     CA Educational Facilities Authority
                (Golden Gate University)                                        5.500         10/01/2031            25,646
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     CA Educational Facilities Authority
                (Western University Health Sciences) 1                          6.000         10/01/2032         1,068,010
--------------------------------------------------------------------------------------------------------------------------
    130,000     CA GO                                                           5.000         10/01/2023           133,709
--------------------------------------------------------------------------------------------------------------------------
    100,000     CA GO                                                           5.000         02/01/2024           104,022
--------------------------------------------------------------------------------------------------------------------------
     50,000     CA GO                                                           5.000         08/01/2024            52,619
--------------------------------------------------------------------------------------------------------------------------
     10,000     CA GO                                                           5.000         03/01/2028            10,352
--------------------------------------------------------------------------------------------------------------------------
     50,000     CA GO                                                           5.000         02/01/2032            51,661
--------------------------------------------------------------------------------------------------------------------------
     20,000     CA GO                                                           5.125         03/01/2031            20,826
--------------------------------------------------------------------------------------------------------------------------
     50,000     CA GO                                                           5.125         06/01/2031            51,885
--------------------------------------------------------------------------------------------------------------------------
    100,000     CA GO                                                           5.150         10/01/2019           100,366
--------------------------------------------------------------------------------------------------------------------------
     25,000     CA GO                                                           5.500         04/01/2019            25,111
--------------------------------------------------------------------------------------------------------------------------
     20,000     CA GO                                                           5.500         03/01/2020            20,253
--------------------------------------------------------------------------------------------------------------------------
      5,000     CA GO                                                           5.500         03/01/2020             5,061
--------------------------------------------------------------------------------------------------------------------------
      5,000     CA GO                                                           5.500         10/01/2022             5,015
--------------------------------------------------------------------------------------------------------------------------
    200,000     CA GO                                                           6.250         10/01/2019           200,110
--------------------------------------------------------------------------------------------------------------------------
  6,000,000     CA Golden State Tobacco Securitization Corp. 1                  5.750         06/01/2021         6,461,700
--------------------------------------------------------------------------------------------------------------------------
  1,070,000     CA Golden State Tobacco Securitization Corp.                    6.250         06/01/2033         1,193,585
--------------------------------------------------------------------------------------------------------------------------
 37,215,000     CA Golden State Tobacco Securitization Corp.                    6.625         06/01/2040        42,553,851
--------------------------------------------------------------------------------------------------------------------------
  1,830,000     CA Golden State Tobacco Securitization Corp.                    6.750         06/01/2039         2,107,794
--------------------------------------------------------------------------------------------------------------------------
  1,350,000     CA Golden State Tobacco Securitization Corp.                    7.800         06/01/2042         1,677,254
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     CA Golden State Tobacco Securitization Corp. 1                  7.900         06/01/2042         2,498,100
--------------------------------------------------------------------------------------------------------------------------
 40,000,000     CA Golden State Tobacco Securitization Corp. (TASC) 2           5.000         06/01/2045        41,105,600
--------------------------------------------------------------------------------------------------------------------------
  2,810,000     CA Golden State Tobacco Securitization Corp. (TASC) 1           7.875         06/01/2042         3,505,166
--------------------------------------------------------------------------------------------------------------------------
    150,000     CA Golden State Tobacco Securitization Corp. (TASC)             7.875         06/01/2042           187,109
--------------------------------------------------------------------------------------------------------------------------
  7,000,000     CA Golden State Tobacco Securitization Corp. RITES 3            9.872 4       06/01/2043         9,584,190
--------------------------------------------------------------------------------------------------------------------------
     10,000     CA Health Facilities Financing Authority
                (Sisters of Providence)                                         6.400         10/01/2005            10,029


                   22 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
CALIFORNIA Continued
$   460,000     CA Health Facilities Financing Authority
                (Small Facilities Loan), Series B                               7.400%        04/01/2014     $     470,709
--------------------------------------------------------------------------------------------------------------------------
     25,000     CA Health Facilities Financing Authority
                (Stanford Health Care)                                          5.000         11/15/2028            26,287
--------------------------------------------------------------------------------------------------------------------------
     25,000     CA HFA (Multifamily Hsg.), Series A                             5.900         02/01/2028            25,823
--------------------------------------------------------------------------------------------------------------------------
     25,000     CA HFA (Multifamily Hsg.), Series B                             5.500         08/01/2039            25,808
--------------------------------------------------------------------------------------------------------------------------
    410,000     CA HFA (Single Family Mtg.), Series A-2 1                       6.450         08/01/2025           416,212
--------------------------------------------------------------------------------------------------------------------------
  1,205,000     CA HFA, Series A 1                                              4.800         08/01/2012         1,220,267
--------------------------------------------------------------------------------------------------------------------------
     25,000     CA HFA, Series A                                                5.600         08/01/2011            25,861
--------------------------------------------------------------------------------------------------------------------------
    110,000     CA HFA, Series B                                                5.650         08/01/2014           110,837
--------------------------------------------------------------------------------------------------------------------------
    300,000     CA HFA, Series B 1                                              7.125         08/01/2024           310,866
--------------------------------------------------------------------------------------------------------------------------
    365,000     CA HFA, Series B-1 1                                            5.600         08/01/2017           377,107
--------------------------------------------------------------------------------------------------------------------------
  1,500,000     CA Pollution Control Financing Authority
                (Browning-Ferris Industries)                                    6.875         11/01/2027         1,522,800
--------------------------------------------------------------------------------------------------------------------------
  1,200,000     CA Pollution Control Financing Authority
                (General Motors Corp.) 1                                        5.500         04/01/2008         1,201,560
--------------------------------------------------------------------------------------------------------------------------
     20,000     CA Pollution Control Financing Authority
                (Mobil Oil Corp.)                                               5.500         12/01/2029            20,945
--------------------------------------------------------------------------------------------------------------------------
    975,000     CA Pollution Control Financing Authority
                (San Diego Gas & Electric Company) 1                            5.850         06/01/2021           976,482
--------------------------------------------------------------------------------------------------------------------------
    145,000     CA Pollution Control Financing Authority
                (San Diego Gas & Electric Company)                              5.850         06/01/2021           145,331
--------------------------------------------------------------------------------------------------------------------------
  4,660,000     CA Pollution Control Financing Authority
                (Southern California Edison Company) 1                          6.400         12/01/2024         4,729,900
--------------------------------------------------------------------------------------------------------------------------
  1,300,000     CA Pollution Control Financing Authority
                (Southern California Edison Company) 1                          6.400         12/01/2024         1,329,406
--------------------------------------------------------------------------------------------------------------------------
    300,000     CA Pollution Control Financing Authority
                (Southern California Edison Company)                            6.400         12/01/2024           301,152
--------------------------------------------------------------------------------------------------------------------------
  3,000,000     CA Pollution Control Financing Authority
                (Waste Management) 1                                            5.400         04/01/2025         3,095,580
--------------------------------------------------------------------------------------------------------------------------
  3,250,000     CA Public Works (Department of Corrections) 1                   5.250         01/01/2021         3,280,583
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     CA Public Works (Department of Corrections)                     5.500         01/01/2017         2,062,020
--------------------------------------------------------------------------------------------------------------------------
     10,000     CA Public Works (Department of Corrections)                     5.500         06/01/2019            10,122
--------------------------------------------------------------------------------------------------------------------------
     15,000     CA Public Works (State Universities)                            5.500         12/01/2018            15,079
--------------------------------------------------------------------------------------------------------------------------
     50,000     CA Public Works (State Universities)                            5.500         06/01/2019            50,114
--------------------------------------------------------------------------------------------------------------------------
     50,000     CA Public Works (State Universities)                            5.500         06/01/2021            50,107
--------------------------------------------------------------------------------------------------------------------------
    615,000     CA Public Works (State Universities)                            5.500         06/01/2021           616,316
--------------------------------------------------------------------------------------------------------------------------
    370,000     CA Public Works (State Universities)                            5.500         06/01/2021           370,466
--------------------------------------------------------------------------------------------------------------------------
    510,000     CA Public Works (Various California Universities                5.500         06/01/2019           514,406
                Project)
--------------------------------------------------------------------------------------------------------------------------
    165,000     CA Rural Home Mtg. Finance Authority
                (Single Family Mtg.), Series D                                  6.700         05/01/2029           166,752
--------------------------------------------------------------------------------------------------------------------------
  5,400,000     CA Statewide CDA (Berkeley Montessori School) 1                 7.250         10/01/2033         5,599,422


                   23 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
CALIFORNIA Continued
$   265,000     CA Statewide CDA (CA Odd Fellow Hsg.)                           5.500%        10/01/2023     $     265,511
--------------------------------------------------------------------------------------------------------------------------
    850,000     CA Statewide CDA (Citrus Gardens Apartments) 1                  6.500         07/01/2032           891,242
--------------------------------------------------------------------------------------------------------------------------
  1,425,000     CA Statewide CDA (Citrus Gardens Apartments) 1                  9.000         07/01/2032         1,425,214
--------------------------------------------------------------------------------------------------------------------------
  4,500,000     CA Statewide CDA (Daughters of Charity) 1                       5.250         07/01/2030         4,734,405
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     CA Statewide CDA (East Valley Tourist) 1                        9.250         10/01/2020         2,207,580
--------------------------------------------------------------------------------------------------------------------------
  7,600,000     CA Statewide CDA (East Valley Tourist) 1                       11.000         10/01/2020         7,824,428
--------------------------------------------------------------------------------------------------------------------------
  5,000,000     CA Statewide CDA (Fairfield Apartments) 1                       7.250         01/01/2035         5,099,650
--------------------------------------------------------------------------------------------------------------------------
  5,000,000     CA Statewide CDA (John F. Kennedy University) 1                 6.750         10/01/2033         5,191,500
--------------------------------------------------------------------------------------------------------------------------
    550,000     CA Statewide CDA (Kaiser Permanente)                            5.300         12/01/2015           573,832
--------------------------------------------------------------------------------------------------------------------------
  2,750,000     CA Statewide CDA (Live Oak School) 1                            6.750         10/01/2030         2,938,403
--------------------------------------------------------------------------------------------------------------------------
  6,000,000     CA Statewide CDA (Marin Montessori School) 1                    7.000         10/01/2033         6,124,080
--------------------------------------------------------------------------------------------------------------------------
  1,400,000     CA Statewide CDA (Napa Valley Hospice) 1                        7.000         01/01/2034         1,460,410
--------------------------------------------------------------------------------------------------------------------------
  1,650,000     CA Statewide CDA (Notre Dame de Namur University)               6.500         10/01/2023         1,696,613
--------------------------------------------------------------------------------------------------------------------------
  1,635,000     CA Statewide CDA (Notre Dame de Namur University)               6.625         10/01/2033         1,684,655
--------------------------------------------------------------------------------------------------------------------------
  1,465,000     CA Statewide CDA (Quail Ridge Apartments) 1                     6.500         07/01/2032         1,520,582
--------------------------------------------------------------------------------------------------------------------------
  2,100,000     CA Statewide CDA (Quail Ridge Apartments) 1                     9.000         07/01/2032         2,098,677
--------------------------------------------------------------------------------------------------------------------------
    500,000     CA Statewide CDA (Rio Bravo)                                    6.300         12/01/2018           510,205
--------------------------------------------------------------------------------------------------------------------------
  1,975,000     CA Statewide CDA (Sonoma Country Day School) 1                  6.000         01/01/2029         1,986,890
--------------------------------------------------------------------------------------------------------------------------
    160,000     CA Statewide CDA (Stonehaven Student Hsg.)                      5.875         07/01/2032           171,398
--------------------------------------------------------------------------------------------------------------------------
    400,000     CA Statewide CDA (Sycamore) 1                                   6.000         03/20/2038           440,356
--------------------------------------------------------------------------------------------------------------------------
  4,000,000     CA Statewide CDA (Turning Point) 1                              6.500         11/01/2031         4,178,040
--------------------------------------------------------------------------------------------------------------------------
    450,000     CA Statewide CDA (United Airlines) 5,6                          5.700         10/01/2033           293,301
--------------------------------------------------------------------------------------------------------------------------
  7,800,000     CA Statewide CDA COP (Cedars-Sinai Medical Center)
                INFLOS 1,3                                                      8.184 4       11/01/2015         7,848,984
--------------------------------------------------------------------------------------------------------------------------
  7,000,000     CA Statewide CDA COP
                (Pride Industries/Pride Industries One Obligated Group)         7.250         11/01/2029         7,349,510
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     CA Statewide CDA COP (Windward School) 1                        6.900         09/01/2023         2,080,360
--------------------------------------------------------------------------------------------------------------------------
  4,500,000     CA Statewide CDA COP INFLOS 3                                   9.100 4       10/01/2011         5,345,910
--------------------------------------------------------------------------------------------------------------------------
    500,000     CA Statewide CDA, Series A                                      5.200         09/02/2025           497,690
--------------------------------------------------------------------------------------------------------------------------
  1,250,000     CA Statewide CDA, Series A                                      5.350         09/02/2035         1,252,725
--------------------------------------------------------------------------------------------------------------------------
  5,000,000     CA Statewide Financing Authority Tobacco
                Settlement (TASC)                                               6.000         05/01/2037         5,286,150
--------------------------------------------------------------------------------------------------------------------------
 11,720,000     CA Statewide Financing Authority Tobacco
                Settlement (TASC) 1                                             6.000         05/01/2043        12,390,736
--------------------------------------------------------------------------------------------------------------------------
 30,000,000     CA Statewide Financing Authority Tobacco
                Settlement (TASC)                                               6.000         05/01/2043        31,716,900
--------------------------------------------------------------------------------------------------------------------------
  3,835,000     CA Valley Health System COP 1                                   6.875         05/15/2023         3,840,714
--------------------------------------------------------------------------------------------------------------------------
     75,000     CA Valley Health System, Series A                               6.500         05/15/2025            78,450
--------------------------------------------------------------------------------------------------------------------------
    120,000     CA Veterans GO                                                  4.700         12/01/2012           120,053
--------------------------------------------------------------------------------------------------------------------------
 10,000,000     CA Veterans GO 1                                                4.700         12/01/2017        10,186,500
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     CA Veterans GO                                                  5.600         12/01/2032         1,029,020


                   24 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
CALIFORNIA Continued
$ 1,500,000     CA Veterans GO, Series B                                        5.450%        12/01/2017     $   1,533,030
--------------------------------------------------------------------------------------------------------------------------
  1,800,000     CA Veterans GO, Series BH 1                                     5.600         12/01/2032         1,815,588
--------------------------------------------------------------------------------------------------------------------------
     55,000     CA Veterans GO, Series BP                                       5.500         12/01/2026            55,043
--------------------------------------------------------------------------------------------------------------------------
    150,000     CA Veterans GO, Series BR                                       5.250         12/01/2026           150,864
--------------------------------------------------------------------------------------------------------------------------
    565,000     CA Veterans GO, Series BT                                       5.000         12/01/2012           574,684
--------------------------------------------------------------------------------------------------------------------------
  5,250,000     CA Veterans GO, Series BT 1                                     5.375         12/01/2016         5,346,758
--------------------------------------------------------------------------------------------------------------------------
     25,000     CA Water Resource Devel. GO, Series S                           5.500         04/01/2009            25,057
--------------------------------------------------------------------------------------------------------------------------
  2,935,000     Calaveras County Special Tax Community Facilities
                District No. 2                                                  7.000         09/01/2026         3,254,533
--------------------------------------------------------------------------------------------------------------------------
  2,300,000     Campbell Redevel. Agency Tax Allocation                         6.600         10/01/2032         2,521,191
--------------------------------------------------------------------------------------------------------------------------
  1,460,000     Carson Improvement Bond Act                                     7.375         09/02/2022         1,573,150
--------------------------------------------------------------------------------------------------------------------------
  6,000,000     Carson Redevel. Agency                                          6.000         01/01/2035         6,064,800
--------------------------------------------------------------------------------------------------------------------------
  1,350,000     Cathedral City Improvement Bond Act 1915 2                      5.050         09/02/2035         1,343,102
--------------------------------------------------------------------------------------------------------------------------
    100,000     Central CA Joint Powers Health Financing Authority
                COP (Community Hospitals of Central CA)                         6.000         02/01/2020           106,600
--------------------------------------------------------------------------------------------------------------------------
  1,200,000     Chino Community Facilities District Special Tax                 6.000         09/01/2028         1,248,612
--------------------------------------------------------------------------------------------------------------------------
  1,340,000     Chino Community Facilities District Special Tax                 6.000         09/01/2033         1,388,950
--------------------------------------------------------------------------------------------------------------------------
  7,000,000     Chula Vista Redevel. Agency (Bayfront)                          7.625         09/01/2024         7,167,370
--------------------------------------------------------------------------------------------------------------------------
    500,000     Chula Vista Redevel. Agency (Bayfront)                          8.250         05/01/2024           532,250
--------------------------------------------------------------------------------------------------------------------------
  1,825,000     Coalinga Regional Medical Center COP 1                          5.750         09/01/2024         1,897,745
--------------------------------------------------------------------------------------------------------------------------
  3,040,000     Coalinga Regional Medical Center COP 1                          6.000         09/01/2034         3,122,354
--------------------------------------------------------------------------------------------------------------------------
  2,360,000     Colton Community Facilities District Special Tax                7.500         09/01/2020         2,607,045
--------------------------------------------------------------------------------------------------------------------------
    815,000     Commerce CDC Tax Allocation                                     5.750         08/01/2010           855,677
--------------------------------------------------------------------------------------------------------------------------
  2,800,000     Commerce CDC Tax Allocation                                     6.000         08/01/2021         2,886,688
--------------------------------------------------------------------------------------------------------------------------
  3,075,000     Contra Costa County Special Tax Community
                Facilities District                                             5.580         08/01/2016         3,185,300
--------------------------------------------------------------------------------------------------------------------------
  1,500,000     Corona-Norco Unified School District Public
                Financing Authority                                             6.125         09/01/2034         1,549,170
--------------------------------------------------------------------------------------------------------------------------
     50,000     Culver City Redevel. Finance Authority                          5.800         11/01/2013            50,761
--------------------------------------------------------------------------------------------------------------------------
  3,335,000     Davis Public Facilities Finance Authority
                (Mace Ranch Area)                                               6.600         09/01/2025         3,491,478
--------------------------------------------------------------------------------------------------------------------------
  3,280,000     East Palo Alto Redevel. Agency Tax Allocation
                (University Circle-Gateway)                                     6.625         10/01/2029         3,513,995
--------------------------------------------------------------------------------------------------------------------------
  1,500,000     Eastern CA Municipal Water District
                (Crown Valley Village)                                          5.625         09/01/2034         1,524,420
--------------------------------------------------------------------------------------------------------------------------
    160,000     Eastern CA Municipal Water District (Serena Hills)              6.000         09/01/2033           163,216
--------------------------------------------------------------------------------------------------------------------------
  4,000,000     El Dorado County Special Tax 2                                  5.250         09/01/2035         3,978,840
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     Escondido Joint Powers Financing Authority
                (California Center for the Arts) 1                              6.000         09/01/2018         2,051,420
--------------------------------------------------------------------------------------------------------------------------
    700,000     Farmersville Unified School District COP                        5.000         08/01/2026           689,710
--------------------------------------------------------------------------------------------------------------------------
  1,625,000     Folsom Special Tax Community Facilities District No. 10         6.300         09/01/2012         1,751,588


                   25 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
CALIFORNIA Continued
$ 8,500,000     Folsom Special Tax Community Facilities District No. 10         6.875%        09/01/2019     $   9,342,265
--------------------------------------------------------------------------------------------------------------------------
     10,000     Fontana Redevel. Agency (Jurupa Hills)                          5.500         10/01/2027            10,397
--------------------------------------------------------------------------------------------------------------------------
  5,000,000     Freemont Community Facilities District
                (Pacific Commons)                                               5.375         09/01/2036         4,992,250
--------------------------------------------------------------------------------------------------------------------------
  1,675,000     Hawthorne Community Redevel. Agency Special Tax                 7.200         10/01/2025         1,780,944
--------------------------------------------------------------------------------------------------------------------------
  1,180,000     Hawthorne Community Redevel. Agency Special Tax                 7.200         10/01/2025         1,254,635
--------------------------------------------------------------------------------------------------------------------------
  1,835,000     Hercules Improvement Bond Act 1915                              5.100         09/02/2035         1,801,401
--------------------------------------------------------------------------------------------------------------------------
  3,000,000     Hesperia Community Redevel. Agency Tax Allocation 1             5.000         09/01/2035         3,134,070
--------------------------------------------------------------------------------------------------------------------------
  3,000,000     Huntington Park Public Financing Authority, Series A            6.200         10/01/2025         3,123,660
--------------------------------------------------------------------------------------------------------------------------
    130,000     Independent Cities, CA Lease Finance Authority
                (El Granada Mobile Home Park)                                   6.000         05/15/2034           135,734
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     Indio Improvement Bond Act of 1915 Assessment
                District No. 2003-03                                            6.125         09/02/2029         2,023,140
--------------------------------------------------------------------------------------------------------------------------
  2,820,000     Indio Improvement Bond Act of 1915 Assessment
                District No. 2004-3                                             5.500         09/02/2030         2,814,134
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     Indio Public Financing Authority                                6.100         09/02/2029         2,101,420
--------------------------------------------------------------------------------------------------------------------------
  4,250,000     Indio Redevel. Agency Tax, Series B                             6.500         08/15/2034         4,461,523
--------------------------------------------------------------------------------------------------------------------------
  5,000,000     La Verne COP (Bethren Hillcrest Homes) 1                        5.600         02/15/2033         5,289,400
--------------------------------------------------------------------------------------------------------------------------
  4,500,000     La Verne COP (Bethren Hillcrest Homes) 1                        6.625         02/15/2025         4,963,095
--------------------------------------------------------------------------------------------------------------------------
  1,750,000     Lake Elsinore Public Financing Authority, Series F              7.100         09/01/2020         1,889,195
--------------------------------------------------------------------------------------------------------------------------
  3,400,000     Lake Elsinore Unified School District                           5.350         09/01/2035         3,440,086
--------------------------------------------------------------------------------------------------------------------------
     20,000     Lathrop Improvement Bond (Mossdale Village)                     6.125         09/02/2028            20,604
--------------------------------------------------------------------------------------------------------------------------
  5,000,000     Lathrop Special Tax Community Facilities District No. 03-2 1    7.000         09/01/2033         5,237,100
--------------------------------------------------------------------------------------------------------------------------
    750,000     Lincoln Special Tax                                             5.900         09/01/2024           798,345
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Lincoln Special Tax                                             5.950         09/01/2028         1,072,450
--------------------------------------------------------------------------------------------------------------------------
  1,305,000     Lindsay Redevel. Agency                                         5.000         08/01/2025         1,351,784
--------------------------------------------------------------------------------------------------------------------------
  2,290,000     Lindsay Redevel. Agency                                         5.000         08/01/2035         2,353,548
--------------------------------------------------------------------------------------------------------------------------
     25,000     Loma Linda Collateralized Loan (Redlands)                       7.375         06/01/2009            25,300
--------------------------------------------------------------------------------------------------------------------------
     25,000     Long Beach Bond Finance Authority
                (Aquarium of the South Pacific)                                 5.000         11/01/2026            26,071
--------------------------------------------------------------------------------------------------------------------------
 12,450,000     Los Angeles Community Facilities District (Playa Vista) 1       4.750         09/01/2031        12,749,672
--------------------------------------------------------------------------------------------------------------------------
  1,475,000     Los Angeles Community Redevel. Agency
                (Grand Central Square) 1                                        5.850         12/01/2026         1,476,106
--------------------------------------------------------------------------------------------------------------------------
 36,235,000     Los Angeles Community Redevel. Agency
                (Manchester Social Services)                                    5.000         09/01/2037        37,683,675
--------------------------------------------------------------------------------------------------------------------------
    250,000     Los Angeles County Schools Regionalized
                Business Services Corp.                                         5.125         09/01/2027           250,378
--------------------------------------------------------------------------------------------------------------------------
  2,375,000     Los Angeles Department of Water & Power RITES 1,3              10.954 4       07/01/2024         2,610,648
--------------------------------------------------------------------------------------------------------------------------
  5,500,000     Los Angeles Harbor Department, Series B 1                       6.000         08/01/2014         5,711,970


                   26 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
    CALIFORNIA Continued
$    85,000     Los Angeles Harbor, Series B                                    5.375%        11/01/2019     $      87,684
--------------------------------------------------------------------------------------------------------------------------
     25,000     Los Angeles Regional Airports Improvement Corp.
                (United Airlines) 3,5,6                                         8.800         11/15/2021            22,275
--------------------------------------------------------------------------------------------------------------------------
  2,500,000     Los Angeles USD ROLs 1,3                                        8.826 4       07/01/2015         3,070,875
--------------------------------------------------------------------------------------------------------------------------
  2,500,000     Los Angeles USD ROLs 3                                          8.826 4       07/01/2016         3,070,875
--------------------------------------------------------------------------------------------------------------------------
  1,500,000     Los Angeles USD ROLs 3                                          8.826 4       07/01/2017         1,842,525
--------------------------------------------------------------------------------------------------------------------------
     15,000     Los Gatos Union School District                                 5.000         08/01/2024            15,830
--------------------------------------------------------------------------------------------------------------------------
     65,000     M-S-R Public Power Agency (San Juan)                            6.000         07/01/2022            65,852
--------------------------------------------------------------------------------------------------------------------------
  4,550,000     M-S-R Public Power Agency (San Juan) ROLs 1,3                   9.323 4       07/01/2017         4,677,582
--------------------------------------------------------------------------------------------------------------------------
    100,000     Madera County COP (Valley Children's Hospital)                  5.750         03/15/2028           102,313
--------------------------------------------------------------------------------------------------------------------------
     50,000     Marina Community Facilities District Special Tax                6.250         09/01/2023            51,500
--------------------------------------------------------------------------------------------------------------------------
    915,000     Menifee Union School District 2                                 5.200         09/01/2030           916,464
--------------------------------------------------------------------------------------------------------------------------
    500,000     Menifee Union School District 2                                 5.250         09/01/2035           500,510
--------------------------------------------------------------------------------------------------------------------------
    400,000     Menifee Union School District Special Tax                       5.200         09/01/2035           394,116
--------------------------------------------------------------------------------------------------------------------------
    690,000     Menifee Union School District Special Tax                       5.500         09/01/2034           697,362
--------------------------------------------------------------------------------------------------------------------------
    385,000     Menifee Union School District Special Tax                       5.500         09/01/2034           389,108
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Merced Special Tax 2                                            5.000         09/01/2030           975,520
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Merced Special Tax 2                                            5.100         09/01/2035           981,690
--------------------------------------------------------------------------------------------------------------------------
     20,000     Mill Valley Community Facilities District Special Tax
                (Library Renovation)                                            5.800         08/01/2026            20,012
--------------------------------------------------------------------------------------------------------------------------
    480,000     Modesto Irrigation District COP                                 5.300         07/01/2022           480,902
--------------------------------------------------------------------------------------------------------------------------
    700,000     Murrieta Community Facilities District Special Tax
                (Bremerton)                                                     5.625         09/01/2034           713,853
--------------------------------------------------------------------------------------------------------------------------
  1,810,000     Murrieta Community Facilities District Special Tax
                (Creekside Village)                                             5.200         09/01/2035         1,744,116
--------------------------------------------------------------------------------------------------------------------------
  2,500,000     Murrieta Community Facilities District Special Tax
                (Murrieta Springs)                                              5.500         09/01/2034         2,508,200
--------------------------------------------------------------------------------------------------------------------------
     25,000     Murrieta Valley Unified School District Special Tax             5.250         09/01/2037            24,674
--------------------------------------------------------------------------------------------------------------------------
  1,785,000     Murrieta Valley Unified School District Special Tax             6.000         09/01/2035         1,874,018
--------------------------------------------------------------------------------------------------------------------------
    875,000     Murrieta, CA Community Facilities District
                (Murrieta Fields)                                               5.250         09/01/2035           863,870
--------------------------------------------------------------------------------------------------------------------------
  2,250,000     Norco Special Tax                                               7.000         09/01/2033         2,525,130
--------------------------------------------------------------------------------------------------------------------------
  1,320,000     Norco Special Tax Community Facilities District No.             7.100         10/01/2030         1,442,694
                97-1
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Northern CA Power Agency (Hydroelectric)                        5.125         07/01/2023         1,053,770
--------------------------------------------------------------------------------------------------------------------------
  7,490,000     Northern CA Tobacco Securitization Authority (TASC)             5.375         06/01/2041         7,673,205
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Orange County Community Facilities District
                (Ladera Ranch), Series A                                        6.250         08/15/2030         1,073,000
--------------------------------------------------------------------------------------------------------------------------
  2,250,000     Orange County Community Facilities District
                (Ladera Ranch), Series A                                        6.700         08/15/2029         2,568,398
--------------------------------------------------------------------------------------------------------------------------
    500,000     Palm Springs Improvement Bond Act 1915                          5.150         09/02/2030           490,380
--------------------------------------------------------------------------------------------------------------------------
     50,000     Palmdale Multifamily Hsg., Series A                             7.375         09/01/2024            50,086

                               27  OPPENHEIMER CALIFORNIA MUNICIPAL FUND


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

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
CALIFORNIA Continued
$ 1,390,000     Perris Community Facilities District Special Tax                5.300%        09/01/2035     $   1,372,417
--------------------------------------------------------------------------------------------------------------------------
  2,085,000     Perris Community Facilities District Special Tax
                (Amber Oaks)                                                    6.000         09/01/2034         2,173,216
--------------------------------------------------------------------------------------------------------------------------
    500,000     Perris Community Facilities District Special Tax                5.100         09/01/2028           497,850
                (Avalon) 2
--------------------------------------------------------------------------------------------------------------------------
    550,000     Perris Community Facilities District Special Tax                5.150         09/01/2032           549,175
                (Avalon) 2
--------------------------------------------------------------------------------------------------------------------------
  2,500,000     Perris Community Facilities District Special Tax
                (Chaparral Ridge)                                               6.250         09/01/2033         2,662,475
--------------------------------------------------------------------------------------------------------------------------
  1,310,000     Perris Community Facilities District Special Tax,               5.750         09/01/2035         1,322,222
                Series A
--------------------------------------------------------------------------------------------------------------------------
  3,605,000     Perris Community Facilities District Special Tax,               6.000         09/01/2034         3,757,528
                Series B
--------------------------------------------------------------------------------------------------------------------------
  1,250,000     Perris Public Financing Authority, Series A                     6.250         09/01/2033         1,336,263
--------------------------------------------------------------------------------------------------------------------------
     95,000     Pittsburg Infrastructure Financing Authority, Series A          5.600         09/02/2024            97,637
--------------------------------------------------------------------------------------------------------------------------
    500,000     Pomona (Single Family Mtg.), Series B                           7.500         08/01/2023           671,325
--------------------------------------------------------------------------------------------------------------------------
  2,500,000     Port Oakland RITES 1,3                                          8.496 4       11/01/2015         2,894,275
--------------------------------------------------------------------------------------------------------------------------
  2,500,000     Port Oakland RITES 1,3                                          8.746 4       11/01/2017         2,943,775
--------------------------------------------------------------------------------------------------------------------------
  2,430,000     Port Oakland RITES 1,3                                         10.919 4       11/01/2022         2,809,712
--------------------------------------------------------------------------------------------------------------------------
  5,025,000     Port Oakland RITES 1,3                                         10.919 4       11/01/2032         5,627,397
--------------------------------------------------------------------------------------------------------------------------
  2,660,000     Port Oakland RITES 1,3                                         12.419 4       11/01/2025         3,248,286
--------------------------------------------------------------------------------------------------------------------------
     40,000     Port of Oakland, Series L                                       5.000         11/01/2032            41,199
--------------------------------------------------------------------------------------------------------------------------
     35,000     Rancho Mirage Redevel. Agency                                   5.500         04/01/2029            35,115
--------------------------------------------------------------------------------------------------------------------------
  3,000,000     Redding Electric COP RIBS 1                                    10.170 4       07/08/2022         4,371,300
--------------------------------------------------------------------------------------------------------------------------
  4,420,000     Riverside County COP (Family Law) 1                             5.000         11/01/2036         4,646,039
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     Riverside Special Tax Community Facilities
                District No. 92-1, Series A                                     5.300         09/01/2034         2,027,540
--------------------------------------------------------------------------------------------------------------------------
     15,000     Rosemead Redevel. Agency                                        5.500         10/01/2018            15,025
--------------------------------------------------------------------------------------------------------------------------
  1,500,000     Roseville Woodcreek West Community Facility                     6.500         09/01/2015         1,701,645
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Roseville Woodcreek West Community Facility                     6.700         09/01/2025         1,142,000
--------------------------------------------------------------------------------------------------------------------------
     10,000     Sacramento County Airport System, Series A                      5.900         07/01/2024            10,439
--------------------------------------------------------------------------------------------------------------------------
     35,000     Sacramento County Airport System, Series B                      5.750         07/01/2024            35,319
--------------------------------------------------------------------------------------------------------------------------
  1,750,000     Sacramento County Sanitation District, Series A 1               5.875         12/01/2027         1,784,878
--------------------------------------------------------------------------------------------------------------------------
      5,000     Sacramento Municipal Utility District                           5.000         08/15/2028             5,207
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Sacramento, CA Power Authority (Cogeneration)                   6.000         07/01/2022         1,050,150
--------------------------------------------------------------------------------------------------------------------------
    125,000     San Bernardino County COP (Medical Center Financing)            5.500         08/01/2024           126,504
--------------------------------------------------------------------------------------------------------------------------
    150,000     San Bernardino Joint Powers Financing Authority
                (Department of Transportation)                                  5.500         12/01/2020           154,250
--------------------------------------------------------------------------------------------------------------------------
  1,850,000     San Bernardino Joint Powers Financing Authority
                (Tax Allocation) 3                                              6.625         04/01/2026         2,023,456
--------------------------------------------------------------------------------------------------------------------------
  3,750,000     San Diego County COP
                (Developmental Service Foundation)                              5.500         09/01/2027         3,805,800
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     San Diego County, CA COP                                        5.700         02/01/2028           974,410
--------------------------------------------------------------------------------------------------------------------------
    315,000     San Diego Industrial Devel.
                (San Diego Gas & Electric Company)                              5.900         06/01/2018           318,358


                   28 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
CALIFORNIA Continued
$    50,000     San Diego Industrial Devel.
                (San Diego Gas & Electric Company)                              5.900%        06/01/2018     $      50,091
--------------------------------------------------------------------------------------------------------------------------
     40,000     San Diego Industrial Devel.
                (San Diego Gas & Electric Company)                              5.900         09/01/2018            40,085
--------------------------------------------------------------------------------------------------------------------------
    325,000     San Diego Industrial Devel.
                (San Diego Gas & Electric Company)                              5.900         09/01/2018           325,777
--------------------------------------------------------------------------------------------------------------------------
  2,730,000     San Diego Sewer, Series A 1                                     5.250         05/15/2020         2,753,150
--------------------------------------------------------------------------------------------------------------------------
  1,880,000     San Diego Unified School District GO RITES 3                   11.023 4       07/01/2027         2,517,395
--------------------------------------------------------------------------------------------------------------------------
  2,445,000     San Diego Unified School District GO RITES 3                   12.027 4       07/01/2023         3,547,010
--------------------------------------------------------------------------------------------------------------------------
     25,000     San Francisco Bay Area Rapid Transit District                   5.000         07/01/2028            26,201
--------------------------------------------------------------------------------------------------------------------------
     15,000     San Francisco City & County Airports Commission                 5.500         05/01/2026            15,374
--------------------------------------------------------------------------------------------------------------------------
     25,000     San Francisco City & County Airports Commission                 5.500         05/01/2026            25,623
--------------------------------------------------------------------------------------------------------------------------
     50,000     San Francisco City & County Airports Commission                 5.625         05/01/2021            51,349
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     San Francisco City & County Airports Commission 1               5.700         05/01/2014         1,029,350
--------------------------------------------------------------------------------------------------------------------------
    435,000     San Francisco City & County Redevel. Agency
                (Mission Bay South)                                             0.000 7       08/01/2020           188,124
--------------------------------------------------------------------------------------------------------------------------
    590,000     San Francisco City & County Redevel. Agency
                (Mission Bay South)                                             0.000 7       08/01/2022           222,595
--------------------------------------------------------------------------------------------------------------------------
    615,000     San Francisco City & County Redevel. Agency
                (Mission Bay South)                                             0.000 7       08/01/2023           216,812
--------------------------------------------------------------------------------------------------------------------------
    540,000     San Francisco City & County Redevel. Agency
                (Mission Bay South)                                             0.000 7       08/01/2024           178,670
--------------------------------------------------------------------------------------------------------------------------
    420,000     San Francisco City & County Redevel. Agency
                (Mission Bay South)                                             0.000 7       08/01/2025           130,095
--------------------------------------------------------------------------------------------------------------------------
  1,375,000     San Francisco City & County Redevel. Agency
                (Mission Bay South)                                             0.000 7       08/01/2030           315,453
--------------------------------------------------------------------------------------------------------------------------
  3,020,000     San Francisco City & County Redevel. Agency
                (Mission Bay South)                                             0.000 7       08/01/2034           538,768
--------------------------------------------------------------------------------------------------------------------------
  1,500,000     San Francisco City & County Redevel. Agency
                (Mission Bay South)                                             5.150         08/01/2035         1,504,770
--------------------------------------------------------------------------------------------------------------------------
  6,490,000     San Jacinto Financing Authority, Tranche A                      6.600         09/01/2033         6,292,250
--------------------------------------------------------------------------------------------------------------------------
  6,345,000     San Jacinto Financing Authority, Tranche B                      6.600         09/01/2033         6,018,042
--------------------------------------------------------------------------------------------------------------------------
  6,530,000     San Jacinto Financing Authority, Tranche C                      6.600         09/01/2033         5,711,595
--------------------------------------------------------------------------------------------------------------------------
  1,500,000     San Leandro Community Facilities District No. 1
                Special Tax                                                     6.400         09/01/2019         1,634,430
--------------------------------------------------------------------------------------------------------------------------
  2,125,000     San Marcos Public Facilities Authority RITES 3                 11.151 4       08/01/2034         2,617,065
--------------------------------------------------------------------------------------------------------------------------
  2,150,000     San Marcos Public Facilities Authority RITES 3                 11.151 4       08/01/2035         2,591,739
--------------------------------------------------------------------------------------------------------------------------
  6,000,000     San Marcos Special Tax 2                                        5.950         09/01/2035         6,378,420
--------------------------------------------------------------------------------------------------------------------------
     25,000     San Mateo Sewer, Series A                                       5.000         08/01/2025            25,889
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Santa Ana Financing Authority (Mainplace)                       5.600         09/01/2019         1,098,980
--------------------------------------------------------------------------------------------------------------------------
    300,000     Santa Monica Community College District                         5.750         07/01/2020           306,726
--------------------------------------------------------------------------------------------------------------------------
  3,935,000     Santaluz Special Tax Community Facilities District No. 2        6.375         09/01/2030         4,011,536


                               29  OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
CALIFORNIA Continued
$    20,000     Sonoma County Community Redevel. Agency (Roseland)              7.900%        08/01/2013     $      20,446
--------------------------------------------------------------------------------------------------------------------------
  1,585,000     South El Monte Improvement District (Merged Aera) 2             5.000         08/01/2030         1,641,505
--------------------------------------------------------------------------------------------------------------------------
  5,245,000     South El Monte Improvement District (Merged Aera) 2             5.000         08/01/2035         5,412,420
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     South Tahoe Joint Powers Financing Authority                    5.000         10/01/2035         2,103,640
--------------------------------------------------------------------------------------------------------------------------
 10,335,000     Southern CA Logistics Airport Authority                         5.000         12/01/2035        10,666,857
--------------------------------------------------------------------------------------------------------------------------
    500,000     Southern CA Public Power Authority                              5.000         07/01/2015           500,995
--------------------------------------------------------------------------------------------------------------------------
    150,000     Southern CA Public Power Authority RIBS                         8.877 4       07/01/2012           150,873
--------------------------------------------------------------------------------------------------------------------------
  1,170,000     Southern CA Tobacco Securitization Authority (TASC) 1           5.500         06/01/2036         1,206,867
--------------------------------------------------------------------------------------------------------------------------
  3,210,000     Southern CA Tobacco Securitization Authority (TASC) 1           6.000         06/01/2043         3,394,703
--------------------------------------------------------------------------------------------------------------------------
    135,000     Stockton Public Financing Authority, Series A                   5.875         09/02/2016           136,362
--------------------------------------------------------------------------------------------------------------------------
  2,250,000     Tejon Ranch Public Facilities Finance Authority
                Special Tax (Community Facilities District No. 1)               7.200         09/01/2030         2,319,638
--------------------------------------------------------------------------------------------------------------------------
  2,000,000     Temecula Valley Unified School District                         5.500         09/01/2035         2,027,900
--------------------------------------------------------------------------------------------------------------------------
     75,000     Thousand Oaks Redevel. Agency                                   5.000         12/01/2020            75,474
--------------------------------------------------------------------------------------------------------------------------
  4,560,000     Trinity County COP 1,3                                          8.500         01/15/2026         4,565,609
--------------------------------------------------------------------------------------------------------------------------
     60,000     Turlock Public Financing Authority                              5.450         09/01/2024            61,478
--------------------------------------------------------------------------------------------------------------------------
  1,600,000     Tustin Community Facilities District Special Tax
                (John Lang Homes)                                               5.500         09/01/2034         1,624,496
--------------------------------------------------------------------------------------------------------------------------
  2,650,000     Upland Community Facilities District Special Tax
                (San Antonio)                                                   6.100         09/01/2034         2,820,634
--------------------------------------------------------------------------------------------------------------------------
    250,000     Vacaville Public Financing Authority                            5.400         09/01/2022           250,043
--------------------------------------------------------------------------------------------------------------------------
  2,200,000     Val Verde Unified School District                               5.000         01/01/2030         2,312,112
--------------------------------------------------------------------------------------------------------------------------
  2,500,000     Val Verde Unified School District                               5.000         01/01/2035         2,623,450
--------------------------------------------------------------------------------------------------------------------------
    415,000     Val Verde, CA Unified School District Special Tax               5.450         09/01/2036           419,192
--------------------------------------------------------------------------------------------------------------------------
    850,000     Vallejo COP (Marine World Foundation) 3                         7.000         02/01/2017           893,129
--------------------------------------------------------------------------------------------------------------------------
  1,000,000     Vallejo COP (Marine World Foundation) 1,3                       7.200         02/01/2026         1,050,270
--------------------------------------------------------------------------------------------------------------------------
  1,060,000     Valley Sanitation District 2                                    5.000         09/02/2025         1,048,690
--------------------------------------------------------------------------------------------------------------------------
  1,375,000     Valley Sanitation District 2                                    5.200         09/02/2030         1,375,963
--------------------------------------------------------------------------------------------------------------------------
  1,160,000     Victor Valley Union High School District 2                      5.100         09/01/2035         1,156,230
--------------------------------------------------------------------------------------------------------------------------
    500,000     Victorville Special Tax 2                                       5.050         09/01/2030           499,060
--------------------------------------------------------------------------------------------------------------------------
    450,000     Victorville Special Tax 2                                       5.125         09/01/2035           447,246
--------------------------------------------------------------------------------------------------------------------------
    200,000     Vista Community Devel. Commission (Vista Redevel.)              6.000         09/01/2025           204,612
--------------------------------------------------------------------------------------------------------------------------
  4,000,000     Western Hills Water District Special Tax
                (Diablo Grande Community Facilities)                            6.125         09/01/2031         4,130,480
--------------------------------------------------------------------------------------------------------------------------
    500,000     Western Hills Water District Special Tax (Diablo Grande)        6.875         09/01/2031           533,740
--------------------------------------------------------------------------------------------------------------------------
  1,570,000     Westlands Water District RITES 1,3                             11.129 4       09/01/2030         1,884,502
--------------------------------------------------------------------------------------------------------------------------
  2,645,000     Westlands Water District RITES 1,3                             11.129 4       09/01/2035         3,157,918
--------------------------------------------------------------------------------------------------------------------------
     15,000     Yucaipa Redevel. Agency
                (Eldorado Palms Mobile Home)                                    6.000         05/01/2030            15,425
                                                                                                             -------------
                                                                                                               795,424,995


                   30 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

  PRINCIPAL                                                                                                          VALUE
     AMOUNT                                                                    COUPON           MATURITY        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--10.4%
$50,000,000     Puerto Rico Children's Trust Fund (TASC) 2                      0.000% 7      05/15/2050     $   3,172,000
--------------------------------------------------------------------------------------------------------------------------
  2,245,000     Puerto Rico HBFA 1                                              6.250         04/01/2029         2,302,539
--------------------------------------------------------------------------------------------------------------------------
  5,750,000     Puerto Rico Infrastructure                                      5.000         07/01/2041         6,004,553
--------------------------------------------------------------------------------------------------------------------------
  5,510,000     Puerto Rico ITEMECF (Cogeneration Facilities) 1                 6.625         06/01/2026         5,979,232
--------------------------------------------------------------------------------------------------------------------------
  2,710,000     Puerto Rico ITEMECF (Mennonite General Hospital) 1              6.500         07/01/2012         2,731,246
--------------------------------------------------------------------------------------------------------------------------
 22,400,000     Puerto Rico Port Authority (American Airlines), Series A 1      6.250         06/01/2026        17,741,472
--------------------------------------------------------------------------------------------------------------------------
 27,000,000     V.I.Public Finance Authority (Hovensa Coker)                    6.500         07/01/2021        30,785,130
--------------------------------------------------------------------------------------------------------------------------
  4,515,000     V.I.Public Finance Authority, Series A 1                        6.375         10/01/2019         5,117,030
--------------------------------------------------------------------------------------------------------------------------
  5,150,000     V.I.Public Finance Authority, Series E                          6.000         10/01/2022         5,382,265
                                                                                                             -------------
                                                                                                                79,215,467

--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $821,239,118)--115.0%                                                        874,640,462
--------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(15.0)                                                                 (113,758,562)
                                                                                                             -------------
NET ASSETS--100.0%                                                                                           $ 760,881,900
                                                                                                             =============

FOOTNOTES TO STATEMENT OF INVESTMENTS

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

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

3. Illiquid security. The aggregate value of illiquid securities as of July 31,
2005 was $85,224,842, which represents 11.20% of the Fund's net assets. See Note
5 of Notes to Financial Statements.

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

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

6. Non-income producing security.

7. Represents a zero coupon bond.

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

ABAG         Association of Bay Area Governments
CDA          Communities Development Authority
CDC          Community Development Corp.
COP          Certificates of Participation
GO           General Obligation
HBFA         Housing Bank and Finance Agency
HFA          Housing Finance Agency/Authority
INFLOS       Inverse Floating Rate Securities
ITEMECF      Industrial, Tourist, Educational, Medical
             and Environmental Community Facilities
M-S-R        Modesto Irrigation District of the City of
             Santa Clara and the City of Redding
RIBS         Residual Interest Bonds
RITES        Residual Interest Tax Exempt Security
ROLs         Residual Option Longs
TASC         Tobacco Settlement Asset-Backed Bonds
USD          Unified School District
V.I.         United States Virgin Islands


                   31 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

--------------------------------------------------------------------------------
INDUSTRY CONCENTRATIONS  July 31, 2005 / Unaudited
--------------------------------------------------------------------------------

DISTRIBUTION OF INVESTMENTS BY INDUSTRY OF ISSUE, AS A PERCENTAGE OF TOTAL
INVESTMENTS AT VALUE, IS AS FOLLOWS:

INDUSTRY                                           MARKET VALUE         PERCENT
--------------------------------------------------------------------------------
Tobacco Settlement Payments                       $ 187,142,727            21.4%
Special Tax                                         183,414,879            21.0
Special Assessment                                  134,720,554            15.4
Municipal Leases                                     79,946,346             9.1
Pollution Control                                    41,238,595             4.7
General Obligation                                   36,191,015             4.1
Marine/Aviation Facilities                           35,198,609             4.0
Hospital/Health Care                                 27,513,697             3.2
Education                                            23,978,625             2.7
Airlines                                             18,057,048             2.1
Adult Living Facilities                              15,339,564             1.8
Electric Utilities                                   13,687,584             1.6
Multifamily Housing                                  13,525,444             1.5
Sales Tax Revenue                                    10,525,496             1.2
Higher Education                                     10,411,795             1.2
Hotels, Restaurants & Leisure                        10,032,008             1.2
Not-for-Profit Organization                           7,817,674             0.9
Water Utilities                                       7,653,068             0.9
Resource Recovery                                     6,200,382             0.7
Single Family Housing                                 5,400,233             0.6
Sewer Utilities                                       4,563,917             0.5
Manufacturing, Durable Goods                          1,201,560             0.1
Gas Utilities                                           879,642             0.1
                                                  ------------------------------
Total                                             $ 874,640,462           100.0%
                                                  ==============================


                   32 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

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

RATING                                                                  PERCENT
--------------------------------------------------------------------------------
AAA                                                                        17.4%
AA                                                                          5.8
A                                                                           9.8
BBB                                                                        48.6
BB                                                                          1.1
B                                                                           0.1
CCC                                                                         2.0
Not Rated                                                                  15.2
                                                                          ------
Total                                                                     100.0%
                                                                          ======

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   33 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

-------------------------------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------------------------------
Investments, at value (cost $821,239,118)--see accompanying statement of investments     $ 874,640,462
-------------------------------------------------------------------------------------------------------
Cash                                                                                           779,884
-------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest                                                                                    11,882,384
Shares of beneficial interest sold                                                          10,607,640
Investments sold                                                                             5,805,000
Other                                                                                           21,368
                                                                                         -------------
Total assets                                                                               903,736,738

-------------------------------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $73,620,540 purchased on a when-issued basis
or forward commitment)                                                                      73,776,761
Payable on borrowings (See Note 6)                                                          67,600,000
Dividends                                                                                      589,687
Shares of beneficial interest redeemed                                                         432,232
Distribution and service plan fees                                                             149,558
Trustees' compensation                                                                         110,289
Interest expense                                                                                77,542
Shareholder communications                                                                      28,778
Transfer and shareholder servicing agent fees                                                   22,498
Other                                                                                           67,493
                                                                                         --------------
Total liabilities                                                                          142,854,838

-------------------------------------------------------------------------------------------------------
NET ASSETS                                                                               $ 760,881,900
                                                                                         ==============

-------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
-------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                               $      66,034
-------------------------------------------------------------------------------------------------------
Additional paid-in capital                                                                 705,575,364
-------------------------------------------------------------------------------------------------------
Accumulated net investment income                                                            5,012,437
-------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments                                                (3,173,279)
-------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                  53,401,344
-------------------------------------------------------------------------------------------------------
NET ASSETS                                                                               $ 760,881,900
                                                                                         ==============


                   34 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
----------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $621,735,823 and
53,950,406 shares of beneficial interest outstanding)                                              $11.52
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price)    $12.09
----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $59,530,396 and 5,162,095 shares
of beneficial interest outstanding)                                                                $11.53
----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $79,615,681 and 6,921,403 shares
of beneficial interest outstanding)                                                                $11.50

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   35 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

--------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------
Interest                                                           $ 37,971,138

--------------------------------------------------------------------------------
EXPENSES
--------------------------------------------------------------------------------
Management fees                                                       3,115,304
--------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                               1,139,564
Class B                                                                 610,171
Class C                                                                 432,616
--------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                 182,931
Class B                                                                  29,650
Class C                                                                  21,277
--------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                  33,635
Class B                                                                   4,543
Class C                                                                   4,226
--------------------------------------------------------------------------------
Interest expense                                                        443,752
--------------------------------------------------------------------------------
Custodian fees and expenses                                              28,517
--------------------------------------------------------------------------------
Trustees' compensation                                                   15,940
--------------------------------------------------------------------------------
Other                                                                   122,074
                                                                   -------------
Total expenses                                                        6,184,200
Less reduction to custodian expenses                                     (5,752)
                                                                   -------------
Net expenses                                                          6,178,448

--------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                31,792,690

--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
--------------------------------------------------------------------------------
Net realized gain on investments                                      1,502,281
--------------------------------------------------------------------------------
Net change in unrealized appreciation on investments                 61,275,811

--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS               $ 94,570,782
                                                                   =============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   36 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

YEAR ENDED JULY 31,                                                    2005              2004
----------------------------------------------------------------------------------------------
OPERATIONS
----------------------------------------------------------------------------------------------
Net investment income                                         $  31,792,690     $  32,731,573
----------------------------------------------------------------------------------------------
Net realized gain                                                 1,502,281         2,593,176
----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)             61,275,811         9,407,322
                                                              --------------------------------
Net increase in net assets resulting from operations             94,570,782        44,732,071

----------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
----------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                         (26,908,765)      (23,080,655)
Class B                                                          (3,003,604)       (4,213,716)
Class C                                                          (2,082,510)       (1,515,899)

----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A                                                         168,989,275         4,558,937
Class B                                                         (13,357,770)      (38,472,624)
Class C                                                          44,091,249         2,456,965

----------------------------------------------------------------------------------------------
NET ASSETS
----------------------------------------------------------------------------------------------
Total increase (decrease)                                       262,298,657       (15,534,921)
----------------------------------------------------------------------------------------------
Beginning of period                                             498,583,243       514,118,164
                                                              --------------------------------
End of period (including accumulated net investment income
of $5,012,437 and $5,214,626, respectively)                   $ 760,881,900     $ 498,583,243
                                                              ================================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   37 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

CLASS A   YEAR ENDED JULY 31,                           2005          2004         2003          2002           2001
-----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                $  10.31      $   9.97     $  10.60      $  10.49       $  10.11
-----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .62 1         .68          .63           .53            .53
Net realized and unrealized gain (loss)                 1.21           .27         (.66)          .10            .38
                                                    -------------------------------------------------------------------
Total from investment operations                        1.83           .95         (.03)          .63            .91
-----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.62)         (.61)        (.60)         (.52)          (.53)
-----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                      $  11.52      $  10.31     $   9.97      $  10.60       $  10.49
                                                    ===================================================================

-----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                     18.20%         9.54%       (0.57)%        6.20%          9.17%
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)            $621,736      $401,491     $385,141      $409,689       $387,388
-----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                   $477,934      $400,452     $410,237      $398,651       $344,808
-----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   5.59%         6.52%        5.88%         5.09%          5.08%
Total expenses                                          0.92%         1.00%        0.96%         0.86% 4        0.88%
Expenses after payments and waivers and
reduction to custodian expenses                          N/A 5        0.97%         N/A 5         N/A           0.87% 4
-----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                   15%           26%          63%           27%            20%

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. Excludes interest expense.

5. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   38 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

CLASS B   YEAR ENDED JULY 31,                           2005          2004         2003          2002           2001
-----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                $  10.31      $   9.97     $  10.61      $  10.50       $  10.11
-----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .54 1         .64          .55           .45            .45
Net realized and unrealized gain (loss)                 1.22           .22         (.68)          .10            .39
                                                    -------------------------------------------------------------------
Total from investment operations                        1.76           .86         (.13)          .55            .84
-----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.54)         (.52)        (.51)         (.44)          (.45)
-----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                      $  11.53      $  10.31     $   9.97      $  10.61       $  10.50
                                                    ===================================================================

-----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                     17.40%         8.70%       (1.42)%        5.39%          8.46%
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)            $ 59,530      $ 65,991     $101,079      $128,857       $137,307
-----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                   $ 61,244      $ 84,482     $118,611      $132,685       $126,060
-----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   4.90%         5.76%        5.09%         4.32%          4.33%
Total expenses                                          1.69%         1.77%        1.73%         1.62% 4        1.63%
Expenses after payments and waivers and
reduction to custodian expenses                          N/A 5        1.74%         N/A 5         N/A           1.62% 4
-----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                   15%           26%          63%           27%            20%

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. Excludes interest expense.

5. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   39 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

CLASS C   YEAR ENDED JULY 31,                          2005         2004         2003         2002          2001
-------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                $ 10.29      $  9.95      $ 10.58      $ 10.48       $ 10.09
-------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .52 1        .60          .54          .46           .45
Net realized and unrealized gain (loss)                1.23          .26         (.66)         .08           .39
                                                    ---------------------------------------------------------------
Total from investment operations                       1.75          .86         (.12)         .54           .84
-------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.54)        (.52)        (.51)        (.44)         (.45)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                      $ 11.50      $ 10.29      $  9.95      $ 10.58       $ 10.48
                                                    ===============================================================

-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    17.33%        8.71%       (1.33)%       5.31%         8.48%
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)            $79,616      $31,102      $27,898      $24,936       $18,105
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                   $43,444      $30,371      $27,011      $21,775       $14,489
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  4.73%        5.74%        5.12%        4.33%         4.32%
Total expenses                                         1.69%        1.78%        1.73%        1.62% 4       1.63%
Expenses after payments and waivers and
reduction to custodian expenses                         N/A 5       1.75%         N/A 5        N/A          1.62% 4
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  15%          26%          63%          27%           20%

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. Excludes interest expense.

5. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   40 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

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

Oppenheimer California Municipal Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The Fund's investment objective is to seek as
high a level of current interest income exempt from federal and California
income taxes for individual investors as is consistent with preservation of
capital. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).

      The Fund offers Class A, Class B and Class C shares. Class A shares are
sold at their offering price, which is normally net asset value plus a front-end
sales charge. Class B and Class C shares are sold without a front-end sales
charge but may be subject to a contingent deferred sales charge (CDSC). All
classes of shares have identical rights and voting privileges with respect to
the Fund in general and exclusive voting rights on matters that affect that
class alone. Earnings, net assets and net asset value per share may differ due
to each class having its own expenses, such as transfer and shareholder
servicing agent fees and shareholder communications, directly attributable to
that class. Class A, B and C have separate distribution and/or service plans.
Class B shares will automatically convert to Class A shares six years after the
date of purchase.

      The following is a summary of significant accounting policies consistently
followed by the Fund.

--------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic exchanges are valued
based on the last sale price of the security traded on that exchange prior to
the time when the Fund's assets are valued. Securities traded on NASDAQ are
valued based on the closing price provided by NASDAQ prior to the time when the
Fund's assets are valued. In the absence of a sale, the security is valued at
the last sale price on the prior trading day, if it is within the spread of the
closing "bid" and "asked" prices, and if not, at the closing bid price.
Securities traded on foreign exchanges are valued based on the last sale price
on the principal exchange on which the security is traded, in the country that
is identified by the portfolio pricing service, prior to the time when the
Fund's assets are valued. In the absence of a sale, the security is valued at
the official closing price on the principal exchange. Corporate, government and
municipal debt instruments having a remaining maturity in excess of sixty days
and all mortgage-backed securities will be valued at the mean between the "bid"
and "asked" prices. Futures contracts traded on a commodities or futures
exchange will be valued at the final settlement price or official closing price
on the principal exchange as reported by such principal exchange at its trading
session ending at, or most recently prior to, the time when the Fund's assets
are valued. Securities may be valued primarily using dealer-supplied valuations
or a portfolio pricing service authorized by the Board of Trustees. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and


                   41 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
domestic securities whose values have been materially affected by what the
Manager identifies as a significant event occurring before the Fund's assets are
valued but after the close of their respective exchanges will be fair valued.
Fair value is determined in good faith using consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).

--------------------------------------------------------------------------------
INVERSE FLOATING RATE SECURITIES. The Fund invests in inverse floating rate
securities that pay interest at a rate that varies inversely with short-term
interest rates. Certain of these securities may be leveraged, whereby the
interest rate varies inversely at a multiple of the change in short-term rates.
As interest rates rise, inverse floaters produce less current income. The price
of such securities is more volatile than comparable fixed rate securities. The
Fund will invest no more than 20% of its total assets in inverse floaters.
Inverse floaters amount to $81,192,276 as of July 31, 2005, which represents
8.98% of the Fund's total assets.

--------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of July 31, 2005, the Fund had purchased $73,620,540
of securities issued on a when-issued basis or forward commitment.

--------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of July 31, 2005, securities with an aggregate
market value of $315,576, representing 0.04% of the Fund's net assets, were in
default.

      There are certain risks arising from geographic concentration in any
state. Certain revenue or tax related events in a state may impair the ability
of certain issuers of municipal securities to pay principal and interest on
their obligations.


                   42 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND


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

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

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

                                                                NET UNREALIZED
                                                                  APPRECIATION
                                                              BASED ON COST OF
                                                                SECURITIES AND
   UNDISTRIBUTED    UNDISTRIBUTED            ACCUMULATED     OTHER INVESTMENTS
   NET INVESTMENT       LONG-TERM                   LOSS    FOR FEDERAL INCOME
   INCOME                    GAIN     CARRYFORWARD 1,2,3          TAX PURPOSES
   ---------------------------------------------------------------------------
   $5,711,725                 $--             $3,173,279           $53,401,344

1. As of July 31, 2005, the Fund had $3,173,279 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of July 31, 2005, details
of the capital loss carryforward were as follows:

                         EXPIRING
                         -----------------------------
                         2009               $3,173,279

2. During the fiscal year ended July 31, 2005, the Fund utilized $1,502,281 of
capital loss carryforward to offset capital gains realized in that fiscal year.

3. During the fiscal year ended July 31, 2004, the Fund utilized $2,486,648 of
capital loss carryforward to offset capital gains realized in that fiscal year.

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


                   43 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

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

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

                                               YEAR ENDED       YEAR ENDED
                                            JULY 31, 2005    JULY 31, 2004
          ----------------------------------------------------------------
          Distributions paid from:
          Exempt-interest dividends           $31,994,879      $28,810,270

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of July 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.

          Federal tax cost of securities     $821,239,118
                                             =============
          Gross unrealized appreciation      $ 54,136,933
          Gross unrealized depreciation          (735,589)
                                             -------------
          Net unrealized appreciation        $ 53,401,344
                                             =============

--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended July 31,
2005, the Fund's projected benefit obligations were increased by $2,160 and
payments of $7,254 were made to retired trustees, resulting in an accumulated
liability of $91,136 as of July 31, 2005.

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

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

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


                   44 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

--------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts at a rate equal to the Federal
Funds Rate plus 0.50%. The Reduction to Custodian Expenses line item, if
applicable, represents earnings on cash balances maintained by the Fund during
the period. Such interest expense and other custodian fees may be paid with
these earnings.

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

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

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

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

                                YEAR ENDED JULY 31, 2005        YEAR ENDED JULY 31, 2004
                                 SHARES           AMOUNT         SHARES           AMOUNT
-----------------------------------------------------------------------------------------
CLASS A
Sold                         19,938,576     $223,516,947      7,744,923     $ 80,841,517
Dividends and/or
distributions reinvested      1,431,372       15,844,672      1,331,353       13,858,499
Redeemed                     (6,371,483)     (70,372,344)    (8,763,844)     (90,141,079)
                             ------------------------------------------------------------
Net increase                 14,998,465     $168,989,275        312,432     $  4,558,937
                             ============================================================

-----------------------------------------------------------------------------------------
CLASS B
Sold                          1,070,121     $ 11,925,943        600,000     $  6,274,104
Dividends and/or
distributions reinvested        164,749        1,816,688        260,942        2,715,157
Redeemed                     (2,471,135)     (27,100,401)    (4,597,223)     (47,461,885)
                             ------------------------------------------------------------
Net decrease                 (1,236,265)    $(13,357,770)    (3,736,281)    $(38,472,624)
                             ============================================================

-----------------------------------------------------------------------------------------
CLASS C
Sold                          4,514,407     $ 50,858,939      1,017,725     $ 10,643,445
Dividends and/or
distributions reinvested        106,662        1,181,896         90,433          940,495
Redeemed                       (722,327)      (7,949,586)      (888,932)      (9,126,975)
                             ------------------------------------------------------------
Net increase                  3,898,742     $ 44,091,249        219,226     $  2,456,965
                             ============================================================


                   45 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended July 31, 2005, were as follows:

                                        PURCHASES           SALES
          -------------------------------------------------------
          Investment securities      $291,378,026     $71,239,205

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

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

--------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended July 31, 2005, the Fund paid $230,614
to OFS for services to the Fund.

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

--------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years. Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B AND CLASS C SHARES. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for its services in connection with the distribution
of those shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class B and
Class C shares. The Distributor also receives a service fee of up to 0.25% per
year under each plan. If either the Class B or Class C plan is terminated by the
Fund or by the shareholders of a class, the Board of Trustees and its
independent trustees must determine whether the Distributor shall be entitled to
payment from the Fund of all or a portion of the service fee and/or asset-based
sales charge in respect to shares sold prior to the effective date of such
termination. The Distributor's aggregate uncompensated expenses under the plan
at July 31, 2005 for Class B and Class C


                   46 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

shares were $2,131,461 and $1,323,815, respectively. Fees incurred by the Fund
under the plans are detailed in the Statement of Operations.

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

                                       CLASS A          CLASS B          CLASS C
                      CLASS A       CONTINGENT       CONTINGENT       CONTINGENT
                    FRONT-END         DEFERRED         DEFERRED         DEFERRED
                SALES CHARGES    SALES CHARGES    SALES CHARGES    SALES CHARGES
                  RETAINED BY      RETAINED BY      RETAINED BY      RETAINED BY
YEAR ENDED        DISTRIBUTOR      DISTRIBUTOR      DISTRIBUTOR      DISTRIBUTOR
--------------------------------------------------------------------------------
July 31, 2005        $565,644          $16,065         $127,684          $12,567

--------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily undertaken
to limit its management fees to not exceed 0.55% of average annual net assets
for each class of shares. This voluntary undertaking is expected to remain in
effect indefinitely, however, may be amended or withdrawn by the Manager at any
time.

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

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

As of July 31, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 15% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.

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

The Fund can borrow money from banks in amounts up to one-third of its total
assets (including the amount borrowed) less all liabilities and indebtedness
other than borrowings to purchase portfolio securities, to meet redemption
obligations or for temporary and emergency purposes. The purchase of securities
with borrowed funds creates leverage in the Fund. Until terminated on January
21, 2005, the Fund had entered into an agreement which enabled it to participate
with certain other Oppenheimer funds in a committed, unsecured line of credit
with a bank, which permitted borrowings up to $540 million, collectively.
Interest was charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.75%. The Fund also paid a commitment fee


                   47 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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

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

equal to its pro rata share of the average unutilized amount of the credit
facility at a rate of 0.09% per annum.

      Effective January 21, 2005 the Fund entered into a Revolving Credit and
Security Agreement (the "Agreement") with a conduit lender and a bank which
enables it to participate with certain other Oppenheimer funds in a committed,
secured borrowing facility that permits borrowings of up to $800 million,
collectively. To secure the loan, the Fund pledges investment securities in
accordance with the terms of the Agreement. Interest is charged to the Fund,
based on its borrowings, at current commercial paper issuance rates (3.3439% as
of July 31, 2005). The Fund pays additional fees of 0.30% per annum on its
outstanding borrowings to manage and administer the facility and is allocated
its pro-rata share of a 0.13% per annum commitment fee for a liquidity backstop
facility with respect to the $800 million facility size.

      For the year ended July 31, 2005, the average daily loan balance was
$15,816,712 at an average daily interest rate of 2.751%. The Fund had borrowings
outstanding of $67,600,000 at July 31, 2005 at an interest rate of 3.3439%. The
Fund had gross borrowings and gross loan repayments of $228,700,000 and
$191,500,000, respectively, during the year ended July 31, 2005. The maximum
amount of borrowings outstanding at any month-end during the year ended July 31,
2005 was $67,600,000. The Fund paid $40,880 in fees and $369,790 in interest
during the year ended July 31, 2005.

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

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


                   48 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND

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


                   49 | OPPENHEIMER CALIFORNIA MUNICIPAL FUND






                                            A-7
                                         Appendix A

                             MUNICIPAL BOND RATINGS DEFINITIONS

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

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

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

MUNICIPAL LONG-TERM RATING DEFINITIONS

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

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

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

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

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

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

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

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

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

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

MIG/VMIG RATINGS: U.S. SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for short-term obligations
that are considered investment grade. These ratings are designated as Moody's Investment
Grade (MIG) and are divided into three levels -- MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated
SG, or speculative grade.

In the case of variable rate demand obligations (VRDOs), a two-component rating is
assigned. The first element represents Moody's evaluation of the degree of risk associated
with scheduled principal and interest payments. The second element represents Moody's
evaluation of the degree of risk associated with the demand feature, using the MIG rating
scale.

The short-term rating assigned to the demand feature of VRDOs is designated as VMIG. When
either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR,
e.g., Aaa/NR or NR/VMIG 1.

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

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

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

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

SG: Denotes speculative-grade credit quality. Debt instruments in this category may lack
margins of protection.

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

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

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







AA: An obligation rated `AA' differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the obligation is very
strong.

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

BBB: An obligation rated `BBB' exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC, and C

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

BB: An obligation rated `BB' are less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions, which could lead to the obligor's inadequate capacity to
meet its financial commitment on the obligation.

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

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

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

C: The `C' rating may be used to cover a situation where a bankruptcy petition has been
filed or similar action has been taken, but payments on this obligation are being continued.

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

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







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

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

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

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

N.R. Not rated.

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

Bond Investment Quality Standards

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

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

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







A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial commitment on the
obligation is satisfactory.

A-3: A short-term obligation rated "A-3" exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.

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

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

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

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

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

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

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


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

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

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

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

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

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

Speculative Grade:

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

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

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

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

Entities rated in this category have defaulted on some or all of their obligations.
Entities rated "DDD" have the highest prospect for resumption of performance or continued
operation with or without a formal reorganization process. Entities rated "DD" and "D" are
generally undergoing a formal reorganization or liquidation process; those rated "DD" are
likely to satisfy a higher portion of their outstanding obligations, while entities rated
"D" have a poor prospect for repaying all obligations.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote relative status
within the major rating categories. Plus and minus signs are not added to the "AAA"
category or to categories below "CCC," nor to short-term ratings other than "F1" (see
below).

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

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

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

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

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

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

D: Default. Denotes actual or imminent payment default.







                                            B-1
                                         Appendix B

                          MUNICIPAL BOND INDUSTRY CLASSIFICATIONS

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














                                            C-12
                                         Appendix C

               OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class A shares(2)
of the Oppenheimer funds or the contingent deferred sales charge that may apply to Class A,
Class B or Class C shares may be waived.(3)  That is because of the economies of sales
efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as
the "Distributor"), or by dealers or other financial institutions that offer those shares
to certain classes of investors.

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

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

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






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

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

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






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

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

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

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

Class A shares issued or purchased in the following transactions are not subject to sales
charges (and no concessions are paid by the Distributor on such purchases):
|_|   Shares issued in plans of reorganization, such as mergers, asset acquisitions and
         exchange offers, to which the Fund is a party.
|_|   Shares purchased by the reinvestment of dividends or other distributions reinvested
         from the Fund or other Oppenheimer funds (other than Oppenheimer Cash Reserves) or
         unit investment trusts for which reinvestment arrangements have been made with the
         Distributor.
|_|   Shares purchased 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.

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

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

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

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

A. Waivers for Redemptions in Certain Cases.

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

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

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

IV.    Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who
                       Were Shareholders of Former Quest for Value Funds
---------------------------------------------------------------------------------------------

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

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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





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

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

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

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

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

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

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






13
                                           C-
Oppenheimer California Municipal 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
PX0790.001.1205

--------
(1) In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent
Trustees" in this Statement of Additional Information refers to those Trustees who are not
"interested persons" of the Fund and who do not have any direct or indirect financial
interest in the operation of the distribution plan or any agreement under the plan.
(2) Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund.
(3) In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered closed-end
fund, references to contingent deferred sales charges mean the Fund's Early Withdrawal
Charges and references to "redemptions" mean "repurchases" of shares.
(4) An "employee benefit plan" means any plan or arrangement, whether or not it is
"qualified" under the Internal Revenue Code, under which Class N shares of an Oppenheimer
fund or funds are purchased by a fiduciary or other administrator for the account of
participants who are employees of a single employer or of affiliated employers. These may
include, for example, medical savings accounts, payroll deduction plans or similar plans.
The fund accounts must be registered in the name of the fiduciary or administrator
purchasing the shares for the benefit of participants in the plan.
(5) The term "Group Retirement Plan" means any qualified or non-qualified retirement plan
for employees of a corporation or sole proprietorship, members and employees of a
partnership or association or other organized group of persons (the members of which may
include other groups), if the group has made special arrangements with the Distributor and
all members of the group participating in (or who are eligible to participate in) the plan
purchase shares of an Oppenheimer fund or funds through a single investment dealer, broker
or other financial institution designated by the group. Such plans include 457 plans,
SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans other than plans for public school
employees. The term "Group Retirement Plan" also includes qualified retirement plans and
non-qualified deferred compensation plans and IRAs that purchase shares of an Oppenheimer
fund or funds through a single investment dealer, broker or other financial institution
that has made special arrangements with the Distributor.
(6) However, that concession will not be paid on purchases of shares in amounts of $1
million or more (including any right of accumulation) by a Retirement Plan that pays for
the purchase with the redemption proceeds of Class C shares of one or more Oppenheimer
funds held by the Plan for more than one year.
(7) This provision does not apply to IRAs.
(8) This provision only applies to qualified retirement plans and 403(b)(7) custodial plans
after your separation from service in or after the year you reached age 55.
(9) The distribution must be requested prior to Plan termination or the elimination of the
Oppenheimer funds as an investment option under the Plan.
(10) This provision does not apply to IRAs.
(11) This provision does not apply to loans from 403(b)(7) custodial plans and loans from
the OppenheimerFunds-sponsored Single K retirement plan.
(12) This provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.